Some might consider it ironic the idea of soup kitchens hit the mainstream of U.S. consciousness following the stock market drop of the Great Depression because the exact reverse is occurring now, as these and other nonprofits are actually hurting in today’s faltering marketplace. The reversal in sense? Simple – private sector backing for nonprofits comes from individual and corporate earnings, and sales of assets in the donors’ portfolios. Donors are much less inclined to give cash away when their very own net income has fallen, and therefore are also not as likely to sell shares in a down market, even if it is for a good cause.
Corporations whose philanthropic programs are financed through their yearly budgeting process have been apparently cutting back. One local community bank lately renewed a grant to get a neighborhood charity, but at a quarter of the award of last year. The message is clearly there, though they said they would revisit their amount of giving after releasing their gains ends in following quarters – current net income and earnings per share drives their level of contribution to nonprofits. Individuals with compensation dependent upon stock options and commissions, bonuses are belt-tightening as well, and some foundations have been caused by today’s declining stock market to delay decisions on grant acceptances, as well as to cut their level of giving back.
Consider their portfolio value or bases with significant concentration in business stock; particularly those senior executives today could have depreciated very considerably from just annually or two ago. For instance, while the Dow Jones Computer Services Index is up 4.4% in the past year (as of the writing of this article), the DJ Financial Services Index is down a whopping 45.7% for that same interval. Declining portfolio values are understandable, be they totally diversified or focused in business shares, but at exactly the same time it is also distressing because the demands that nonprofits serve do not go away when the market declines. Fairly frequently, the exact reverse happens.
The absence of funding for nonprofits striving to offer a change for the better will only imply that their beneficiaries that are underprivileged will endure a drawback that is larger at a time when they actually need more goodwill. So your big benefactor is a senior executive at a major financial services business hit by the mortgage debacle.