Are Foundations Forever?
Are foundations forever, like those famous diamonds? The pot has been vigorously stirred again on this question by recent opinion pieces in the United States that have commented on the merits and demerits of an endowed foundation model assuming longevity, if not perpetuity, of foundation assets and giving over time.
The latest round in the debate of spend now versus spend over time was initiated by a piece in The Chronicle of Philanthropy, Now or Forever. This piece suggests that we need to think more today about whether the ‘default setting” of long or indefinite life for foundations should be questioned, given a) strained government resources, b) the scale of the problems we face today such as climate change and c) the importance of reducing inequality through charitable giving to redistribute wealth. The authors, Ray Madoff and Robert Reich, both academics, suggest that the relationship between philanthropy and time deserves more attention from academe. To remedy this they are hosting a discussion this week at Stanford from which no doubt we will be hearing further echoes.
In the meantime a quick rejoinder from the Chair of the Council on Foundations, who also leads a place-based “perpetual” foundation, makes a strong case for an enduring endowment that builds a much larger base of assets over time that can be made available to support many different needs in a community. This side of the argument is the one favoured by a majority of endowed foundations today, in Canada as well as in the United States, who see themselves as stewards and builders, not only to support community on an ongoing basis but also to initiate new ideas and to support innovation over time. We have several examples of family foundations created in the 1940s through 1960s that have grown to become significant national funders and are able through their larger endowments to make major financial bets on work to improve the lives of Canadians. And a number of very large foundations created through bequests in the last decade that have come to join these older foundations in deploying their assets very effectively for social change.
An important question in this consideration of philanthropy and time is whether lifespan matters to effectiveness. The third contributor to the current debate in the United States is Francie Ostrower, a researcher of the “spend down foundation” whose piece Perpetuity or Spend-Down brings some facts to the table. Among her conclusions? That while a decision about foundation longevity clearly affects the strategies chosen by a foundation, this is not what makes a difference to the foundation’s impact. What matters is how a foundation’s leaders make decision about using their “life” rather than how they have chosen to ‘end” it (or not). So, suggests Ostrower , a foundation that sets goals, provides long-term funding, strengthens grantees to carry on their work and pays attention to intent is going to make a difference greater than one that does not, regardless of whether it is perpetual or limited life.
This necessary discussion about philanthropy, time and strategy is worth paying attention to, for the questions it raises about what really makes a difference and to whom, as well as what one would call the “moral” obligations of charitable funders. A foundation that remains a reliable funder of community needs year after year adds value just as much as an issue-focused foundation placing a big bet on an all out effort to make social change It isn’t possible to say that one is better than the other. But execution makes a difference, whether it’s along life or a spend down funder. We will be talking about this at our conference in Vancouver in November. The Andrea and Charles Bronfman Philanthropies, funded by Canadian Charles Bronfman, is a foundation that has executed its spend down strategy very thoughtfully, sharing its experience and reflections in a very open way. Jeffrey Solomon of ACBP will join Judy Oberlander from the Leon and Tea Koerner Foundation in Vancouver , another foundation that has executed a well thought out transition to a new form . These leaders will stimulate our deeper thinking about the choices to be made regarding philanthropy, time, change and impact.
For more on the recent experience of a family foundation that closed.
Malcolm Burrowson April 14, 2016 Reply
Thank you for bringing this discussion forward to the PFC membership. Perpetual foundations are important public resources, as are foundations with a limited lifespan. Both play a role in providing public benefit. Afterall, the world’s largest private foundation, The Bill and Melinda Gates Foundation, is a spend-down. The moral hazard of perpetuity is to focus too much on protecting capital, not providing maximum public benefit. It’s a tension that can be managed over time through good governance. I wrote on the topic in The Philanthropist in 2010 in the wake of the financial crisis. Many of the issues are still relevant. http://thephilanthropist.ca/original-pdfs/Philanthropist-23-1-397.pdf
Jennifer Thomason July 29, 2016 Reply
Thanks for sharing Malcolm