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A Charity’s Responsibilities to a Sponsor in Trouble

What responsibility, if any, does a charity have when a faithful sponsor faces bad press or worse?

The last charity I worked for as an employee…Operation Kids… was a startup children’s charity organized as a federated nonprofit. A little more than eight years after its founding, Operation Kids is now on solid ground. But like all startups, there were some moments when it was touch and go; when the charity could have as easily failed as succeeded.

It’s fair to say that say that Operation Kids would not be in same the place were it not for an early corporate sponsor, itself a startup called XanGo. XanGo is a multi-level marketing organization (MLM) that sells a supplemental juice drink made from the Asian fruit called mangosteen.

It’s beyond the scope of this blog to talk about the relative merits of the MLM business model or of XanGo as a health elixir. Suffice it say that XanGo has hundreds of thousands of adherents worldwide who have made their choice.

Let me also stipulate that by all accounts XanGo is doing well financially.

However, within the last year the Food and Drug Administration (which regulates food and drugs sold in the States) sent a letter to XanGo asking it to account for an extravagant claim made by a related party about the health benefits of drinking XanGo.

In the United States the supplement industry is allowed to sell their goods with relatively little regulation so long as they don’t make unsubstantiated claims about the supplement’s efficacy and so long as it is safe.

XanGo has also recently gotten unflattering press coverage in Forbes Magazine, an Associated Press story, and elsewhere. The coverage mainly consists of dismissing XanGo as ‘snake oil’ sold to the unsuspecting based on emotion rather than steely-eyed science.

XanGo’s response to the FDA was that the party making the claim was not the company itself and also that the claim has long since been withdrawn.

XanGo’s response to the skeptical press and by extension, to the medical establishment is something like this: “there are more things in heaven and earth than are dreamt of in your philosophy” and science.

And of course, XanGo is right. Here’s just one example of many I could site. It’s only in the last 20 years that science realized… kicking and screaming… that it’s not stress that causes 70-90 percent of peptic ulcers, but a bacteria called helicobactor pylori. The discoverers of this truth, the persistent and daring Australians Barry Marshall and Robin Warren, who won the Nobel Prize for medicine in 2005 for their discovery. Read the fascinating backstory here.

I could list more, but it’s enough to say that science has blind spots and prejudices just like any other entity, collective or individual.

So then what responsibility, if any, does a charity have when a sponsor faces bad press or worse?

Let’s begin by getting the obvious out of the way. Operation Kids owes XanGo nothing more than a hearty and sincere thanks for all the money, time and expertise. Any suggestion that a quid pro quo is required taints the generous donations XanGo has already made.

But, by the same token, XanGo and Operation Kids are closely joined. No doubt Operation Kids’ board and management feel obliged to offer some show of support if for no other reason than self-interest; the donations they get from XanGo are based on the number of bottles sold!

Operation Kids must also feel some measure of conflict. It’s not impossible that this could be the undoing of XanGo. And in so failing reflect badly on the charity.

In order of increasing of daringness here are some things Operation Kids could do to throw a line to a friend:
  • Redouble their recognition of XanGo’s generosity in their internal and external materials/publications.
  • Send notes and letters of support to XanGo management and key distributors.
  • Nominate XanGo for notable corporate citizenship awards.
  • Get an accounting from the charities in the federation of how they’ve used the money from XanGo to bring XanGo’s donations into focus.
  • Send a letter to the editors of the publications critical of XanGo highlighting the company’s many donations and include in it some of the specifics found in the accounting from the affiliate charities.
  • Pitch story ideas about how XanGo’s money is used by Operation Kids charities.
  • Backdoor the mainstream media by launching a charm offensive to the alternative and social media.
  • Encourage their affiliated charities to do any or all the above.
  • Do some behind-the-scenes lobbying of trade groups, business groups and other influentials and ask them to take a public stand against the FDA and/or the critical press.
  • With XanGo’s sponsorship, mount a touring exhibit about Operation Kids that makes stops in major media markets.
  • Enlist the aid of key federal lawmakers, saying, in effect, that XanGo is a generous corporate citizen and the FDA is being overzealous of what amounts to a small indiscretion by third-party.
  • Send a letter in support of XanGo to the FDA.
  • Publicly denounce as misguided the FDA and/or the publications in question.
These are very thorny issues and I don’t envy the decisions that Operation Kids’ board and management face.


Rick Larsen said…
You raise some interesting points and I’d like to weigh in on this from the charity perspective. As president of Operation Kids, no one is more familiar with the history of the relationship with XanGo, or with our philosophy on cause marketing, which is:

Cause marketing rightly influences customers and employees and helps them understand “who they are doing business with” and “who they work for” at an important and relevant social level. It does not, nor should it, have a rightful place in swaying government regulation. In areas such as FDA approval, “right is right.”

Operation Kids has built a brand around accountable giving. Cause marketing is certainly a core principle: people want to know not only what you sell, but from a human perspective, “who you are” and we can help companies achieve that; but only if the giving, the results and the motivation, are all genuine.

XanGo expressed an interest from day-one, in ‘giving back.’ This commitment was not contingent upon any predetermined levels of success nor was it in exchange for anything from Operation Kids, but rather was a pure ambition and reflective of the principles of the founders. Operation Kids was chosen as their partner based on our insistence on results and accountability; an attitude we happened to share. From a marketing perspective, have they benefited substantially from their giving? Yes. But you have raised more important issues.

Any discussion of cause marketing must include what a charity “will and will not do” as well as what a charity “can and cannot do.”

Operation Kids has always publicized with great skill, its successes and accomplishments with XanGo and other corporate partners. We receive donations, design strategies, vet the effectiveness of programs and charities, monitor the giving process and at the end, measure and report results. We also design programs that enable the donor to benefit from their giving from a marketing perspective. But what we cannot realistically do, nor should any charity presume to do, is create “cover” for a corporate donor. The facts surrounding a donor’s business or products, must to stand on their own.

What XanGo does for Operation Kids and its charities is significant, and yet only a part of what they do philanthropically around the world. They are by any standard, “good guys.” The charities and programs we support understand fully what XanGo has done for them, and XanGo has always understood the results of their giving. Interestingly enough, most of the data and results we provide back to XanGo, is for their internal use rather than public positioning...their choice.

As far as messaging or lobbying to the FDA, or publicly taking any kind of stand on the issues you cited, it would be counterproductive for this one compelling reason; that is not our core competency. We do not possess the ability to assess products!

Now, if anyone wants to examine the corporate culture of XanGo including the level of commitment to giving, or to respond to the question of whether or not their giving is genuine or rightly motivated, that would be our area; that is where we have first-hand knowledge. We can respond in these areas because we have seen the donor in action. We could present a compelling and informed case.

But we must leave FDA issues to the FDA. If there is a problem with a product, no amount of “doing good” is going to sway a regulatory agency. On the other hand, if there is no problem (which we suspect will be the case) it will work itself out. It is the FDA’s responsibility to protect the public and they should do their due diligence. It is our responsibility to manage effective giving. I think the public instinctively understands this as well and would take exception with a charity who would attempt to play a role in this type of process.

Based on your valid tactical outline of cause marketing in action, I would respectfully draw a distinction and suggest that Operation Kids strives to adhere to a different, more pure interpretation of cause marketing. We have always tried to do things a little differently; a little better. It is our brand. I am glad you raised these issues and this perspective because this is an excellent opportunity to respond to a “case in point” and explain how we view our role in charitable giving.

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