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Cynicism Unfair, Firm Not Socialist, Co-founder Says

Although Impact Makers welcomes stories about our unique business model ("Profiting From Marx," News & Features, Nov. 22), we believe that the story was overly cynical and misrepresented Impact Makers as somehow "socialist" in nature.

First, Impact Makers is governed by a volunteer board comprised of community leaders, similar to any other foundation or nonprofit in Richmond. That volunteer board holds the executive leadership accountable for their fiduciary responsibility to maximize the operating profits of their divisions, and the board must approve major capital expenditures. This point was completely omitted in the article.

Second, the consulting industry is well-established. Nobody questions a for-profit venture in this space. Additionally, foundations are well-established institutional forms, and we have many of these operating and supporting community programs in Richmond. Nobody would question a new foundation formed by a wealthy philanthropist who decides to support community programs in Richmond, even if it supported multiple "causes" in the city. So why is Impact Makers the focus of skepticism in this article when it has simply merged these two well-established concepts into a new and unique business form and is supporting local community programs in the process? Do only the wealthy have the responsibility and societal permission to try to make a difference in their communities?

Third, the article misrepresented Impact Makers as somehow "socialist." I believe strongly that the opposite is in fact true. Impact Makers is applying capitalist principles to the nonprofit world — we are like a foundation in that we distribute needed resources to Richmond community programs; however, instead of being based on charitable donations, we are a nonprofit organization that in fact is competing in the free market and generating economic value. How is that socialist?

What is unique about Impact Makers is that the company actually transforms the economic value it creates into social value.

As your reporter pointed out many times throughout the article, profits can be manipulated. However, your reporter failed to mention that Impact Makers recognized this issue from its founding and has instituted checks and balances and guidelines to ensure that does not happen.

ú We have a volunteer board that holds the executive leadership responsible for their fiduciary responsibility to maximize operating "profits."

ú We define operating profits as the rest of the business world does — and we ensure that profits aren't manipulated through direct board supervision.

ú Ten percent of operating profits are distributed pre-tax to our community partners per corporate tax law; Impact Makers then pays taxes on the rest of the profits.

ú The board acts as a foundation board in that they decide who receives distributions and how much of the after-tax profits go to these chosen partners within the guidelines we set (apolitical, secular, helping people help themselves, local 501c3s).

ú The board decides how much of the after-tax profits are distributed to our partners and how much, if any (maximum limit may be set in bylaws), is kept for business growth to generate future profits for our partners.

ú If we aren't profitable, we still distribute our minimum pledge. We intend to meet our minimum pledge even if we aren't profitable, but in fact hope to beat that pledge each year.

Michael Pirron
CEO, Impact Makers

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