January 21, 2016
Mark Zuckerberg and Priscilla Chan's recent pledge to donate 99 percent of their Facebook shares to the Chan Zuckerberg Initiative (CZI) quickly became the subject of criticism from some quarters of the not-for-profit sector.
Some of this criticism focused on how Zuckerberg and Chan decided to establish the CZI as a limited liability company (LLC), rather than as a traditional foundation.
There are some advantages to doing this — an LLC has much more flexibility to contribute to the common good by investing in for-profit companies as well as by donating to not-for-profits.
But because LLCs aren't subject to the same regulatory requirements as traditional foundations, they can, in theory, fund things that don't necessarily further charitable goals.
Criticism also has focused on how such a massive amount of money, combined with the use of a "less accountable" LLC, could lead to a further concentration of power in the hands of wealthy people such as Zuckerberg and Chan.
If nothing else, the debate has opened up an opportunity to have an important discussion about the relationship of philanthropy, particularly "big philanthropy," to the broader community — and what kinds of actions can enhance this relationship in order to maximize both philanthropy's social impact and the community's support for its work.
In this context, the concept of a "social license to operate," which has generated more attention in the private sector, particularly within the mining industry, than from the not-for-profit sector, is relevant — and reflects an increasingly common view that private companies can't just do what they want while ignoring the needs of local communities.
Defining the Social License to Operate
It's not a license in the formal sense — you don't apply for it and get it if you tick the right boxes. It's something a company earns through its actions; it's an intangible asset that a company earns and must work to maintain, in much the same way that it earns and must work to maintain its reputation.
In other words, a social license is a type of "soft" regulation, as opposed to "formal" or "hard" regulation, which is determined and enforced by government agencies and regulators.