> If I wanted to donate a large amount of money to a non-profit, I would structure it as a zero-interest loan, and would just keep deferring the repayment of the loan as long as the org stays true to its mission, compensates executives in reasonable proportion to regular employees, etc.
Not sure if I'm missing something, but this sounds totally ridiculous to me.
You give 1M to someone you think is going to spend it well, and they do; why isn't that the end of the transaction? Why do you forever have a gun to their head?
Maybe you've got all the best intentions about what would cause you to call the loan back. But after they've taken donations of this sort, why would anyone continue donating to them? They've built up liabilities to 3rd parties, I'm not interested in potentially paying off their loans instead of doing good work if some of those 3rd parties change their mind.
No organization would accept a donation of this form. If the size of the donation was large enough to be compelling, it would also put the organization at risk. Having a looming loan of millions of dollars at risk if you upset someone isn't viable, especially given that the implication is that this would last indefinitely. A nonprofit that took loans like this over time would very quickly end up with potential debts much, much greater than they could ever hope to repay.
Op mentions sunset provisions in a sibling, but at that point the difference between this and a recurring donation is marginal.
Just donate a smaller amount on a recurring basis. You reduce your risk that the nonprofit will upset you, without making their existence tenuous.
Agreed, if a non-profit takes enough of these that any one loan (or any group of loans) makes up a majority of their assets/income, they've implicitly taken on a new board and are more beholden to the "money board" than to their actual board.
Right, in practice this would result in either the nonprofit giving you a board seat, them refusing your money, or increased overhead either via some kind of insurance policy that they pay into that would cover you recalling the loan, or them just refusing to spend your money until the deferment period expires. But those last two probably result in you recalling your donation because the premiums on that insurance would be ridiculous, so they wouldn't be effectively using your donation.
The problem is you have a huge principle-agent problem with these non-profits. In a standard corporate structure, shareholders elect members of the board who can replace the management. But who elects the board of a non-profit? Why not those who donate to them? There has to be some reliable mechanism to impose accountability by those who give funds.
Now lacking a mechanism for accountability, people give funds with all sorts of strings attached. But wouldn't it be better to give funds with a voting interest attached to the board instead?
In any sizable nonprofit, the vast majority of the board is not involved in actually carrying out the work of the organization. They are there for oversight and political capital.
There could be sunset provisions (e.g. if a loan is deferred for 10 consecutive years, it is cancelled), this would encourage continued giving rather than massive one-off donations.
Year 5 the president embezzled 800k and ran away leaving the non-profit effectively broken, now you are pissed and want your 1 MM back. I think you should go for a walk and meditate this better.
Not sure if I'm missing something, but this sounds totally ridiculous to me.
You give 1M to someone you think is going to spend it well, and they do; why isn't that the end of the transaction? Why do you forever have a gun to their head?
Maybe you've got all the best intentions about what would cause you to call the loan back. But after they've taken donations of this sort, why would anyone continue donating to them? They've built up liabilities to 3rd parties, I'm not interested in potentially paying off their loans instead of doing good work if some of those 3rd parties change their mind.