Girl Scouts & Good Corporate Governance

Cookie prices & tax filings as evidence of corporate inefficiency
charity, politics
2011-04-212015-02-15 in progress certainty: unlikely importance: 7


I was read­ing a new blog, rib­bon­far­m.­com by the inter­est­ing Venkatesh Rao, because one post on the true orga­ni­za­tion of cor­po­ra­tions had been linked approv­ingly on Less­Wrong; he presents a life­cy­cle of cor­po­ra­tions by way of describ­ing how a cor­po­ra­tion inevitably degen­er­ates into oper­at­ing. They are con­stantly being born and then ripped apart by hun­gry entre­pre­neurs (a nicer name for Venkatesh’s ‘sociopaths’), and this cre­ative destruc­tion keeps things rel­a­tively effi­cient and cuts down on indefi­nite & other like the . Very few orga­ni­za­tions indeed sur­vive more than a cen­tu­ry.1

But of course, some cor­po­ra­tions last a very long time. Mil­len­nia is , and the Catholic Church resem­bles mod­ern cor­po­ra­tions in many respects. It’s inter­est­ing look­ing at their areas of exper­tise—­food, con­struc­tion, and reli­gion seem to pre­dom­i­nate.

Barriers to entry

All areas with what one might call ‘unearned’ advan­tages; if a tem­ple tells you that Bud­dha endorses that tem­ple and wor­ship­ing else­where might con­demn you to the or rebirth as a , they prob­a­bly did­n’t earn that endorse on the free mar­ket with really good homilet­ics and espe­cially effec­tive phil­an­thropy. If a con­struc­tion com­pany has been build­ing the local Shinto tem­ples for the past cou­ple cen­turies, they’ll go on get­ting busi­ness regard­less of whether they’re doing an effi­cient job. The pro­duced near will go on sell­ing well despite trans­gres­sions like sell­ing expired frozen goods as fresh and forg­ing the doc­u­men­ta­tion. When King Henry VIII expelled the Catholic Church and seized , he seized some­thing like 1⁄4 of the entirety of Eng­land2; one has to won­der if the monas­ter­ies were that good at agri­cul­ture & busi­ness. Mod­ern cor­po­ra­tions have seamy under­bel­lies even if they seem utterly unob­jec­tion­able3.

So if one sees an old cor­po­ra­tion, one is jus­ti­fied in ask­ing how it has sur­vived so long—­does it have some sort of unique sta­ble niche it alone can fill, or an unfair advan­tage? It might be a sim­ple case of luck. With mil­lions of cor­po­ra­tions over the years, surely a few will sim­ply hap­pen to sur­vive a long time.

But it seems to me that if this were the case, one would expect to see such cor­po­ra­tions shift­ing niches and sur­viv­ing in com­pet­i­tive areas for long peri­ods; but instead, if one looks at exam­ples like the for­mer old­est cor­po­ra­tion in the world, , one sees a story which runs more like this: they lived in a pro­tected niche for an extremely long time and then they died shortly after ven­tur­ing into more com­pet­i­tive areas; and indeed, Kongō Gumi was founded in 578 AD as a tem­ple con­struc­tion com­pany and went bank­rupt after it tried to expand into gen­eral real estate in the mid­dle of a .4 Gumi illus­trates another fail­ure mode: a sin­gle leader can draw on the accu­mu­lated cap­i­tal (fi­nan­cial & social) of an ancient insti­tu­tion. How did Gumi, a rel­a­tively small con­struc­tion com­pany in a shrink­ing busi­ness, have enough credit to hang itself? Per­haps because it was such an ancient insti­tu­tion. The folly of one gen­er­a­tion can be fueled by the pru­dence of many gen­er­a­tions.

Char­i­ties are usu­ally , inci­den­tal­ly, with curi­ous spend­ing pat­terns.5

That is all back­ground for the main ques­tion.

Judging charities

Pre­sum­ably we would ‘blame’ a lead­er­ship if it was fail­ing to accom­plish its pub­licly claimed goals and serv­ing itself instead (the fancy eco­nom­ics term for this is the ). A char­ity focused on char­ac­ter-build­ing and recre­ation is a bit harder to judge than one try­ing to stamp out polio; the lat­ter can just point to falling death-rates.8

There are a num­ber of cri­te­ria we could try to judge Girl Scouts on:

  1. Is the admin­is­tra­tive over­head grow­ing or decreas­ing?

    Com­put­er­i­za­tion and gen­eral tech­no­log­i­cal devel­op­ments means that the nec­es­sary bureau­cracy ought to be more effi­cient than, say, in the 1950s.

  2. Is the enroll­ment of Girl Scouts as a frac­tion of the young female pop­u­la­tion increas­ing or decreas­ing?

    If Girl Scouts is shrink­ing, then the good the orga­ni­za­tion can do is nec­es­sar­ily also shrink­ing. It’s hard for Girl Scouts to help a lot of young girls learn self­-dis­ci­pline or char­ac­ter if they’re all flee­ing.

  3. Are camps being more or less uti­lized, or worse, being closed?

    Camp­ing and the out­doors are one of the key aspects of any Scout­ing orga­ni­za­tion and in a sense, what makes them more than a club for arts & crafts9. If they are going unused, then it’d be like a library no longer lend­ing book­s—it may still be doing some­thing use­ful, but one won­ders what exact­ly.

How can we judge Cri­te­rion 1? Eas­i­ly, it turns out. Girl Scouts is a char­i­ty, char­i­ties are non­profit cor­po­ra­tions, cor­po­ra­tions keep records of spend­ing, and often make them pub­lic; as an IRS-recognized char­i­ty, Girl Scouts is oblig­ated to make finan­cial reports pub­lic, and some Googling then turns up as a source for the reports, at which point it’s easy to down­load their PDF and finally answer the ques­tion—what does Girl Scouts spend its money on? (That char­ity fil­ings are pub­licly avail­able seems to be gen­er­ally unknown; peo­ple rou­tinely ask ques­tions about char­i­ties that could be answered by look­ing at the Form 990s.)

Cri­te­rion #2 is hard­er, but total enroll­ment is pub­lic infor­ma­tion, as is US cen­sus data about how many young girl there are.

Cri­te­rion #3 is diffi­cult to research; it seems unlikely that camp atten­dance or clos­ing data is eas­ily found online, and it is pos­si­ble that not even Girl Scouts National (GSUSA) knows the answer. We’ll punt on #3, and see how far we can get on #1 and #2 with­out look­ing at the tax fil­ings.

Here are some facts to con­sid­er. Girl Scouts was founded in 1912 and is a cen­tury old. The GSUSA lead­er­ship is appar­ently unelect­ed. And the is well-known as one of stratos­pheric exec­u­tive com­pen­sa­tion, which would be as easy to jus­tify in char­ity as any­where else (“should­n’t our man­agers get a fair liv­ing wage? You don’t want the Girl Scouts crip­pled by head­hunters poach­ing it.”) Par­tic­u­larly trou­bling are the cookie sales them­selves. At first glance, they seem almost designed to con­cen­trate con­trol & mon­ey, rather than decen­tral­ize it:

  • The coun­cil prob­a­bly con­trol the cookie sales through stan­dard meth­ods like copy­right or trade­mark or
  • prices and avail­abil­ity report­edly are now set nation­ally for each area. This is a very recent devel­op­ment.
  • Cook­ies have been offi­cial fundrais­ers and sold since the 1920s; they were com­mer­cial­ized in 1934, and com­mer­cial bak­ers used nation­ally in 1936
  • Com­pet­ing would be hard because so much of the value is in the brand (and brands are so prized by man­u­fac­tur­ers because they are a license to print mon­ey).
  • Economies of scale dis­cour­age alter­na­tives; there are 2 offi­cial bak­ers in 2011, com­pared to 14 bak­ers in 1961.
  • There are few fundrais­ing alter­na­tives: Girl Scouts some­times sell cal­en­dars or mag­a­zine sub­scrip­tions or nuts or pop­corn, but the sales of those are peanuts and most only sell cook­ies.
  • Returns of cook­ies are for­bid­den

Revenue streams (other than cookies)

How are they being fund­ed, any­way? Their FAQ also says (em­pha­sis added):

Girl Scouts of the USA is paid a roy­alty for use of the licensed trade­marks by its licensed ven­dors based on gross annual sales vol­ume. Girl Scout coun­cils do not pro­vide any por­tion of their cookie rev­enue to Girl Scouts of the USA. No other rev­enue from cookie sales goes to Girl Scouts of the USA. Girl Scouts of the USA pro­vides con­trac­tual ser­vices and approves all edu­ca­tional mate­ri­als devel­oped by the bak­ers, as well as pro­vid­ing coor­di­na­tion and train­ing for national media, safety stan­dards, lead­er­ship pro­grams and sale guide­lines.

That’s sen­si­ble. Let’s move on.

At this point an econ­o­mist is slap­ping his head some­where. Money is . What mat­ters is the whole sys­tem, not arbi­trary labels and divi­sions. If you give Kim Jong-Il $50 worth of rice, you just freed up $50 for his nuclear weapons pro­gram. If the 2 bak­ers are pay­ing GSUSA a licens­ing fee, that fee is com­ing from some­where. . It’s com­ing from the cost of the cook­ies! The license fee must be built into the cost struc­ture. If the coun­cils & troops are charged $1.20 for a box and the baker then pays 20 cents to GSUSA, you could change the arrange­ment to the baker hav­ing no license fee, charg­ing $1 a box, and then GSUSA tak­ing 20 cents. Every­one makes the same amount of money in the end, but sud­denly no longer are “70% of pro­ceeds stay­ing in the local Girl Scout coun­cil”. The differ­ence is a mean­ing­less ver­bal one.

There may be inno­cent rea­sons for these word­ing choic­es, but the more cyn­i­cal know what they think: GSUSA is hid­ing its rake by blam­ing it on the 2 scape­goat bak­ers. Fas­ci­nat­ing­ly, if the $1 fig­ure is a ceil­ing, GSUSA could be get­ting a fig­ure com­pa­ra­ble to the indi­vid­ual troops, since the troops only get around 10% or 40 cents; if the true cost of bak­ing is <80 cents and the licens­ing makes up the other >40 cents, GSUSA would be get­ting more!

The other 60% goes to the local coun­cil, which appar­ently cov­ers, among other things, all the lit­tle rewards and incen­tive pro­grams for the girls.14

Are there any stats break­ing things down fur­ther? The Seat­tle Times men­tions that

Girl Scouts USA does­n’t share in the local coun­cils’ cookie pro­ceeds, though it does get a 2% roy­alty from the com­mer­cial bak­ers’ net sales.

Net sales pre­sum­ably means the full $800 mil­lion, or to put it another way, 2% of each $4, which would be 8 cents, which brings the bak­ers’ $1.20 down to $1.12. That’s more rea­son­able. $16 mil­lion is a lot but it was­n’t the hun­dreds of mil­lions we feared. One Girl Scouts leader com­ments that the bak­ers get $0.90 of each $4.00 (22.5%), which is smaller than our con­ser­v­a­tive esti­mate of 20 cents more.

Staying honest: predicting before the experiment

So, before we peek at the tax fil­ings, what pre­dic­tions would we make? It’s impor­tant to pre­dict before we look at more data; there are too many which let you decide that the results con­firm your the­ory or beliefs (even if you were just lied to). If your the­ory can account for any result, then it’s a pretty worth­less the­o­ry. (If your pre­dic­tions don’t elim­i­nate out­comes as pos­si­bil­i­ties, then you wind up hold­ing weird beliefs like WWII sab­o­tage con­firms the exis­tence of Japan­ese sabo­teurs and the absence of sab­o­tage also con­firms the exis­tence of said sabo­teurs, or that con­fess­ing to witch­craft con­firmed you as a witch and not con­fess­ing also con­firmed you. Which is daft.)

Predictions

Well, one would expect a high salary for the GS CEO (>$300k seems like a sum I would start to won­der about), one would expect sub­stan­tial ben­e­fits15, a large num­ber of employ­ees in gen­eral (em­pire build­ing); a major red flag would be any employ­ees between Girl Scouts and the 2 licensed bak­ers (and any basi­cally end our inquiry right there).

This essay for me has been some­thing of an intel­lec­tual exer­cise. With­out know­ing the facts of the mat­ter, going on gen­eral knowl­edge and cal­cu­la­tions, I would try to make a case for cor­rup­tion in GSUSA. The case so far may or may not be con­vinc­ing depend­ing on how much trust one puts in the 2% fig­ure. The IRS tax fil­ings would reveal impor­tant data like employee salaries, which trump any­thing I’ve said so far. Will my sus­pi­cions be vin­di­cat­ed? Or will I be revealed as a cynic or para­noiac, and the Seat­tle Times and oth­ers right in point­ing to the coun­cils as hog­ging all the mon­ey?

The data

The stan­dard source for non­profit fil­ings is entry on the national orga­ni­za­tion GSUSA and more specifi­cal­ly, its .

2009

When I first wrote this, the 2009 was the lat­est fil­ing avail­able, so we’ll start with it.

What inter­est­ing things do I note on the first read?

  • the head­quar­ters are on in NYC—what is a fru­gal char­ity doing on a street whose Wikipedia entry describes how it is the most expen­sive street in the world?

  • the ‘gov­ern­ing body’ has just 30 vot­ing mem­ber­s—so it actu­ally is elec­tive (in a very nar­row sense)

  • there are 539 employ­ees

  • it received $6m in dona­tions & grants ($1.5m gov­ern­ment) and paid out $4.1m in sim­i­lar (all to var­i­ous local coun­cils, it seems)

  • it received $37.7m in ‘pro­gram ser­vice rev­enue’

    The later sec­tion (page 10) is very con­fus­ing to me. I’m not sure how to read it. It may imply that $32m came from mem­ber­ship dues and the other $5.1m from ‘meet­ing and learn­ing events’.

  • invest­ments are an odd item; in 2008 they earned $2.15m, but are recorded are -$3.9m in 2009! Did they get burned badly in the hous­ing bub­ble?

    More inter­est­ing­ly, the detailed break­out sec­tion includes an item for ‘roy­al­ties’ which must be the cookie roy­alties! The roy­al­ties are $8,122,461, much less than the $16m fig­ure. They also earned $2.8m from ‘div­i­dends, inter­est, other sim­i­lar amounts’.

    There’s one set of items I have no idea to inter­pret. ‘Gross amount from sales of assets other than inven­tory’ lists ‘(i) Secu­ri­ties: 53,116,009’ and then ‘Less cost or other basis and sales expenses’ lists ‘(i) Secu­ri­ties: 59,853,735’ for a ‘Gain or (loss)’ of -6,737,726.

    Another curi­ous entry is ‘Gross sales of inven­to­ry, less returns and allowances’ ($37.9m), ‘Less cost of goods sold’ ($16.6m) for a ‘Net income or (loss) from sales of inven­tory’ of $21.2m. It’s pos­si­ble that this is some sort of cookie reselling scheme, but more likely it’s just GSUSA sell­ing Girl Scout mer­chan­dise like uni­forms at a healthy 57% markup. A full set of Scout equip­ment can be very expen­sive.

  • the ‘Salaries, other com­pen­sa­tion, employee ben­e­fits’ expense item con­sti­tutes $37.3m; and GSUSA spent $34.6m the pre­vi­ous year

    Here is another area where the details (page 11) begin to trip me up. ‘Com­pen­sa­tion of cur­rent offi­cers, direc­tors, trustees, and key employ­ees’ amounts to only $2.4m! ‘Other salaries and wages’ is a total of $24m. The remain­ing $9m seems to go to $2.7m in pen­sion con­tri­bu­tions, $5.7m in ‘Other employee ben­e­fits’, and $2.2m in pay­roll tax­es.

  • All ‘Other expenses’ make up $44.5m

    Some of them make one won­der. $489k in invest­ment man­age­ment fees seems some­what rea­son­able if $14m is being held in ‘sav­ings and tem­po­rary cash invest­ments’, $93m in ‘pub­licly traded secu­ri­ties’ & $22m in ‘other secu­ri­ties’, as does $913k in legal fees; but what did they bury in the $11.8m lacon­i­cally listed as ‘Other’? Did they really have to spend $6.1m on ‘occu­pancy’ and $3.7m on ‘travel’. It is sur­pris­ing how lit­tle they pay in insur­ance ($305k) but then again, the insur­ance often cited as one of the nec­es­sary over­head expen­di­tures prob­a­bly is more a prob­lem for the coun­cils which actu­ally own the camps & facil­i­ties.

  • the form, in case you missed it, spells out the impli­ca­tion: GSUSA was $17m in the red in 2009, and $7m in the red in 2008. How on earth does that work? Where is the money com­ing from? Am I mis­un­der­stand­ing some­thing? Did they really choose to spend an extra $3m on salary & ben­e­fits even as they fell off a finan­cial cliff?

  • the sum­mary is par­tic­u­larly stark: Total lia­bil­i­ties 2008, $19.35m; 2009, $40.8m. Its net assets in 2009 amount to $118.9m.

    If it con­tin­ues to deficit spend at $20m a year, then it’d be down to $100m in 2010, and $80m in 2011, and bank­rupt around 2015 or so. I had expected to find a large salary/benefits item like $38m, but I had not expected to find GSUSA in such par­lous state.

  • the check­list does have one inter­est­ing item, #28, which asks about for­mer employ­ees etc. hav­ing a busi­ness rela­tion­ship; this was all marked no, so if there’s a revolv­ing door, it’s using some loop­hole or dodge, which makes it less like­ly. Phew! One bit of good news.

  • part 7, sec­tion A cov­ers the juicy salary infor­ma­tion—but omits the details! All it reports is that 70 indi­vid­u­als are includ­ed, who col­lec­tively earned $3,793,979 in salary & ben­e­fits from GSUSA ‘and related orga­ni­za­tions’, and at least one earned >$150,000.

    For­tu­nate­ly, on page 17 (part VII, sec­tion Aaa), we find that the CEO gets $435,352 and $63,058, for a total of $498,410. The VP makes $431,758, the chief of staff $310,630, the exec­u­tive vice pres­i­dent makes $311,618, the senior vice pres­i­dent makes $248,979, the ‘VP & gen­eral man­ager’ makes $297,407, and a pas­sel of 7 other vice pres­i­dents of var­i­ous sorts make sim­i­lar sums in the 300-190k range.

    On page 42, we read of still more pay­ments. The CEO has 82k in ‘other com­pen­sa­tion’, 48k in ‘deferred com­pen­sa­tion’, and 16k in ‘non­tax­able ben­e­fits’ (health­care?). These may or may not sub­sume her $63k from ‘other orga­ni­za­tions’ pre­vi­ously men­tioned, but if we add it all together (), she got $561,468. Nor is she unique—the other exec­u­tives are all get­ting their other/deferred/nontaxables as well.

  • the ‘Inde­pen­dent Con­trac­tors’ sec­tion is more detailed. 2 ‘Tech­ni­cal Ser­vices’ firms earned $2.3m; 1 legal firm earned $0.9m; and 2 mar­ket­ing firms earned $1.2m.

    This does­n’t seem so bad, but a final item men­tions that there are 45 other inde­pen­dent con­trac­tors each paid >$100,000! (If they aver­aged $250k each, then the 45 were paid $11.25m, for total pay­ments to inde­pen­dent con­trac­tors of ~$15.6m.)

  • One ran­dom item I was struck by was $192k spent on direct lob­by­ing (of a leg­isla­tive body), and a total of $866,500 in direct lob­by­ing 2005-2009. One does­n’t expect the Girl Scouts to have much lob­by­ing to do.

  • One sug­gested cost for cookie money is schol­ar­ships, but the endow­ment sec­tion ($112m) men­tions spend­ing $1.2m on ‘grants or schol­ar­ships’, so I doubt any cookie money is going directly there. It’s par for the indebted course that the GSUSA endow­ment declined to $107m.

2010

The 2010 Form 990 is like­wise avail­able from Guidestar.

  • The first page is as strik­ing as before:

    • vot­ing mem­bers is down 2 to 28

    • employ­ees is down 21 to 518

      • but com­pen­sa­tion is still up, from $37.3m to $40.1m
    • Total rev­enue: $80.7m. Total expens­es: $85.5

      • $4.8m in the red is much bet­ter than 2009’s $17m
  • Rev­enue seems mostly sim­i­lar (roughly same amount of grants & dues)

    • but what on earth is GSUSA doing to earn $85k for ‘soft­ware main­te­nance’?
  • Expenses is pretty sim­i­lar

    • ‘com­pen­sa­tion of cur­rent offi­cers, direc­tors, trustees etc.’ has fallen from $2.4m to $1.9m, despite the pre­vi­ously noted increase in employee com­pen­sa­tion
    • ‘other salaries and wages’ is $23.5m—­less than 2009?
    • the 2009 report listed just $1.8m for ‘Other’, but the 2010 lists $12m! What on earth?
    • Travel fell $0.8m, so per­haps they have been cut­ting back
  • The “total net assets or fund bal­ances” by the end of the year totaled $112m, down from $118.9m in 2009; this is more than I would have guessed from a $4m deficit.

  • 2010 lob­by­ing was sub­stan­tially high­er—$307k vs $192k

  • pg 21 cov­ers the GSUSA endow­ment with con­ve­nient current/prior year com­par­isons.

    • No prizes for guess­ing that the bal­ance, con­tri­bu­tions, & grants all fell
    • how­ev­er, invest­ment income soared to a gain of $9.5m from a loss of $1.4m
    • “other expen­di­tures for facil­i­ties and pro­grams” increased by a solid $1.1m
  • Salary infor­ma­tion is very inter­est­ing (page 39):

    • the CEO com­pen­sa­tion for Cloninger now totals $621k, up from $500k—a remark­able $121k salary increase
    • next is Corsello (CFO/senior VP), who now makes $500k—a jump of ~$70k

2011

The 2011 return was finally posted in late 2012. To redo the 2010 analy­sis:

  • First page:

    • vot­ing mem­bers up 1 to 29

    • employ­ees down to 490, a loss of 28

      • but com­pen­sa­tion is still up, from $40.1m to $42.98m
    • Total rev­enue: $90m. Total expens­es: $89.59m

      So (bare­ly) in the black! With the 2011 fis­cal year, the bleed­ing seems to have stopped.

  • The rev­enue improve­ments are mostly due to large increases in “Invest­ment income” and “Other rev­enue”; these seem to be related to “Secu­ri­ties” ($5m; this is the same puz­zling “Gross amount from sales of assets other than inven­tory”) and mer­chan­dis­ing sales (“Net income or (loss) from sales of inven­tory”; but not the “roy­al­ties” I spec­u­lated were cookie money since that was $8.1m in 2009 but has fallen to $7.9m in 2011).

  • the “Salaries, other com­pen­sa­tion, employee ben­e­fits” expense item is $42.98 vs $40.1m, as already men­tioned

    pg10: “Com­pen­sa­tion of cur­rent offi­cers, direc­tors, trustees, and key employ­ees” now amounts to $2.1m, “Other salaries and wages” $27.938m; with the remain­der being $4.7m for the pen­sion (dou­bled), $6.2m for “Other employee ben­e­fits” (+$0.5m), and $2m in pay­roll taxes (-$0.2m).

    Sched­ule O (pg59) explains part of the pen­sion change as

    NET UNREALIZED GAIN/(LOSS) -8,329,587 PENSION EXPENSE 5,410,836 CHANGE OF DEFERRED GIFTS -142,795

    TOTAL -3,061,558

  • Offi­cer salary/compensation is not much differ­ent from 2010. The CEO has another $21k in total com­pen­sa­tion, the CFO/VP has jumped $12k, the chief of staff fallen $19k, the “VP & Gen­eral Man­ager” held steady, etc.

Over­all, a num­ber of exist­ing trends held, but the pic­ture improved. As sug­gested in pre­vi­ous years, the pen­sion may be an issue. (Per­haps the pen­sion is related to the steady shed­ding of employ­ees.)

Assessment of data & predictions

So, what’s the upshot here? I’m far from an expert on these sorts of finan­cial mat­ter­s—an inter­ested lay­man, no more. To me, the pic­ture the fil­ing paints is of a some­what bureau­cratic & self­-serv­ing orga­ni­za­tion pay­ing steadily more in salary, ben­e­fits, and pen­sion to a gag­gle of exec­u­tives (half a mil­lion or more to its CEO) even as its rev­enues & endow­ment shrink and it sinks deeper in debt. This pic­ture improves in the 2011 fil­ing, sug­gest­ing I may have exag­ger­ated the prob­lems by ascrib­ing the sins of the reces­sion to the man­age­ment.

But regard­less, GSUSA appar­ently is not doing this on the back of the cookie prices, which seem to be rel­a­tively unim­por­tant: the $8m in roy­al­ties (if that’s the cookie rev­enue) is less than 1⁄3 of their mem­ber­ship fees and less than 1⁄2 of their mer­chan­dise profit. The price increases out­pac­ing infla­tion may be due to a des­per­ate or greedy GSUSA, but they seem to be run­ning at a loss only in the last few years, long after much of the price increase, and increases could only net them a lit­tle more rev­enue.

Hon­esty com­pels me to say that the cul­prits are almost cer­tainly the local coun­cils, who reap some­thing like 60% of the rev­enue and can recap­ture the other 10% from the troops through the meth­ods described in the pre­vi­ously linked arti­cles.

On the other hand, GSUSA does seem to be in trou­ble. So per­haps I was right after all? If I was, it is an equiv­o­cal sort of right, and one I can’t really claim as a vic­to­ry. Intro­spect­ing, I think I may have fallen prey to a sort of which one might call a ‘sto­ry­telling bias’—I had a nifty story about a reli­able gusher of cookie rev­enue cor­rupt­ing a self­-s­e­lected elite, and I ignored that the elite could become scle­rotic and self­-serv­ing by many mech­a­nisms, not just the one that cap­ti­vated my mind at the moment.

See Also


  1. , “The Armories of the Lat­ter Day Laputas, Part 5”:

    In 2009, the Japan­ese busi­ness analy­sis and sur­vey firm Tokyo Shoko Research (a com­bi­na­tion of Dunn and Brad­street and TRW in Japan), con­ducted an exam­i­na­tion of the found­ing dates of the 1,975,620 enter­prises in their data­base.They found 21,666 com­pa­nies which have existed for over 100 years. The Bank of Korea con­ducted a sim­i­lar eval­u­a­tion of their data­base and found that there are 3,146 firms founded over 200 years ago in Japan, 837 in Ger­many, 222 in the Nether­lands and 196 in France. There are 7 com­pa­nies in Japan over 1,000 years old; 89.4% of the com­pa­nies with over 100 years of his­tory are for profit busi­ness­es. How­ev­er, a closer exam­i­na­tion of the his­tory of these long-sur­viv­ing enter­prises reveals that many under­went takeovers, buy­outs and essen­tially a com­plete restruc­tur­ing of mis­sion and the nature of the busi­ness the firms were engaged in—often more than once in their his­to­ry. Thus, the chances of a busi­ness entity (ex­clud­ing reli­gious and aca­d­e­mic insti­tu­tions) sur­viv­ing for >100 years is 1.096%.

    Physi­cist offers the fruits of his own research into cor­po­rate longevity and the life cycle:

    But it turns out that cities and com­pa­nies differ in a very fun­da­men­tal regard: cities almost never die, while com­pa­nies are extremely ephemer­al. As West notes, Hur­ri­cane Kat­rina could­n’t wipe out New Orleans, and a nuclear bomb did not erase Hiroshima from the map. In con­trast, where are Pan Am and Enron today? The mod­ern cor­po­ra­tion has an aver­age life span of 40 to 50 years. This raises the obvi­ous ques­tion: Why are cor­po­ra­tions so fleet­ing? After buy­ing data on more than 23,000 pub­licly traded com­pa­nies, Bet­ten­court and West dis­cov­ered that cor­po­rate pro­duc­tiv­i­ty, unlike urban pro­duc­tiv­i­ty, was entirely sub­lin­ear. As the num­ber of employ­ees grows, the amount of profit per employee shrinks. West gets giddy when he shows me the lin­ear regres­sion charts. “Look at this bloody plot,” he says. “It’s ridicu­lous how well the points line up.” The graph reflects the bleak real­ity of cor­po­rate growth, in which effi­cien­cies of scale are almost always out­weighed by the bur­dens of bureau­cra­cy. “When a com­pany starts out, it’s all about the new idea,” West says. “And then, if the com­pany gets lucky, the idea takes off. Every­body is happy and rich. But then man­age­ment starts wor­ry­ing about the bot­tom line, and so all these peo­ple are hired to keep track of the paper clips. This is the begin­ning of the end.” The dan­ger, West says, is that the inevitable decline in profit per employee makes large com­pa­nies increas­ingly vul­ner­a­ble to mar­ket volatil­i­ty. Since the com­pany now has to sup­port an expen­sive staff—over­head costs increase with size—even a minor dis­tur­bance can lead to sig­nifi­cant loss­es. As West puts it, “Com­pa­nies are killed by their need to keep on get­ting big­ger.”

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  2. I also found esti­mates which went as high as 1⁄3! Fukuyama cites an esti­mate of the Church as con­trol­ling 1⁄3 of Den­mark as well as 1⁄2 of Nor­way’s land (the source appar­ently being Lock­hart 2007, Den­mark, 1513–1660: The Rise and Decline of a Renais­sance Monar­chy).↩︎

  3. Why is IKEA, nor­mally con­sid­ered a paragon of virtue with its com­mit­ment to renew­able ener­gy, such a legal labyrinth? What moral high ground was for­feited when IKEA decided to help finance Com­mu­nist regimes by shift­ing man­u­fac­tur­ing to cheaper Poland by 1965? Much of explores the deep com­pro­mises made by Amer­i­can organic farm­ing in order to scale to large sales vol­umes. The images of IKEA and organic farm­ing remain largely intact & untar­nished despite the con­sid­er­able cov­er­age both have received over the years.↩︎

  4. The aspect makes the tale of Kongō Gumi even sad­der; a 1400-year old cor­po­ra­tion has seen many bub­bles come and go on the local and inter­na­tional scene, and so really ought to know bet­ter.↩︎

  5. Tyler Cowen, Good and Plen­ty: The Cre­ative Suc­cesses of Amer­i­can Arts Fund­ing:

    Since 1969, tax-ex­empt non­profit insti­tu­tions must spend a cer­tain per­cent­age of their income each year. At first the clause required either 6% or the rate of return on assets, whichever was greater. In 1981 the Inter­nal Rev­enue Ser­vice revised the rule and put it at 5%…

    This lit­tle-known rule is a sig­nifi­cant part of Amer­i­can arts pol­i­cy. On aver­age, most foun­da­tions spend 5 to 10% of their assets, with many foun­da­tions clus­tered right at the 5% lev­el. The legal con­straint thus appears to bind in many cas­es. Indeed when the legal require­ment changed from 6 to 5% in 1981, the aggre­gate grant rate fell from 8 to 6% over the fol­low­ing decade. Before 1969 many foun­da­tions were lit­tle more than meth­ods of tax eva­sion and store­houses for pri­vate wealth. They were explic­itly mar­keted to donors in those terms, and 70% of busi­ness-linked foun­da­tions had no pro­grams for char­i­ta­ble giv­ing what­so­ev­er. The Ford Foun­da­tion, a lead­ing arts donor, had been set up in 1937 but did not actively make grants until the 1950s…Note that from 1981 to 1999, 84.5% of the increase in foun­da­tion assets (which rose almost three­fold over that peri­od) came from new dona­tions and the cre­ation of new foun­da­tions, rather than from returns on exist­ing foun­da­tion assets [Mehrling, Per­ry. 1999. “Spend­ing Poli­cies for Foun­da­tions: The Case for Increased Grants Pay­out.” Eco­nom­ics Depart­ment, Barnard Col­lege]

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  6. $20 would be a small Girl Scouts cookie order for me, and I have bought for many years.↩︎

  7. There are scat­tered claims of boxes sell­ing for $4.50. Even if cur­rently untrue or just iso­lated inci­dents, $4.50 is inevitable.↩︎

  8. Indeed, ‘sav­ing lives’ is an easy enough met­ric that there is a ‘meta-char­ity’, , which ranks char­i­ties by effi­cien­cy; it is sober­ing to reflect that the price of a life is just $1000 or $2000. If one’s ethics say that fail­ing to stop a mur­derer is as morally bad as mur­der­ing the vic­tim your­self, then that leads to an unpalat­able con­clu­sion about every $2000 one spends on lux­u­ries like vaca­tions or restau­rants.↩︎

  9. My fam­ily is a Scout­ing fam­ily and though I was not a Girl Scout, I went on my fair share of Girl Scout camp­ing trips and did more than my fair share of their arts & crafts. I was left with a higher opin­ion of the for­mer than the lat­ter, and a sym­pa­thy for who would rather join Boy Scouts.↩︎

  10. “Last year, Girl Scouts in the old Lake Erie Coun­cil, which served Cuya­hoga, Lake and Geauga coun­ties, sold more than 986,000. Each girl ped­dles an aver­age of 115 to 130 box­es.” quoted in , “Some Girl Scout cook­ies change their names, but the fla­vor’s the same”.↩︎

  11. “Global cocoa prices: 2010-2011 fore­cast”, Euromon­i­tor Inter­na­tional:

    Prices for Sep­tem­ber-de­liv­ered cocoa peaked at £2,465 a tonne on 19 July, the high­est level for a sec­ond-month con­tract in 32 years.

    $4270/tonne is $4.27 per kilo­gram or $1.94 a (Im­pe­ri­al) pound or 12 cents an ounce.↩︎

  12. It’s rea­son­able to focus on Thin Mints, as they are the best-seller, mak­ing up a quar­ter of sales.↩︎

  13. Wal­mart refuses to post prices and most reviews take an almost per­verse plea­sure in omit­ting the exact price; so I’m going on this blog­ger’s off­hand men­tion.↩︎

  14. Fig­ures can vary a lot. If you look at the fol­low­ing quote, it seems to imply that , leav­ing $1.70. Sub­tract $1.2 for bak­ing, and they need 50 cents per box to buy adver­tis­ing, han­dle the non-ex­is­tent returns, and offer incen­tives to the girls?

    Cook­ies cost $3.50 per box.

    Of this amount, Bruney said, 40-55 cents, for an aver­age of 47 cents, goes directly to the troop. The coun­cil receives another $1.33 per box to sub­si­dize events and camps.

    The rest of the pro­ceeds pay the bak­ers, buy adver­tis­ing and incen­tives for the girls, and take care of any debt from peo­ple not pay­ing for their cook­ies, Bruney said.

    “Girl Scout cook­ies take on new shape”, El Defen­sor-Chieftain↩︎

  15. $50,000 of health ben­e­fits is worth more than $50,000 to any self­-serv­ing employ­ee, because it is taxed light­ly, may keep her salary from being taxed in a higher brack­et, and is harder for the pub­lic to object to.↩︎