Google's For-Profit Charity

In a rare instance of real world experience confirming an academic hypothesis, Google has announced that it is setting up a for-profit charity.  In this paper, which I discussed a few days ago (below), my coauthor and I argue that the for-profit charity might be a sensible, underexploited institution.  In the course of the discussion, we ask why, if we are correct, there are no for-profit charities and we provide the obvious answer that the reason is tax discrimination.  But Google’s plan suggest that the advantages of the for-profit form are strong enough to outweigh the tax disadvantages.  The next step is for the government to recognize that tax discrimination on the basis of corporate form is unwise and to change the law.

Comments

[Jonathan L]

I haven't yet read your paper, so I apologize if I am asking out of ignorance, but how does Google.org differ from a socially responsible venture fund? As I understand it, the organization run by the aptly named Dr. Brilliant will invest in companies and technologies that 1) will "help the world," presumably by improving the environment or aiding the poor and 2) will generate a return. Is the philanthropic aspect merely the fact that the fund will pass up NPV positive investments that simply don't meet the first prong? If so, is the philanthropy simply the opportunity cost of choosing only socially responsible investments (or the most socially responsible investments)? This could certainly amount to a significant donation considering that the model for venture funds is to make a wide range of investments hoping for a few homeruns, and such a model is at least partially precluded by the first of Google.Org's criteria, but it does seem like a limited way for such a well capitalized company to go about giving charity. Also, wouldn't it make more sense for Google.org to function as a sort of venture fund-of-funds, partnering with other venture in their socially responsible investments? Would be a lot less work for Dr. Brilliant and it wouldn’t necessarily preclude the capturing of synergies from Google’s core business.

[Dan V.]

Most venture capitalists only try to pick big winners and realize that only 2 or 3 out of ten may be "ten baggers." This excludes from consideration many opportunities that might make decent returns and provide much needed jobs and tax revenues. That is not their concern.

Any viable, legitimate business that can provide stable employment and benefits is a socially responsible investment. We need to develop another form of venture capital enterprise that seeks the greater multitude of good business opportunities.

There is a great deal that can be done to counteract the sociopaths that our society produces in such abundance. Is the U of C Law School limited to the role of being just a passive observer?

[Jeff Mowatt]

The concept of a for-profit charity isn't really new. For instance, a business for social purpose paradigm has existed since 1996:-

http://www.p-ced.com

Also, the Community Interest Company model became part of UK company legislation in 2004. The UK model, according to the Department of Trade and Industry, like the earlier one above, defines a social enterprise as a business which distributes more than 50% of its profit to community purpose. So, does this mean Google is going to give more than 50% to charity?