Nonprofit Law Blog: Independent Sector Annual Conference 2012

Back home after a full day at the 2012 Independent Sector Annual Conference: Game Changers. Here's a recap of my day listening in on great conversations, contributing with questions, and connecting with new and old friends and acquaintences.

Creating and Implementing Game Changing Strategies
David La Piana, La Piana Consulting

David identified when there are possibilities for game changing decisions: (1) when there's an opportunity to take a leap, and (2) when the current business model isn't working. He also used the "five frogs on a log" riddle to illustrate there's a difference between deciding and doing. To move from deciding to doing, you first need pain. David's discussion included a brief descipription of the amazing evolution of The AIDS Healthcare Foundation from a local hospice in L.A. to a ?global organization providing cutting-edge medicine and advocacy to over 130,000 people in 22 countries whose mission is to rid the world of AIDS. He also provided some practical leadership advice: focus on the 20% of the employees who are early adopters most supportive of the game changing strategy and not on the 20% who are always going to be opposed to any big change. The group then discussed the importance of mobilizing local communities post-election while there was still momentum. When I asked about the risks of making game changing decisions, David responded that nonprofit leaders must think big but should always pilot risky projects because, unlike in the venture capital world, nonprofits can often not afford big projects to fail.

Blueprint 2013 ? What?s the Forecast for Philanthropy and the New Social Economy?
Lucy Bernholz, Arabella Advisors / Philanthropy 2173

We were treated to an advance preview of Lucy's annual forecast, which will be available on January 1 for free (thanks in part to the Foundation Center)! To begin, Lucy reiterated a question she admits to asking persistently year after year: what's public, what's private, and who decides? With respect to the use of private resources to do social good, nonprofits are not in the sandbox alone. Joining them are social businesses, impact investors, political spenders, and informally affiliated groups of individuals (e.g., hackers). What's unknown - the relative contributions of each. The audience questioned the impact of private monies on the election, perhaps noting the failures of American Crossroads (Super PAC) and Crossroads GPS (501(c)(4) social welfare organization). But Lucy advised us to check out the Sunlight Foundation's site for a fuller picture. Two technology trends to note: (1) Square, and (2) Data sharing?(but the required culture change must catch up to the tech).

Keynote - Game On: Reality after the Rhetoric
Matt Miller, Washington Post

So many interesting tweetable observations (thanks to Independent Sector, Lucy Bernholz, Rafael Lopez, and Sarah Beaulieu):

• Upward mobility, economic security and equality are critical to America's path forward. U.S. should be leading the way.
• U.S. being behind France in upward mobility is like France being behind U.S. in croissants and afternoon sex.
• Main wild card right now is debt limit (not fiscal cliff); need to say debt limit is unconstitutional.
• "Filibuster reform" is the least sexy, most important issue in the U.S. Senate.
• Simpson-Bowles proposal assumes fed spending at 21% GDP. Not possible with our current population.
• If we don't take care of Medicare, we will make it impossible for money to be spent on other social services.?Progressives need to "demagogue responsibly" on Medicare.

Reimagining Ways to Finance the Sector
Moderator: Laura Callanan, McKinsey & Company

Panelists: Lucy Bernholz; Paula Goldman, Omidyar Network; Julie Mikuta, New Schools Venture Fund; Conan Smith, Michigan Suburbs Alliance; Dan Winterson, Gordon and Betty Moore Foundation

This session focused on alternative ways to think about funding the work of the nonprofit sector, including impact investing (using a broad definition encompassing mission-related investing and program-related investments), venture philanthropy, and social impact bonds (SIBs). A good resource on SIBs from McKinsey is available here. "SIBs are structured to get proven solutions to scale with no risk to public budgets?governments pay for the solutions only if they work. But despite this risk shifting, a SIB?s structure involves several actors?each charging a fee or return. As a result, this tool is a more expensive way to scale programs than if government simply contracted directly with a service provider. These additional costs will be worth it in many cases, but SIBs won?t be suited to every situation." - McKinsey on Society

Blending Profit and Purpose: Game Changer?
Moderator: Paul Clolery, The NonProfit Times

Panelists: Phil Buchanan, The Center for Effective Philanthropy; Jan Masaoka, California Association of Nonprofits; Marc Thibault, American Sustainable Business Council; Robert Wexler, Adler & Colvin

This session was structured as a debate over?new for?profit vehicles and ventures for serving the public good (so-called "hybrid organizations" like the benefit corporation). Jan and Phil argued against the hybrids stating they were unnecessary vehicles that were too easily used for greenwashing. From this perspective, the danger of hybrids is magnified because of the efforts to give them tax benefits and public contracting preferences on par with charitable nonprofits. Rob and Marc countered that hybrids are necessary to fill a hole in the choice of legal structures for companies that wanted to engage in public good without necessarily focusing only on shareholder interests. Rob cited the 2010 eBay vs. Newmark case for the proposition that corporate actions must value shareholders, but this case leaves much room for directors who still have "close to a free hand when considering matters that are most likely to have broader social or environmental implications? how products are manufactured, marketed and sold, corporate investments, fair trade, employment and supplier issues" (Mark A. Underberg -?Harvard Law School Forum on Corporate Governance and Financial Regulation). Playing devil's advocate, I questioned whether the benefit corporation was the right type of hybrid for receiving any tax benefits or public contract preferences; perhaps a new type of hybrid holding assets in charitable trust (and subject to Attorney General oversight) and subject to independent audits would be more appropriate for such benefits. Such hybrid might otherwise not be able to meet all of the requirements of 501(c)(3) but would go further on the charitable side of the spectrum of the hybrids (perhaps even more so than the L3C).

Looking forward to day 2 of the Conference.

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