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Ken Stern: What’s Wrong With the Charitable Sector, How to Fix It – Wal-Mart Stores, Inc. (WMT), Chevron Corporation (CVX), Goldman Sachs Group, Inc. (GS)

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In the video below, Ken Stern, former CEO of National Public Radio, discusses his new book, “With Charity For All.” In the book, Stern takes on the charitable sector, which he says, “operates with little accountability, no real barriers to entry, and a stunning lack of evidence of effectiveness.”

Stern gives his take below on what’s broken in the charitable sector, how to fix it, and how Americans can best make a difference. Given Stern’s unique perspective from his days at NPR, we also discussed the future of radio and the technologies that are disrupting it. A full transcript follows the video.

Wal-Mart Stores, Inc. (NYSE:WMT)Ken Stern Interview (Full Version)

Brendan Byrnes: Hey folks, I’m Brendan Byrnes and I’m joined today by Ken Stern, the author of “With Charity for All.” Ken, thank you so much for joining us.

Ken Stern: Thanks for having me.

Byrnes: My first question is — this is maybe an under-appreciated topic, with charities. A lot of people just put their money into it and don’t think about it, or at least think they’re doing the right thing. Why did you decide to get involved with this, and why did you decide to write the book?

Stern: A lot of the reason I got involved was my past experience with the charitable world. I actually ran a charity, National Public Radio, for about eight years, first as a COO, then as a CEO, and I saw some of the challenges I faced. When I left, I wondered whether those challenges were unique to NPR or really more broad-based.

What I found out actually really surprised me. How large the charitable sector is — 1.1 million charities, $1.5 trillion in annual revenues, 10%-15% of the American workforce — and a lot of what I saw as problems was in terms of effectiveness, and that really led to this book.

Byrnes: What’s the most surprising thing that you found in the book, in your estimation?

Stern: I think two things — well, there’s lots of surprising things; I could go on all day — but one is how many charities actually look, feel, and operate like for-profit businesses. The best example of that in my mind is charitable hospitals, which are more profitable than for-profit hospitals, compensate their executives in the millions, and most importantly, actually provide no more charitable services than for-profit hospitals.

There are lots of examples of charities like that. That really surprised me, as well as some of the effectiveness challenges.

Byrnes: Why be a for-profit hospital instead of a charitable hospital, if you can do seemingly most of the same things?

Stern: Well, for investment purposes. I think the real difference between charitable hospitals and for-profit hospitals are the ability of a for-profit hospital to distribute profits to shareholders. It’s really an investment distribution issue.

On the charitable side, the question is really whether the government and donors should be supporting these hospitals, which are really essentially for-profit businesses.

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