Philanthropy and Social Enterprise: Should they Mix?

There has long been a spirited debate over whether philanthropy should have a place in social enterprise. The argument heated up again last week at a conference sponsored by New York University's Heyman Center on Philanthropy and Fundraising called "Charities on Trial."

There, New York Times philanthropy journalist Stephanie Strom questioned the blurring of lines in the social change space. Perhaps one of the most unsettling behavioral trends by today's philanthropy donors, Strom told conferees, is their growing willingness to funnel their tax-exempt dollars to support for-profit programs- and sometimes, at the expense of the nonprofit organizations they used to support.

"Newer forms of philanthropy," she said, "have been quick to promote the use of for-profit models for social good, and the case they make is persuasive. Why shouldn't GE get some sort of tax break for creating a system that better enables the management of health records, a system that would benefit nonprofit hospitals? ...When Citibank provides mortgage financing to low-income families, why shouldn't that portion of its operations be eligible for the same tax treatment as a local community loan bank gets?"

Trouble is, Strom told the NYU conference, some of the projects seeking funding on some of the new online giving sites -- such as Global Giving, for example -- are corporate programs. Donors making gifts to support those projects "are, effectively, underwriting corporate social responsibility," Strom says. "In other words, companies are using gifts for which a donor has received a tax deduction to finance their corporate philanthropy - something they used to have to fund out of their profit streams." Meanwhile, she says, the Bill & Melinda Gates Foundation, among other private grantmakers, is starting to devote a small portion of its grantmaking to partnerships with for-profit companies ranging from MTV to JPMorgan Chase and Merck, Strom says.

The topic will get debated again at this fall's Social Capital Markets conference, a place where investors in the business-for-good space are starting to converge. For the first time this year, there will be a Tactical Philanthropy track to look at how philanthropy is changing in response to the expansion in the types of groups and people now working for change. That track is being developed in partnership with Tactical Philanthropy, Sean Stannard-Stockton's philanthropic advisory services firm, which grew out of his blog of the same name.

What do you think? Does philanthropy have a place in social enterprise? Are new tax rules required to keep it all kosher? Where is collaboration needed? Let us hear from you.