Tuesday, May 31, 2011

California Association of Nonprofits Needs to Advocate for Social Enterprise Corporate Structures

I find it frustrating when business and non-profit leaders cling to the misconception that the American economy is a zero-sum game. For each winner in the economy there must be a corresponding loser according to this line of thinking. Unfortunately, this view misses that a growing economy with expanding efficiencies arising from new innovations allows for a growing pie of opportunity. One reason I've been such a fan of social enterprise over the last 12 years is because this sector disproves each day the idea of a zero-sum economy with its innovative activities.

But then interest group politics trots out the tired argument of the zero-sum pie once again. This time, the California Association of Nonprofits worries about legislative efforts to create new hybrid corporate structures that combine what social enterprise has always been about: social good with profitable enterprise. The nonprofit and for-profit sectors are already blending and a new corporate form would help government catch up and benefit from the social enterprise innovations.

The California Association Nonprofits fears that a new corporate structure might cause a decline in donations to nonprofits as individuals reroute their resources to these new entities. But this overlooks the fact that a new blended corporate form will grow the economic pie increasing social good beyond what the nonprofit sector can offer alone.

In my experience, social enterprise inspires a new segment of investors not engaged in traditional nonprofits. Because of their new-found involvement in social good, they are likely to also start donating to nonprofits. And those investors that are already donating to nonprofits do not stop supporting the nonprofit because of their new involvement in social enterprise.

It would be far better for the California Association of Nonprofits to recognize the shared benefits of innovation and become an advocate for new social enterprise corporate structures.

Caution must not be an excuse for inaction.

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