Social-Impact Bonds Could Complement Other Forms of Giving

To the Editor:

Largely missing from the dialogue about social-impact bonds has been the perspective of a key stakeholder group: service providers.

For nonprofits, the bonds offer not only newfound access to investment capital, but also the chance to highlight their effectiveness and ability to measure outcomes. Mark Rosenman’s cautionary account of the potential negative consequences of social-impact bonds (“Commercializing Human Services Is a Dangerous Move,” Opinion, June 30) loses sight of the fiscal realities facing nonprofits and fails to recognize the need for new resource pools.

The social-investment market has the potential to inject billions of dollars into efforts to tackle some of our biggest social problems. Mr. Rosenman’s portrayal of how the bonds work in practice contains several misrepresentations.

Mr. Rosenman states that social-impact bonds and other “market models” are meant to substitute traditional forms of altruism, philanthropy, and government responsibility for the common good—suggesting that the bonds threaten to dissuade other forms of giving.

But the bonds represent a necessary supplement for what have become insufficient revenue streams to address increased demands for costly services.

Agencies in fields such as prisoner re-entry, where service provision yields measurable reductions in public spending, must embrace the social-investment model and advocate for its adoption. With the proven ability to reduce public costs related to criminal recidivism, agencies like the Doe Fund and similarly successful organizations are well positioned to play a leading role in not only bringing bonds to the United States but also providing proven and effective interventions to ensure successful social outcomes, along with a financial return for investors.

Bruce Western, a Harvard University scholar who is an internationally recognized expert on crime and incarceration, studied the impact of the Doe Fund’s paid transitional work program, “Ready, Willing & Able,” in 2010. He found that the program reduces recidivism by up to nearly 60 percent and that the resulting savings in criminal-justice expenses outweigh program costs by 21 percent.

Commercial funding sources and other “business-world” concepts can lead to success for nonprofits. Mr. Rosenman’s cynical take on social entrepreneurship and aversion to for-profit ideals in the charitable sector is misguided.

Social-impact bonds or other forms of commercial financing are by no means a panacea, but we have to be open to new opportunities to garner the financial support needed to make further progress.

While we should be asking hard questions about the validity and feasibility of social-impact bonds, to write off or deride this form of funding would simply be nearsighted and irresponsible. The reality is that social programs that address these issues come at a cost. And in a down economy, resources become scarce as needs and demands increase.

If new resource markets are on the horizon, service providers must seize the opportunity and resist detractors who cling to an old-guard vision of nonprofit purity.

George McDonald

Founder and President

Doe Fund

New York, N.Y.

Bigger payouts won’t ensure risk-taking

To the Editor:

Pablo Eisenberg’s opinion piece (“As It Seeks a New Leader, Council on Foundations Must Take Risks,” July 28) urges foundations to increase their payouts and the diversity of board members.

While those steps are important, they may not necessarily support the ability of philanthropy to take risks or be more accountable and better address the pressing issues facing the communities we serve.

I would suggest two different lenses through which to view this complex issue of risk-taking in philanthropy. A recent study by the Pew Charitable Trusts shows that the wealth gap between whites and African-American and Latino minorities has widened considerably in the past quarter of a century.

Foundations can invest in narrowing this gap through greater investment in education and health-care access for communities of color, as well as in policy advocacy.

Second, the challenges facing communities and nonprofit organizations across the developing world are staggering in scale and the level of need: 2.5 billion people don’t have access to sanitation and one billion individuals don’t have access to water. Around the world one person dies from hunger every 3.5 seconds. Foundations can increase their support globally to ensure good governance, human rights, and strong civil societies.

Foundations are often guided by donor intent, mission statements, historical precedents, and economic fluctuations.

Now is the time for a collective conversation about how best to tackle the world’s problems in a way that brings together governments, businesses, philanthropy, and civil society. Philanthropy could play a pivotal role in convening such a critical conversation.

Sushma Raman

President

Southern California Grantmakers

Los Angeles

Sabbaticals can lead to staff turmoil

To the Editor:

Phyllis N. Segal and Ruth Wooden offer an interesting case for sabbaticals (“In Hectic Times, Sabbaticals for Leaders May be More Necessary Than Ever,” Opinion, July 28). However, the article focuses entirely on the leader; nothing is mentioned about the staff he or she leads. What would a leader’s sabbatical mean for them?

A leader taking a six-month sabbatical would return to a disillusioned and angry staff. The leader would have irreparably damaged his standing. In short, he would no longer be a leader. Leaders do not abandon their staffs for six months, not in good times and especially not in bad times.

Leadership is about setting the right example, building teamwork, and inspiring others.

All of these would be lost were a leader to leave his staff for six months for personal renewal. Imagine the captain of a sports team leaving his teammates, or a company commander leaving his troops. He would no longer retain the confidence and respect necessary for leadership.

The authors point out that an organization would not suffer if a leader were to take partial salary during a sabbatical and if a capable interim leader were brought in to keep the organization running. These are utilitarian arguments. They speak nothing about what truly makes an organization thrive: great leadership.

Certainly, a recharging of the batteries is healthy and necessary, for leaders and everyone else. That’s what vacation is for.

Richard Brown

Babylon, N.Y.