July 13, 2000 | Read Time: 2 minutes
After years of watching from the sidelines as the economy has boomed and the stock market has soared, more and more non-profit organizations are setting up units that are pursuing profits and investments, says Business Week magazine (June 26).
“Everyone from New York’s Museum of Modern Art to the National Geographic Society to Columbia University has decided that people will toss more money into a potentially lucrative investment than into a good cause,” writes Business Week‘s Diane Brady, who covers corporate strategies for the magazine. “So they’re trying to reach into those deep pockets by setting up Web sites, selling insurance, and otherwise hawking their names and services.”
Among the groups singled out in the article is the College Board, a century-old non-profit organization that does student testing.
This fall, the College Board will offer a new for-profit subsidiary: a Web site called collegeboard.com that will offer test preparation, SAT registration, and book sales.
The Web site will put the College Board into competition with companies such as Kaplan Inc. and Princeton Review, which Business Week says “rake in the big bucks by tutoring students” for the College Board’s own tests.
Outsiders will own 30 percent of the College Board’s Web site. As a for-profit unit, the new Web site will be able to “dole out stock options and make its shareholders rich without harming the parent’s tax-free status,” Business Week says. “It even hopes to go public next summer.”
The magazine says that non-profit groups’”newfound lust for riches” is stirring “a host of troubling issues.”
“Legally, non-profits are free to do almost anything they want as long as they pay a so-called unrelated business income tax on commercial activities that don’t relate to their central mission,” Business Week says. “But forays into the private sector can distract a group from its core agenda, alienate donors, or propel it into areas where it has an unfair edge over rivals.”
“Money-making ventures also raise ethical questions,” the magazine says. “Society forgives taxes from the country’s 1.1 million non-profit organizations because their missions achieve some social good. Why should such groups be allowed to use a brand built with taxpayer dollars to enrich shareholders?”
