The idea of using Philanthropic funds for the purchase or funding of a Corporation may seem unethical at first glance. It may be that some people would consider such an action to be illegal in nature, though it is not. It could very well be that if this was the only information available, people would avoid donating to such a foundation altogether. What if those Corporate Entities were in fact, an integral part of the Philanthropic efforts and whose “donations” in return to the foundation and the direct beneficiaries, far exceeded any costs associated with establishing said Corporate Entities?
What if, in fact, the Corporate Entity was owned by the foundation itself, and the recipients of aid were the actual shareholders of the Corporate Entity? The fact is that such systems are already in place, though most of the current efforts do not focus on beneficiary ownership of the corporate entity by the recipients of aid. What is being introduced herein is similar in nature, but focused solely on its role within the realm of Corporate Social Responsibility, providing for and giving back to the recipients of assistance.
Welcome to the world of the Incorporated Model of the Community Development and the Community Service Centers. If a definitive improvement in the lives of the recipients is indeed the final goal, along with the complete and total eradication of poverty over the course of time, welcome to the solution.
“What? What do you mean you bought a Shopping Mall with the donated funds?” The concept sounds almost farcical when expressed in such a manner, but the basic principle is not far from the variation being proposed here. In such an environment, a select group of corporate entities would be purchased, perhaps not with donated funds that were specified for other purposes, but certainly with some of the funds made available for the project.
Such practices are currently in place, though certainly not widespread or the “norm” within the fundamental principles of philanthropic investments. Certainly, none of these current examples are being operated in the same fashion either, and any real comparison effectively ends with the funding and/or purchase of the corporate entity or entities in question. Such an investment in the case being proposed here, is in reality, an actual investment in the recipients of social assistance.
The developers of this concept are constantly reminded that such actions are “illegal” … and they are in a great many instances, or would be if these arrangements had not been made prior to the investment of funding to the foundation or other organizational entity in charge of the operations and project(s). In fact, not only is this practice perfectly legal, but can be established in order to provide a long-term ROI to the philanthropic foundation(s) should they wish to pursue investment opportunities to expand their potential area of influence.
Granted, the establishment of such agreements and contracts is a bit more complex and involved, and it can even make negotiations … interesting to say the least. However, as long as there is a legal agreement or contract in place, with the specifics and the details in place, such actions are not only legal, but generally beneficial to everyone involved. While this may not be an ideal concept for granted funds, it is a viable and attractive alternative for the actual investor and especially, those investors with a focus on humanitarian, environmental and/or other social pursuits.
If the investors only knew that their funds would be utilized for the purchase of corporate interests, there is little doubt that they would be more than just hesitant to donate. However, if all of the facts are properly laid out during the negotiations for project funding, such alternatives are often preferential to more traditional expenditures. This is even more true when the normal course of business for the project, whatever it may be, would normally require ongoing donations and fundraising efforts (and related expenditures) if they were to remain in business.
Under the guidelines as being presented herein, these issues are no longer any concern and the only real questions are related to how best utilize the positive proceeds that are generated. When donors and investors discover that the corporate proceeds will ensure the continued funding and expansion of the programs they are seeking to support, they are often willing to consider such an option without too much of a challenge. When the investor sees the extent to which these corporate entities will positively impact the overall project(s) and the recipients of assistance, in addition to potentially paying for future expansions and growth, it is generally not very difficult to command their full attention.
These corporate entities are an integral and important part of the overall project strategy. Not only do they allow for the continuation of funding from within the original project, but additional funds can be made available for growth and expansion as well. Further efforts from these corporate entities provide ample opportunities for in-kind contributions back to the foundation and to the recipients of assistance.
The corporate entities should provide a direct and tangible benefit not only to the project management group, but also to the recipients of social assistance within the programs to be established by the project(s). The corporate entities should share a role not only in the economic sustainability of the overall project, but also in the humanitarian and even, to some degree, in the environmental areas of concern for sustainable development. In short, the Corporations are, in these cases, as much a part of the charitable works as the foundations in charge of the operations of the projects are themselves.
Indeed, in some cases, these corporate entities will in fact, be owned by the foundation itself. In other cases, these corporate interests (for lack of a better term in this case) will be owned by a Trust, established for and on behalf of the development and to further its economic and financial, humanitarian, sociological and environmental pursuits. Whether the organizational structure in charge of the corporate entities is a faith based organization, a private trust or even a private hedge fund or yet another corporate body, it will, to some degree, function in much the same way as many corporate structures do today, though of course, there will be some major and noteworthy differences as well.
Whereas a more traditional, publicly traded corporation, will have shareholders or bondholders these corporations will be run in much the same manner, with the recipients of assistance and the organizational structure in charge of the project operations serving in the role of the shareholders.
In short, these corporate entities will not function much differently than any other publicly traded corporation. The corporate or incorporated structure is already in place, though certain changes will have to be made in order to make them more effective. As the funding from the foundation will provide the capital investments for the corporate entity, the foundation does little more than claim its rightful place as a majority shareholder.
The foundation will have a place on the board of directors, as will a member of the Ombudsman Program and the Citizen Review Board as will be established within the project parameters. The corporate entities will still be held to account by the Board of Directors who will be held to account by the shareholders. (Both the Ombudsman Program and the Citizen Review Boards will hold their representatives to direct account for their decisions, but that will be laid out in a separate article) However, rather than reverting the corporate proceeds back to the shareholders in the form of dividends, these funds will be invested in trust accounts established within a private hedge fund for supplementing humanitarian and infrastructure projects in addition to the provision of the basic necessities of life for members within the community development.
These funds will be strategically invested through the Hedge Fund in order to generate further financial gains and returns that will be reinvested within the respective project infrastructural systems. These investments will include the complete subsidization of the educational institutions, medical and health care facilities, sociological support and assistance programs and a host of other programs as will be determined on an individual basis. Further efforts will be expanded to include research and development, automation and a host of other technologies for the direct benefit of the corporate interests, the community and the individual1.
None of these practices will have any real bearing on the overall management and structure of the corporation, though their by-laws, articles of agreement and other governing principles will have to be individually tailored to ensure a continued and mutually beneficial cooperative effort by and between the corporate entity and foundations and to allow each to keep the other in check and maintaining a balanced system within the project(s). “Excess” funding will be utilized for the expansion of existing programs, the implementation of new programs and to more fully fund research, development and other laboratory and real-world systems for the purposes of further expanding sustainable growth and development
It needs to be pointed out that this is all part of the Incorporated Structure Community Developments and not the Community Land Trust Developments. While the two different types of systems function by and large, in much the same capacity and with the same end-result in mind, the differences are distinct and relevant enough to merit two separate classes of identification for the Community Developments2.
The concept behind the Incorporated Model of Community Developments is to integrate Sustainable Development with current standards and practices in such a manner so as to cause little to any disruption within the current systems. As the systems become more wholly recognized, it is believed that the transition into the Community Land Trust Developments and other alternative options will become increasingly viable.
As corporate structures and even as Corporate Social Responsibility take increasingly relevant and meaningful roles in the establishment of sustainable development and business across the globe, these other concepts should become increasingly viable and less radical alternatives to the socially accepted standards and norms of the day. The Incorporated Model of Community Developments allows for the creation of a wholly sustainable development that not only funds its continued operations, growth and expansion, but also provides a positive and long-term financial return for the initial investors more in line with capital and equity investments, and not merely (or constantly) seeking out yet another donor.
Some of the more popular “charities” in the world today, routinely utilize between seventy and ninety percent of all donations for “Administrative Costs”. In short, this means that every time someone gives them one US dollar, seventy to ninety percent stays within the foundation for salaries or is spent to get that next person to give the same US dollar. Many of the funding principles utilized by some of the more major “charities” are in fact, illegal in nature in much of the world, though since the vast majority of their donations come from the industrialized nations where such criminal action is not in fact or by law, criminal action … they routinely get away with perpetuating this outrageous behavior.
Imagine someone buying a thirty-two ounce super-sappy-’spresso mix at their favorite coffee mill and coming out with just over three ounces of coffee? People would be outraged if such actions were perpetrated against them directly, but laud the actions of others who are getting away with something that, while not illegal by definition, is certainly unethical and morally wrong and every bit as egregious in every sense of these words. There is absolutely nothing whatsoever sustainable about such a business model.
Corporate Social Responsibility and Sustainable Development should not be simple catch-phrases or “triggers”. Nearly one-half of the population of the world lives in abject poverty, a good portion of them within the levels of “extreme” poverty. There is plenty of evidence to prove that the current methods in place do not benefit very many people outside of the foundations themselves. The current business models have virtually replaced the concerns of those most in need of support and assistance, with the needs and desires of the foundations in charge of these operations.
If such accusations seem harsh to the average reader, it should also be noted that these are not mere applications, but proven, verifiable facts about the ongoing programs that are exacerbating the current problems at the expense of those whom are most desperately in need of hope and a hand up! When everything is said and done, there may be those people who still consider utilizing an investment in projects to establish corporate entities to be criminal, if not unethical and immoral.
However, in reality, such a practice is not criminal and it is certainly not any worse than a system that allows for the foundation to enrich itself while at the same time abetting in the continuation of the very same conditions that allow for poverty to remain a systemic and cyclical stain on the very fabric of society. For the more discerning investor, the real question needs to be the relevant purpose of the investment, even when it is humanitarian in nature.
Should the investor be looking for investments that will provide it with little more than a tax-benefit and a touch of emotional indigestion as they sit there gloating, feeling good about their efforts? Or should the investor be looking for more viable alternatives that provide immediate and permanent support and assistance for those that need it, while at the same time providing for a long-term return for the recipients of assistance in addition to positive returns for the investor? When asked in such a way, the real solution seems quite clear and simple indeed.
1The idea of automation still creates a substantial level of controversy, but with such a system in place, not only could all jobs be fully automated, but the individuals would retain their positions as consumers and would directly benefit from the proceeds. While there is a lot of controversy, the technological revolution is not some distant, abstract science fiction construct or “right around the corner”, but here and now, with us today. We can either prepare to work within the new changes within the up and coming economic and financial systems or we can fall by the wayside at a great expense in human lives and quality of life. The system being proposed here embraces automation and the ability of humans to spend more time enjoying a better quality of life, while at the same time continuing to provide financial incentive to encourage the individual to seek out a better life, and not becoming dependent on the system(s) as will become the new norm.
2The author of this article is the primary proponent of the Incorporated Model of Community Developments for Sustainable Development, he is not the primary resource for the Community Land Trust Developments. Both systems are designed to be wholly and completely sustainable, though it remains the opinion of the author alone, not necessarily reflective of the beliefs of any organizations he may be part of, that a system such as the Incorporated Model is substantially easier to integrate into current societal needs and with as little disruption as possible to any existing economic and/or financial system(s). It is hoped that this type of sustainable development will lead to a more enlightened and beneficial method of conducting business that will ultimately allow for the introduction of what are, in view of the current systems in place, more “radical” ideas that may disrupt the current system but still need to be introduced as part of the long-term solutions. The problems facing the world today are complex and systemic in nature and evolve over the course of time. It is imperative that the solutions be likewise complex and systemic in nature, whole and complete, but capable of being adaptive in nature, so as to evolve with the times and with the current circumstances at any given point in time.