“Businesses Try to Make Money and Save the World”

Monday, May 7, 2007

ALTRUSHARE SECURITIES is a brokerage firm, engaged in the sort of things you might expect of a Wall Street outfit, like buying and selling stock, and providing research on companies. Unlike its peers, however, the firm is majority-owned by two charities that each control about one-third of it.

So is it a for-profit business? Or a nonprofit fund-raising machine?

In fact, like hundreds of new businesses starting up around the country, it is both. Altrushare is an example of the emerging convergence of for-profit money-making and nonprofit mission.

The practice is even creeping into corporate bluebloods like General Electric, whose $12 billion Ecomagination business promotes its products’ minimal environmental impact as well as their positive impact on the bottom line.

“We’re a for-profit institutional brokerage, and we have to compete on execution and commissions and do so with the same technology and talent you would expect from a top-tier firm,” said Peter Drasher, a founder of Altrushare, which is based in Bridgeport, Conn. “What makes us different is our nonprofit ownership and our mission, which is to support struggling communities with our profits.”

The nonprofit sector is also part of the movement. Motivated by growing competition to attract donor dollars, charities are going beyond longstanding practices. Some are adopting innovative investment strategies or owning other ventures outright.

“I think what people are increasingly looking for, whether in the for-profit or nonprofit sector, is how you harness the vitality and promise of capitalism in a way that’s more fair to everyone,” said Juliana Eades, the president of the New Hampshire Community Loan Fund, a nonprofit mortgage lender that has begun dabbling in other types of financing.

The result is a small but budding practice – what some label the fourth sector – composed of organizations driven by both social purpose and financial promise that fall somewhere between traditional companies and charities. The term “fourth sector” derives from the fact that participants are creating hybrid organizations distinct from those operating in the government, business and nonprofit sectors. But because the types of participants vary widely and much of the activity is nascent, no single name for what is occurring has gained broad use.

“There’s a big movement out there that is not yet recognized as a movement,” said R. Todd Johnson, a lawyer in San Francisco who is working to create an online wiki to engage in the give and take of information for what he calls “for-benefit corporations,” another name for fourth-sector activities.

Consumers, employees, managers and – perhaps most important – investors are driving the phenomenon.

“Young M.B.A. students are not satisfied with going to work for a normal corporation because they are passionate to do good in the world and do it in business,” Mr. Johnson said. “People of faith want exactly the same thing, and there is a whole generation of people who’ve become extraordinarily wealthy as a result of the technological revolution and are now asking themselves if they can create change in the world.”

Those desires are reflected in the growth of so-called sustainable enterprise programs at the nation’s most prestigious business schools, in the corporate marketing campaigns that emphasize social benefits instead of mere sex appeal, and a blossoming of new investment vehicles like Good Capital, Investors’ Circle, Underdog Ventures and the Social Venture Network.

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Source: New York Times (link opens in a new window)