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Sarah Dadush addresses RED’s response to her paper

Sarah Dadush sent us this response to our Cui Bono? Post.

It’s gratifying that Red is willing to shed light on some of the transparency issues raised by my paper. This openness could help Red set a standard for other initiatives that resemble it. The Red model now creates many informational gaps, which extend far beyond the question of whether Bono and Shriver are making money from it.

It’s not about whether to “do the (Red) thing” but about how to do it. We want to know more about whose interests our purchasing decisions are serving and in what proportion. We want to know what commercial arrangements cause the appearance of the Red logo on everything from T-shirts to strollers to laptops, and what the label represents socially.

Watchdogs, academics, journalists and blogs like this one make it their business to filter information on the public’s behalf. Ensuring that regulators have access to this information is also important, because they supervise charitable activities. Hopefully this will help them to ‘upgrade their choice’ of regulatory tools, to use another Red slogan.

The fact that The Persuaders is required to donate its profits is reassuring though it also raises some questions: Why does the Global Fund indicate that The Persuaders is not a donor? And why not make this (positive) feature more obvious? Maybe it’s because The Persuaders don’t actually profit from the Red brand, so no money moves. Or maybe it’s because The Persuaders would prefer to avoid regulation as a “commercial co-venturer”, which would require additional disclosure.

With regard to regulating The Persuaders as a professional fundraiser, the definition of Professional Fundraiser in NY includes: “Any person who directly or indirectly by contract … for compensation or other consideration (a) plans, manages, conducts, carries on, or assists in connection with a charitable solicitation … ; (b) solicits on behalf of a charitable organization or any other person; or (c) who advertises that the purchase or use of goods, services, entertainment or any other thing of value will benefit a charitable organization but is not a commercial co-venturer.” The Persuaders solicits and assists in the solicitation of funds from the public through Bono and Shriver-led public outreach on T.V. shows like Oprah, and at concerts, as well as through traditional fundraising events like the Sotheby’s art auction. They also engage consumers directly: when consumers buy a Red Gap T-shirt, they’re buying it because it’s Red, not just because it’s Gap (that’s the point of Red, after all). And The Persuaders are the ones coordinating the Red donation machine, which has generated over $100 million in contributions from the corporate partners. They clearly carry out these activities on behalf of the Global Fund (their only charity partner), and advertise that buying Red will benefit that charity.

These activities affect the public’s trust just as traditional fundraising models do, and should be regulated accordingly. And even though The Persuaders receive no financial compensation from the Global Fund, my paper argues that the licensing fees paid to The Persuaders amount to fundraiser fees, and that the Global Fund has essentially outsourced the payment of fundraiser fees to the corporate partners.

Extending charities’ regulation to encompass the Red model is important. Otherwise, the door is open to charities to avoid regulation simply by having a third party pay their fundraisers!

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  1. David wrote:

    I had the good fortune of hearing Ms. Dadush speak on Red last weekend at NYU. After her presentation, a man stood up to ask a rhetorical question that really underlines what’s at issue here. He said (more or less):

    “I’ve been a professional fundraiser for the past ten years. I want to get this straight: you’re telling me that if I’d simply had my fees pass through some third party I could have completely avoided all the disclosure requirements?”

    From a common-sense perspective, it seems obvious that Red/Persuaders are acting as a fundraiser. If they really aren’t currently required to report as such to the Attorney General’s office, I think that’s a loophole that needs closing.

    Posted December 9, 2009 at 12:11 pm | Permalink
  2. Jeff wrote:

    I must be missing something here. I am not seeing the harm in having charities using third party fundraisers. Fundraising is time consuming and expensive and many charities are better at doing good than fundraising. Why shouldn’t they outsource their fundraising to professionals who have connections and who know how to market a cause and raise money? Perhaps the Persuaders should be filing a disclosure statement, but is administrative corner cutting really a problem?? In my view, the larger issue that goes beyond RED to most charities currently fundraising or using the cause-related marketing model for Africa is the use of negative stereotypes and the misleading messages that are used to suggest that you can save a life by buying an ipod.

    Posted December 9, 2009 at 1:14 pm | Permalink
  3. Todd Wiener wrote:

    I am the professional fundraiser to which David’s comment refers. Here in New York, my company is required to have a contract with any charity we represent and file a closing statement disclosing the funds raised and expenses incurred. These documents are routine and a matter of public record. Therefore I was quite surprised when I first read Ms. Dadush’s paper and learned that Red and its partner companies operate their campaigns in New York with no oversight by the charities bureau whatsoever. The laws already on the books for commercial co-ventures and professional fundraisers would seem to apply for the reasons that Ms. Dadush cites in her paper. Certainly the spirt of these laws would suggest that Red and its partners should be subjected to the same kind of scrutiny that my firm receives. If not, I hope that the laws are updated to include cause related marking programs like Red. All professional fundraisers—and all nonprofits—stand to benefit from the greater trust that would result from such increased transparency. – Todd Wiener, CEO, Aaron Consulting Company

    Posted December 9, 2009 at 1:49 pm | Permalink
  4. Mara Einstein wrote:

    There is a bigger issue here that is not being addressed. Specifically, that (RED) is just one of hundreds–if not thousands–of cause marketing campaigns initiated by a growing number of consumer products companies.

    Due to a number of social and cultural factors, consumers have come to expect that products will be associated with one “social good” or another. While research only a few years ago suggested that consumers would purchase products associated with a cause “all things being equal,” today the research says that consumers will PAY MORE for a product when a cause is attached. Moreover, it is the younger consumers and women–targets that marketers are most interested in reaching–that have a particular affinity to these types of campaigns.

    (RED) is just the tip of the iceberg. There’s also breast cancer (see Samantha King’s wonderful book, Pink Ribbon’s Inc.), red dresses, P&G’s numerous initiatives, Beyonce and Hamburger Helper (I’m not kidding!), and so on.

    I’m not saying all of these campaigns are bad. Some of them are quite good. However, how does the customer know and who is really benefiting in the end?

    I’m currently working on a book on this topic and I’m happy to chat with others and welcome input.

    Posted December 10, 2009 at 3:31 pm | Permalink
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