Corporation
of New York
Vol. 4/No. 2
Spring 2007
The Lost (and Found) Voters of Hurricane Katrina
At the Heart of South Africa, a Constitution and a Court
A Timeless University Trains Teachers for a New Era
Philanthropy Now: Diversity and Creativity for Changing Times
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Philanthropy Now: Diversity and Creativity for Changing Times
A Golden Age?
Big gifts, from Gates or anyone, have in fact been known to have an exponentially
positive effect on the private and foundation sectors, too, encouraging
additional donations for a cause. Take poverty. The Gates Foundation formalized
its Global Development program a year ago, and plans to devote about $875
million annually to the effort. Still, in late November, David Rockefeller
said he would make a $225 million bequest to the Rockefeller Brothers
Fund (RBF) to create the David Rockefeller Global Development Fund. It
was the largest gift in the fund’s history, and it will be put toward
the RBF programs that address poverty, health care, sustainable development
and management of the global economy, among other areas.
Indeed, it helps to recall that what some people have suggested is a golden age of American philanthropy began in 1996, when Ted Turner, an active philanthropist, chastised his fellow moguls for their stinginess and suggested that more would give if someone published an annual list of big donors. Turner’s remarks prompted Slate magazine to do just that, and helped spark more media coverage of philanthropy in general. In 1997, acting on a challenge from Vartan Gregorian, president of Carnegie Corporation of New York, Turner pledged $1 billion to support UN programs. Perhaps as a result of all this, giving has become a contest for some. Peter B. Lewis, a Cleveland philanthropist who is chairman of the Progressive Corporation, an automobile insurance company, is one person who acknowledged it as such in January 2006, when he promised $101 million to Princeton University; he said he chose that figure to surpass the previous record donation to the university, which was $100 million.
So what is there for foundations to worry about? This is a good time for them. The fact that there is more money in the philanthropic sector creates an opportunity for foundations large and small to examine their goals and strategies, several experts have suggested. It’s an occasion for them to define their comparative advantage vis-à-vis both government and big spenders like the Gates Foundation.
Forecasters predict several likely outcomes from this self-examination, but few expect dramatic changes. “Foundations have always made their impact doing four things,” says Kathleen D. McCarthy, director of the Center on Philanthropy and Civil Society at the Graduate Center of City University of New York: “Building institutions, forging partnerships to leverage their grants, training new managerial elites in new fields, and investing in new ideas. That’s what they will continue to do.”
But they may become more strategic. “That is happening, period, regardless of Gates,” says Gunderson, adding, “Foundations are becoming much more focused in grantmaking, in expertise, and that’s a healthy thing.”
As a result, foundations may decide to write fewer, bigger checks to pay for longer-term projects. That, some experts believe, is a good thing: it leads to more efficient grantmaking as recipients need spend less time writing grant applications and reapplying for funds. “Transactions costs” are therefore lower. Larger grants may also allow foundations to develop a closer relationship with the organizations they support, leading to more understanding of their true program needs and closer monitoring of how their money is used.
The positives aside, a word of caution is in order here: no grant recipient will turn down a large project grant, yet some lack the staff and capacity to deal with them. Virtually every large project commitment stretches an organization in some way, often adding to overhead expenses. Over the years, many funders have been reluctant to cover those costs. But that may be changing. “The sector is beginning to recognize that operational support is a key component of effectiveness,” Gunderson says. “I think that discussion is starting, and it will improve the entire sector.”
Tackling larger issues is also likely to lead to more grantmaking partnerships with governments and among foundations. As Vartan Gregorian has pointed out: “In the past, it may not have been normal for foundations to collaborate because institutional pride was at stake. But nowadays, I believe most foundations understand that what is done to improve the lives of human beings is much more important than who is responsible. And that makes forming philanthropic networks to carry out strategic grantmaking much easier.”
Examples of such cooperative efforts abound. In December 2006, the Gates Foundation and the William and Flora Hewlett Foundations agreed to collaborate on a $60 million series of grants to improve the quality of primary and secondary schools in the developing world. The Partnership for Higher Education in Africa is a $350 million effort by six foundations—Carnegie Corporation, the Rockefeller, Ford, John D. and Catherine T. MacArthur, Hewlett and Andrew W. Mellon foundations—to strengthen universities in a number of African nations. The Corporation also partners with the James S. and John L. Knight Foundation in an effort to improve journalism education at some of the nation’s great research universities and with the Annenberg, Ford, Nellie Mae Education and Ford foundations on an initiative to improve teacher education.
“Where Market Forces
Have No Force”
In an era when agenda-setting foundations like Gates focus on humanitarian
problems, many arts and culture organizations have raised fears of a coming
drought in their funding. Some statistics do show donations to the arts
dropping in the post-tsunami, post-Katrina, global-warming world and numerous
arts administrators have expressed concern that their museum, opera or
theater will be dropped in favor of organizations that produce tangible
results demonstrably contributing to the public good. How can performances
of Beethoven symphonies, uplifting as they are, compete with programs
to feed the hungry of Africa?
James Allen Smith of Georgetown says he sees the subject with a 30- to 40-year perspective. In the early 1950s and 1960s, the arts were getting a much smaller share of total funding, perhaps as low as 2 percent. That proportion grew dramatically over the years, at times into the double digits. But part of the gain came from extensive capital campaigns that are now over. Lately, “the arts fears that as the pie has grown, its share has changed,” Smith says. “But they’re not hurting.” Besides, he adds, it’s not just the large foundations that are on the playing field in terms of funding for the arts. In reality, says Smith, “You have to look down a few levels to small foundations to find people who understand the needs of artists.” Smaller foundations are also more responsive to regional or local needs and to smaller institutions. Council on Foundations head Steve Gunderson agrees that the arts are not in as much trouble in terms of funding as some may think. He points out that many of today’s philanthropists who were born in the baby-boom era are positively predisposed to arts and cultural efforts and are probably going to keep them in mind when it comes to giving.
Arts organizations have, however, raised a real issue that applies more generally across the philanthropic spectrum: the imperative of producing measurable results. Foundation executives, grant recipients and experts all fear that the focus on results will stymie innovative thinking and experimentation.
“I worry that performance measures may mean shorter time horizons and make nonprofits behave more like business entities and lose some of their nonprofit values,” Smith says. “For example, hospitals not providing care for charity cases, performing arts centers that are changing programs to lure audiences, grants made to people who are certain of success. It’s a blurring of an ethos that undermines the motives rooted in charity and philanthropy. ”
Such caution in grantmaking could have long-term repercussions. “I understand the pressure on foundations to be relevant and to produce measurable results,” says Richard Haass, the president of the Council on Foreign Relations, which depends on foundation grants. “But this pressure should not be a disincentive for investing in the development of human capital. Foundations, to put this positively, should invest in people and ideas. When you give money, you never know if you’ll get intellectual capital from it.”
Haass says he has not yet witnessed a great flow of funds away from investing in ideas, but that he has noticed that some foundations are starting to act like nongovernmental organizations, getting into the business of delivering health care, for example. And in terms of funding for the idea-generating mission of think tanks, Haass notes that support for policy-related work has been shrinking or has become extremely focused. “The agenda is set, and you decide if you want to work on it,” he says. “There’s been a decline in funding for general work.”
Martin Morse Wooster of the Capital Research Center also encourages foundations to take more risk, not less, particularly with people. “A lot of existing foundations give lots of money to well-established people in their declining years who are good at getting grants,” he notes. “They should be giving money to talented people they spot. A lot of the great grantmakers were very good at being talent spotters, and that’s something that foundations are sorely lacking in.”
Far from being the culprit on this score, the Gates Foundation has adopted the traditional line that foundations have the luxury of experimentation that might fail. In another 2006 speech, Bill Gates said: “Through our foundation, Melinda and I are trying to step in where market forces have no force—to point research dollars and technological innovation toward challenges that are truly life-and-death for some of the world’s poorest people. That often means taking the risks that businesses can’t afford, and governments can’t justify.”
Gunderson, for one, says the Gates Foundation has lived up to those words. It’s others in the new generation of business-oriented philanthropists who are trying to harness the market to provide solutions to social problems.
The Omidyar Network, for example, describes itself as a “mission-based investment group committed to fostering individual self-empowerment on a global scale.”