What's driving social entrepreneurship?

OnPhilanthropy.com reports ...

… Timothy Zak, President of the Pittsburgh Social Enterprise Accelerator and a panelist at the [NYU'’s Stern School of Business'’ Social Entrepreneur] conference, was among those who believe that in order for an organization with a social mission to be successful, 501(C)(3) status must be viewed as merely a tax code reference. “The difference between non-profits and for-profits is a legal distinction, and should not reflect a way to operate,” he reasoned.

This is simply wrong.

Unfortunately, this seems to be a growing agreement among good intentioned people who wish to "fix" nonprofits. The simple fact is 501(C)(3) status is granted by states Attorney General to corporations -- yes, every registered nonprofit is by law incorporated, hence a corporation -- that operates to the benefit of the public.

The distinction between for-profits and nonprofits is therefore one of ownership. Individual investors -- often as few as one person -- own for-profits. Ownership of nonprofits, on the other hand, rests with its constituency, ultimately the people of the state who have granted it a license to operate. Instead of shareholders, nonprofits have stakeholders. The duty of nonprofit Boards is to insure the maximum return on investment to these stakeholders, i.e. the public. As such, the nonprofit sector is the "hidden socialist sector" of America. This understanding should drive every business decision a nonprofit makes.

Social Entrepreneurs talk a lot about the dual bottom line, i.e. the need for nonprofit leadership to understand that they have both a fiduciary as well as public duty to fulfill. That's all well and good, but I've never met an Executive Director who didn't understand that innately. Of course, the sector can always use more training and capacity in order insure mission success, but what businesses couldn't? Yet too few for-profit CEOs seem to understand that, just like nonprofit corporations, they too have a dual bottom line to return value to the community's in which they are licensed to operate.

If the growing alliance between academia and for-profit America really wants to make an impact on our country's quality of life, they should look at themselves first. If so, perhaps than our world wouldn't be in such a global crisis.

What do you think?