Philanthropy Should Have Glass Pockets

By Vartan Gregorian

This article originally appeared in the April 1, 2004 edition of The Chronicle of Philanthropy.

Watchdog journalism is an instrument of democracy, wrote Murrey Marder, former chief diplomatic correspondent of The Washington Post. To anybody who has read the spate of newspaper articles describing in vivid detail a series of abuses by foundation leaders, ranging from using endowment money to pay for personal expenses to excessive salaries for absentee directors, that vital role of journalism is abundantly clear. But if Americans only read about scandal, without any context, then they may tend to believe that scandal is the norm. If such an impression is allowed to go unchallenged, the public will be left with distorted notions about the standards and conduct of philanthropic and other nonprofit organizations.

It is incumbent upon all of us in the fields of philanthropy and charity to note such aberrations and abuses and denounce them forcefully. Misconduct by foundation leaders -- and that includes both staff members and trustees -- is a double betrayal: first, of the intent of an institution's founder, who provided its initial endowment and mission, and second, of the public trust and of the people and organizations that were meant to be the beneficiaries of philanthropy or charity.

As in every facet of American life and elsewhere, when abuses occur -- be they in the realm of religious institutions, corporations, government, or any other sector of our society -- they are certainly not the norm; they are the exception. And unless those exceptions are put in proper perspective, they will serve in the role of a false currency, that, once widely circulated, can be neither retrieved nor redeemed.

I cannot presume to speak for all my colleagues, though I can say that those I know well have raised their voices, both privately and publicly, and I'm sure will continue to do so when it comes to this subject. I can, however, use the standards and conduct of our foundation, the Carnegie Corporation of New York, which we have adhered to over the past 93 years, to highlight what is expected of American philanthropy.

In a 1911 letter to the original trustees of the Carnegie Corporation of New York, Andrew Carnegie called the practice of philanthropy "a sacred trust."

He deeply and sincerely believed that his wealth was something that should only pass through his hands to be reinvested in the society that had provided him with the opportunity to create it in the first place. Thus he gave away almost all of his vast fortune to build libraries, endow more than 22 nonprofit and philanthropic organizations in the United States and abroad (including the corporation), and carry out other works in fulfillment of his wish to do "real and permanent good in this world."

The corporation has honored that mandate since its founding, but we are hardly alone: The overwhelming majority of philanthropic foundations in this country absolutely, unquestionably, and with utter dedication use their resources, be they great or small, to do real and permanent good to the best of their ability, with no waffling, no finagling, and not even the slightest hint of "creative bookkeeping." Not ever.

Sometimes, there is confusion in the mind of the public about the distinctions between charity and philanthropy, which has become blurred over time. Charity, which is derived from the Latin word carus, meaning dear, has a long religious history: For Christians, Muslims, and Jews, for example, it has meant giving immediate relief to human suffering without passing judgment on those who suffer. Philanthropy has a more secular history and comes from the Greek word philanthropos, meaning love of mankind; the word is now often used to describe generosity that promotes human progress in any field. In the financially overstimulated 1980s and '90s, numerous people who accumulated great wealth seemed to have lost sight of the true essence of philanthropy. Some, it seems, decided to set up foundations more to take advantage of the Internal Revenue Service's inattention to the regulation of foundations than for the "love of mankind," and thus never had any committed intention of investing in the future.

Since philanthropy has so many newcomers, and major changes have occurred in the leadership of our nation's numerous nonprofit organizations, including foundations, it is important to restate and reaffirm the roots of philanthropy, which are deeply entwined with the most basic American ideals and civic life. As Alexis de Tocqueville pointed out nearly 170 years ago, we are a people who practice generosity toward our fellow men and women because we feel an obligation to respond in kind to our generous society for providing us not only with freedom, but also with opportunity and the ability to succeed. That is an extraordinary and uplifting notion that attempts to combine both the public and private good.

At the Carnegie Corporation of New York, we continue to practice philanthropy with the same dedication and idealism that Andrew Carnegie evidenced and that he would expect of those whom he trusted to follow after him. One of our earlier trustees said that it was incumbent upon foundations to have "glass pockets," and I endorsed that sentiment when I became president of the foundation in 1997.

"Freedom from political pressure," I wrote, "is as necessary for the viability of private foundations as it is for institutions of higher education, but so is transparency.

...Foundations should stand for the best ideas and impulses of the American people, their idealism, altruism, and generosity. Because of this, their values, and how they conduct themselves, must be higher than the prevailing standards. We are accountable not only before the law and the court of public opinion, but before history as well."

Nothing serves better as a motivator for high ethical standards than a dedication to the ideals of philanthropy, but at a time of rapid change in the world of philanthropy, we must call for stronger and unequivocal self-policing and self-regulation as well as stronger condemnation of those who abuse the privilege of participating in philanthropy by violating the underlying principles of all foundation activities: openness and accountability.

We must also insist that IRS and state regulations governing foundations be strictly enforced. In fact, we should insist that the taxes paid by foundations, which are supposed to be earmarked by the IRS for regulating the nonprofit world but have not always been used that way in the past, be strictly and vigorously committed to that purpose. Additionally, we must promote and assist the regulation and enforcement efforts of state attorneys general.

People do not become ethical by taking a course, and ethical behavior is not a divisible commodity that can be rationed or used when circumstances make it convenient.

We must demand that adherence to the highest ethical standards be an integral part of the day-to-day operation of all our institutions. Certainly, ethical conduct should be expected in any field, but it is especially critical in philanthropy, where we must expect nothing less than the highest ethical standards from those who are the stewards of money left by good ancestors -- those who wanted to help those who would follow after them.

Since becoming president of the Carnegie Corporation, I have assumed that it is my obligation to speak forcefully about these issues in both public and private venues and will continue to do so at every possible opportunity and from every platform available to me. Indeed, I have stated publicly and categorically that when it comes to transparency and accountability, we cannot compromise. In that connection, I am on record as stating that foundation leaders and board members should be indicted for abuses and, if found guilty, should be fired and even jailed. Unfortunately, though, in our celebrity-conscious culture, where scandals and infamy are often considered more newsworthy than good works, statements and speeches of foundation executives championing the cause of ethical behavior are rarely afforded much press coverage; denunciations of foundations are.

We at the Carnegie Corporation are proud to uphold our long tradition of integrity and accountability. I will continue to miss no opportunity to speak out on this issue, but speaking out isn't enough. We must all practice what we preach. At the Carnegie Corporation, that is exactly what we will continue to do.