How far are foundations willing to go to try to solve what they see as the most urgent problems facing the human race? The received wisdom about the foundation world goes something like this: because of their freedom from electoral or shareholder pressure, foundations enjoy a greater degree of latitude than the other sectors.

They can thus support unpopular or politically thorny causes, and can respond swiftly and in innovative ways to new issues. But do they? With some exceptions, no, according to the philanthropy leaders and commentators Alliance talked to for this article. Desire for institutional survival, arrogance, complacency and bureaucracy are among the reasons given. Others, more sympathetically viewed, include the obligations of good governance and issues of staff competence.

So how far are foundations willing to go to try to address the most pressing problems? Not very far, says Rayna Gavrilova of the Trust for Civil Society in Central and Eastern Europe. Why is this? The short answer, she says, is ‘because this is their essence’. The obligations of stewardship and good governance, she feels, militate against mounting a serious attack on critical issues as they arise. ‘Foundation leaders and staff are stewards of other people’s money and the huge responsibility of managing these resources invalidates their presumed potential to react forcefully to the big challenges.’ The stakeholders involved are many, and frequently difficult to consult. The pressure for good governance, she believes, ‘has transformed the simple desire of doing something good into a complicated decision-making process involving diverse interests. If the staff stands firm for a major change, it has to convince boards, and not infrequently donors too.’

Foundations’ self-protective practices

Rick Cohen of NonProfit Quarterly believes that the US foundation sector has just demonstrated the unwillingness of foundations to go all out ‘in spades’. The Council on Foundations, ‘the trade association of institutional philanthropy in the US’,   recently sent an open letter to its members about responding to the global financial crisis. ‘One would have thought that the Council might say, now is the time to unleash your capital to bolster the organizations protecting people least well served in these economic times? Maybe it could have instructed its membership that the 5 per cent mandatory spending requirement should be seen as the absolute minimum in these times, and that foundations should be radically increasing their grantmaking, even if it means cutting into foundations’ assets.’

Instead, he says, the Council ‘encouraged its members to play “convening” roles, encouraging dialogue, taking advantage of foundations’ non-financial roles’.

He cites three reasons for foundations’ reluctance to mobilize their most effective asset – money. First, he says, ‘there is virtually no advocacy about the functions of foundations, and their contributions to society and the economy.’ Most US foundations are unknown and unseen as far as the general public is concerned, ‘so debates about philanthropy end up focusing on the “usual suspects”, a few large, better known foundations, leaving most of institutional philanthropy free from scrutiny or pressure.’

Second, he argues, ‘philanthropy has turned the discussion of effectiveness and equity into a discussion of process. How happy are the grantees? How well are they treated? How much reporting do they have to do? Philanthropy,’ he continues, ‘never has to seriously face the question, is there a better regime for delivering social value on $700 billion in tax-exempt endowments than foundations as presently constituted?’

Third, in the US, ‘there is no charitable or philanthropic mandate or incentive to address the needs of the poor, to bridge social chasms, to address critical socio-economic problems.’ Philanthropy is conceived so broadly that the relatively wealthy can be – and frequently are – its beneficiaries. ‘Our society,’ he concludes, ‘has turned the self-protective practices of foundations – a structured minimal spending requirement, the just-about-sacrosanct protection of the financial corpus, institutional perpetuity – into sacred cows.’
 
The cosy smokescreen of donor intent

There is also the characteristic anxiety among trustees that, in turning to address problems unforeseen by founders, foundations might depart too far from their mission or the founder’s original intent. While Nicholas Borsinger of Pro Victimis Foundation thinks that this is the main reason why foundations fail to take on big issues, he is dismissive of it, believing that it is generally used as an excuse for inaction. ‘The famous “statutory constraints” (at once the worst and least acceptable reason),’ he argues, ‘are largely a cosy smokescreen since mandates can be both interpreted and changed.’ The other reason – with which, he says, he has a degree of sympathy – has to do with staff and board competence ‘and the implications of stepping out of comfort zones and steep learning curves’.

Old and new foundations

Marcos Kisil of IDIS in Brazil makes a distinction between what he calls old and new foundations. He sees the old foundations as much less likely to respond to changes in the world around them: ‘They see themselves as owners of strategies and methods of operation that are above criticism, and see performance much more in terms of number of projects funded or amount of money disbursed in a given year than in terms of changes that they influenced in society. They have serious difficulty in understanding the changes that are occurring in the world. On the other hand, new foundations accept the idea of acting as learning organizations with a real need to participate in the process of development.’ They are more likely to form partnerships, he argues, and ‘their leaders adopt a hands-on approach to human problems’.

Rory Tolentino of APPC cites some honourable exceptions like the Gates and Khemka Foundations, but agrees with Kisil’s point about old and new foundations. ‘I think the bigger and perhaps the older foundations are constrained by such issues as original intent, a large infrastructure, long-term grantee expectations, etc.’

Rayna Gavrilova sees as a positive development the ‘emergence and impressive effectiveness of specialized foundations, which tackle consistently and with superhuman commitment the major grievances of the world’. Echoing Marcos Kisil, she adds: ‘The private foundations with live donors are in the best position to operate in such a sweeping way, and we have seen recently encouraging examples. What sets them apart is the fact that there is only one degree of separation between the need and the response.’

Donor priorities vs recipient needs

What about those foundations that don’t have the comfort of an endowment and need to raise money? Under these circumstances, says Janet Mawiyoo of the Kenya Community Development Foundation, foundations are not free to act as they choose: ‘Donors have a first call on where money is going. If the donor has not prioritized an issue, then the foundation cannot make grants in the area because they are under an obligation to work within the parameters set by the donor.’

Donors, she feels, are likely to be frightened off by areas of work they see as challenging or revolutionary: ‘Educating poor people to know their rights or working with vulnerable categories of people to help them become better engaged in resolving their issues is important, but if no donor sees that need, the foundation cannot fund it.’

In general, says Mawiyoo, giving is influenced more by donors’ ideas than by recipients’ needs. Donors are often unwilling to take advice; they give to issues they feel strongly about, whether or not these are where their money would do most good. ‘I have come across many projects in our region,’ she says, ‘which are more about responding to the needs of the givers than of the people being assisted. Since those being given have no say, they take what they receive, reasoning that “something is better than nothing”.’

Entering new fields

Marcos Kisil also applies the old-new distinction to risk-taking. ‘Traditional foundations,’ he says, ‘are dominated by their bureaucracy. If their staff believe that risk-taking can jeopardize their annual evaluation and any bonus that could accompany it, they become more cautious and they do more of the same. New foundations still have the influence of their founders, and staff are still pursuing and creating their own space. Creativity and risk-taking are natural components of this phase.’

The point about bureaucracy is taken up by Rory Tolentino, who believes that ‘foundations can become just as bureaucratic and “lumbering” as other institutions’. She feels that reputation keeps some tied to particular areas of work: ‘They have staked their reputation around solving some issues and are afraid to let an issue go without clear impact on it, or fearing perhaps that they will be seen to be leaving an issue or problem unresolved.’ She also suggests that since no single foundation can hope to make an impact on all the pressing problems of the world, ‘they will stick with what they know how to do’. Like Nicholas Borsinger, she cites the inhibiting sense that ‘it may be too difficult to “relearn” the causes of a new problem, or move their staff to learn to do new things’.

Tolentino also makes the point that foundations operating in other countries may be reluctant to take on social justice issues such as human rights and governance because their ability to work in these countries at all depends on the state’s tolerance of them and there is a danger that external actors may be seen as ‘interfering with domestic issues’.

Nicholas Borsinger also believes that foundations are often shy of risk because steering into the unknown could mean becoming involved with unsuitable organizations. ‘The main problem of entering new fields is less risk as such than the all too prevalent tendency to end up partnering with the most astute but often least worthwhile and capable partners in the field. When failure results not because of having taken big, well-thought out risks but because of landing in the lap of smooth operators in the grantseeking business, what a flop.’

What’s to be done?

Two things, says Janet Mawiyoo. First, foundations must work to ‘increase the pot of money which allows you the flexibility to fund in the areas you consider critical at any one time’. Second is donor education: ‘working hard at educating donors who have been associated with the foundation for a long time, so that they buy into the strategic plan of the foundation rather than specific programmes’.

Collaboration, suggests Rory Tolentino. ‘We could be talking to other philanthropies and trying to come up with more consensus about the problems, and perhaps agreeing on what each can do about one or another problem. I think talking to each other helps you feel like you are not trying to solve all the problems of the world by yourself. At the same time, it enables foundations to allow each other to deal with different issues.’ But she admits this may not be realistic – given the tendency towards competition that she senses among foundations.

A possible remedy, thinks Nicholas Borsinger, is to fight for ‘a legal obligation to review existing foundations statutes every 20-25 years, with outsiders’ perspectives respected’. In these circumstances, he suggests, the foundation should perhaps have just one obligation: ‘to mention on its website the reasons why it turned down suggestions for reviewing a mandate that was considered as no longer adapted by qualified outsiders. The foundation’s liberty would thus be preserved and its accountability too.’

Slaughtering the sacred cows

‘At a minimum, in disastrous economic times like these,’ says Rick Cohen, ‘there should be much higher spending by foundations, with significant commitments to countercyclical spending and to targeting resources to the social problems that destabilize societies. In times of critical need, social and economic problems need to take priority over the protection and growth of the corpus.’

It may well be time to put foundations on a track that leads to alternatives to perpetuity, he suggests, ‘so that foundations can plan for shorter time frames for deploying their resources rather than measuring success by ever-growing endowments’. Finally, he suggests that it may be time to change the tax structure, in the US at least, ‘giving a higher level of charitable incentives to grantmaking that addresses social and economic problems’.

However, he adds, ‘it all starts with advocacy. Allowing concentrations of capital to exist with minimal substantive scrutiny is a prescription for achieving only a scintilla of what institutional philanthropy can and should accomplish for social change.’

The sense of great institutional inertia which will need to be overcome, whether from outside or inside the sector, is shared by both Rayna Gavrilova and Marcos Kisil. Gavrilova argues for greater leadership among boards: ‘It takes leaders, not managers, to push for change; it takes genuine interest and trust on behalf of the boards. A “country club” style board is sometimes a disservice to the human race.’ ‘Sometimes,’ concludes Kisil, rather ruefully, ‘changing traditional organizations is much more difficult than changing the world’.

Alliance would like to thank the following for contributing to this article:

Nicholas Borsinger Executive Director, Pro Victimis Foundation, Switzerland
Rick Cohen National Correspondent for Nonprofit Quarterly, USA
Rayna Gavrilova Executive Director, Trust for Civil Society in Central and Eastern Europe
Marcos Kisil President, Institute for the Development of Social Investment, Brazil
Janet Mawiyoo Executive Director, Kenya Community Development Foundation
Rory Tolentino Former Chief Executive, Asia Pacific Philanthropy Consortium

Andrew Milner is Alliance Associate Editor. Email am@andrewmilner.free-online.co.uk