Aligning Stakeholder Interests in NGO Transformations: Emerging Good Practices

This paper offers insights and approaches about different frameworks that meet an institution’s needs as it undertakes the complex transition process from a nonprofit to a for-profit MFI.

The paper lists a number of possibilities for maintaining the institution’s social mission, including careful consideration of participation of NGO managers, directors, staff, investors and the NGO itself as a stakeholder in the new institution. Recommendations include:

• Equity participation, an effective tool aligning the interests of top management and board directors with those of investors and the institution linking their potential future payoff to the MFI’s future success;
• Employee stock ownership plans and other profit-sharing schemes are effective tools for aligning interests for staff giving them a stronger stake in the institution’s success.

The paper contends that these measures are to be complemented by essential business concepts, applicable to every industry, frank communication, clear planning, strong management, effective compensation and incentives, and transparent governance practices.