Nagging issues for Europe’s foundations

Helmut Anheier

Europe could be the 21st-century heaven of philanthropy. Rich, diverse, open, at peace with itself, and with an unfinished project of uncertain future that stands unique in the world: the European Union. Certainly, not all is well in Europe – but this is all the more reason why foundations should be more in demand than ever before.

Europe also has more and larger foundations than at any time in modern history. Despite the financial crisis, there are more foundations with endowments of €250 million and above, relatively large even by US standards. Moreover, they exist in an increasingly connected part of the world, and in a political environment that offers more opportunities for foundations to engage and achieve impact, and fewer obstacles than ever before. By and large, however, these opportunities haven’t been taken.

I believe the main reason for this is that European foundations seldom see themselves as pan-European institutions (with all that that implies in terms of strategy and mutual support) or make any effort to tell the rest of the continent what they do or how they do it.

Deputizing for the state is a dead end

In the aftermath of the financial crisis, Europe’s governments and international organizations are looking to foundations to shoulder some responsibilities and relieve fiscal pressures. When municipal libraries, theatres or swimming pools are threatened with closure, or schools and universities can no longer afford programmes or entire departments, foundations are asked to step in and subsidize the public sector.

The dangers of this are well known: asking foundations to substitute or complement state activities would reveal how paltry their resources actually are compared to those of the state. It would make clear that foundations can only marginally alleviate but never really solve fiscal problems on the scale confronting most EU member states.

The opportunity

Instead of covering the shortfalls of others, foundations can spot problems, develop better systems and approaches, and work with partners to create sustainable solutions.

This requires confidence, entrepreneurship, openness and foresight. It also requires knowledge, a deep understanding of issues, and a sense of strategy and purpose. Given the many challenges and opportunities foundations are facing, this should be a time of innovation, with new ideas and daring new programmes that show how relevant foundations have become – and increasingly will be – for the new Europe. It should be thrilling to be part of a creative force helping forge responses to problems like climate change, changing demographics or fiscal policy.

The insular mentality

Unfortunately, however, this is seldom the case. It is, of course, difficult to generalize across a diverse field, and there are notable exceptions to a generally rather disappointing reality. But it may be only a slight overstatement to say that cautious, conventional and defensive are adjectives that come to mind more readily than innovative, open, entrepreneurial or exciting. Why? There are many reasons, some quite justifiable, but one of them is a largely self-inflicted handicap that leaves foundations more politically vulnerable, more cautious and more set in their ways than necessary.

It is the direct result of two assumptions that are as faulty as they are convenient: first, that foundations can play major roles without being transparent, accountable and open institutions in a Europe that is crying out for these qualities in political processes; and second, that foundations can become a serious player at the European level without actively investing in a collective European infrastructure of philanthropy.

Evading legitimate questions

Not surprisingly, basic information on Europe’s larger foundations is patchy, if it is available at all, and certainly not readily accessible to the general public. What is the fair market value of their endowments? How are funds invested? Do portfolio strategies follow principles that are in line with philanthropic expectations? How are decisions made and how accountable are foundation boards? How much do foundations pay out each year, to whom and for what? Foundations have shirked such questions, yet these are legitimate questions if they want to act as innovators and change agents, to be active participants in shaping the new Europe.

Instead, they prefer flashy brochures that typically reveal little, couched in a self-congratulatory style that celebrates some cause célèbre or another. Meanwhile, five nagging issues remain unaddressed:

Timid policy action
European foundations failed to put convincing momentum behind the push for the European Foundation Statute. While the European Commission was ready to be convinced that a new legal instrument was needed, it took great effort to enlist enough support among leading European foundations. If the Foundation Statute becomes reality, it will not be because European foundations overwhelmingly pushed for it. On the contrary, indifference was more common than active engagement in how the new instrument could open up opportunities for philanthropy.

Ignoring criticism
Foundations tend to ignore rather than address critical assessments of current foundation practices and policies. A recent debate about introducing some sort of annual payout rate in the UK was summarily dismissed by representatives without any regard for the positive experiences in the US. Press reports on foundations, often ill-informed, are not answered in an authoritative way. The predictable and unjustifiably critical way in which some leading European papers reported on the Giving Pledge in the summer of 2010 is instructive: the foundation community did not react energetically to counteract misinformation and prejudice.

Obtuse attitude towards research
The small research community on European philanthropy has received much less support from foundations than is the case in the US, Japan or Australia. Every three to five years a report is commissioned, usually by some consultant or retired senior civil servant, to assess the field of teaching and research in philanthropy in Europe – and typically little comes of it. Research and teaching clusters are taking hold (for example, in Heidelberg, Rotterdam and London) but these are national initiatives with little direct support for a European vision, let alone joint research.

Not being in it together
European foundations have shown little solidarity. They under-invest in their common future, as the example of the European Foundation Statute shows. But the under-investment goes deeper: The European Foundation Centre would not exist without funds from the Ford Foundation and the Mott Foundation. When Bertelsmann Stiftung in Germany came under attack in the press last year, no other foundation came to its defence, and the German Association of Foundations fell into uneasy silence. Bertelsmann Stiftung itself felt it better to weather the storm than to actively refute the basically unjustified accusations of political meddling, tax avoidance and improper governance. When the Italian banking foundations had to confront the government’s desire for control of their assets, there was no reaction to speak of on the part of European foundations.

Passing the buck
Foundations are increasingly jumping on the bandwagon of impact and performance measurement, following the lead of their American counterparts. Because they rarely have the capacity to develop and implement adequate systems on their own, they pass the burden of measurement and reporting on to grantees (where is becomes easily ritualized and hence less meaningful). If foundations are truly interested in their impact, they should become clearer and more open about their own role and objectives, and take accountability and transparency seriously. They should assess their impact in such a way that it has consequences for their future performance.

The real value of foundations to Europe

Over the years, I have been a keen observer and great admirer of the idea of philanthropy and the role of foundations in the new Europe. Economically speaking, they make little difference, but that is not the point. Without them the continent, and the European Union especially, would be much poorer in terms of opportunities and innovative capacity, and it would lack the great potential foundations harbour. Yet that potential is not being realized, largely because foundations want to have their cake and eat it. They want to be influential but aren’t prepared to pay the price in terms of openness.

So what can be done? Three things stand out: first, Europe’s foundations need to invest in infrastructure in terms of better information and representation. Without better data and knowledge and a willingness to make the world of philanthropy known beyond what seems comfortable and convenient, there can be little meaningful change. Second, foundations need to become more transparent and establish minimal accountability standards. We live in what have been called ‘audit societies’, and foundations need to live up to what is expected of other institutions. Unless they are willing to open their books, little beyond the present status quo can be achieved. Third, and perhaps most important, foundations should be more open about what they actually want – what they will contribute, what they expect in return, and how we can measure their achievements.

Helmut Anheier is Academic Director of the Centre for Social Investment, University of Heidelberg and Dean of the Hertie School of Governance, Berlin. Email anheier@hertie-school.org

Editor’s note
What do you think of Helmut Anheier’s ‘nagging issues’ and Gerry Salole’s and Luc Tayart’s response? Please email your thoughts to caroline@alliancemagazine.org for publication in the June issue of Alliance.


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