Gates calls for capitalism to change

In his farewell address as president in January 1961, Dwight Eisenhower issued a warning about the “military-industrial complex.”

It took a retired career military officer to see the danger posed by the escalating alliance of the military and industry.

Last week, at the World Economic Forum in Davos, Switzerland, Microsoft Chairman Bill Gates scolded capitalism for not doing more to address the needs of the world’s poor.

Gates, one of the world’s wealthiest individuals, built his fortune in the marketplace of capitalism.

And as he conceded to The Wall Street Journal, “we were not focused on the needs of the neediest” as Microsoft built itself into a global behemoth.

Now, Gates says companies should undertake enterprises that create products and services for the poor.

Corporations also must recognize, he says, that progress in technology, health care and education tend to further enrich the wealthy while skipping the poor.

Gates’ call for changing capitalism’s mindset likely will not persuade those who believe corporations violate their duty to shareholders by building social and environmental goals into their business bottom line.

But as research repeatedly has shown, companies that make it their business to do good are more attractive to investors, customers, vendors and employees than companies that do not.

Communities, including the global community, sink or swim together.

And with nearly three billion people throughout the world living on less than $2 a day, and 36.5 million Americans living in poverty, our future depends on free enterprise that focuses its innovative energy on a “triple bottom line” that recognizes the interconnectedness of social, environmental and economic outcomes.

By seeking and investing in business and social strategies to help the poor help themselves, corporation help create stronger communities and markets that benefit the common good.

Bill Gates calls the corporate strategy he advocates “creative capitalism.”

You could just call it common sense.

Google searches for philanthropic results

The launch of Google.org, the ambitious philanthropic arm of web-search behemoth Google that, as The Wall Street Journal reports, is an unusual hybrid of nonprofit and for-profit social enterprise, is good news for the charitable marketplace.

That marketplace is changing, thanks to a new generation of givers outside the mainstream of traditional philanthropy that want get involved in different ways and that want results that can be measured.

Many of those givers are applying to philanthropy the know-how and resources they developed in the information-technology sector and other emerging industries, and in some cases, like Bill Gates and Google, the magnitude of those resources is unprecedented.

And many givers, including those with modest wealth, are pooling their resources to create powerful assets for change.

All this is good news because the charitable marketplace needs new energy, vision and enterprise.

Nonprofits and givers are America’s unsung heroes, devoting their time, know-how, money, connections and passion to fixing social problems.

But because they are unsung, and often invisible, nonprofits typically struggle to deliver services effectively, secure the support they need, and sustain themselves financially.

Perpetuating that struggle is a rigid set of rules, created and enforced by foundations, and the nonprofit trade groups and consultants that depend on foundation dollars, that burden nonprofits with paperwork, make them jump through funders’ hoops, and limit nonprofits’ freedom to be innovative and enterprising.

While organized philanthropy is quick to pay lip service to change and collaboration, it typically fails to truly practice, value or encourage it.

Because of Google’s size and influence, Google.org may help to raise the sights of foundations, trade groups and consultants.

Blinded with the need to perpetuate its own legacy and its control of the charitable marketplace, much of organized philanthropy is stale and stuck in a rut.

But new philanthropy, like Google.org, is taking a fresh looking beyond business as usual to find the most effective ways of putting philanthropic resources to innovative and collaborative use to create smart solutions, often mixing nonprofit with for-profit and government resources, to heal and repair our communities.

The charitable marketplace is strong because it is diverse, giving a broad range of nonprofits and philanthropies room to test their strategies.

Because of the wealth it controls, organized philanthropy exercises market power that does not reflect its effectiveness.

The growth of new philanthropy adds vital competition and diversity to the charitable marketplace, increasing its ability to produce effective solutions to our most urgent social problems.

Nonprofits need to communicate better

Nonprofits must work harder to tell their story.

Securing the resources they need to sustain themselves and make a difference in addressing social problems depends on truly engaging a broad range of constituents, including board, staff, volunteers, givers and partners, including government, business and other nonprofits.

And effective communications lies at the heart at the job of engaging all those constituents.

So nonprofits need to boil their story down to basics and learn how to tell it simply and clearly.

Nonprofits need to be able to measure their impact, and say how their work makes a difference in the lives of people and communities.

Nonprofits need to prepare their staff, board and other partners to champion their cause.

Nonprofits need to develop relations with the media, a powerful vehicle for reaching a broad audience.

Nonprofits need to become more effective advocates on public-policy issues that affect both the charitable marketplace and the clients nonprofits serve.

And nonprofits need to persuade institutional and individual givers to invest in helping them strengthen their ability to communicate.

The message of nonprofits, and the skill with which they communicate it, is critical to their mission.

Social change depends on civic leadership

As the Iowa caucuses clearly showed, Americans are hungry for change.

Yet while a new president can set the tone for change, truly fixing what is wrong in America depends on the often-unsung work of the charitable marketplace, which itself needs fixing.

In addition to serve as key players in addressing urgent social needs, nonprofits, institutional philanthropy and individual givers can act as civic society’s enterprising arm, investing in and brokering the kind of partnerships critical to fixing the flawed public policies underlying our most serious social problems.

Effectively playing those roles, however, requires leadership, both among those working in the charitable marketplace, and on the part of the politicians who are tripping over one another in this intense political season to claim the title of change agent.

While it too often proves to be intrusive, dysfunctional and counterproductive, government actually can serve as a positive force in restoring fairness, vitality and independence to the charitable marketplace.

Big foundations, along with the nonprofit trade groups and consultants that depend on those foundations’ support and do their bidding, claim the charitable marketplace can police itself.

But an unregulated marketplace simply leaves the big foundations free to continue their ham-fisted bullying of nonprofits without having to account for the unfettered power they exercise, and often abuse, in return for the tax-exempt status they enjoy.

If the presidential candidates who claim to be change agents truly want fix what is wrong, they should be speaking out for changes in the way government regulates and invests in the charitable marketplace, and partners with nonprofits and philanthropic organizations.

Government should require institutional funders to be more open about their operations and activities, and to pay out a bigger share of their tax-exempt assets.

Government also should set aside tax revenue to match contributions by private philanthropy to funding pools that would be earmarked for investment in building the operating capacity of nonprofits.

And politicians should be much more outspoken and visionary about the partnerships that government should create with nonprofits and business that are essential for addressing our most serious social problems.

Instead of interfering with social and economic progress, government should be creating incentives for nonprofits and business to foster progress.

For their part, people working in the charitable marketplace must take the lead in putting their own house in order.

To be more effective at addressing urgent social needs and their root causes, nonprofits need boards that are more engaged in setting goals and strategies, securing resources, forming partnerships and gauging impact.

Foundations need, on their own, to pay out a bigger share of their assets, invest more in helping nonprofits strengthen their operations and services, and be more open about their work.

Corporate-giving programs need to walk their talk: A recent survey by the Center for Corporate Citizenship at Boston College found that while 60 percent of executives surveyed say corporate citizenship is a big part of their business strategy, only 39 percent actually make it part of their business planning process, and just 25 percent give an individual or team the job of handling citizenship issues.

Individual givers also can exercise greater impact by getting more involved in the causes they support, contributing not only their dollars but also their time, know-how and connections.

And groups such as community foundations, United Ways and state associations of nonprofits that claim to serve as conveners and voices for change need to move beyond their words and truly push for the investment and partnerships needed to make change happen.

In our diverse and independent society, fostering an effective charitable marketplace will depend on nonprofits, institutional funders, individual givers and political leaders who are smart, engaged and collaborative.