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Debate Over Telemarketing Case Should Focus on Reform

The Chronicle of Philanthropy

April 3, 2003


To the Editor:

One would hope that the debate surrounding the case of Ryan v. Telemarketing Associates ("Legitimate Fund Raising or Fraud?," March 6) would finally help us determine how to protect donors from inefficient charities and greedy fund raisers, while preserving the rights of charities to continue their very important work.

Sadly, we are instead engaged in a largely academic debate, including in this newspaper, that will not result in real reform. Instead of advocating for reform, charities and fund raisers have chosen to hide behind the First Amendment. Just as irresponsibly, charity regulators have chosen to hide behind an unconstitutional attempt to limit what charities can spend on fund raising. This is the wrong debate.

Donors will continue to lose if we don't change the debate. To achieve real reform, we should stop focusing on the First Amendment and fund-raising costs, and instead debate and agree upon ways to create a marketplace that informs donors.

By empowering consumers to make better decisions, fewer of them will be deceived, fewer inefficient or dishonest charities will be able to survive, and fewer fund raisers will be able to get rich off the naiveté of uninformed donors and complacent charities. We must reform the culture.

Let's begin by finding ways to help regulators empower donors by enforcing the laws and regulations already in place. Improving constitutionally acceptable efforts of regulators will help create a more informed public that is better equipped to protect itself. Let's also find ways to disseminate more information about the activities of charities. These outcomes will improve the philanthropic marketplace without violating the First Amendment.

More important, we must share ideas for how charities and the broader nonprofit community can become more transparent and accountable, and less vulnerable to the unjustifiably high fees charged by some fund raisers.

Why would a charity ever sign a contract surrendering 85 percent of the money raised on its behalf to a telemarketer? The charity in Ryan v. Telemarketing Associates made a horrendous business decision in agreeing to such terms.

Nonprofits must view their fund-raising partners with the same neutrality as businesses view their vendors. They must negotiate for better terms with fund raisers, or they must find more competitive alternatives that do not cripple their productivity. By simply making better business decisions, charities will go a long way toward increasing their effectiveness.

Nonprofits must also lead the way in empowering donors to make better decisions. By encouraging the flow of information, charities will ultimately reduce the burdens of cultivating and retaining donors. This means cooperating with watchdogs, initiating efforts to improve the methodologies of watchdogs, reporting financial data with greater attentiveness and timeliness, and making it available whenever requested. Foundations can help by supporting initiatives that identify ways to improve the information available to donors. Finally, other giving intermediaries, such as online-giving portals and philanthropic advisers, should aggressively promote ratings and reviews of charities, so that the transactions they enable become more effective.

By creating a more competitive environment, the nonprofit world will institutionalize its own improvement. The charities that naively pay outrageous fund-raising fees will slowly go out of business. The companies charging those fees will follow. Those charities that demonstrate their efficiency and effectiveness to the greater number of donors will develop a greater capacity to pursue their missions. Less-transparent charities will either change their practices or lose support. Ineffective organizations will be subsumed by more effective ones, inspiring a wave of consolidation in the sector that is sorely needed. And donors will have access to increasingly powerful tools for managing their giving, tools that will simultaneously reduce fund-raising costs for charities.

The debate that awaits us does not concern the First Amendment. The debate concerns reform, and the components of reform that empower donors to become more informed.

Let's have that debate. Let's achieve reform. Millions of donors are waiting for us to act.

Kyle Waide
Deputy Director
Charity Navigator
Mahwah, N.J.

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