This research essay, On Social Investing, presents individual insights and research on social investing and introduces change management as applied in urban public management. It begins by highlighting current and sustained problems in customary private equity capital and nonprofit practices and offers contrasting personal perceptions of social investors. Alternative models of nonprofit business structures are then introduced that are socially and economically democratic, lived experiences are shared, and the essay concludes with possibilities for change management, especially with leadership in the urban public management sector. The essay underscores the need for constant research and analysis in this field and areas of giving as a social responsibility to the world and all its individual communities.
Social investing is particularly important, yet the current social investing industry is riddled with customs and practices that hinder its impact, even when social impact is the purported goal of the community-based, mission-driven organizations they seek to fund. There is a change management crisis happening in social investing and within urban public management organizations that needs to be evaluated and solved to prepare for the future. The crisis has been described as “too little sound analysis … and too little attention to management in the public sector”; this is an identifiable, rectifiable problem for society (Rainey 2021, 5). Simply put, due to the lack of universal sound analysis, an organization must “attempt to identify what scale it would need to achieve to have [a] transformative effect” on its own (Dubb 2022). Companies should be designed and competently managed with constant feedback loops incorporated into their operational processes and structures to provide raw primary data to internally assess the impact effectiveness of organizations.
Steve Dubb (2022), Senior Editor of Economic Justice at Nonprofit Quarterly, affirms, “As [the Nonprofit Quarterly] has noted, impact investing can have many definitions. For social movement investing, the desired impact is to grow community power.” Hence, according to Dubb, in addition to providing influence and capital resources, social investing gives ownership equity and power back to the communities because “it’s not social movement investing unless movements are involved in steering where investment dollars go” (2022). In “What Is Social Movement Investing?—And Can It Build Community Power?” Dubb asks why the rich would invest against their own interests. He suggests that social investing can be perceived introspectively within certain donating camps as anticapitalism. The rich may possibly presume that giving away too much to the poor could lead to an era of blasphemous socialism and/or forced communism and be perceived as an existential threat to the wealth status of the rich who became and remain rich through current imperialist capital systems. Some institutions are labeled social merely because of the operations and services they provide.
The proposed public management of social investing dollars and the actions of corporate beneficiaries of social philanthropy must be explored and codified as a model that better serves people today, not as a bastion of power and prowess that is resistant to change and vested in current practices, customs, and traditions. According to current research, “the character of these fields and of their separation needs clarification,” as most private equity firm models buy ownership control and power over enterprises founded by the disadvantaged (Rainey 2021, 6). Robustly claiming to help communities, most private equity firms effectively reappropriate equity ownership from the community. Some investors need to be reminded that they do not have to require ownership equity for social giving, and that there are alternatives, such as providing smaller equity-free cash grants that can impact poor businesses, too.
There are models today that allow individuals to invest in social missions with or without profit motives. Social enterprises are institutions with or without profit motives that operate with social missions. Benefit corporations are certified companies or legal entities whose missions and operations are of direct benefit to society; they make a profit by using various modalities. Cooperatives share ownership and are governed by collaborative democratic practices. These could be viewed as alternatives for the socially motivated interests and dollars of social investors. These organizations innately operate differently from traditional government organizations and/or nongovernmental organizations.
Corporate research is a rudimentary technical investment that organizations undertake either willingly or due to the requirements of bylaws. Corporate research can also be outsourced to a consultant who specializes in devising research methods that identify measures of social impact within an organization. The need for this is fundamental. In various Master of Arts in Urban Studies graduate courses at CUNY School of Labor and Urban Studies, I learned that nonprofit foundations only disburse 1–3% of their endowments to the community. This is a disservice to the communities from which nonprofits regularly take money, power, and equity. No one stops to wonder why they retain the coffers of community monies. Most people recognize this, but do not challenge this expression of tradition or custom in urban public management systems. Such “organizations and the people in them often provide crucial goods and services; the analysis of how they can do so effectively, and the dissemination of that knowledge can enhance the discharge of these crucial functions” (Rainey 2021, 4).
Internally, however, as is often the case, most public managers do not question why they give so little and do not meet the needs they are meant to provide for, and for which they receive entity benefits. People rely on public social service programming, and the “inadequate organization and management of those functions create severe problems for citizens” (Rainey 2021, 4). Nonprofits save money on taxes and even get free mailing with the United States Postal Service. Yet, over time, they boldly retain more than they distribute of this accumulated community wealth and power. Assessing which companies should provide collective money can influence the particulars of community sustainability and viability. Impact can be used as a key performance indicator. Choosing to invest/spend with diverse vendors is a practice that can be implemented, assessed, and measured for community impact. Change management within urban public management could begin simply with consistent documentation of assessments, such as these, for further knowledge and evaluations. These assessments could lead to new policy creation and enforcement. As a minority business owner, I make certain that part of my operations, including spending costs, goes to minority community organizations. My business bank, for example, is local, black owned, and in a low-income neighborhood. I chose to open a business account at that bank due to these qualifications, in addition to their ability to provide banking services that meet my business needs. Banking with such an institution is vital to me, but most may not think of such factors when choosing where to spend their business dollars. They may be particularly hesitant to place their business operations in primarily poor locations.
References
Dubb, Steve. March 9, 2022. “What is Social Movement Investing–And Can it Build Community Power?” Nonprofit Quarterly. https://nonprofitquarterly.org/what-is-social-movement-investing-and-can-it-build-community-power/.
Rainey, Hal G. 2021. Understanding and Managing Public Organizations, 6th ed. Hoboken: Jossey-Bass.
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