'Donor's Rights Movement' Gains Momentum

I begin tonight with an uplifting story about the spirit of philanthropy . . . as interpreted by the plaintiffs’ bar.

It seems that here in Palm Beach, the American Heart Association has a skilled information officer who, in mixing and matching databases, came up with the factoid that the individual with the largest personal income last year contributed not one dime to organized charity.

The head of the Palm Beach chapter of the Heart Association, sensing a large opportunity, set up a meeting with this individual, who happened to be a tort lawyer, and made a pastoral visit to his law office. After some pleasantries, the Heart Association official said, "Mr. Tort Lawyer, our research shows that as a result of your class-action settlements against the asbestos, fast food, chemical, tobacco, tire, beer, HMO, computer, cell phone, handgun and lead paint industries that, last year alone, you earned $383 million in personal income-and yet you made no charitable contributions whatsoever. . . And the lawyer responded, "Well, does your research also show that I have three children pursuing graduate degrees, all of them at Ivy League schools?"

And the Heart Association official said, "Well, no."

"Well, does your research show that I have an 87-year-old mother whose healthcare bills run upwards of $100,000 per year?"

"Well, no."

"Well, does your research show that my sister and her five kids were left penniless when her husband was killed in an auto accident?"

"Well, no."

"Well, if I wouldn’t help any of them, why would I help you?"

Thus saith the tort lawyer. . . .

The question for us tonight is-where is American philanthropy-after a half-century of dynamic growth and troubled performance? After the early promise and the more recent disappointment? After the abundance of good deeds by donors-and much mischief committed by foundation executives?

My best judgment is that we are nearing the end of the bad old days.

Three Failings

Let me explain. Over the past generation, the performance of American philanthropy has failed to match the promise of American generosity for three primary reasons:

First, is the petty larceny of the philanthropic management class. You all know the stories-the self-enrichment of nonprofit executives, the side deals and sweetheart contracts, the occasional lootings and liftings.

We were even treated to our own perp walk-when William Aramony, the head of United Way, was chased down the sidewalk by the tabloid media. His walk of shame didn’t have quite the showbiz flair of Tyco’s Dennis Kozlowski or Adelphia’s John Rigas. But it had a poignancy all its own-Kozlowski and Rigas, after all, were taking money from corporate shareholders. Aramony was taking money from undernourished children.

The second problem has been the almost total collapse of trusteeship. The idea-descended from the common law-is that to accept a board appointment is to acknowledge the donor’s declaration of trust in your stewardship. From the time when men marched off to the Crusades to the time-this week-when men are sailing for the Persian Gulf, they have said in the most careful, premeditated way, "I, John Jones, trust you, Bill Smith, to handle this matter in my absence."

For centuries, if that trust was well-placed, a handshake would seal arrangements for a lifetime, and beyond. Today, in the foundation world, a three-inch-thick trust agreement incites an immediate search for loopholes, for the elastic phrase, for the exploitable lacuna.

How does the foundation trustee approach his job today? How does he define the responsibility and discharge the trust? Well, I think the Washington Post had it about right a few months ago when it profiled one of the most influential figures in East Coast philanthropy. In one of those endless 4,000-word "Style" section pieces, festooned with color photos, the Post recounted the career of a woman it described as the gold standard of nonprofit trustees. (I will omit her name on the chance that she’s a major donor to your organization.)

The Post described this trustee as open, generous, protean in her energies and, above all, passionate in her philanthropic interests. Those passionate interests, according to the Post? Population control groups and environmental activists. To give us just a hint of the intellectual rigor she brings to her philanthropy, the Post quoted her as saying, "I love the population issue because it’s so human."

And then, almost in passing, the Post mentioned that her family fortune had been built in a "global power company." Just to remind you-a global power company is a multinational corporation that consumes large amounts of the earth’s resources to generate electricity. That is to say, it is the b??ªte noire of population control groups and environmental activists.

So there you have, in capsulated form, what the establishment regards as the gold-standard trustee-promiscuously generous, intellectually undemanding, at least vaguely uncomfortable with if not utterly guilt-stricken by the source of family wealth.

The third problem, by far the largest problem, is what I would call the ideological larceny of the philanthropic management class.

Indeed, the rolling capture of America’s great foundations is in many ways comparable to the wave of corruption that has rippled through corporate America in recent years-with one striking difference. In the corporate world, it is wealth that has been taken from shareholders and diverted to managers. In the foundation world, it is power that has been taken from donors and diverted to managers.

Foundation Goals Distorted

Consider. The David and Lucile Packard Foundation has become one of the largest funders of the sustainable development movement, which at its core is both Luddite and Malthusian. David Packard, the father of Silicon Valley, devoted his entire life to the proposition that technology could change our lives for the better.

Consider. Principals of the Andrew W. Mellon Foundation are among the leading proponents of a high-tax fiscal policy, including the confiscatory rates of the estate tax. Andrew Mellon, along with John F. Kennedy and Ronald Reagan, was one of the three great tax-cutters of the 20th Century.

Consider. The W. K. Kellogg Foundation is among the leading funders of the nonprofit management class-supporting thousands of employees who make their living in the processing of grant applications. W. K. Kellogg, the apostle of Midwestern self-reliance, set up his foundation to help individuals help themselves.

I could go on-and on other occasions, I will. For it is a long and still not widely understood story.

Pew, Ford, Johnson, MacArthur. How were the great fortunes of modern capitalism turned to the service of anti-market initiatives? How did the fruits of technological genius come to fund the corrosive campaigns of junk science? How did the icons of the American Century wind up fronting for the centrifugal forces of multiculturalism?

It is a long, sad story-these are the bad old days-but, as I say, they appear to be coming to an end.

One of the first observers to remark the changing tide was the Harvard scholar Peter Frumkin, whose writing on philanthropy is always illuminating if not always intentionally so. As Frumkin writes: "Philanthropy has become a controversial matter, particularly when donors make their own decisions about how and when to spend their money, rather than leaving those details to professionals."


Donors Pushing Back

Donors are beginning to push back. They are defining their own objectives-and setting their own agenda.

  • Donor families are reminding trustees that they do not sit on foundation boards merely to keep the chairs warm-or to dress up their resumes.
  • They are reminding trustees that they have not been invited to replace the values of the donor with their own.
  • They are reminding trustees-and, occasionally, reminding them with the business end of a lawsuit-that they have undertaken fiduciary responsibilities and will be expected to discharge them faithfully.
  • Thanks, in part, to some of the stouthearted men and women in this room, a genuine reform movement is gaining traction. And it is beginning to redress the imbalance between donors and what Prof. Frumkin calls the professionals-as if foundation staffers had been sent abroad to some prestigious Swiss academy, there to have the secret tablets of philanthropy entrusted to them.

    Donor’s Rights Movement

    And as the reform movement-what I call the donor’s rights movement-has gained momentum, the professionals have become unhappy. And you know what happens when philanthropoids are unhappy. They become . . .verbal.

    Hear the President of the Fund for New Jersey decrying what he perceives to be a dangerous new trend: "I believe that we are essentially cowering before the specter of donor designation. Our language is largely defensive-we use phrases like ‘not a penny will be misused.’ This sends a terrible message that does not honor the intelligence and integrity of our partners."

    Or hear The Nonprofit Quarterly, one of the leading trade publications in the foundation world. In its current editorial, it implores foundation executives to "withstand the ‘donor is God’ trend and create a more democratic and inclusive form of . . . grantmaking."

    I suspect that the verbal escalation may have topped out last month in Bermuda. After I spoke there on the donor’s rights movement, it was reported that I had "unleashed a wave of donor terrorism."

    Well, I don’t think they should be so hard on themselves. Cowering becomes them.

    What you hear behind all of this yelping, I would suggest, is the sound of an establishment challenged-its cliches rebutted, its cozy relationships re-examined, its settled patterns of behavior upset. What you hear, I think, is the sound of change-and perhaps, with the concerted efforts of reform-minded people across the industry, the end of the bad old days.

    How, then, will we know when the good old days are finally at hand? That’s easy. We’ll know when the donor’s vision and values are restored to their rightful and central place in foundation grantmaking. We’ll know when the person who created the wealth and sought to make his world a better place is honored for both the achievement and the intention. And we’ll know, most clearly, when, after the donor can no longer speak for himself, his words are accorded both primacy and high place within the foundation that bears his name.

    This article is excerpted from an address Mr. Freeman delivered to a conference on “Successful Giving in Extraordinary Times” sponsored by the Fund for American Studies and the American Council of Trustees and Alumni in Palm Beach, Fla., Jan 17, 2003.