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Non-profits: Risk, Reward, and the Agency Problem

Interesting post on the Fractured Atlas blog about non-profit success. Here's what the writer says about non-profits:
"1) Employees can’t own stock, so they don’t benefit from financial success. Yet they’re still vulnerable to financial failures (i.e. they can lose their jobs or suffer career setbacks). To a lesser extent, the same is true for non-profit Board members. When someone’s got no stake in the upside but is still exposed on the downside, the rational response is extreme conservatism.

2) The culture of the non-profit sector is such that managers go to absurd, herculean efforts to avoid admitting failure, mostly in an effort not to embarrass themselves in front of funders.

3) Non-profit organizations are chronically under-capitalized. By failing to build reserves or hoard surpluses, we end up in a situation where each budget is a tightrope. A single serious misstep is enough to pose an existential threat to the organization."