Transforming philanthropy for the shifting sands of the 21st century

EVENT
Council on Foundations' 51st Annual Conference
Date 1--3 May 2000
Venue  Los Angeles
Theme  Transforming Philanthropy

It seemed fitting that the 2000 conference of the Council on Foundations, entitled ‘Transforming Philanthropy’, should take place in Los Angeles, the self-styled ‘city of the 21st century’. With 40 per cent of its citizens living below the official poverty line, LA seems to provide a microcosm of the problems facing the world in the next century.

What role should foundations be playing? This was the question facing two sessions entitled ‘Shifting Sands: Rethinking Philanthropy’s Role in a Fast-Changing Environment’. Although grantmaking by US foundations has again broken all records (see report on p7), foundation money can never be more than a drop in the ocean in terms of tackling widespread poverty.

A key role for foundations has always been to fund innovative new programmes. Without market pressures or accountability problems, foundations are in a unique position to take risks and accept failure. If a business is unsuccessful, it must eventually close. But foundations can give money to things no one wants or needs for years – and to whom are they accountable?

At the same time, they are the recipients of substantial public funds.[1] Does this bring no public responsibility, no responsibility to address the problems of the 40 per cent of Angelenos living in poverty? According to one speaker, only 5 per cent of philanthropic dollars goes to the welfare of poor people. Autonomy and diversity are much-cherished foundation values, but is complete freedom within the law the best way to use foundation money?

People at the meeting seemed to see three possible paths for foundations:

• to fund only what the government doesn’t fund – and be marginalized;
• to follow the government’s agenda;
• to help set the public agenda.

Using foundation money to support advocacy, to force the hand of those with greater resources to make a real difference, is clearly an option. But whose agenda are they going to set? Clearly foundations have a great deal of combined wisdom -- ‘What happens to all those reports you guys get? someone asked – but they are not elected and they represent no one. Could one imagine communities coming together as a group to set their agenda and approaching foundations as a separate group with their problems?

Affinity groups and funders’ coalitions could play a valuable role here. LAUF (Los Angeles Urban Funders) is a good example. Following civil unrest in LA in 1992, 22 foundations joined forces to improve conditions in low-income neighbourhoods. Although project grants come from the separate funders, a pooled $1 million fund is devoted to facilitating a dialogue with the local communities.

The changing universe of philanthropy

So what is new in the philanthropy field in the USA? The session titles give some clues. Of two sessions on ‘The Changing Universe of Philanthropy’, one, not surprisingly, looked at ‘Virtual Philanthropy’ and the role of the Internet both in raising money and in forging closer links between donors and charities.

The other focused on ‘New Players Expanding the Universe’. These were the donor advised funds, now offered by for-profit organizations such as Fidelity and Vanguard as well as by community foundations and other more traditional institutions. Fidelity’s Charitable Gift Fund has 22,000 donors and $3 billion in assets – it received $870 million in 1999 alone. It pays out 20 per cent of the Fund value each year. They claim this is new money, and all agree that funds such as theirs have set new standards in making giving easy and flexible – something donors appear to want.

Jack Shakely, President of the California Community Foundation, revealed that what he called ‘default philanthropy’ -- people giving to charity to prevent their children having too much -- is now the biggest growth area.

New twist on grantmaking?

A session on venture philanthropy looked at the differences between traditional philanthropists and the much-talked-of new philanthropists, largely successful high-tech entrepreneurs, who are applying the principles of venture capital to the philanthropy field. They fund organizations not projects, make fewer, larger investments, actively support their ventures/investments, and develop exit strategies. Whether the exit strategies work is as yet unknown as the ventures are all so new, but the venture philanthropists' market-style model of accountability is interesting. Staff supporting projects are held directly accountable for their success or failure. A seat on the board of the non-profit receiving support may be resented, but it gives an additional source of direct accountability.

As always, debates like this raised more questions than answers, but they were interesting questions.

1  Michael Porter and Mark Kramer recently calculated that the Federal Treasury contributes $1.48 for each grant dollar (Harvard Business Review, Nov/Dec 1999).