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Corporate Abuse of Charity Ratings

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The American Beverage Institute (ABI) complains that 'Mothers Against Drunk Driving' (MADD) received only a 'D' from the American Institute of Philantrophy. Slate Magazine already ran a story about the obvious: ABI's efforts to weaken MADD is all about the alcohol industry's bottom line and profits. And if MADD was indeed 'ineffective' as the rating suggests, then ABI would likely not bother to even attack it. So, what is happening here? Why go after a charity that seems to fail in its mission?

 

First, many advocacy organizations naturally spend more resources on overhead and difficult-to-measure activities, scoring typically lower than service delivery organizations (such as foodbanks). MADD is at 61% program spending, and AIP sets a 75% expectation for highly efficient charities. Second, efficiency ratings tell donors nothing about the actual impact of an organization. As we have argued elsewhere, financial efficiency is, at best, a weak proxy for effectiveness and, at worst, weakens the nonprofit sector significantly by forcing organizations to neglect organizational growth and engage in a 'race to the bottom.' 

 

Charity watchdogs, including Charity Navigator, are currently changing their ratings to include more meaningful information about individual organizations. This will still include financial data, but also provide more information about what organizations actually do. Measured by the attention received by your corporate opponents, MADD is a good investment for donors.          

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