The case study provided in Craig E. Johnson’s book, Ethics in the Workplace , is a moral and valuable lesson regarding the blurred vision between a for profit and a nonprofit. This example, while it may be considered severe, is an excellent one that leads the reader to more important questions. The question of whether nonprofits should operate as businesses encourages the reader to think about the pros and cons of each. If a nonprofit were to operate as a business, it would basically eliminate the unending concern about funding.
Nonprofits, operating as a business, would be able to reap the benefits of for profit companies making more money for the organization but not necessarily the mission. However, this would ultimately lead to more expenses as the budget would have to include higher amounts in staff pay, marketing, and benefits. Another con of operating as a business is taxes. Nonprofits would no longer be exempt from paying taxes and once again, the cost would greatly increase the budget.
Probably the most dangerous aspect of a nonprofit run as a business is the loss of the mission and vision. One may be concerned that the need for money and greed will usurp the original mission of the nonprofit. Should businesses operate more like nonprofits? This question is a difficult one to answer. Nonprofits exist for social justice, in many cases nonprofits pick up where the government has left off. While our economy is based on supply and demand, there is societal pressure to be charitable and giving.
If businesses were to be as charitable as a nonprofit, they would undoubtedly lose money and perhaps close due to lack of funding, yet, their sense of social justice would be fulfilled. Since there will always be consumers, thus a demand for goods and services, businesses should not operate as nonprofits. As cited in the case study in the introduction by Johnson (Johnson, Ethics in the Workplace, 2007), the Goodwill Branch in Portland, Oregon does compete on the same level as businesses in the area.
The Branch pays their top staff over $100,000 with the CEO’s salary at a whopping half a million. Yet, because they are registered as a nonprofit, they are exempt from paying taxes on goods and services, people utilizing the nonprofit get services for free, and they are able to pay their staff lower than competitive wages. If, as cited in the case study, a nonprofit competes on all levels with a for profit business, then the competition must be fair. Either the nonprofit has to begin to pay taxes or taxes for the business should be eliminated.
It is important to note, however, that the elimination of taxes would devastate the economy. When it comes to salaries, businesses definitely have the upper hand. Because businesses operate to make money, they can afford to hire only the best in the fields. Nonprofits, relying more on government funding, are unable to afford those astounding costs. Furthermore, nonprofits operate under the definition of social services. For a nonprofit to lose sight of that and pay top dollars for staff, is a vision they can not afford to lose.
Thus, executives of nonprofits should in no way be compensated or expect to be compensated at the same rate as their business counterparts. The services offered are meant to be taken advantage of by disadvantaged citizens and pay rates should reflect that mission. In the case study previously mentioned, Michael Miller, the CEO of the Goodwill Branch in Portland Oregon, is receiving a salary of $500,000 not including benefits and expenses. Moreover, some of the workers at that same branch are making below minimum wage. It is immoral for Mr.
Miller to receive such a high salary, not only because his staff is making considerably less but more importantly because the salary is not in line with the overall charitable mission of Goodwill. It is unreasonable to believe that staff pay will remain the same as a nonprofit expands. However, certain standards must be in place to substantiate higher salaries. Standards may include: overall budget of the nonprofit and allocation of funds, effective service of the nonprofit based on data taken from all available programs, how the nonprofit compares to others in its region or state, and how well they are fulfilling their mission.
The question as to whether this writer would charitably donate to the sight mentioned in the study can best be answered by weighing morals against greed. This writer believes that they would not donate to the sight unless there was documented proof that at least 90% of the donation was going to the people it was intended to help. Since this branch is more likely to document exaggerated salaries such as the CEO’s, it is unlikely a donation would be made to that particular branch.