• Home
  • About
    • About this Blog
    • About Andrew Taylor
    • Contact
  • Subscribe
  • Other AJBlogs
  • ArtsJournal

The Artful Manager

Andrew Taylor on the business of arts & culture

Philanthropic equity

September 19, 2013 by Andrew Taylor

Philanthropic Equity

SOURCE: Flickr user JD Hancock

The nonprofit organization has always had at least one missing hammer in its toolbox, both by design and by definition. That missing tool is equity capital, the kind of investment and investor that provides economic resources in exchange for ownership.

In a capitalist system, driven to a large degree by private capital and private ownership, nonprofit organizations are designed to do a different kind of work. To promote and preserve that kind of work, equity capital is off the table. The vast majority of tax-exempt cultural organizations are structured as non-stock corporations, which means they are not owned by anyone, but held in the public trust.

From many angles, the lack of equity capital is a feature, not a flaw. But from certain angles, it’s a structural barrier to nonprofit health, vitality, scale, and scope. In recent posts, both Clara Miller and Diane Ragsdale explore that barrier in elegant and insightful ways.

Clara Miller attacks the issue head-on, by naming and describing the hole in some detail.

Planning for, raising, and deploying equity-like capital in a nonprofit fulfills three needs that are universal for a growing or changing enterprise, regardless of tax status: 1) capital investment—separate and distinct from regular income, or revenue—when growth or change occurs; 2) the benefits of shared “ownership” and shared risk by a concerted, expanded group of investors and, potentially, supporters; and 3) the adoption of a protective rather than an exploitative role for these stakeholders (aka the equity holders ethic).

Diane Ragsdale reflects on some of the symptoms of the problem, in the struggle of foundation program officers to decide how much, how long, and how consistently they should fund a worthy nonprofit in the face of broad and complex needs.

While at [the Andrew W. Mellon Foundation] I found myself continually questioning whether it was better to provide stable support to a few over a very long period of time (forsaking all others) or to “cycle out” grantees after a reasonable period of time in order to make room for new entrants. No matter the choice, the questions that ensued were maddening: If “fewer but larger” which few given that so many worthy organizations needed support? If “spreading the wealth” then what was a “reasonable” timeline for ending support given that organizations and their projects were chronically underfunded?

Foundations are, essentially, one of many proxy investors available to support and grow public-trust organizations. But unlike equity investors, they don’t own the long-term success of the organization. They care deeply about it, of course. They want it to succeed. But their role and control around equity-like investment is fuzzy both for the donor and the recipient.

This is not to suggest that there should be traditional equity capital in nonprofits. But it does suggest we need a more specific, responsive, and intentional approach to ‘capital’ in the nonprofit world. And that capital-focused donors understand the outcomes and attributes of their work.

Filed Under: main

Comments

  1. Michael DiFonzo says

    September 21, 2013 at 11:03 pm

    Great piece Andrew! As always brilliant and well stated.

  2. Rebecca Thomas says

    September 27, 2013 at 3:00 pm

    Thanks for this great post. Equity itself may not be a tool available to the nonprofit arts sector, but we need to introduce an “equity ethic” in our grantmaking. There are already a few examples of equity-minded funders in the arts sector. The Doris Duke Charitable Foundation, in partnership with Nonprofit Finance Fund, has invested flexible, multi-year, equity-like capital in ten performing arts organizations to support their long-term artistic and financial health. We don’t “own” the participating grantees’ eventual success or failure, but our capital (or philanthropic equity) has supported their deliberate, measurable change at the enterprise level. A handful of organizations are already generating financial returns that, instead of being returned to shareholders, can be reinvested in the future vitality of the art.

About Andrew Taylor

Andrew Taylor is a faculty member in American University's Arts Management Program in Washington, DC. [Read More …]

ArtsManaged Field Notes

#ArtsManaged logoAndrew Taylor also publishes a weekly email newsletter, ArtsManaged Field Notes, on Arts Management practice. The most recent notes are listed below.

RSS ArtsManaged Field Notes

  • The sneaky surprise of new arts buildings May 27, 2025
    That shiny new arts facility is full of promise and potential, but also unexpected and unrelenting expense.
  • The one and the many of board service May 20, 2025
    How do nonprofit boards balance individual impulse with collective resolve?
  • The relentless rise of pseudo-productivity May 13, 2025
    Visible activity and physical exhaustion are not useful measures of valuable work.
  • The strategy screen May 6, 2025
    A strong strategy demands a clear job description
  • What is Arts Management? April 29, 2025
    The practice of aggregating and animating people, stuff, and money toward expressive ends.

Artful Manager: The Book!

The Artful Manager BookFifty provocations, inquiries, and insights on the business of arts and culture, available in
paperback, Kindle, or Apple Books formats.

Recent Comments

  • Barry Hessenius on Business in service of beauty: “An enormous loss. Diane changed the discourse on culture – its aspirations, its modus operandi, its assumptions. A brilliant thought…” Jan 19, 18:58
  • Sunil Iyengar on Business in service of beauty: “Thank you, Andrew. The loss is immense. Back when Diane was teaching a course called “Approaching Beauty,” to business majors…” Jan 16, 18:36
  • Michael J Rushton on Business in service of beauty: “A wonderful person and a creative thinker, this is a terrible loss. – thank you for posting this.” Jan 16, 13:18
  • Andrew Taylor on Two goals to rule them all: “Absolutely, borrow and build to your heart’s content! The idea that cultural practice BOTH reduces and samples surprise is really…” Jun 2, 18:01
  • Heather Good on Two goals to rule them all: “To “actively sample novel experiences (in safe ways) to build more resilient perception and prediction” is about as useful a…” Jun 2, 15:05

Archives

Creative Commons License
The written content of this blog is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License. Images are not covered under this license, but are linked (whenever possible) to their original author.

an ArtsJournal blog

Copyright © 2025 · Magazine Pro Theme on Genesis Framework · WordPress · Log in