Philanthropy Now: Diversity and Creativity for Changing Times

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A look at its “portfolio” of grantees shows ventures like Backfence, which produces very local web sites for the posting of neighborhood news; CellBazaar, which allows people to buy and sell goods over their cell phones; GlobalGiving, an Internet site that connects individual and institutional donors directly to social and economic development projects around the world; and Witness, which helps “local human rights defenders…use video to transform personal stories of abuse into powerful tools of justice.”

Similarly, the Skoll Foundation, founded in 1999 by Jeff Skoll, the first president of eBay, describes its mission as fomenting social change to benefit the world “by investing in, connecting and celebrating social entrepreneurs….proven leaders whose approaches and solutions to social problems are helping to better the lives and circumstances of countless underserved or disadvantaged individuals.”

Google, meanwhile, appears to be just getting started on philanthropy. One early effort, a small “grants” program, offered free advertising it says was worth $33 million to 850 nonprofit organizations, including the Grameen Foundation USA, Doctors Without Borders, Room to Read and the Make-a-Wish Foundation.

Google has announced that it will henceforth focus its efforts on poverty, energy and the environment. In February 2006, the company named Dr. Larry Brilliant, a founder of the Seva Foundation, a Policy Advisory Council member at the University of California, Berkeley School of Public Health, and a member of the Strategic Advisory Group of Kleiner-Perkin’s Pandemic and Bio-Defense Fund, as executive director of Google.org.

But Google’s philanthropic efforts remain small according to its web site and its 2005 Form 990 to the Internal Revenue Service. Among them: $5 million to Acumen Fund, a nonprofit venture fund that invests in market-based solutions to global poverty; $250,000 to TechnoServ, which has launched an entrepreneurship development program in Ghana; and $200,000 to PlanetRead, an organization that tries to improve literacy in India by adding subtitles to Bollywood films and other videos. The foundation’s total assets are $85 million.

Some of these moves have prompted traditional foundation-watchers to scratch their heads. Questions about them were generally met with a chorus of “it’s too early to tell.”

“Let’s see in three years,” Wooster says. “What I applaud Omidyar and Google for doing is trying to think up new ways to do philanthropy.” Gunderson agrees, saying, “It’s too new. Its big attraction is that it’s attracting more money. There are people who will be drawn to that form of giving. They would not otherwise participate in this sector.”

Abramson, too, is circumspect: “It’s a movement with some upsides, but some downside as well,” he says. “One may worry, for example, about whether nonprofits that don’t have commercial potential may be overlooked by philanthropy that is moving toward a more commercial orientation.”

Still, Abramson notes, these new philanthropic efforts probably came about, in part, because government wasn’t picking up the ideas foundations had incubated, so the new generation of funders turned to getting the marketplace interested. That, he says, “may unleash a whole new set of resources for addressing social problems.”

Oversight and Governance
The new and emerging forms of philanthropy, together with the high profile of the post-Buffett Gates Foundation, are widely expected to increase the push for accountability in the foundation sector. So will the influx of new money to philanthropy that demographers are expecting as baby-boomers age. Foundations, therefore, may find themselves facing increased regulation, or, at the least, more oversight.

In the wake of the November 2006 elections, Senator Charles Grassley, the Iowa Republican who has held hearings on what he called abuses in the nonprofit world, no longer heads the Finance Committee. But Kathleen McCarthy, of the Graduate Center, CUNY, warns: “The Grassley hearings will not be the last to look at the role of foundations in American life.” She believes that some proposals, like an increase in the mandated payout rate and perhaps a sunset provision that requires foundations to go out of business in, say, 25 years, will return to the legislative agenda.

With the Gates Foundation as an example, following the John M. Olin Foundation, which shuttered its doors in 2005, and the Atlantic Philanthropies, which intends to go out of business in 2016, other foundations may also choose to spend their funds and close down voluntarily. There is ample precedent for making such a choice. Linkages, the newsletter of the Rockefeller Philanthropy Advisors, notes that, “Julius Rosenwald created a foundation with the wealth he earned as founder of Sears, Roebuck & Company, and stipulated that all the funds be spent by 25 years after his death; the Foundation closed in 1948, having spent $63 million. The Aaron Diamond Foundation, The Stern Fund and Field Foundation more recently did the same,” as did the Vincent Astor Foundation.

Elizabeth Boris of the Urban Institute has said that other governance issues may also be debated on Capitol Hill, like a minimum number of board members. But Steve Gunderson does not foresee a confrontation with Congress. “Congress’s likely focus is in the area of governance: transparency, conflict of interest, and maybe compensation, though I hope not,” he says. “We need to deal with the obvious abuses.” Beyond that, he thinks Congress will avoid attempting to make qualitative judgments about how foundations spend their money, which would be resisted. Private foundations and private donors have generally been left to set their own course, so long as they met minimal payout requirements each year, and that is likely to continue, he believes.

Foundation executives themselves seem to be worried about their records, however. Late last year, an admittedly unscientific Internet poll taken by the Philanthropy News Digest asked respondents to choose the philanthropic sector’s biggest challenge in 2007. By January 2, 2007, 190 people had voted and the overwhelming response was “demonstrating effectiveness,” with 58 percent; 18 percent focused on “leadership vacancies,” showing similar concern about the future. Yet thanks to the Internet, foundations are providing more information about themselves than ever before—through their own web sites and through entities such as Guidestar (www.guidestar.org), a web site founded in 1994 to improve the dissemination of information about charities and philanthropies.

By many measures, the foundation sector’s future looks bright. Buffett’s gift is likely to inspire more people to give, and some may well follow his example and give to an existing foundation. This, too, has precedent. Since 2001, acting on behalf of an anonymous donor, Carnegie Corporation has been able to grant a total of $85 million to small- and medium-sized, New York City-based arts, cultural and social service organizations because of the generosity of an anonymous donor who has chosen the Corporation to make the grants on the donor’s behalf.

Some experts, including James Allen Smith of Georgetown, hope that foundations will accept gifts from others, precisely because good grantmaking is harder than it looks. There might even be competition among foundations for money. Others note that Buffett did not choose a “staff-dominated” foundation that had any chance of departing from the political and philosophical principles of its founders—also good, in the view of some. “Buffett looked at Gates, thought about how he was using his money, and trusted Bill Gates, who is 25 years younger than him, and is using the money in his lifetime,” notes Martin Morse Wooster. “Donors,” he adds, “want to have more control over how their money is spent.”

Nearly everyone agrees that most foundations will continue in their traditional role of experimenting, trying out new ideas, taking risks that other institutions, held more accountable to various constituencies, cannot. That’s because problems themselves are not going away; in fact, some are more complicated than ever.

New York Mayor Michael Bloom-berg, who says he’ll devote himself to spending his own multi-billion-dollar fortune philanthropically after he leaves office in 2009, acknowledged as much in December 2006. Announcing that the city would spend $150 million annually to combat entrenched poverty, he said $25 million of it would be raised privately from donors. “When you do things with public money, you really are required to do things that have some proven track record and to focus on more conventional approaches,” he told The New York Times. “But conventional approaches, as we know, have kept us in this vicious cycle of too many people not being able to work themselves out of poverty even though they’re doing everything that we’ve asked them to do.”

In other words, today’s problems require more creativity, not less. That leaves foundations with an even bigger role to play in the years ahead.

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