Hartford Business Journal

www.HartfordBusiness.com • October 14, 2019 • Hartford Business Journal 29 nonprofit by-laws and charters. In other words, stakeholder capi- talism splices some philanthropic DNA into the genome of corporate America so that it will operate more justly — to contribute more to the general good and not solely to enrich shareholders. The immediate reciprocal ques- tion this raises is whether we should be splicing some DNA in the other direction. Would philan- thropic-sector organizations be improved if we spliced a strand of capitalist DNA into their genome? The answer is yes, and I'm not talking simply about common anodyne exhortations that "non- profits need to be run more like a business." I suggest that new DNA is need- ed because philanthropic organi- zations still follow a 19th-century operating model that is ill-suited for the 21st century. Modern nonprofits are highly regulated complex enterprises, with duties, real estate, payrolls, exposures and financial challenges as daunting as those of sharehold- er-owned businesses — yet, we still regard them as mere charities. The term charity should be delet- ed from the philanthropic lexicon. It is demeaning and disrespectful to the hard 21st-century operating conditions nonprofits face daily. Similarly, the term nonprofit is an accident of history that does more harm than good. The term's original purpose was as an identi- fier — to distinguish corporate entities whose purpose is to create wealth from those whose purpose is to advance a mission. But the term has taken on a life of its own and birthed a "poverty-is-virtue" mindset that creates a sense of entitlement and an expectation that these organizations must do everything on the cheap. My point is that it would be a mistake to delve deeply into capi- talism without delving as deeply into philanthropy. The two evolved on a parallel track, and philanthro- py's purpose is to offset capital- ism's harder edges. Former Connecticut College President Clare Gaudiani put it this way in, "The Greater Good — How Philanthropy Drives the American Economy and Can Save Capital- ism,": Philanthropy softens "capital- ism's more destructive features, cutthroat competition and wealth concentration, … the destructive facets of competitiveness." We do better when our business sector and our philanthropic sec- tor each perform optimally and in concert. John M. Horak is the director of TANGO Nonprofit Education and Consulting. His opinions are his own. EDITOR'S TAKE Lamont shouldn't be comforted by WSJ praise S truggling sports teams often point to moral victories as signs of hope for the future. For example, UConn's football program, which is featured in this week's issue, took solace last month in losing by just two points to a Big Ten-conference opponent, the University of Illinois. Unfortu- nately, the team has struggled mightily since and is on its way to another losing season. Gov. Ned Lamont also heralded a moral victory recently, praising a Wall Street Journal op-ed that didn't actually criticize Connecticut's economy or fiscal state. The article, "States of Economic Comparison," analyzed income- growth rates among states and linked them to economic and policy lessons. At the end of the op-ed, WSJ's editorial board briefly discussed Connecticut, giving Lamont a slight pat on the back for his efforts to turnaround the state. "The Governor so far has kept his promise to businesses and high earners not to raise their taxes, and it's encouraging that wages and salaries during the first two quar- ters of 2019 increased 4%, the same as in Massachusetts. The bad news is the state has dug a deep hole, but maybe it has stopped digging." Lamont jumped on the attention: "The Wall Street Journal is right," he said in a statement. "We are making the tough and necessary decisions to get our state moving again. This kind of endorsement shows that many around the coun- try are taking notice of the new direction for Connecticut." Ironically, four days after the WSJ op-ed published, a series of Lamont-endorsed fee and tax in- creases went into effect, including on car trade-ins, digital purchases, prepared meals, e-cigarettes, short-term rentals and alcohol (not including beer). The state's minimum wage also increased to $11 per hour, one of the highest rates in the country. It's apparent the WSJ editorial board wasn't fully informed about the budget signed into law earlier this year. While it did not increase income-tax rates it did contain more than $600 million in higher taxes and fees. I'd hardly call that a new direc- tion for Connecticut. To be fair, Lamont inherited a fiscal quagmire, and needed to pass a budget that balanced a multibil- lion-dollar deficit. His two-year, $43.4 billion spending plan may have done that while also helping solidify the state's rainy day fund. That's the good news. But in terms of the state's overall economic picture, things are mixed and I'd say we are far from a turn- around. And I don't think Lamont has instilled a ton of confidence in the business community, despite his private-sector background. The minimum-wage increase was frustrating to small busi- nesses, but it pales in comparison to the anxiety created by the state's new paid family medical leave pro- gram, which will eventually provide some of the richest benefits in the country. Many business leaders I interact with continue to express trepida- tion about the state's future. That's also backed up by a recent Con- necticut Business & Industry As- sociation survey. Of the 356 business executives who participated in the survey, just 11 percent said they expect the state's economy to grow next year; 77 percent said paid family medical leave will negatively impact their business; 81 percent believe the state's business climate is declining (a 20-point jump from last year); and 92 percent disapprove of law- makers' handling of the economy and job creation. Democrats and Lamont could dismiss the CBIA as an arm of the Republican party but that would be a mistake. The message CBIA's members send is far more impor- tant than any WSJ op-ed. Greg Bordonaro, Editor Would philanthropic- sector organizations be improved if we spliced a strand of capitalist DNA into their genome? The answer is yes.

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