What If GM or AIG Were a Non-Profit?
Two big bailout stories came out today and all day I've been thinking about how both are interlocked. Most of us heard about the declared bankruptcy of GM but it was the tale of AIG* trying to recapture their charitable endowment for executive salaries and bonuses that peaked my interest the most. Fortunately my organization does not receive support of AIG and is not affected but there are dozens who are including Citymeals on Wheels. I think we can all agree that, if true, it is a despicable act of desperation. I am hoping the news reports and blogs are wrong but it got me thinking. Putting that story to one side, what if GM or AIG were treated like a charitable organization, non-profit or not-for-profit company? Would we bail them out? Would we prop up bad management for the sake of the mission? I don't think so.
At the start of this economic downturn many non-profits saw the warning signs, we began to tightening our belts and look at ways to retool and streamline project management systems. The word from many corporate boardrooms was that 'all bets are off' and to set clear guidelines for impact and expenditures. Yet as individual donations began to dry up and CSR departments began to downsize, we heard nothing either candidate to prop up these shortfalls. Knowing there would be no bailout, we became more nimble (we are 9% admin), more open to collaborate and more willing to partner with charities and social entrepreneurs with similar and/or complimentary missions. How much would have we saved if the big three had become the big one in September 2008?
Instead of installing 'a private board' of automobile executives perhaps Obama would be wiser to install successful not-for-profit leaders.
Another alternate plan that was relayed to me by multiple folks via Twitter is to go the whole hog and well beyond the Michael Moore plan. Buy GM completely, turn it into a not-just-for-profit company that builds and delivers an integrated and energy efficient public transportation system (
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*I should note that there are a number of shiny apples in AIGs executive cart. A few months back Jake deSantis resigned from AIG and donated all of his post tax bonus to charity, almost $750K. Here is his letter to Mr. Liddy. Kudos Jake.
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The confusion about AIG and GM being non profits for a long time...was the HUGE salaries everybody was making.
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Why not make banks non-profit or not for profit ?
What stops you from starting a non-profit bank? There are no laws against it. All you have to do is to actually do it. And given the current business climate it sounds like a rather feasible idea whose time has come.
Technically they were non-profits. Neither could make a profit.
They have been "non-profit" organizations for a while now.
"...it is a despicable act of desperation." No it is an act of greed.
By the way, non profits are audited every year here in New York. If we had the same rule for banks none of the mess would have happened.
I think non-profits are fine, as long as the funds for such activities are acquired through *voluntary* means. Everyone agrees with, and is ok with the fact that profits are not going to be made.
However, governments do not acquire their funds this way. They rely on taxation, which as everyone knows, is not voluntary. So when governments fund things that are non-profitable (which unfortunately is standard procedure) a double-loss to society is incurred:
Not only does the taxpayer have to give up money that he/she would have used in a more beneficial way, but the money itself is allocated by government in a non-resourceful way.
I think non-profits are ok...but they've got to be voluntary.
Exactly. I don't care how you restructure GM. You can set up GM as a pyramid ponzi organization for all I care. Call it whatever you want. Just don't FORCE me to invest in the business.
So the Police department Should be run for profit?
They use the property seisure laws from the "Drug War" to pay for their military toys, so at least they are working towards profitability...
Well in the old days, it was either Guns for Hire or bring in the Army like they did for Irish working on the C&O railroad at Harper's Ferry.... After all we don't want the Irish getting uppity...
Piqued.
Hahaha, I saw that too--wasn't going to say anything, but it did grate a little....
Wait... GM was a non-profit... it didn't make any money... ever, if you average out their losses with their earnings. That didn't stop them from ripping everybody off, of course.
If the gov't had not lent or given tens of billions to GM, the firm would have been bankrupt by now. This would have been a considerable inconvenience to many, no doubt; but by now the usable bits would have new owners, employees would have moved on, something new would be produced - a lot like what happened in the computer industry, as giant firms grew up and collapsed and reorganized over the past fifty years.
Government bailouts delayed this process of "creative destruction", making an artificially-animated zombie of GM. Now it's deep in the hole, and will probably be propped up for another decade or two.
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