Chaper 15,
The chapter examines the internationalization of the nonprofit sector in the context of globalization and explores some of the reasons for the significant expansion of crossborder activities. Next the chapter focuses on the management of international nongovernmental organizations and other types of nonprofits that operate across borders. The chapter also covers the implications of globalization and cross-border activities in the fields of service delivery, humanitarian assistance, and advocacy.
KEY TERMS
global civil society ■ international NGO (INGO) ■ international philanthropy ■ transnational advocacy networks
The internationalization of the nonprofit sector is not a recent phenomenon (Anheier and Cunningham 1994). Of course, the Catholic Church and Islam have long had transnational aspirations and maintained far-reaching operations for centuries. The modern, internationally active NGO emerged from anti-slavery societies, most notably the British and Foreign Anti-Slavery Society in 1839, and from the International Committee of the Red Cross (ICRC), founded by Henri Dunant in 1864 after his experiences in the Battle of Solferino. By 1874, there were 32 INGOs (Chatfield 1997), which increased to 804 by 1950 (Tew 1963), although with significant fluctuations between 1914 and the end of World War II. What seems new, however, is the sheer scale and scope that international and supranational institutions and organizations of many kinds have achieved in recent years. In this chapter we describe the growing internationalization of the nonprofit sector and explore some of its causes. What are the key drivers behind this internationalization process and its growing momentum? What are the management and policy implications of internationalization, and what are likely future developments?
DIMENSIONS OF THE INTERNATIONALIZATION OF THE NONPROFIT SECTOR Since no comprehensive data are available on the internationalization of the nonprofit sector, we begin our analysis by presenting three related facets of globalization and philanthropy: the scale and revenue of international activities of the nonprofit sector in the US and selected countries; the rise of international nongovernmental organizations and the emergence of what has been called global civil society (Anheier et al. 2001a; Kaldor 2003); and the growth of international philanthropy.
The scale and revenue structure of nonprofit international activities
In terms of revenue structure, the internationally oriented nonprofits, as measured by the Johns Hopkins team (Salamon et al. 2003), receive 29 percent of their income through fees and charges, including membership dues, 35 percent from both national and international governmental organizations in the form of grants and reimbursements, and 36 percent through individual, foundation, and corporate donations. With volunteer input factored in as monetary equivalent, the donation component increases to 58 percent of total “revenue,” which makes the international nonprofit field the most voluntaristic and donative part of the nonprofit sector after religious congregations (73 percent), just ahead of civic and advocacy (56 percent) and environmental groups (56 percent), and far more than is the case for domestic service-providing nonprofits.
The rise of international nongovernmental organizations1 Governmental and multilateral funds channeled through NGOs for development and relief activities have increased significantly since the 1970s, with many NGOs having become large-scale organizations (Table 15.2). In the 1970s, aid channeled through NGOs as a share of all aid flows from OECD countries to developing countries was 11 percent. Since then the INGO share has doubled, with most of the gain in the 1990s, a period which coincides with the significant expansion of INGO operations more generally. The change in the economic weight and political importance of INGOs is highlighted even further when we look at the composition of total aid flows, using estimates compiled by Clark (2003: 130). In the 1980s, INGOs increasingly became an additional circuit of official development and humanitarian assistance flows, with the share of such resources in total INGO revenues jumping from 44 percent to 55 percent between 1980 and 1988. However, the 1990s saw a remarkable reversal: official aid flows declined overall, both directly (bilateral and multilateral) and indirectly via INGOs. In 1990 dollars, official grants to INGOs fell from $2.4 billion in 1988 to $1.7 billion in 1999. By contrast, private donations, including individual, foundation, and corporate contributions, more than doubled from $4.5 billion to $10.7 billion. These figures underscore the significant expansion of INGOs in the changing development field of the 1990s, and the major private mobilization effort they represent.
International philanthropy Philanthropy
is perhaps the least internationalized component of the nonprofit sector; at the same time, foundations are among its most visible components internationally. Large foundations such as the Ford Foundation and the Rockefeller Foundation, the network of Soros Foundations in Central and Eastern Europe, and now Central Asia, the Robert Bosch and Bertelsmann Stiftungen in Germany, and the Rowntree Foundation in the UK enjoy high cross-national recognition. Prominent examples of philanthropic gifts for international causes are the Bill and Melinda Gates Foundation’s program to develop vaccines for malaria and the HIV/AIDS virus; the John D. and Catherine T. MacArthur Foundation’s grantmaking program in environmental protection and natural resource management; and the Ford Foundation’s support of human rights.
Impact of organizational forms
The dynamics of the organizational infrastructure explored above have important implications for global civil society and its impact on society in general. Here we explore the implications for organizational efficiency and survival, democratization, North–South tensions, and an increasing presence in cyberspace. Organizational efficiency and survival Global complexity tends to breed new forms and leads to hybridization. As INGOs adapt to this complexity they take on a variety of forms to increase overall fit between environment and mission. By finding the right level for decision-making and mobilizing resources to areas of need, global INGOs increase their effectiveness. So they increase their impact on social change in terms of, for example, alleviating poverty, promoting human rights, and environmental conservation. The more effective their organizational form is, the greater the social impact.
Chapter 16
Policy issues and developments
In this chapter, we first take an historical look at macro-level changes that have affected and will continue to affect the nonprofit sector over time. Next, the chapter discusses a number of critical policy issues related to the greater political salience of the nonprofit sector. In a closing section, the chapter returns to the broader, long-term issues and explores different scenarios for the future of nonprofit development.
LEARNING OBJECTIVES
As a concluding chapter, this chapter will look at current policy issues but also take a longer-term view of developments affecting the nonprofit sector in the US and in different parts of the world. After considering this chapter, the reader should: ■ have a basic understanding of long-term developments of the nonprofit sector; ■ know some of the supply and demand conditions and how they affect the nonprofit sector over time; ■ understand the background behind major nonprofit policy issues in the US and other countries.
KEY TERMS
Some of the key terms introduced or reviewed in this chapter are: ■ new public management ■ recombination ■ refunctionality ■ third-party government ■ Third Way
SUPPLY AND DEMAND FACTORS REVISITED1
We begin by revisiting the critical supply and demand conditions responsible for the emergence of different types of organization, as presented in Chapter 6, and ask: what are the broader circumstances that affect these conditions, and thus organizational choice and sector shifts over time? It is beyond the scope of this chapter to provide a full answer, and indeed, economic theories are still struggling with this question (Ben-Ner and Gui 1993). What we can do, however, is to suggest a number of initial avenues that might be usefully explored in this context. Several aspects of the economic, social, and political order of the twentieth and early twenty-first centuries have been, and are, affecting supply and demand conditions, and therefore sectoral shifts. These include the massive growth in scope and complexity of economic activity; the effects of the World Wars, the Depression, and political upheavals; the prolonged prosperity in many OECD countries after World War II; fundamental technological changes; and changing demographic trends.
Technological changes
The last few decades have been a time of great and increasingly rapid technological changes. These have affected the sectoral make-up of economies mainly through the effect on the demand for organizational forms. First, technological innovations have created as well as alleviated information asymmetries, and, for the most part, reduced problems of nonexcludability and non-rivalry. For example, improved access to information has improved the ability of consumers to evaluate the goods and services of various organizations (e.g. in 362 POLICY ISSUES AND DEVELOPMENTS health services, where the performance of individual physicians and of hospitals is now feasible), thus lowering the demand for alternatives to forprofit firms
The legal system
A country’s legal and regulatory system can play an enabling as well as a restrictive role with respect to the extent to which different types of organization are affected by changes in the factors outlined above. Many aspects of the legal and regulatory system have had profound impacts on sectoral shares and shifts over time. The following examples suggest the importance of the system for the varying boundaries of sectors over time and across countries: ■ entry restrictions for forprofit firms in particular markets (e.g. the blood industry); ■ barriers to entry for nonprofit organizations (e.g. the high capitalization requirements for Japanese foundations); ■ discrimination against forprofit firms (e.g. the disadvantageous position of forprofit providers in some social services in Germany); ■ restrictions on the nonprofit sector (e.g. laws that severely complicate the ownership of real estate by voluntary associations in France); ■ favorable tax laws for nonprofit organizations (now in place in most developed market economies); ■ the absence of suitable legal incorporation forms that support the fundamental role of particular types of organization (such as for private nonprofit organizations in China).
The cultural system
While cultural aspects are, of course, important in many ways, their precise impact on sectoral shifts is difficult to capture, particularly cross-nationally. There are, however, two aspects of culture that are directly relevant for our purposes. The first is the degree of ethnic, linguistic, and religious heterogeneity of a country’s population, and the extent to which this heterogeneity is transformed into effective demand and effective supply.
The political system
In addition to the legal system, the political system establishes the basic “default settings” and policies for economic actors. Clearly, government policies establish rights, demarcate areas of responsibility, establish tax and similar regulations, and allocate funding for different types of organization. In Chapter 13, we looked at various types of government–nonprofit relationships and explored their implications, and throughout this book we have emphasized the critical role of the political system and the extent to which it creates an enabling or constraining environment for nonprofit development. For example, the social origins theory (Chapter 6) makes it clear that decisions about government social spending are a key factor in explaining variations in the economic scale of the nonprofit sector crossnationally. Moreover, the social origins theory suggests that the nonprofit sector may have different “moorings,” being rooted in long-standing patterns of nonprofit–government and nonprofit–society relations. Because of the centrality of the political system for the nonprofit sector, we will take a closer look two cases: first, the US and the interaction between the its political culture and policymaking in the nonprofit field; and second the European case of modernizing the welfare state.
SOCIAL CAPITAL AND CIVIL SOCIETY
Yet while their economic function, particularly in terms of service provision, has been a common, though often overlooked, feature of nonprofits in most developed countries, an emphasis on nonprofits as civil society institutions is new, and reflects profound changes in the wider political environment. The political discourse about the nonprofit sector has expanded from the welfare state paradigm that long characterized the field to include what we call pronounced neo-Tocquevillian elements, that, again, figure not only in Third Way approaches but also among neo-conservative perspectives. In the 2000 presidential election in the US and in the 2002 parliamentary elections in the UK, the major political parties— be they Democrats or Republicans, Labour or Tory—favored a greater role for nonprofit voluntary associations, including faith-based communities, in local social policy
CONCLUDING REFLECTIONS
The numerous government policy initiatives currently under way and being considered in the US and elsewhere are therefore suggestive of a more fundamental policy shift whose ultimate objective may, however, not be clear: what kind of “society” and what kind of “community” do the current US administration, New Labour, etc. want? What kind of relationship between the nonprofit sector and government (at various levels) do governments and civic leaders have in mind? What is the role of “business” and corporate social responsibility in that regard? How do these ideas differ from those of other political parties? How do international issues figure in this context, if at all? In the US social policy context, transnational issues and globalization rarely figure; in the UK policy debate, “Europe is the dog that did not bark,” according to Plowden (2001). But at national levels in North America, Europe, and Japan, a puzzling aspect of current policy debate about welfare and governmental reform, civic renewal, and communitybuilding is the absence of a wider vision of what kind of future society we have in mind when we discuss the role of the nonprofit sector. What kind of society did the Clinton and Bush administrations have in mind with their emphasis on faith-based communities as part of welfare reform? What future British society does New Labour envision when it links devolution with a greater reliance on the voluntary sector? Or what future German society does the governing coalition of Social Democrats and Greens have in mind as a blueprint when they discuss the renewal of civic engagement and the introduction of competitive bidding in social care markets at the same time? In the absence of such a debate, or explicit policy blueprints, we suggest the following scenarios as markers to chart the deeper policy visions that government, opposition, and nonprofit sector representatives may have in the future: ■ New public management scenario: nonprofits are seen as a set of well-organized, corporate entities that take on tasks and functions previously part of the state administration, but now delivered through competitive bidding processes and contractual arrangements, trying to maximize the competitive advantages of nonprofit providers in complex social markets under state tutelag
Chapter 17
Stakeholders, governance, and accountability
This chapter is in three parts. First, the chapter explores the role of stakeholders in nonprofit organizations, and the special requirements that arise for governance and accountability from the multiple constituencies. Against this background, the chapter considers the governance of nonprofit organizations, the role of the board, and the relationship between the board and management. And in the third part, we examine the different forms of accountability in the third sector.
LEARNING OBJECTIVES This chapter explores the implications of nonprofit characteristics for the governance and accountability of private organizations for the public benefit. After reading this chapter, the reader should:
KEY TERMS This chapter introduces several key management concepts (these will be important in the next chapter as well): ■ accountability ■ conflict of interest ■ forms of accountability ■ governance
■ law of nonprofit complexity ■ multiple constituencies ■ principal–agent problem ■ stakeholders ■ transparency
STAKEHOLDERS AND MULTIPLE BOTTOM LINES S
takeholders are people or organizations that have a real, assumed, or imagined stake in the organization, its performance, and sustainability. Depending on the organization, stakeholders include members, trustees, employees, volunteers, clients or users, customers, funders, contractors, government, oversight agencies, community groups and watchdog organizations, etc. Figure 10.1 offers a stakeholder chart for a child day care center and an art museum to illustrate the complexity of stakeholder relations in nonprofit organizations. This stakeholder complexity is a good avenue to approach the relationship between what in business firms is called the “bottom line” and the governance requirements of nonprofit organizations. The “bottom line” refers to the bottom line of a firm’s profit and loss statement, but is more generally used as a reference to what really matters, or the heart of the matter. Clearly, the bottom line for a business is profit, even though other indicators such as market share or employee satisfaction are important as well. What could be the bottom line for nonprofit organizations, which, as seen in Chapters 6 and 8, operate under the nondistribution constraint?
GOVERNANCE
The term governance comes from the world of business. Corporate governance is the system by which organizations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as the board, managers, shareholders, and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set and the means of attaining those objectives and monitoring performance. Today, governance has taken on a meaning that takes it far beyond the confines of a single corporation and can be applied to entire societies. The Governance Working Group of the International Institute of Administrative Sciences issued a useful summary statement on this broader conception of governance: ■ Governance refers to the process whereby elements in society wield power and authority, and influence and enact policies and decisions concerning public life and economic and social development
Governance is a broader notion than government, whose principal elements include the constitution, legislature, executive, and judiciary. Governance involves interaction between these formal institutions and those of civil society. ■ Governance has no automatic normative connotation. However, typical criteria for assessing governance in a particular context might include the degree of legitimacy, representativeness, popular accountability, and efficiency with which public affairs are conducted. Governance is different from management, which is primarily a staff function, although in many smaller and medium-sized organizations both functions overlap. It is useful to think of the board as the focal point of governance, and the chief executive officer as the focal point of management. For Hudson (1999: 42), the governance of nonprofit organizations is “about ensuring that the organization has a clear mission and strategy, but not necessarily about developing it. It is about ensuring that the organization is well managed, but not about managing it. It is about giving guidance on the overall allocation of resources but is less concerned with the precise numbers.” Thus, governance involves the responsibility for the organization’s performance and direction. Governance is primarily an organizational steering function and closely related to the notion of stewardship
