On Friday, the Obama administration announced the charities that would receive the $1.4 million that president Obama was awarded when he won the Nobel Peace Prize. Interestingly, CNBC, the leading financial news channel looked to cover the news and brought on Chronicle of Philanthropy staff writer Ian Wilhelm to talk about the picks.
What transpired was interesting because CNBC thought they had a “gotcha moment” when they pointed out the overhead expense ratios of some of the organizations were not perfect according to Charity Navigator. They even singled out College Summit, one of the most well regarded education charities, to ask about its seemingly low percent of revenue going to fund programs.
To Ian’s credit, he quickly pointed out that many people, even Charity Navigator, do not believe overhead expense ratios are the best way to evaluate nonprofits and do not capture how effective they are.
The video clip is interesting because it demonstrates how woefully ignorant the financial news media is about philanthropy. Considering philanthropy is a $300 billion a year industry and nonprofits book $1.5 trillion in revenue each year, the financial news media is dropping the ball on a major segment of the economy.
(Full disclosure: I’m on the advisory board to Charity Navigator helping them launch a new rating methodology.)
There was an even more egregious example in CNN’s reporting on the salary of the head of the Boys and Girls Clubs last week. Zero cost benefit analysis, but an abundance of moral judgment. The gap between the thought leaders and the media could not be greater and this must be addressed with some great vision and strategy.
I tend to think that the poor reporting on philanthropy issues by the financial media is simply due to a lack of knowledge about the sector. It does seem to me that newspapers like the Wall Street Journal, NY Times and USA Today have been getting more savvy about these issues, as I pointed out during their post-Haiti earthquake coverage.
What I find interesting is that they would set aside the simple principals that their own industry has established. There is no standard p/e for any of the stocks they cover on a daily basis anymore than there should be a standard admin/ rev figure for all non-profits.
That being said, I would not be so quick to write off the industry. Right now I am working with a group in China made of former bankers and analysts who are working to develop structured research on the industry. Where this is particularly useful is that they have a mindset that can isolate, identify, and compartmentalized data in a way that few industries train for … so, engaging them in your process as Charity Navigator should be something you consider.
Because at the end of the day, they will be able to help you create those different silos that are better suited to the different groups that exist, and then help to develop metrics that more accurately represent those groups.
Yes, CNBC would dismiss as a charlatan anyone who came on their show and suggested you could analyze stocks using a single ratio. That’s why I think that the financial media will quickly pick up on the underlying problems with their analysis once it is explained in a way that respects their frame of reference.