Can we think of art investment as socially responsible investment?

March 10, 2010 Erica Coslor Leave a comment

When conducting my research on the use of artwork as a financial investment, I came across some interesting justifications for investing in art from some of the finance-side interviewees. In addition to the typical comments about portfolio diversification, some people, along with some of the background readings, suggested that we could envision art as a type of sustainable or socially responsible investment.

There are different ways to make a financial investment in artwork, but due to the complicated nature of the art market and the many expectations that differ from traditional financial market exchange, I usually suggest that novices with investment goals start by searching for an art investment fund, rather than buying work outright. Most of gallerists whom I have spoken with recognize that artwork does have investment value, but they tend to prefer someone who will buy works that have an emotional resonance, or aesthetic appreciation value. Given the recent troubles with people who have thought of their houses as too much of an investment, I also share this caution. Furthermore, being able to pick artwork at a low price that will go up in value over time requires some expertise, and a greater return is necessary to compensate for the relatively high transaction costs of buying and selling at auction.

Art funds, however, usually provide this expertise in-house, the same way that a hedge fund manager has expertise in stocks, bonds and other investments. Although this type of securitized art investment is fairly new, there are a number of established and upcoming funds with different goals. The best funds will offer the benefits of a diversified portfolio of artwork, expert advising, financial expertise, and transparency about management costs, goals and other factors. When you put money into one of these funds, which are usually structured as private equity, you are essentially buying a ’share’ of their portfolio. Many of the funds have the added benefit of annual dividends, which could be preferred to a direct purchase of art, where the investor only sees money at the end of a fairly long holding period.

But is this socially responsible investment (SRI)? Well, if we think about the meanings of sustainable investing, through screens and filters, as well as other types of socially responsible investing, such as faith-based goals, artwork would be considered acceptable for many of these goals. For example, according to one expert in Islamic finance, the fact that the funds are backed by real assets means that they could be a type of Islamic investment. Another consultant that I spoke with laughed at the idea that artwork was socially responsible, but he said they could be seen as a type of passion investment. Artwork is not usually associated with sin products, environmental pollution, or other areas typically associated with negative screens. Credible fund managers  will also carry out due diligence on any work purchased, to make sure that it is not stolen property or under dispute.

While some people oppose the idea of treating artwork as a financial investment, a good number of those involved in the art market welcome new buyers, even if they are investors rather than traditional collectors. Purchasing shares in an art fund is not the same thing as donating to a museum, but it is a way of directing money toward arts and culture.

Potential investors with an SRI agenda should know that this type of investment does not usually benefit the artists directly. This is because living artists are paid for their work when it is sold for the first time through a gallery, but unlike film producers or musicians, they do not typically enjoy profits on future sales of their creations. Intellectual property rights protect them others profiting from the unauthorized use of the images or ideas, but artists are not paid from future sales of the actual piece. The exception is that in the European Union, and a few other places, auction sales are taxed by the droit de suite, or artist’s resale rights, which provide a form of royalty to the artist or their estate. Nonetheless, while the artists may not benefit directly if funds are purchasing work in the secondary market, it is possible to make the argument that for an artist to gain a greater following in the secondary market does improve their career prospects, at least indirectly.  (There are a few funds that have goals of providing income to actual artists, but these typically have a different structure, so I will not discuss these here.)

With these considerations in mind, my personal opinion is that we can think of art as socially responsible investing, but you have to think about your goals. This type of investment can provide some benefits to artists and those in the market, but bear in mind that it is not the same thing as directly “investing in the arts” by donating to a museum or other nonprofit engaged in arts and culture. It might be more accurate to say that you are investing in the art market, as opposed to the arts. However, if you want to invest your money according to your values and interests, this seems to be a reasonable way to go about it.

As with all investment advice, be sure to do your research and due diligence.

Categories: nonprofit, philanthropy Tags: , , , ,

The privatization of higher education, is it really happening?

March 9, 2010 Sondra Barringer 1 comment

Over the past 30 years or so the argument that public higher education is becoming privatized has become an accepted fact. However, less attention has been focused on how, why and to what extent these colleges and universities are actually pursuing more “private” means of sustaining themselves as various types of government support has declined. Preliminary evidence from my dissertation research indicates that though there is evidence of privatization among public colleges and universities between 1970 and 1995, however, concluding that this is occurring for the entire industry would be an oversimplification.

Using a new methodological technique I empirically derived five different organizational funding strategies that are being pursued by a sample of 164 colleges and universities from 1970-1995. These strategies range from very public funding models (no endowment income, very little if any endowment and low levels of private contributions) to funding models that closely parallel the private colleges and universities within this industry which are characterized by high levels of endowment income and wealth as well as high levels of private gifts, grants and contracts.

Overall the field is shifting towards the private end of the spectrum with increases in private and hybrid strategies over the time period, with declines in the strategies at the public end of the spectrum. This gives the picture of an industry characterized by dynamic changes over time. This shift is, primarily, being driven by the movement of a small subgroup of institutions, predominantly the branch campuses of the large state systems (University of Texas-San Antonio, University of California-Davis, and University of Wisconsin-Platteville for example) and smaller public colleges and universities that are not affiliated with the large state systems (Southwest Texas State University, Evergreen State College, and Coastal Carolina University for example). This indicates that this industry, rather than being dynamic, is actually relatively stable with significant movement by a small but important contingent of institutions. This finding is contrary to the depiction of the higher education industry in the popular press and in some academic literatures.

This evidence indicates that the privatization of higher education is not an industry-wide phenomenon but instead is occurring in a smaller subpopulation of colleges and universities within this very diverse group. The majority of institutions that are seen as pursuing privatized strategies in the literature have not drastically changed their funding strategies in the past 30 years. These larger state institutions have consistently been pursuing endowment income, donations and higher tuition levels as means for sustaining their mission. Therefore to say that privatization is occurring across the board and at much higher rates than in the past is not supported by the empirical evidence.

Categories: higher education, privatization Tags: , ,

Foundation Governance and Grantmaking

January 21, 2010 Jasmine McGinnis 2 comments

A good deal of my dissertation interests and current research surrounds understanding the connection between foundation governance and grantmaking. Like Sondra, this has led me to a number of organizational or governance theories that would lead us to hypothesize about the connection between the board members of a foundation (or any funder)  and their eventual grant making decisions. Principal agent theory, institutionalism, and network theory (amongst others) would lead us to different conclusions about this particular relationship, but would lead us to hypothesize that their IS a relationship.

This has led me to several questions (particularly as I think back to my former life as a fundraiser in the nonprofit sector). If (as network theory and a good deal of anctedotal evidence would suggest, ) getting grants from foundations is truly about “who you know” and what “social circles” you’re a part of – how does that impact nonprofits who are likely “outsiders”, like social justice or advocacy organizations?

There’s almost a chicken and egg question that results from this train of thinking.  Many scholars and funders are trying to understand what a ‘better performing’ nonprofit looks like. But the subsuequent question this leads me to ask are if nonprofits thought of as ‘better performing’ are really just those organizations with better reputations.

In the economist tradition of studying nonprofits, performance would be a measure of the”efficient production” of goods/services. So how does reputation impact a nonprofits production? Are funders associating reputation with high performance or are they truly using some of their own measures to construct their image of a ‘better performing’ nonprofit.

In my own work I hope to “answer” some of these questions by conducting a survey or an experiment with foundation board members (at least these are my hopes!) to better understand how and why funders make their decisions.

I also hope to advance our understanding of terms in the sector that are constantly used, but always misunderstand. Supposedly financial health, collaboration, and organizational performance are the ways that funders make grant decisions but empirically we really don’t know a good deal about these decisions. In fact, we don’t really understand how funders view these concepts. Again thinking back to my work experience there is likely a gap that exists between the way funders view collaboration and the way nonprofit managers and staff view these terms.

I hope this provides everyone some food for thought and would love to hear feedback from anyone who has any thoughts on this!

Categories: foundations, fundraising, philanthropy Tags: , ,

The sector divisions and organizational identities

January 18, 2010 Sondra Barringer Leave a comment

It has occurred to me in the course of revising a work in progress that in the general literature on organizations there is surprisingly little discussion of sector differences or governance differences as mediating or conditioning the impacts of some of our fundamental theories. Neoinstitutionalism, resource dependency and population ecology are just some theories or orienting frameworks which come to mind. Most of the discussion regarding the role of sector differences is restricted to the nonprofits and public administration literature; when it does occur or get mentioned within the broader organizations literature it is usually in the form of a control variable in analysis.

Why is it that organizational researchers have been lax in examining this question? (Or have I simply been looking in the wrong places?)Why is this not a question in the broader literature? Why is it restricted to the small subsection of nonprofits? If researchers are truly interested in developing theories of organizational behavior shouldn’t we take into account this fundamental aspect that creates heterogeneity within organizational fields/markets and populations?

This issue becomes increasingly interesting given the growing interest within the field in categories of organizations and organizational identities. Recent work by Greta Hsu, Michael T. Hannan, Ezra Zuckerman, and others has focused on organizations and the impacts of the different identities on an organization’s likelihood of success in a given industry or field. It seems to me that this has direct relevance for both the issue of sector differences as well as higher education, which as I mentioned is my field of interest. This is in fact one of the issues that I will be examining in my dissertation research. Hopefully I can shed some light on the role of sector differences and multiple identities on higher education institutions and organizations more generally. Bringing these two issues together will hopefully aid in bridging this gap in the organizations literature.

Categories: organizations, sector differences, theory Tags: , , , ,

Introduction: Sondra Barringer

January 15, 2010 Sondra Barringer Leave a comment

Hello everyone, welcome to our venture into the blogging world. My name is Sondra Barringer and I am currently a fourth year student in the Sociology Department at the University of Arizona, working on my doctoral dissertation. My fellow bloggers and I had the pleasure of meeting at the RGK Center for Philanthropy and Community Service Summer Fellowship Program at the University of Texas at Austin this past summer. Like Erica I am also a bit of a black sheep since my background is in sociology and organizations. My interest in nonprofits developed out of my interest in sector differences in organizations, specifically in higher education which is the subject of my dissertation.

My academic background, like many nonprofit researchers, is also a little eclectic. My undergraduate degree is in Economics and Sociology from Baylor University and my graduate work here at the University of Arizona has focused primarily on organizations, methods, higher education, networks, and statistics.

My dissertation work is situated at the intersection of higher education, organizational strategies, governance, nonprofits, and methodology. Broadly speaking it examines the different organizational strategies that are pursued by institutions of higher education, the factors that dictate which strategies are pursued and the impacts of those strategies on the various constituencies of higher education.

Categories: nonprofit Tags: , , , , , , ,

Introduction: John Ronquillo

January 8, 2010 John C. Ronquillo Leave a comment

Hi all. Welcome to our new online venture. As you can expect, with all of us being PhD students, we have quite a bit on our plates and updates are surely forthcoming. My name is John Ronquillo and I am in my third year at the University of Georgia where I’m a doctoral candidate in the School of Public and International Affairs.

Like many of my colleagues, my interest in nonprofit studies and social entrepreneurship came about through various other channels. Upon graduating with a degree in journalism from Arizona State University, my intention was to go to law school. A close mentor of mine who was on the faculty of the School of Public Affairs at ASU suggested I look into getting an MPA first to boost my chances of getting into a good law school. For this and various other reasons, I followed this advice and after I completed my master’s I had more or less forgotten about law school and was intent on pursuing at PhD While earning my MPA, I had the opportunity to work in some unique capacities such as directing all of the student events for the 2004 Presidential Debate at ASU. From there I worked as a graduate intern in the state and local government relations office at Salt River Project, one of Arizona’s largest electric utilities (and some might say, due to their intricate system of dams, the reason Phoenix is able to exist in it’s current state). After that I worked as a contracted consultant for various organizations before I was hired as the Policy and Research Analyst at the Arizona Association of Counties (AACo), a 501(c)4 organization that represents Arizona’s 15 counties before the Arizona State Legislature. While I loved my time at AACo (and some days still wish I was there) I cut my time short in order to pursue my PhD in the Department of Public Administration and Policy at UGA.

Some might say I can’t make up my mind; I just like to think I’m interested in a lot of different things. When I arrived at Georgia, I had in tow a completely different set of intentions than I have now. While I am very interested in public management, I have also gained a keen interest in contracting, cross-sector collaboration, or partnership between organizations of differing sectors by any other name, which logically exposed me more to the nonprofit and commercial sector. And furthermore, it all made sense to me as nearly all of my previous professional work experience  involved collaborating with partners of a different sector. I have been fortunate enough to use some of these example in my current research.

At this time, I am in the dissertation writing phase of my program, and I will go on the academic job market at some point this year. The topic of my dissertation is on the subject of organizational innovation and how managers of public and nonprofit organizations perceive and value innovation within their respective agencies given a set of environmental and managerial characteristics. I enjoyed presenting this work at conferences in 2009, but will be much more gratified by getting it into a bound book in 2010.

Other research I’m working on includes a project on service learning and volunteerism by students providing free tax services to the public, a comparative study on social enterprise and social innovation initiatives, and a study on accountability measures in cross-sector collaborations.

I look forward to writing on all of these things in the coming months, and also look forward to interesting and spirited dialogue with my colleagues here!

Categories: nonprofit, organizations, public service Tags: , , , ,

New Journal Alert!

December 2, 2009 lindseymcdougle Leave a comment

For some time now I have been speaking with several of my colleagues about the fact that there are no academic journals that focus specifically on nonprofit education. Although there are several scholars in the field who conduct research in this area, there have been no academic publications devoted specifically to learning and education in the sector. This is unlike in the field of management where several journals (e.g., Management Learning, Academy of Management Learning and Education, etc.) are specifically devoted to the academic nature of management.

Thankfully, however, the nonprofit sector can now claim an education journal as well!

While at this year’s ARNOVA conference I learned of a new journal focused on nonprofit education and leadership. And, given the placement of my degree program (in a school of Education) and the nature of my degree (focused on leadership), I was more than happy to hear this news.

The journal, which is called: The Journal of Nonprofit Education & Leadership is a collaborative effort between Western Kentucky University Foundation and American Humanics.

I look forward to seeing how this journal develops and the impact that it will have on the field of nonprofit and philanthropic education.

Categories: journal, leadership, nonprofit education Tags: , , , , ,

Introduction: Lindsey McDougle

December 1, 2009 lindseymcdougle 1 comment

Why hello there… and welcome to the Third Sector Network! My name is Lindsey McDougle and I very excited about this innovative new blogging collaborative. I hope that the information provided here proves to be useful to those who are interested in issues of strategic importance to the nonprofit/philanthropic sector.

I am currently in the dissertation phase of a doctoral program specializing in nonprofit/philanthropic leadership and management at the University of San Diego. My research interests in the field relate to public perceptions and knowledge of nonprofit and philanthropic sector organizations. In business terminology, then, my interests would be in awareness, attitudes, and usage (AAU) data as it pertains to the nonprofit sector.

Interestingly (or perhaps not so much in nonprofit/philanthropic studies where much of the work is inter- and multi-disciplinary), my academic background has not been in the field of nonprofit management. Both my undergraduate and graduate degrees are in natural resource and environmental policy. Furthermore, the bulk of my professional experience (prior to pursuing my PhD) has centered around environmental and sustainability initiatives. But, moving into the area of third sector research was not that far of a stretch for me.

While completing my masters degree, I worked at IBM in the environmental division where my primary responsibility was to work with environmental nonprofits in my local area and arrange events and opportunities for them to speak with our employees (through various lunch and learns, Earth Day events, and Wildlife Habitat Council: wildlife at work programs). It was during this time that I became very interested in the nonprofit sector and decided that I wanted to pursue a PhD in the area.

Understanding what the public knows about nonprofits, and the perceptions that they hold about the third sector speaks volumes about the perceived relevance of nonprofit organizations (in the public’s eye). So obviously given my interests, I am very excited to be a part of this wonderful blog team, and I look forward to engaging in meaningful dialog with our readers!

Categories: nonprofit, philanthropy Tags: , , , ,

ARNOVA 2009: Cleveland Rocks

November 16, 2009 John C. Ronquillo 2 comments

**Cross-posted from johncronquillo.wordpress.com**


This week is going to be action-filled in the best possible way…another academic conference! From November 18 to 21 several of the Third Sector Network’s contributors  will be in Cleveland for the 39th Annual Association for Research on Nonprofit Organizations and Voluntary Action (ARNOVA) Conference. I am very much looking forward to the conference because I always come away with an immense flood of new information. I love the multidisciplinary aspect of the conference; it is simply amazing to see so many people from different parts of the world and in various fields converge in one place for a few days to discuss their common (and sometimes not-so-common) research themes.

The theme for this year’s conference is Philanthropy in Communities: Finding Opportunity in Crisis. It is relevant and timely, and I am really excited to see the research that will be presented. I will be presenting two papers: the first is on managerial perceptions of innovation value in public and nonprofit organizations, and the second will be a case study of the now defunct Arizona 2-1-1 Online program. I’m also excited to be participating in a colloquium entitled “Does Real Action Happen Online?” I’m very eager to hear my colleagues’ response to what I view as a question of ever-increasing importance.

In addition to presenting my research, Lindsey McDougle and I will also be helping with the social media coverage of the conference. I’ll post a few updates on my blog and here at thirdsectornetwork.org. Also joining me in the social media coverage are:

Additionally, you can follow the conference on Twitter where conference-goers will be using the #arnova09 hashtag. We will also be using Cover It Live for a live stream of activities during the conference. You can follow both the tweets and the Cover it Live stream at http://arnova.ning.com.

So, even if you can’t join us in Cleveland, we hope you’ll join us online!

Categories: conference, nonprofit, philanthropy Tags: , , , ,

Introduction: Erica Coslor

November 16, 2009 Erica Coslor Leave a comment

Hello everyone, thanks for joining us. I’m Erica Coslor and I’m currently finishing up my doctoral dissertation in Sociology at the University of Chicago. I had the pleasure of meeting my co-bloggers back in June when we took part in a paper writing workshop at UTexas, Austin.

In the company of these fine nonprofit researchers, I feel like a bit of a black sheep, because my interest in nonprofits has come as a result of my dissertation research, which is on the use of artwork as a financial investment and how this ‘financialization’ came to be. This led me to write a policy  paper about the potential negative consequences to museums that treated artwork as a financial investment, with some modest proposals about how we might avoid the loss of stakeholder trust that comes from liquidating permanent collections. Working on that paper has led me to thinking more about nonprofit assets and governance.

Despite my outsider status in the area of nonprofits (I have not specialized in nonprofit organization studies), I do have a healthy regard for nonprofit management as a part of organization theory and management studies. One thing that I liked in my training in public policy and management at Carnegie Mellon University was that we were encouraged to see ourselves as having the flexibility to move between government, nonprofit and corporate work throughout our careers. I suppose I have already done this alongside my academic career, because I have had the opportunity to work for several nonprofits in my role as a part-time GIS mapping consultant, including the Trust for Public Land and OpenLands in Chicago. While I am now pursuing an academic career, in the future I hope to do more research on nonprofits, as well as consulting work, and when teaching project courses, I hope to have local nonprofits as clients for my future students, which is a good way for universities to give back to the surrounding community.

I do have another rallying cry to study nonprofits, which is that from a theoretical perspective, if we study nonprofit and other forms of organization, this increases the diversity in the types of organizations studied, which is likely to bring about new findings for organization and management studies. (To make an analogy, anthropologists often  study one society at a time, but through comparison they are able to create more general theories and insights that inform researchers who work on different geographical regions.) Well, that’s my Chicago theory coming to the foreground, and I suppose I should end on that note, rather than going on about the increasing professionalization of the nonprofit community and creation of new epistemic cultures around nonprofit management. I look forward to seeing how this forum will evolve in the future.

Categories: nonprofit, philanthropy, public service Tags: , ,