2007 may prove to be a very bad year for activist groups who discovered decades ago that they could raise lots of tax-exempt cash by telling the rest of us how to run our lives. They preached planetary doom and gloom, sermonized about the evils of capitalism and coerced corporations to become more transparent, more sustainable and more socially responsible. They pressured world leaders to ban the use of DDT while millions of people were dying of malaria. They used their political clout to oppose economic and resource development in areas of the world where clean water and basic sanitation are luxuries that only a few can afford. They demonized agricultural biotechnology and, as a result, starving children were denied access to donated food.
But now, those winds of change may be reversing course. Tax-exempt activist groups who have been demanding “corporate social responsibility” are discovering the hidden meaning behind that old English idiom: “What is good for the goose is good for the gander.” My mother used to utter these words often, but I must admit that I never understood what she was trying to say and why she was so fixated on geese.
Developments in Germany, England and Australia will no doubt clarify the meaning for the activist charities. The German government has announced plans to reform its laws on charitable organizations and donations. A report prepared for the German Ministry of Finance found that the “chaotic proliferation” of charitable organizations had enabled special interest groups to avoid taxes and to win undue public influence. According to a recent article by journalist Thomas Deichmann, Greenpeace may lose its charity status in Germany because of its political campaigning and alleged illegal activities. If that happens, the Rainbow Warrior’s goose will indeed be cooked.
The British are at least one step ahead of the Germans. Last November, Parliament approved the Charities Act which seeks to enhance transparency and accountability among tax-free groups. Hail Britannia!
Meanwhile, Down Under, the Australian Tax Office has announced that it is cracking down on charities engaging in partisan political campaigning. The Australian Broadcasting Company reported last weekend that “in a review of 59 groups claiming charitable status . . . inspectors found that many of them accept money from the public and then pass it on in political donations.” The news report also stated that “at least one environmental charity has already been stripped of its tax-exempt status for what the Tax Office said was inappropriate political campaigning.”
Michael Schrage, an MIT researcher who ran a global philanthropic education initiative for a U.S. investment bank, recently opined in a Financial Times commentary that, “perversely, today’s FTSE or Nasdaq companies are far more transparent, accountable and responsibly governed that the typical wealthy foundation or charity.” He added, “More damning, corporate results are measured in the marketplace while philanthropic results are not. That invites mischief and mismanagement.”
For the business executives who are reading this column, keep Schrage’s words in mind the next time some activist group claims your company isn’t transparent, and that you need to be more “socially responsible,” or that your firm isn’t paying enough taxes. Just remember that in the United States, activist groups are not required to practice what they preach, and they certainly aren’t obliged to be as transparent or accountable as the corporations they attack. And, never forget that federal and state lawmakers have rewarded these groups with the ultimate privilege—the privilege to pay no taxes.
I never thought that I would find myself encouraging the U.S. Congress to follow the lead of the Germans, the British and the Australians on matters involving the regulation of tax-exempt activist groups. The fact is that efforts by a few brave souls to reform the laws governing tax-exempt organizations in the U.S. have been thwarted by a powerful activist lobby. Given the makeup of the current Congress, I have no expectation that the situation will change anytime soon. Reform will require a majority in the House and Senate to stand up to the special interests and proclaim that what is good for the goose is, indeed, good for the gander. Until that happens, the goose that is being cooked belongs to the American taxpayer.