Repost from 5/10/18 Slate
By Felix Salmon

This piece is part of the Slate 90, a series that examines the multibillion-dollar nonprofit sector. Read all stories from the Slate 90 here, and view the Slate 90 nonprofit rankings here.

It’s hard to find anybody who will profess to being a fan of the annual nonprofit gala. And yet there’s probably one happening near you tonight—the high season for such events generally runs from early May through Labor Day. The mother of all galas took place on Monday: The annual Met Gala, which benefits the Metropolitan Museum of Art (No. 2 in the Slate 90Arts, Culture, and Humanities category).

Your own local gala will probably take place in a ballroom or some similarly grand space and will feature an abundance of circular tables for 10. You’ll eat the kind of nondescript food designed to be served to hundreds of people simultaneously (hence the sobriquet “rubber chicken dinner”), sip cheap wine, and be subject to a cavalcade of speeches. The charity’s executive director will talk, and so will the master of ceremonies (probably someone from television), as will a handful of honorees, employees, and other stakeholders. The reward for all this listening is … to watch the de rigueur slickly produced video. (If you’re lucky, and you’re very rich, and you’re at an extremely high-end gala, you might be treated to a three-song set performed by Elton John or Jon Bon Jovi.)

None of this comes cheap. The cost to attendees, on a per-person basis, can significantly exceed the amount you’d pay for Hamilton tickets. A table at the Grand Gala Ball of Houston’s Museum of Fine Arts (No. 9 in this category in the Slate 90), for instance, will set you back at least $10,000, or roughly the same as tickets to the Kennedy Center’s recent Spring Gala. (They’re at No. 8.) And while much of that ends up flowing to the charity in question as a donation, a surprisingly large percentage is often spent on simply putting on the gala itself.

This is undoubtedly great business for the large gala economy: event spaces, caterers, photographers, society reporters, party planners. But are galas truly good business for charities?

The downside of these dinners isn’t just in the upfront financial cost; they also occupy an inordinate proportion of senior executives’ time and attention. During some months of the year, the job of running a major nonprofit can effectively turn into that of an event planner: wrangling honorees, obsessing over invitation design, flowers, and dozens of other details. That goes double in the “development” office—the part of the charity devoted to raising new money—where staffers can end up focusing on selling gala-dinner tables to the exclusion of almost everything else. After all, gala-dinner seats are a wasting asset: If you don’t sell them by the night of the dinner, they’re worthless. The headline sums raised are nearly always gross amounts before accounting for costs. And organizations often aren’t particularly good at figuring out, in advance, the direct and indirect costs that staging a gala will impose.

I once saw a tiny nonprofit spend months organizing a blowout gala dinner, an endeavor which effectively became the full-time job of the entire staff. After all the costs were tallied from what seemed to be an extremely successful event, the gala ended up losing money for the organization. And while best practice is to keep costs to no more than 30 percent of the amount raised, it’s common for them to far exceed that level.

Still, galas survive and thrive for some sound economic reasons. They’re a forcing mechanism, something that turns a desire to give annually into an actual cash donation. And attendance becomes habit. Once you’ve gone a few years in a row, attending (and hence donating) becomes a default behavior. Joel Simon from the Committee to Protect Journalists, for example, says that 90 percent of attendees at their benefit dinner, the International Press Freedom Awards, are “repeat customers.” The tougher decision becomes, then, to decide not to go.

More cynically, gala dinners are selling something hugely valuable. Not the largely underwhelming food or experience, but rather social and professional cachet. Galas are places to be seen, to acquire social capital, to claim your place in the pecking order. That goes for honorees, of course, many of whom are expected to pony up a substantial sum in return for their lucite awards. (Transactional philanthropy at its finest: If Anthony Scaramucci receives the Hedge Funds Care Award for Caring at the 13th Annual New York Open Your Heart to the Children Benefit, you can be sure that’s because he’s written a very large check to the cause.) But it applies just as much to the couple at table 24 waving to their friends at table 17. What’s more, when a CEO is honored, you can be sure that its accounting firm, law firm, and investment bank will take prominent tables.

The design, then, makes gala dinners a way for charities to diversify their revenue streams. They bring in donors who would ordinarily not feel motivated to support the organization. And it’s much easier to get a sympathetic business to buy something once per year (a table, a full-page ad in the program, a sponsorship of some description) than it is to get them to simply donate a similar sum of money.

What’s more, honoree acceptance speeches serve a purpose: It’s not often that you have a couple hundred rich and powerful people as a captive audience, forced to at least pretend to listen to your message. Many, having bought a table, will have filled that table with friends and acquaintances chosen specifically because they’re similarly rich and/or sympathetic to the cause, which makes gala dinners a decent way to coddle your best donors and acquire new ones.

The biggest question, however, is rarely asked: Would these supporters give a straight cash donation if they weren’t invited to a fancy party? After all, spending several hundred thousand dollars to raise a million dollars from people who would have given you a million dollars anyway seems a bit silly, especially when you’re adopting a format that can be easily abused.

In the case of the Met Gala, it pays to throw the bash. The Met Gala, first held in 1948, has emerged as the Super Bowl of the fashion world. And it’s nearly as lucrative: The cost of a single ticket has now reached $30,000 (or $275,000 for a table), and Vogue editor Anna Wintour’s 20-year reign over the event is closing in on an all-time gross of $200 million.

Wintour doesn’t work for the Met, so it’s not like her hugely valuable time and connections could be put to better use elsewhere in the organization. The fashion-industry brands and celebrities from sports, music, and film who swarm the event are more interested in Dolce & Gabbana than Caravaggio and Guercino—to see and be seen rather than support the museum. That means that the funds raised really are additional and probably wouldn’t have been donated otherwise.

And these fair-weather friends of the Met bring in more in a single night—over $12 million in 2015—than the Met hopes to raise per year with its new compulsory out-of-state admission fees (expected to bring in $6 million to $11 million per year).

Galas also cement institutions’ place on the cultural map. The Met Gala accounted for only about 2.5 percent of the $473 million that passed through the Met in 2015. Yet part of all galas’ allure is the “earned media” (in PR-speak) that the event brings—that’s priceless. The Met is an extreme case: While Vogue naturally provides a huge amount of coverage, other magazines and TV outlets flock to cover it as well. On top of that, celebrities like Selena Gomez, A-Rod, and Kendall Jenner rack up Instagram likes by the millions. This year set a new benchmark, with Rihanna, the “reigning red-carpet MVP” once again proving herself to be the epicenter of 21st-century beauty and fashion. If Anna Wintour does soon end up stepping down from her perch at the very top of the fashion world, then 2018, with its over-the-top Catholic theme accompanied by priceless treasures from the Vatican, might be looked back on as the greatest year in Met Gala history. 

By nsn2020

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