Recently, due to a series of reports on rising salaries for charity executives, multiple big-name charities – such as disaster relief group Save the Children – have come under fire for the mismanagement of funds. This accusation is compounded by the claim that many of these charities also engage in so-called ‘unethical’ investment; Comic Relief, in a striking BBC exposé, was revealed to have invested in companies that manufacture arms, cigarettes, and alcohol.
These two factors ostensibly point to the over-bureaucratization of charities and the prioritization of the corporate mission – i.e. stay in the black – above the supposed charitable aim. However, we must put these two pieces of information in perspective: in order to actually be helpful, charities have to be profitable, so that they can fund long-term, successful projects in various parts of the globe.
They cannot run on donations alone – the conception that money from individuals or groups is sufficient for the successful execution of developmental projects is manifestly unrealistic. In or- der to stay solvent, and make more than merely a marginal difference, charities must both be able to hire adept managers and give them the funds with which to achieve significant results.
In the United Kingdom, a little over half of the population donates to charity, with an average of £10 a month given to various charitable organisations. Annually, then, British adults do- nate £9.3 billion to charity; most of this money goes to huge, big-name charities – such as Cancer Research UK, Oxfam, and NSPCC (National Society for the Prevention of Cruelty to Children), which sponsor considerable research or large national projects. These chari- ties work incredibly hard to secure both consistent voluntary and ‘legacy’ donations (in the latter, people a sum of money or portion of their estate in their wills), and yet they only form 1 per cent of the UK’s 160,000 charities – they may be able to subsist on mostly donations, but how can the rest stay in the black?
Smart investment is the only strategy. The UK Charity Commission, which oversees Britain’s 160,000 charities, mandates that charity trustees make safe investments that produce sizeable returns; hence, money must be placed in large, multifaceted companies which provide funding for a variety of products and projects. Comic Relief was lambasted for its investment in, among others, BAE Systems, a large industrial arms manufacturer. Yet how can one avoid contact with large companies if one wants to make significant returns?
These charities can invest in small, independent coffee shops or organic bee farms, but that will not produce the revenue needed for substantial aid; in order to obtain the funds to actually help people, charities must invest in big business.
Furthermore, investment and organization requires leaders that are experienced and accomplished; high salaries are necessary to appeal to talented people who can maintain and improve a high-powered charity. Recently, William Shawcross, the chairman of the Charity Commission, lambasted large charities for supposed over-payment of executives, claiming that they brought charitable companies into ‘disrepute.’
However, the only way for large charities such as Save the Children to both organize helpful projects and keep themselves afloat is for the most able managers to be scouted and given appropriate compensation.
Gifted executives would not opt to run charitable enterprises over for-profit companies; a propensity towards philanthropy must be supplemented by real, financial incentive.
St Andrews students are quite philanthropic in their activities. Every year we have an assortment of fundraisers, taking various forms such as balls, fashion shows and music festivals that serve to furnish a respective charity. Of course, at these events the actual ‘donation’ derives from ticket sales. For the actual event-goer, charitable contribution is a passive experience. For those that choose to make a more active donation, there is a choice. Many people donate monthly or annually to a specific charity. For those that prefer to supplement our ticket based donations with cash or check, the question is: which charity? Lately allegations have arisen, and not without some basis, that have implicated several large charities in the mishandling and mismanagement of donation money.
Most notably amongst these has been the Comic Relief scandal. Comic Relief apparently invested some of their funds in companies that manu-acture weapons, cigarettes, and alcohol. To say the least, the ethical legitimacy of these financial holdings is questionable.
Certainly some people have criticized the group’s investments and, perhaps, rightly so. Investment in weapons manufacturing would appear, at first glance, to contradict Comic Relief’s oath to support ‘people in conflict.’
I am inclined to agree that a charity’s investments must be of a good ethical judgment. At the minimum, they must be in accordance with the charity’s pledges. If you disagree with a charity’s investments, you have every right not to add to their principle.
However, I think there is another case to be made for not donating to ‘big money’ charities that does not involve the ethical implications of their investments. Rather, I think there is an argument to be made for choosing to make donations to charities which do not have their own investment fund.
These charities, which have no means of independent finance, simply need donations a bit more. This is not to say that big money charities would not put your pound to good use, on the contrary, they can achieve widespread results for their causes that they sup- port. This is to say that your pound may go further within the organization when it is given to a smaller charity.
Consider the following: while there are 163,000 charities registered in the UK, approximately 68,658 of these have an annual turnover of £10,000 or less. While the annual income of the UK charities sector is listed at approximately £61 billion, those same 68,856 charities account for less than half of a percent of that £61 billion. While many of these charities’ annual incomes sit substantially below the £10,000, Comic Relief’s assets alone are worth £135 million.
Charities such as Comic Relief can have a massive impact. However, smaller charities that operative more locally can have just as powerful an effect on the people they work for. In order to do this, lacking any funds or investments, they require donation.
As my colleague has detailed, charities are required by law to invest in lucrative, stable companies. While there is nothing immoral about these conditions, the manner that they have been interpreted by Comic Relief is problematic.
Ignoring that, however, still presents the donor with a choice: to go big or small. And while big charities can have the largest impact in terms of quantity, i.e. the number of mouths fed or people clothed, smaller charities make just as important of a contribu- tion. The people they feed, the children they clothe, will appreciate your donation just as much.
Furthermore, high executive fees will not be a problem – small charities are noted for giving modest pay to their executives, who realize they are working for a greater good, and for whom that is enough of a ‘real’ incentive – they do not need a six-figure salary to be motivated to help those in need. Big charities may have a huge impact, but your pound will likely be going into the pockets of some high-tier exec, rather than towards the building of a well, or the provision of food.
With great power comes great inflexibility as well; large charities will not be nearly as likely to innovate if their system is too expensive or inef- fective, while smaller charities will accept change if that helps both their own growth and the success of their projects.