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to the FDA was that the party making the claim was not the company itself and also that the claim has long since been withdrawn.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:
These are very thorny issues and I don’t envy the decisions that Operation Kids’ board and management face.

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