Make-up of foundation boards crucial to decisions about investment


Caroline Hartnell


Caroline Hartnell

Caroline Hartnell

More than 80 per cent of 105 foundations that lost between 30 and 100 per cent of their assets to Bernard Madoff’s Ponzi scheme had fewer than five trustees serving on their boards. This was one of the findings highlighted in Learning from Madoff: Lessons for Foundation Boards (, a new white paper by the US-based National Committee for Responsive Philanthropy (NCRP). Only 16 of these foundations had five or more trustees, and even among these, their names showed ‘notable homogeneity’. ‘Trustees are caretakers of foundation dollars,’ said Aaron Dorfman, executive director of NCRP. ‘One can argue that a more diverse board of at least five individuals is less likely to make poor investment decisions.’

The make-up of trustee boards seems to be a crucial factor in decisions about mission related investment (MRI) too. At a meeting in London yesterday on ‘Connecting Foundation Values and Mission with Investment Strategies’, at which Melissa Berman of Rockefeller Philanthropy Advisers was speaking, many talked of trustees lacking the confidence to embark on MRI. In fact, the shortage of people with a good understanding of both the financial and the social side – as trustees or advisers or fund managers – could be seen as the main obstacle to the expansion of MRI. Several people talked of social investments being written off immediately as grants because of the difficulties for the finance side if they were treated as investment. New approaches to measuring social impact are being developed all the time, but there need to be people who understand them and are comfortable working with them and confident enough to use them to counter the more mainstream financial arguments.

MRI has long seemed like a no-brainer, and even more so now that an investment with a financial return of say 3 per cent seems entirely normal. And at one level, the London meeting was a sign of just how far MRI has come in the last few years. All foundations represented had at least a toe in the MRI water, and the question ‘What are the opportunities for social investing in Africa?’ elicited several meaningful responses. But it was also pointed out that these foundations are still the tip of the iceberg, and the lack of people who understand the financial and the programme side of foundations is still a formidable obstacle to progress.

For more information
Learning from Madoff is available for free download at
RPA’s Philanthropy’s New Passing Gear: Mission Related Investing: A Policy and Implementation Guide for Trustees can be downloaded at

Tagged in: Foundation boards Madoff Mission-related investing MRI

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