Public Money

How 'Philanthrocapitalism' Could Transform Government

Mark Zuckerberg is now a big-time philanthropist. Two months ago, Facebook’s chief executive and his wife Priscilla Chan launched a plan -- the Chan Zuckerberg Initiative -- to give away most of their wealth. It’s not clear what specific causes the initiative will target or what it will do. But what it does is not nearly as important as how it does it. Without spending a dollar, it has already brought disruptive change to philanthropy. 

How? It’s all about the organization. The initiative is set up not as a traditional tax-exempt nonprofit, but as a for-profit company. It is not bound by the rules that charitable and tax-exempt foundations are. Organized as a limited liability company (LLC), the initiative can call on a variety of capitalistic tools, such as funding nonprofit organizations, making private investments and participating in policy debates. Traditional nonprofits still do good work, but the Chan Zuckerberg Initiative makes “philanthrocapitalism” the center of gravity for a modern charity. READ MORE

Climate Change and Credit Ratings

Patricia, the strongest hurricane ever recorded in the Western Hemisphere, slammed into the town of Emiliano Zapata in southern Mexico in October. Peak winds were 165 miles per hour. The National Oceanic and Atmospheric Administration predicts that the 2015/2016 El Niño -- a causal factor in the ferocity of Patricia -- could foreshadow an indeterminate frequency, number and intensity of such storms in the Northern Hemisphere.

Wildfires in the U.S. West -- California, Colorado, Montana, New Mexico, Oregon and Washington -- were more severe and widespread this summer than in the past, burning or threatening millions of acres of land and thousands of homes. As wildfires increasingly imperil urban areas, they are putting more homes, lives and infrastructure at risk.  READ MORE

Is 'Fair Value' Accounting Actually Fair?

On Oct. 8, 2008, investors were desperate to understand why stocks were cratering and banks had quit lending. It was the height of the financial crisis. That day William Isaac, a former chair of the Federal Deposit Insurance Corporation, went on television and blamed an unlikely culprit: bankers’ accountants. “The Securities and Exchange Commission has destroyed $500 billion of bank capital by its senseless marking to market of these assets for which there is no marking to market,” he said. “That has destroyed $5 trillion of bank lending.” In other words, accounting rules enforced by the federal government were at the heart of the then-unfolding financial catastrophe. Many bankers and investors shared Isaac’s view.

By contrast, government accountants, led by the Governmental Accounting Standards Board (GASB), have embraced these same rules -- known as “fair value” accounting -- with the same enthusiasm that bankers’ and investors’ accountants have scorned them. In fact, during the past three years the people who write accounting standards for states and localities have made fair value a key factor in how governments manage their pensions, investments and retiree health care. Strange as it might sound, that’s a good thing. READ MORE

The Always Tricky Reverse-Commuter Tax

The commuter tax is a tricky one. Many big cities struggle with meeting the needs of thousands of workers who flood downtown every day and then head home to the suburbs (where they’re actually taxed) at night. But other places struggle with the exact opposite problem: capturing revenue from residents who live in the city but commute out to the ’burbs to work. When residents work in suburbs, the whole city misses out on essential revenue -- in many places the city income tax is the largest single source of revenue. Two variations on the reverse-commute hurdles -- one in Michigan and the other in Kansas -- show just how complicated the issue can be.

In Michigan, Detroit levies a tax on outward-bound commuters, but only 15 percent of them actually pay the self-reported tax. The loss adds up, because 62 percent of Detroit residents commute out to the suburbs, according to the nonprofit Citizens Research Council of Michigan. READ MORE

CFOs Are Movin' On Up

Dick Costolo, Twitter’s chief executive officer, announced in June he would be leaving the company. Few were surprised. Twitter’s stock price had fallen nearly 30 percent and shareholders were eager for a change. One initial favorite to succeed Costolo was Anthony Noto, Twitter’s chief financial officer and former CFO of the National Football League. (At press time, a new CEO had not yet been named.)

Of course, unless you’re into Silicon Valley corporate intrigue, you probably don’t care who the next “Top Tweeter” is. But the Costolo-Noto story is noteworthy, because it shows that in some major companies today the CFO has a clear path to become CEO. In fact, in the past few months AMC Theatres, Siemens, BASF, Sprouts Farmers Markets and Blue Earth, among others, all hired a CEO from the CFO ranks. It seems that a growing number of corporate boards not only want traditional CEO skills like decisive decision-making and persuasive communication, but also the dispassionate, reflective, analytical leadership style we associate with CFOs. READ MORE