WCLV-FM, Cleveland's long time for-profit classical radio station, is in the process of transferring its ownership to a new nonprofit foundation. It is a development that is welcomed by devotees of serious music and culture. It appears to be good for Cleveland and sets an example worth considering in other cities whose for-profit classical stations are financially challenged. While the venture is complex in its details, involving a trading of radio frequencies and the takeover of an AM station, and it still leaves room for the current owners to derive income and maintain partial ownership and control of the station, the overall thrust is to preserve the station's mission and to benefit the arts in Northern Ohio. To do this, the designers of this deal appear to have taken account of special advantages of the nonprofit form of organization.
I find this turn of events interesting in the context of current developments surrounding the social role of business. It has become increasingly popular in recent years for businesses to incorporate social objectives into their operations, through programs of corporate giving, volunteering, partnering with local nonprofits in joint ventures, or simply engaging in work that helps the community while it produces financial returns. Some closely held for-profit businesses even describe themselves as "social enterprises". Ben and Jerry's Ice Cream and the Body Shop come to mind as companies that have placed their social objectives on par with their financial objectives and claim that the two go hand in hand.
No doubt these and many other such companies are sincere in their intentions and have done socially beneficial work as they have prospered financially. The for-profit form is very flexible in the objectives it accommodates. Sometimes projecting a strong image of public responsibility is the best way to make profits. In other circumstances, businesses have enough market power to generate extra profits that the owners can choose to donate to good causes. In still other circumstances, the market is forgiving enough for a for-profit business to pursue its own concept of social mission, even if that pursuit is not the most financially lucrative alternative. WCLV fits the latter description - it ran with a social mission to promote classical music on the radio - and found a market to support it.
The problem with for-profit pursuit of a social mission in this way, as WCLV has found, is that there is no guarantee that the mission will continue to be maintained if ownership changes, or if market conditions no longer permit the simultaneous pursuit of mission and profits. This is where the utility of the nonprofit form becomes critical. In a nonprofit, mission comes first and profit is instrumental to mission. In a for-profit, this order is generally reversed - mission is usually instrumental to profit-making and in any case cannot pre-empt market success.
I think it's fair to describe WCLV as a "nonprofit in disguise" since it appears to have always held mission above profit. But its owners are getting older and such visionary ownership cannot be assured in perpetuity in the context of an autonomous for-profit business. Thus, it is wise now for the station to turn to the nonprofit alternative for continuity. It is interesting to ask, of course, why WCLV wasn't set up as a nonprofit in the first place.
This is a puzzling question that applies to other socially conscious companies as well. The answer has to do with both financial objectives and control. The owners of WCLV have clearly done well over the years, even if they did not squeeze the maximum financial value out of their franchise by appealing to more popular tastes. They would probably not have done as well financially under a nonprofit arrangement. Moreover, as a for-profit, they have been able to guide the station under their own vision without some of the more cumbersome arrangements a nonprofit would entail.
I once did a case study of a for-profit child care organization in Florida whose owner was somewhat of a maverick in his methods, though I think well-intended. He was near retirement age and contemplating how to move out from his responsibilities running the organization. But he still wanted to maintain the mission of helping troubled children. He said he couldn't just sell the organization to another private owner because he would have no assurance of its continuity. I asked why he didnt convert it to a nonprofit, make the appropriate arrangements for sale or donation of the assets, and continue to run it as a salaried executive until he was ready to step down. His answer was that he was afraid that his board would get fed up and fire him!
Clearly the issues of control will be more complicated for the new WCLV, but opting for a nonprofit solution seems to be the right way to go at this time. WCLV has been a nonprofit in disguise all along - probably choosing the for-profit form as the right path until now. But this is a good time to shed the disguise, before ownership transfer risks loss of this valuable social asset.
As for the argument that a new breed of for-profit social enterprise can take the place of nonprofits, the WCLV example provides insights into both the value and limitations of this approach. Well-intentioned for-profit social entrepreneurs like Robert Conrad of WCLV, seeking a mix of financial return and social good coupled with autonomy and flexibility, can certainly make a difference if their social values are matched with a market niche that offers sufficient support. But the nonprofit form is likely to offer the greater assurance that focus on social mission is maintained over the long term.