Fundraising for Performing Arts Organizations

12 April 202417 May 2024 ~ MD Harris Institute ~ Leave a comment

The arts are a vital part of life, and music is the most widely used art of all. Rural areas sometimes lack the people or the funds for art and music programs, so locals fill in the gaps. This article presents a sound course of action for organizations interested in improving their fundraising.

By Mark D. Harris

The arts are shrinking in America. Schools are limiting or canceling art and music programs due to budget constraints. Ordinary men and women are visiting performances and art displays less and less.[1] Yet the arts have powerful positive effects on those who experience them. Arts organizations across America seek to reverse these trends, but they must have money and other resources to do it.

The foundation of fundraising in any organization is to be good at what you do. Just as an artist must make beautiful art and a musician beautiful sound, an organization must have its own kind of beauty. Top leadership in musical organizations must have a clear and compelling mission and vision and communicate well. Lower levels of leadership must direct their teams to recruit fine performers and produce excellent shows. Team members must perform their tasks, however large or small, with aplomb. Donors will not donate to, and concertgoers will not patronize, an organization unworthy of support. Administrative excellence is paramount to make the magic of music and other performing arts.

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Taxes in the Bible

6 March 20237 October 2023 ~ MD Harris Institute ~ Leave a comment

The Bible has much to say about, and many examples of, taxes. God’s plan for taxation in ancient Israel was compassionate, effective, and limited. Modern thinkers, policy makers, and voters would do well to move American, Western, and world tax and government policies closer to what our ancestors would recognize, the taxes in the Bible.

By Mark D. Harris

Governments, like people, have always tried to procure as many resources as possible from everywhere they could. Resources ranged from beautiful things (seashells, beads, precious metals, precious stones) to products (grain, wine, cotton) to labor (forced labor, slavery). Taxation is, by definition, involuntary. Freewill offerings, such as what the Hebrews gave to build the tabernacle (Exodus 35:20-35), are not included in this discussion.

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Recent Studies in Behavioral Finance

Behavioral finance was on full display in the Tulip bubble

15 February 20237 October 2023 ~ MD Harris Institute ~ Leave a comment

Most people in the field of finance assume that people act rationally. But research and life experience suggest otherwise, at least some of the time. What are some recent research findings on how our hearts cloud our heads? How can we minimize the irrational parts of our decision making in finance? We need to look at studies in behavioral finance.

By Mark D. Harris

The Efficient Markets Hypothesis (EMH) suggests that all the available information about a publicly traded company that is pertinent to investing in that company is contained in the stock price at any point in time (Vasileiou, 2020). Insofar as this is true, investors are rational actors who make investment decisions solely on rational grounds. However, company stock prices sometimes are higher or lower than one would expect based on purely objective valuations. This fact suggests that something besides rationality is present in company stock prices.

To explain market behavior beyond the purely rational, researchers turn to behavioral finance. Growing out of Adam Smith’s Theory of Moral Sentiments, one of behavioral finances’ primary observations is that “investors (and people in general) make decisions on imprecise impressions and beliefs rather than rational analysis.” Further, “the way a question or problem is framed to an investor will influence the decision he/she ultimately makes.” The article concludes, “These two observations largely explain market inefficiencies; that is, behavior finance holds that markets are sometimes inefficient because people are not mathematical equations” (Behavioral finance, 2019).

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Earnings Management

1 February 20237 October 2023 ~ MD Harris Institute ~ Leave a comment

The easy money days of the 2010s are over. Bonuses and threats of job loss push managers to match expectations. Earnings management techniques are not always “cooking the books” to reach short term targets. Rather, they can involve making valid operational decisions that benefit shareholders.

By Mark D. Harris

Earnings Management Techniques

Managers are under intense pressure to make quarterly and annual earnings conform to expectations of analysts in the greater market. In a given quarter, if the prevailing expectation is that Company A will have earnings of $10/share (EPS), management at Company A wants to report EPS of $10, or perhaps $10.03. They don’t want to report EPS of $11.50 because that might raise eyebrows, encourage a much higher expectation of EPS in the future, and suggest a volatile earnings pattern. Investors and lenders like smooth growth in EPS, sustainable and predictable, over the long haul.

Even worse than exceeding expectations by too much is falling short. If Company A falls short of earnings targets, reporting perhaps EPS of $9.80, Company A’s stock price is likely to drop, their cost of capital from lenders will increase, and others interested in Company A might liquidate holdings out of fear for the company’s future. Finally, managers’ bonuses, salaries, and even job security are often tied to meeting earnings targets. Woe to the manager who misses his mark.

To avoid such unpleasant circumstances, managers have an array of accounting techniques that they can use to smooth earnings, and to make them appear sustainable and predictable in the near and long term.