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Why do charities exist?

About DJC

The older I get, the less I know and the more inquisitive I get.

Unfortunately, despite a lifelong search, most of the answers elude me. That said, I love to ask the questions and fuel the debates that will ultimately lead us all to a better understanding of the big issues in life, the universe and everything.

They say that we spend 98% of our lives in our head. I for one would like to use that time as effectively as possible.

Should charities exist for the communities they serve and act accordingly, no matter the ramifications? I say yes!

I have been a member of a significant number of not-for-profit boards. At the end of a recent board meeting, a co-director that I often disagree with (there are a few) suggested that ‘while we are often not on the same page, we both have the same objective’.

The author believes the merger of many charities would be in the best interests of the needy.

The author believes the merger of many charities would be in the best interests of the needy. Picture: iStock

After initially responding flippantly, I used the long drive home to ponder her suggestion.

From way of background, please note that while I often disagree with this co-director, she is a woman of integrity, passion and pure motives. I do not question her sincerity, contribution or motives at all!

That said, while she was right in suggesting that we are often on different pages, she was almost certainly wrong in suggesting that we have the same objective. I suspect that while we both have a noble and perfectly valid objective, they are not the same objective.

I could be wrong, but I believe her objective relates to the health of the organisation that we are both on the board of. Again, I could be wrong but, largely consistent with the expectations of ASIC, my co-director views her role as involving governance and the development of strategy to ensure the long-term survival and success of the charity.

Perhaps inconsistent with the expectations of ASIC, I can say with some confidence that this is not my objective. Further, I believe her objective is more consistent with that of a company director than a director of a not-for-profit.

I believe a business exists for its shareholders and that every decision made by the board, and each of its directors, should be consistent with the best interests of those shareholders. As a company director, I am responsible for working with other directors to build a healthy business that can maximise those returns.

In business, the priority should be those shareholders.

But as a director of a charity (and some not-for-profits), I believe that my responsibility is to work with my co-directors and anyone else who may help to further the interests of those in need – the people that the charity was established to serve. Everything we do should be in the best interests of those people and their community.

In charity, the priority should be those users of the service.

This difference is more than cosmetic and much more than semantic. It goes to the heart of what charity should be.

The difference here may best be demonstrated thus.

The minute that selling a business is in the best interest of a shareholder, it should be sold, regardless of the impact on the customer. Equally, the minute that closing a charity is in the best interest of the community it serves, it should be closed, regardless of the impact on other stakeholders – including the board.

I believe there are far too many charities in Australia and that the merger of many would be in the best interests of the needy, saving money and releasing more funds for critical services. But charities continually resist such mergers and other actions that threaten their stand-alone existence – regardless of the benefits to the community base.

I believe that if a charity folding and passing its money on to another provider is in the best interests of the needy, this should be done. If it is in the best interests of customers, it should be done.

But the fact is, few charities will do this. Most will fight hard to survive no matter what is best for customers. Many charities view other charities as competitors. This thinking, while appropriate for commercial enterprises, is entirely inappropriate in the not-for-profit sector.

This thinking pervades many not-for-profits, including hospitals and schools. They are focused on their survival and heath when they should be focused on what will be in the best interests of the community. At the same time, they are busy rationalising this behaviour, saying to themselves that they are essential when they don't know whether this is so.

Charities should be focused 100% on what is best for their community and should be ready to sacrifice themselves whenever that is in that community's best interest. Businesses are, of course, quite different.

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