Yesterday I linked to an entry on Where Most Needed blog detailing how to protect against donors who may renege on their pledges. Where Most Needed and the accompanying linked Wall Street Journal article talk about how it can be tricky to broach the subject of a legally binding pledge agreement lest you offend your wealthy and influential benefactor.

What they don’t mention is the possible public relations problems you might face as well. Some years ago I worked for a theatre that a well known celebrity had pledged to in return for the naming of one of the performance spaces. Unfortunately, his wife filed for divorce. Seeing large alimony payments in his future combined with some other financial troubles, he chose to discontinue his payments.

The theatre was undergoing some financial problems of its own so the board felt it was irresponsible not to pursue the collection of the pledge and chose to sue the celebrity.

The way it ended up playing out in the newspaper editorials and letters to the theatre was that the organization should be grateful for the money it had already received and stop kicking a favorite son when he is down.

This seems to be one of the trickiest points for non-profits. When someone makes a pledge, I think we would all agree they are doing it out of the kindness of their heart. (With perhaps some advice from their accountant.) I think we can all at least empathize with the point of view that if you, as a donor, run into financial problems, you are going to want to reserve the right to hold on to the money you have earned. You are probably going to feel bad about it, but you are going to see your choice as logical.

The problem for non-profits in situations like the one I mention is that people can empathize. This type of thing easily happens on the family level. You promise your child a car when they turn 18, you run into financial trouble and you find you have to tell your child that if they want to keep the car they are going to have to get a job to continue making payments. The child has to work harder or see if grandma can help with the money.

I think this might be partially what happened in the case of my experience. People in the community could imagine themselves falling upon hard times and didn’t like the idea of the theatre coming after them, even for a $100 pledge, because they made a generous gesture.

The public may have sympathy for your non-profit organization because you built based on a promise of money but there is a good chance they are going to see the donor’s decision as practical. The expectation is going to be that you will work harder and find other benefactors. The consequence of not doing so in my car example is to take the bus or bum a ride from friends. The equivalence for a capital project is tougher- scaling back activities (not easy if you don’t even have a roof on yet) or performing in other facilities.

It would be extremely important to have a good solid public relations plan in place before deciding to legally pursue a large lapsed donation. One wrong move and you can poison the well for donations from an entire community.

I am going to peer around philanthropy blogs to see if there are any detailed suggestions of how to be well prepared in these instances. I would be very interested to learn if anyone has come across any good plans or has executed a public relations campaign that preserved the communal good will in a situation where it may have been lost. (Instances where the donor reneges due to their own financial malfeasance tends to create sympathy for the deprived recipient.)