BAD DONORS, GOOD RESULTS • VETS & WORK • EXTREMISTS RATE EXTREMISM A PUBLICATION OF THE
S P R I N G
2 0 1 7
? e r e
Anonymity • Naming Rights • Donor Privacy PhilMag.org
I was the U.S. tour manager for a Burmese Christian band.
When I was driving through Oklahoma, law enforcement seized $53,000 the band had raised for a Thai orphanage and a Burmese college and tried to keep it using civil forfeiture.
I fought this outrageous practice and I won.
I am IJ.
Eh Wah Dallas, TX
Institute for Justice National Law Firm for Liberty
S T R EN G T H EN IN G OUR FR EE SOCIET Y 2 5 T H A N N I V E R S A RY S R EE SOCIET Y S T R ENGT H EN I NG OUR FREE SOCIE T Y 25TH ANNI VER S ARY S T R EN G T H EN IN G OUR FREE SOCIE T Y 2 5 T H A N ST R ENGT H ENI NG OUR FREE SOCIE T Y STR ENGT H ENING OUR FR EE SOCIET Y 25T H ANNI VER S ARY S T R EN G T H EN I N G OUR FR EE SO 25TH ANNIVERSARY STR ENGT H ENING OUR FR EE SOCIET Y S T R ENG T H ENI NG OUR FR EE SOCIET Y 25T H A NNIVERSA RY S T R E N G T H UR FR EE SOCIET Y 2 5T H A NNI VE R S ARY S T R ENG T H ENI NG OUR FR EE SOCIET Y S T R ENG T H ENING OUR FREE SOCIET Y 25TH A N EN GT H ENIN G OUR FR EE SOCIE T Y 25T H A N N IV ER S A RY S T R ENGT H ENI NG OUR FR EE SOCIET Y STR ENG T H ENING OUR AN NIVERSARY STR EN GT H ENI NG OUR FR EE SOCIET Y 2 5 T H A N N IV ER S A RY S T R EN G T H ENING OUR FREE SOCIET Y S The Philanthropy Roundtable EE SOCIET Y 25TH ANNI VER SARY S T R E NG T H ENIN G OUR FR EE SOCIET Y 2 5 T H A N N IV E R S A RY STR ENG T H ENING O is deeply grateful for the G T H ENING OUR FREE SOCIET Y 25TH ANNIVERSARY S T R EN G T H EN IN G OUR FR EE SOCIET Y 2 5 T H A N N I V E R S A RY S support R EE SOCIET Y S T R ENGT H EN I NG OUR FREE SOCIE T Y 25TH ANNI VER S ARY S T R ENoutpouring G T H EN IN G of OUR FREE we SOCIE T Y 2 5 T H A N ST R ENGT H ENI NG OUR FREE SOCIE T Y STR ENGT H ENING OUR FR EE SOCIET Y 25T Hreceived ANNI VER S ARY T R EN G T H EN I N G OUR FR EE SO asSwe celebrated 25TH ANNIVERSARY STR ENGT H ENING OUR FR EE SOCIET Y S T R ENG T H ENI NG OUR FR EE SOCIET Y 25T H A NNIVERSA RY S T R E N G T H our 25th anniversary. UR FR EE SOCIET Y 2 5T H A NNI VE R S ARY S T R ENG T H ENI NG OUR FR EE SOCIET Y S T R ENG T H ENING OUR FREE SOCIET Y 25TH A N EN GT H ENIN G OUR FR EE SOCIE T Y 25T H A N N IV ER S A RY S T R ENGT H ENI NG OUR FR EE SOCIET Y STR ENG T H ENING OUR AN NIVERSARY STR EN GT H ENI NG OUR FR EE SOCIET Y 2 5 T H A N N IV ER S A RY S T R EN G T H ENING OUR FREE SOCIET Y S UR FREE SOCIET Y 25TH AN NIVERSARY S T R E NGT H EN IN G OUR FR EE SOCIET Y 2 5 T H A N N I V E R S A RY STR ENG T H ENIN Over $965,000 was raised through our matching OCIE T Y STR ENGT H EN I NG OUR FREE SOCIE T Y 25TH ANNI VER S ARY S T R EN G T H EN IN G OUR FR EE SOCIE T Y 2 5 T H A N N I V gift campaign, which will provide us with a solid ST R ENGT H ENI NG OUR FREE SOCIE T Y STR ENGT H ENING OUR FR EE SOCIET Y 25T H ANNI VER S ARY S T R EN G T H EN I N G OUR FR EE SO foundation to launch our next quarter-century. 25TH ANNIVERSARY STR ENGT H ENING OUR FR EE SOCIET Y S T R ENG T H ENI NG OUR FR EE SOCIET Y 25T H A NNIVERSA RY S T R E N G T H UR FR EE SOCIET Y 2 5T H A NNI VE R S ARY S T R ENG T H ENI NG OUR FR EE SOCIET S T R ENG Tand H ENING OUR FREE SOCIET Y 25TH A N Thank you to ourY members friends who celebration EN GT H ENIN G OUR FR EE SOCIE T Y 25T H A N N IV ER Sdonated A RY Sto T Rmake ENGTthis H ENI NG OUR FRso EE extraordinary. SOCIET Y STR ENG T H ENING OUR We are honored to know and serve you. OUR FREE SOCIET Y S AN NIVERSARY STR EN GT H ENI NG OUR FR EE SOCIET Y 2 5 T H A N N IV ER S A RY S T R EN G T H ENING UR FREE SOCIET Y 25TH AN NIVERSARY S T R E NGT H EN IN G OUR FR EE SOCIET Y 2 5 T H A N N I V E R S A RY STR ENG T H ENIN Anonymous (32) Education Foundation Knobloch Daniel OCIE T Y STR ENGT H EN I NG OUR FREE SOCIE THealey Y 25TH ANNI VER S ARY S T RCarla EN G T H EN IN G OUR FR EEShuchman SOCIE T Y 2 5 T H A N N I V John Abele ST R ENGT H ENI NG E. OUR FREE SOCIE T Y STR ENGT H ENING OUR FR EE SOCIETLakeside Y 25T HFoundation ANNI VER S ARY S T RThomas EN Gand T HStacey EN I N G OUR FR EE SO Healey Family Foundation Siebel Foundation Bailey Family Foundation 25TH ANNIVERSARY STR ENGT H ENING OUR FR EE SOCIET Y S T R ENG T H ENI NG OUR FR EE SOCIET Y 25T H A NNIVERSA RY S T R E N G T H Shirley and Barnett FHL Foundation Baton Rouge Foundation PaulTE. 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Knight Foundation ST R ENGT H ENI NG OUR Foundation FREE SOCIE T Y STR ENGT H ENING OUR FR EE SOCIET Y 25T H ANNI VER S ARY S T R EN G T H EN I N G OUR FR EE SO Goodstein 25TH ANNIVERSARY STR ENGT H ENING OUR FR EE SOCIET Y S T R ENG T H ENI NG OUR FR EE SOCIET Y 25T H A NNIVERSA RY S T R E N G T H UR FR EE SOCIET Y 2 5T H A NNI VE R S ARY S T R ENG T H ENI NG OUR FR EE SOCIET Y S T R ENG T H ENING OUR FREE SOCIET Y 25TH A N EN GT H ENIN G OUR FR EE SOCIE T Y 25T H A N N IV ER S A RY S T R ENGT H ENI NG OUR FR EE SOCIET Y STR ENG T H ENING OUR
G T H ENING OUR FREE SOCIET Y 25TH ANNIVE RSARY
table of contents
16 W hat’s in a Name?
A delicate dance lies behind some of today’s largest gifts. By Kate Harvey
26 P rivacy as a Philanthropic Pillar Why givers prize the right to be anonymous. By Karl Zinsmeister
A P U B L I CATI O N O F THE
47 Ideas Good Giving from the Grave How donors and charities can plan wisely to avoid posthumous punch-ups. By Doug White The Dark Side of Transparency Private decision-making can be more effective than openness. By Bob Reid
37 The Legal and Political Landscape of Donor Privacy
Rethinking Disability Donors launch an experiment that could spark seminal social reform. By Thomas Meyer
40 Bad Donors, Good Results
Human kindness and charitable success aren’t necessarily linked. That’s one of the paradoxes of philanthropy. By Grant Smith
SPLC on the warpath. The truth on foreign aid. Getting bluegrass in the black. Making Americans. An Oscar for humanitarianism.
10 Nonprofit Spotlight A STEM program helps Native Alaskans shoot for the moon.
11 Interview Paul Haaga The Republican investor on running NPR for $1, how to be an effective board member, and his very own dinosaur.
Business, Love, and Service Three human impulses that led to history’s number-one charitable donation. By Noemie Emery Preservation and Prosperity What could property rights do for Indian reservations? By Daniel Fishman
58 Face to Face Our 2016 Annual Meeting in Charleston, South Carolina.
60 P resident’s Note
Our mission: Protect your philanthropic freedom. By Adam Meyerson
Adam Meyerson PRE SI D E N T
VI C E PR E S ID E N T , P U BL ICA T IO N S
Caitrin Keiper E D I TO R
MA NAG I N G E D ITO R
A RT D I R E CT O R
Madeline Fry I NTE RN
Arthur Brooks John Steele Gordon Leslie Lenkowsky Christopher Levenick Bruno Manno John J. Miller Tom Riley Naomi Schaefer Riley Andrea Scott Andy Smarick Evan Sparks Justin Torres Scott Walter Liz Essley Whyte
C O NTRI B U T IN G E D IT O R S Philanthropy is a multi-prize-winning magazine (FOLIO awards in 2015 and 2016, American InHouse Design 2016, min 2016). It is published quarterly by The Philanthropy Roundtable. The mission of the Roundtable, a 501c3 tax-exempt educational organization, is to foster excellence in philanthropy, to protect philanthropic freedom, to assist donors in achieving their philanthropic intent, and to help donors advance liberty, opportunity, and personal responsibility in America and abroad. All editorial or business inquiries: Editor@PhilanthropyRoundtable.org Philanthropy 1120 20th Street NW Suite 550 South Washington, D.C. 20036 (202) 822-8333 Copyright © 2017 The Philanthropy Roundtable All rights reserved Follow us online:
Some People Love to Call Names At the end of 2016, the Chronicle of Philanthropy published an article headlined “Dozens of ‘Hate Groups’ Have Charity Status, Chronicle Study Finds.” The “study” took at face value a list of 900 entities pinned with the “hate” label by a notoriously partisan attack group—the Southern P overty Law Center. Over the years, numerous investigators have pointed out that most of the scary KKK and Nazi and militia groups that the SPLC insists are lurking under our beds are actually ghost entities, with no employees, no address, hardly any followers, and little or no footprint. But “hate groups” and “extremist organizations” are great copy, especially for fundraising (more on that below). So the SPLC list of stormtroopers-in-our-midst is catnip for journalists looking for dramatic stories. When the Chronicle’s reporter found that 63 of the groups tarred as dangerous by the SPLC are actually IRS-approved charities, did this spark concerns about the accuracy and fairness of the “haters” list? No, just the opposite. The Chronicle wondered if the IRS “is essentially granting government subsidies to groups holding views that millions of Americans may find abhorrent.” One month later came another example of journalism built on the tendentious SPLC definitions of who, in America’s roiling democratic give and take, is evil. The Los Angeles Times wrote in a January 2017 story that a donor who owns “the world’s second largest presenter of live music, sports, and entertainment… has donated to a number of anti-LGBTQ groups such as Alliance Defending Freedom, National Christian Foundation, and Family Research Council. A number of these organizations have been listed as ‘extremist groups’ by the Southern Poverty Law Center.” Let ’s start with the Alliance Defending Freedom—which is listed as a “hate group” along with 916 other organizations in the latest SPLC list released on February 15. The ADF has a network of 3,100 A merican attorneys all around the country who’ve donated more than a million pro bono hours to its work in recent years. The group has had a role in 49 legal victories (plus some losses) at the U.S. Supreme Court. Putting the Alliance Defending Freedom on a list with skinheads and the 130 Ku Klux Klan chapters that the SPLC insists are rampaging across America is like confusing Joe Lieberman with Joseph Stalin.
Security guard Leonardo Johnson was on duty at the Family Research Council in Washington, D.C., when a gunman entered the building and shot him. Johnson survived and managed to disarm the attacker.
According to the SPLC, the Family Research Council is also a “hate group.” Most people with less venomous imaginations know it as a prominent Washington, D.C., think tank built up by a former assistant to Ronald Reagan, with a substantial donor-supported budget, a large headquarters in the heart of the nation’s capital, and staffers who regularly air their arguments in national newspapers and television. Yet it endured an armed attack in 2012 by a gunman who told police he felt driven to act after seeing the nonprofit listed as a hate group on the SPLC website. Floyd C orkins shot a security guard while entering the building with a plan for mass murder, which was thwarted only because the guard managed to disarm him. The third group invoked by the Los Angeles Times, the National Christian Foundation, is actually not on the SPLC list at all (so far!). Yet it was elided into a sloppy association with “extremist groups” in a way that will leave many readers assuming the NCF is up to no good. SPLC’s utter lack of any reasonable criteria for who goes on its list of crazies combines effortlessly with careless reporting, and spreads stigma just by innuendo. Contrary to the dark impression left by the Times phrasing, the NCF is actually one of the largest and most impressive charities in America, having distributed more than $6 billion in gifts in recent years, with a pioneering record of philanthropic effectiveness, and leaders who testify before Congress. But mere proximity to SPLC’s arbitrary “hate” list is enough to tar even the worthiest group. Want more examples? According to the SPLC, leading social scientist Charles M urray is a “White Nationalist” (more about that in a minute). His colleague at the American Enterprise Institute Ayaan Hirsi Ali, one of the world’s bravest voices for freedom and human dignity through her bestselling books, has been categorized as an “Extremist.”
gettyimages / The Washington Post / Contributor
gettyimages / The Washington Post / Contributor
David Horowitz, another bestselling author, is also labeled as an “Extremist.” Others branded with a scarlet E by the SPLC and many media enablers include former Cincinnati mayor and Ohio Secretary of State Kenneth Blackwell, thinktank president Frank Gaffney, Cliff Kincaid of the press watchdog Accuracy in Media, former Lieutenant General Jerry Boykin, WorldNetDaily journalist Joseph Farah, Rafael Cruz, a Cuban immigrant and father of a U.S. Senator, legal gadfly Larry Klayman, and immigration restrictionist Dan Stein. Philanthropist Ron Unz, bestselling author Dinesh D’Souza, regular Congressional testifier Mark Krikorian, former Senator and Governor George Allen, U.S. Attorney General Jeff Sessions, former Congressman Tom Tancredo, former Congressman and Presidential candidate Ron Paul, and scores of other public-spirited Americans active in national debates have likewise been slurred and defined as beyond the pale by the SPLC. So have charities like James Kennedy’s Coral Ridge Ministries, the Federation for American Immigration Reform, the Center for Immigration Studies, the World Congress of Families, the National Organization for Marriage, Liberty Counsel, and hundreds of others. It is entirely fair to disagree with any of these charities or individuals—but utterly unfair to insist they are hate criminals. The largest category on the SPLC “haters” list is “anti-government groups.” (663 entries!) This dragnet catches the tea party and patriot organizations that are suspicious of centralized power, which last we checked was a long and honorable American tradition. What is not part of an honorable American tradition is the course of action prescribed by top SPLC leader Mark Potok: “Sometimes the press will describe us as monitoring hate crimes and so on…. I want to say plainly that our aim in life is to destroy these groups, to completely destroy them.” Taking people and groups with political views different from your own and lumping them with villains and gangsters is the mark of a bullying organization that aims to intimidate and even criminalize philosophical opponents. Paradoxically, the SPLC’s tactics lead directly to incendiary hate and violence— as was demonstrated by the Family Research Council shooting, and again in March when Charles Murray attempted a presentation at Middlebury College about his bestselling book Coming Apart. Incited by the SPLC’s slanderous branding of Murray (who married an Asian woman and has two half-Asian daughters) as a “White Nationalist,” protesters blocked him from speaking in a public hall, pulled fire alarms in the building, then attacked the TV studio where he was being interviewed by a professor. He and the professor retreated under
the protection of security guards, but thugs in masks repeatedly tried to knock Murray down, and pulled the professor’s hair while shoving her from another direction, sending her to the hospital for neck injuries. When Murray reached a car, the protesters climbed on top of it, rocked it, pounded on windows, and uprooted a stop sign to block the road. After Murray and his academic hosts finally escaped to a nearby inn, the protesters descended on it, forcing them to retreat again. Who, really, are the violent haters? Why do so many reporters cite the SPLC blacklist as if it were some kind of neutral Consumer Reports guide to what’s intolerable in cultural advocacy? Why do some donors panic when an SPLC blackball is lobbed against them, as the Los Angeles Times attempted in January? And why is a group that foments such reactions taken seriously? The SPLC was founded as a civil-rights law firm in Montgomery, Alabama, in 1971, and scored some notable victories against the KKK in its early years. But in 1986, when the group broadened its mission to attack a wide range of right-wing organizations, the entire legal staff except founder Morris Dees resigned. Princeton professor Robert George, who remembers the group’s early work but has tussled with it in recent years, calls it “a once noble organization that has fallen into the ignoble role of being an enforcer of ideological orthodoxies.” There are two chief reasons the SPLC lives on in its current irresponsible form: 1) Its efforts to demonize political opponents make for useful drama if you’re a journalist looking for a social-justice story. 2) Raising the alarm about dangerous bigots on the loose is a potent way to raise money from concerned progressives.
Could Art Survive Without the NEA? It depends on who you ask. But, for instance, only
of symphony funds come from local, state, or federal government. The story is similar for many other arts institutions—which, as a whole, get 45 percent of their budgets from donors, approximately that much more from ticket sales, and the single-digit remainder from government funds. (The Almanac of American Philanthropy) SPRING 2017
Though it styles itself as a public-interest law firm, the Southern Poverty Law Center does shockingly little litigation, and only small amounts of that on behalf of any aggrieved individuals. Its two largest expenses are propaganda operations: creating its annual lists of “haters” and “extremists,” and running a big effort that pushes “tolerance education” through more than 400,000 public-school teachers. And the single biggest effort undertaken by the SPLC? Fundraising. On the organization’s 2015 IRS 990 form it declared $10 million of direct fundraising expenses, far more than it has ever spent on legal services. The SPLC is a cash-collecting machine. In 2015 it vacuumed up $50 million in contributions and foundation grants, a tidy addition to its $334 million holdings of cash and securities and its headquarters worth $34 million. “They’ve never spent more than 31 percent of the money they were bringing in on programs, and sometimes they spent as little as 18 percent. Most nonprofits spend about 75 percent on programs,” noted Jim Tharpe, managing editor of the SPLC’s hometown newspaper, the Montgomery Advertiser, in a talk at Harvard’s Nieman Foundation for Journalism. Other reporters who have wised up to the SPLC hustle have noted in exposés how ironic it is that a group proclaiming itself a civil-rights organization has rarely used black attorneys or included any significant number of African Americans on its staff or board. From the French Revolution to Joseph M cCarthy, partisans have over and over used namecalling to sully opponents, end debate, and block necessary cultural reforms. It’s often effective—as their heirs at the SPLC know. There is an American habit, though, of disdain for scaremongering, personal vilification, and attempts to censor discussion. We hope donors will think twice the next time some charity they are supporting or considering gets the side-eye from the Southern Poverty Law Center. —Karl Zinsmeister
The documentary The White Helmets profiles emergency firstresponders in the Syrian civil war.
The Reality of Foreign Aid
giving to relatives by immigrants
(Index of Global Philanthropy and Remittances, 2014 data) 6
The Truth on Foreign Aid People who observe international economics have known for a long time that the official aid sent to low-income countries by the U.S. government is but one flow of funds among many that Americans send overseas to help poor people. But no one knew what the true money trail looked like. That changed in 2006, when Carol Adelman and Jeremiah Norris of the Hudson Institute published the first Index of Global Philanthropy. Building on work Adelman had begun with USAID director Andrew Natsios, the Index team commenced some heroically inventive efforts to measure the many non-governmental sources of assistance to people in the developing world: millions of small contributions to groups like Catholic Relief S ervices, World Vision, Save the Children, and S amaritan’s Purse; grants from large foundations like Gates and Rockefeller; myriad gifts by churches for mission work; vast volunteer efforts; corporate donations; job-creating investments; and the money sent to poor communities back home by immigrants to the U.S. It turned out that these often-inconspicuous little trickles of assistance cumulate into mighty rivers of help totaling more than what the U.S. government gives away officially each year as development aid— much more. The ninth edition of the Hudson Institute’s Index of Global Philanthropy and Remittances, as it is now known, was just published in February. And it showed that in the latest year for which data are available (2014), official U.S. government aid to poor countries totaled $33.1 billion. That’s a lot of money. But private philanthropy to those same poor regions came to $43.9 billion! And a separate kind of very personal philanthropy that the Index calls
gettyimages / AMEER ALHALBI / Stringer
gettyimages / AMEER ALHALBI / Stringer
“remittances”—the cash that U.S. immigrants donate to needy family members in their countries of origin— came to $108.7 billion in 2014. One final funding strand measured by the Index tracks investments that U.S. companies and investors pour into developing countries to start factories and build businesses. Obviously they do that hoping to make money in the long run, but the jobs they create, the technology and modern management they introduce, and the services they provide may do even more than outright gifts to raise the standard of living of the overseas poor. And in 2014, these private U.S. capital flows to poor countries totaled $179.3 billion. So: anyone who uses the $33 billion of official U.S. government aid in 2014 as the measure of our nation’s support for struggling people abroad is badly mistaken. Our federal aid was only 9 percent of our full economic effort toward developing countries. The other 91 percent was some variety of philanthropy or private investment. Having established itself as an indispensable resource, the Index of Global Philanthropy and Remittances is now being institutionalized in an academic setting. With funding from the Gates Foundation and other donors, the Index will be published in the future from Indiana University’s Lilly Family School of Philanthropy, which also puts out the annual Giving USA report, the definitive measure of all domestic philanthropy. Anyone concerned with global poverty will appreciate the vital contribution of the Hudson Institute and Carol Adelman in incubating this research, and thank the Lilly School and its donors for extending this valuable tool into the future.
Humanitarianism Wins an Oscar This year, the Academy Awards gave a boost to a timely humanitarian cause: emergency first responders who save lives amidst the Syrian civil war. The Motion Picture Academy gave its award for best short documentary to the film The White Helmets, a 40-minute Netflix production that follows unarmed members of Syrian Civil Defense, who risk their lives in rebel-held regions to help anyone in need. Filmmaker Orlando von Einsiedel stitched together grainy videos shot by 21-year-old White Helmet volunteer Khaled Khatib to create a heart-wrenching narrative of suffering, bravery, and hope. Viewers rush into smoke and rubble with the White Helmets as they respond to cries for help in the wake of bombings. They watch frantic survivors trying to find loved ones. They listen for signs of life inside collapsed buildings. They experience the agony
of finding corpses under blasted concrete and rebar. They watch the White Helmets cope with the loss of their own family members and colleagues. Fully 150 White Helmets have been killed in the line of duty. The White Helmets take inspiration from the Koranic verse, “To save a life is to save all of humanity.” When they pull a crying “miracle baby” out of a bombed building, and later visit him as a healthy toddler, they show the value of courage and action even in the worst conditions. The volunteers have saved thousands of people and delivered public services to millions more. As the Syrian civil war stretches on, many charitable givers in the U.S. have connected with the White Helmets to help innocent victims of the conflict. The group has recently been nominated for the Nobel Peace Prize. —Susan Billington Harper
PhilAphorisms The dual philanthropy aphorisms below present different sides of the special themes explored in this issue—privacy and naming—and come from an impeccable source…
When you give to the needy do not announce it with trumpets…to be honored by others…. Your Father, who sees what is done in secret, will reward you. — JESUS
Let your light so shine before men that they may see your good works and glorify your Father in h eaven. — JESUS SPRING 2017
Golden Arches, Red Kettles, and Gold Coins Joan Kroc, the widow of McDonald’s founder Ray Kroc (both are profiled on page 55), was often a secret donor. She was a direct giver operating without staff or foundation and, as her biographer explains, “anonymity was a way to protect herself from the deluge of formal requests.” In 1972 Kroc gave $50,000 to a South Dakota town experiencing devastating floods, asking that her giving be kept anonymous. In 1997 she gave $15 million to the North Dakota communities of Grand Forks and East Grand Forks following floods, again requesting anonymity. Two of her most notable charitable gifts, $225 million to National Public Radio and $1.6 billion to the Salvation Army, came after her death, when publicity was no longer something she needed to be concerned about. Though Kroc’s posthumous gift was public, the Salvation Army is no stranger to anonymous gifts. Interestingly, lots of people choose to plop solid gold coins into the organization’s iconic red collection kettles. (A one-ounce gold coin is currently worth about $1,300.) More than 400 gold coins have been dropped into a Salvation Army pot over the past 25 years. —Sean Parnell
Anonymous donors are dropping gold coins in red kettles.
A small band of volunteers are saving bluegrass radio in D.C.
Ticket to Ride When hundreds of thousands of visitors swarmed Washington, D.C., the weekend of the Presidential inauguration, the city’s underground transit system recorded more than one million trips via Metro. As the tourists went home, thousands of unused dollars on Metro cards would have gone to waste if not for two local nonprofits, which collected the leftover fares for a good cause. After Miriam’s Kitchen, a D.C. homeless mission, asked for donations on Facebook, Metro cards flooded in from as far as Hawaii, California, Montana, Oregon, and Texas. A similar appeal from Martha’s Table, a D.C. charity that provides emergency support and education, yielded close to 10,000 cards with money left on them. Both charities can now provide their guests with transportation to job interviews, work, or doctor’s appointments. —Madeline Fry 8
Getting Bluegrass in the Black In Florida, 79-year-old Dick Spottswood rummages through old 78s, LPs, and very new recordings, collecting tunes for his show on “Bluegrass Country”—the popular program that showcases rural American stringband music. He digitizes his selections, burns them to a CD, and mails it to the Washington, D.C., station that airs this distinctively American music in large blocks. Started in 1967, Bluegrass Country was originally a collection of individual shows on WAMU, one of D.C.’s public-radio stations. Interest mushroomed during the folk-music revival, and then digital broadcasting allowed the station to create a separate 24-hour channel that was all bluegrass, all the time. But when WAMU decided to shift its focus to news programming this year, the station was set to close down Bluegrass Country, in the midst of its 50th year. W hen Jeff Ludin got wind of this, he set out to save the programming. After catching the bluegrass bug while working for WAMU in the 1970s, he had started putting together high-quality recordings of Saturday-night concerts staged at the Lucketts, Virginia, schoolhouse, passing them on to Bluegrass Country for wide public airing. As he began scheming last year for ways to keep the music flowing, he soon found lots of allies. He and others created the Bluegrass Country Foundation and developed a new broadcasting model to control costs: modernizing the broadcast facilities to cheaper automated technology, transitioning from an expensive downtown office to more remote production, and engaging volunteers to raise funds and rally listeners. All foundation participants, including Ludin, would be volunteers. This could allow the station to stay on the air with a reduced $350,000 budget. WAMU took the deal, agreeing to have the Bluegrass Country Foundation become the content provider for Bluegrass Country. The foundation will operate all aspects of the station. WAMU will not provide any financial resources, but will provide the government-required frequency license (which would be nearly impossible to replace in D.C.) and temporary occupancy of a production studio. And so at midnight on February 6, there were new hands behind the fast picking and strumming of Bluegrass Country. The new automation technology is working well. The three founders of Rounder Records, the acclaimed Bluegrass label, have even donated to the foundation for fundraising purposes some unreleased music from the 1950s and 1960s. With just a website and a four-person board, the foundation has already raised $150,000. Ludin is hopeful that the new governing structure, lean operations, and creative fundraising will keep bluegrass rhythms and harmonies floating across Washington’s airwaves for another generation to come.
The Salvation Army; Jeff Ludin / Bluegrass Country Foundation
C Sw ha e ri et ty
The Salvation Army; Jeff Ludin / Bluegrass Country Foundation
Making Americans Immigration is back in the news. What exactly our politicians will do about it is yet to unfold. But one thing is clear: charitable groups will carry out much of the real work of helping new arrivals succeed in the U.S. It’s always been that way in this country. At Ellis Island, where more than a third of us had an ancestor enter America for the first time, charitable-aid groups had vital roles in receiving and settling immigrants in hundreds of ways: translating, providing immediate food and clothing, locating relatives, providing religious comfort, helping with paperwork and legal procedures, giving safe temporary housing to unaccompanied women and children, lending money for required fees and railroad tickets to inland destinations, finding jobs for men and women who stayed in the area, and more. These charities included groups like the Traveler’s Aid Society, Italian Welfare League, the Hebrew Immigrant Aid Society, the YMCA and YWCA, the Women’s
Home Missionary Society, the Irish Immigrant Society, the Salvation Army, the Lutheran Immigrant Society, and the Red Cross. They comforted, bolstered, and propelled toward success literally tens of millions of individuals. During the decades of peak immigration to the U.S., a so-called “settlement house” movement grew up, funded by donors and staffed by volunteers, to help immigrants Americanize and prosper. Lots of practical assistance was available at these centers, from language classes to job services to health care. These charitable operations also provided important mentoring and friendships, linking immigrants in need of guidance and kindness with volunteers who stepped up in large numbers to aid the assimilation of new arrivals. Individuals, businessmen, and successful earlier immigrants donated money as well as time. And charities found other creative ways to raise funds for this work. Lizzie Kander was a Milwaukee resident who was alarmed at the home conditions of Russian immigrant families in her city, so she started a charitable initiative teaching them cleanliness, child education, good nutrition, household skills, and economically useful trades, with funds donated by Milwaukee businessmen. When additional money was needed, Kander compiled a 174-page cookbookplus-housekeeping-guide so it could be sold as a fundraiser. The board of directors wouldn’t pay the $18 needed to print the book, so she financed production herself by selling ads. Her Settlement Cook Book eventually sold two million copies, with new editions continuing to be churned out up into the 1980s. The revenue stream from this SPRING 2017 2016
quirky effort paid for the mainstreaming of immigrants in the upper Midwest for 75 years. Today, charities—particularly religious groups—continue to be the primary settlers of many immigrants to the U.S. For instance, refugees, most of whom were violently uprooted from their homes, tend to be especially stressed when they arrive in the U.S. Church groups do most of the heavy lifting to set refugees on their feet. Religious volunteers typically meet the displaced families at the airport, locate apartments for them, furnish the residences and fill their refrigerators and pantries, help locate jobs for the breadwinners, then follow up for many months with things like transportation to doctors, school assistance, driving lessons and provision of used cars, family counseling, and more. There are currently over 40 million foreign-born individuals in America, and there will always be fresh arrivals every year. No matter how our government modulates immigrant flows, the state will never be very good at the things that really matter in helping new residents become settled, successful, and happy in America. For that we will always rely on philanthropic men and women motivated by patriotism, religious faith, and kindness to help fellow human beings who are a long way from familiar life, as they build new homes where they can be proud of themselves, and make their neighbors proud as well. (For more stories like this, subscribe to the Sweet Charity podcast at SweetCharityPodcast.org) 9
nonprofit spotlight Alaska Native Science & Engineering Program
In the rugged terrain of Alaska, high-quality science and math education is hard to come by. But a top-notch program to boost Native Alaskans into STEM fields combines hands-on experience with rigorous academics.
Alaska. By 1998, he had 12 students. The program expanded with donations from the Rasmuson, Alfred Sloan, and Oak foundations, the National Science Foundation, and corporations like BP, C onoco Phillips, ExxonMobil, Udelhoven, and Alaska Airlines. Rasmuson has been a key supporter, providing more than $7 million over the years for facilities, an endowed chair, and more. Diane Kaplan, president of the foundation, says, “Our mission is to enhance the quality of life for everybody in Alaska. ANSEP plays a crucial role in that, by providing skilled professionals who support our state’s economy.” Success starts with the Middle School Academy. For two weeks, students get hands-on experience building their own computers and dissecting salmon, among other activities. They also practice soft skills that pay off across their education. “I learned to get on my own case and do my homework and study for tests,” says Tvetene Carlson, now 19, whose mom encouraged his interest in the program when he was 13. “She always told me that education is the most important thing,” he says. “It’s how you elevate yourself, and become an adult.” The academy now also runs during the school year in 12 Alaska school districts. A PHILANTHROPY
summer program for eighth-to-eleventhgraders offers college-credit classes taught by University of Alaska faculty. Fully 95 percent of students each summer advance at least one level in math or science. ANSEP’s latest offering is a partnership with a high school in Palmer, Alaska, where university faculty teach 30 ANSEP students who plan to graduate a year early with a year or more of college credits. A summer program for high-school seniors propels 95 percent of them through a college math course and a paid engineering or science internship. When they complete that, they receive a $5,000 scholarship toward any STEM degree. Once they reach college, peer and professional mentoring, research projects, summer internships, study groups, and social activities help kids stay enrolled. At weekly ANSEP meetings, STEM professionals talk about their work, and students network and share their own experiences. “Expecting the education system to fix itself isn’t going to happen, because of massive bureaucracy,” says Schroeder. “So you can pull drowning children from the river. Or you can do what ANSEP is doing—prevent them from being thrown in to begin with.” —Claire Sykes
For many Native American students, college seems as far off as the moon. But as Buzz Aldrin said in an appearance at the Alaska Native Science & Engineering Program, “Once you set your mind to get something done, seemingly anything is possible.” ANSEP has been boosting students to university and beyond since 1995, with a plan that begins in middle school and extends into career placement after graduation. This series of intensive academic supports centered at the University of Alaska Anchorage inspires students to explore science, technology, engineering, and mathematics. As of 2016, roughly 2,000 students have taken part in the program, which has over 100 partners in the form of philanthropic organizations, corporations, educational institutions, and government agencies. It helps Natives prepare for careers within the oil and gas industry, biology, conservation, and other technical fields. The Urban Institute has categorized ANSEP as one of the most successful STEM programs in the country, propelling 85 percent of graduates to STEM careers. Alaska’s economy relies heavily on technical knowledge. Yet only 6 percent of Alaska Natives work in a technical field, though they make up 15 percent of the state’s population. In this rugged state, turnover of school teachers is high, and high-level science and math education is difficult to come by. In 1993, engineering professor Herb Schroeder noticed the absence of Natives in his field and worried about the lack of educational opportunity it signaled. Two years later, with funding from Alyeska P ipeline Service Company, he launched ANSEP as a scholarship program at the University of
Salzburg Global Seminar
After finishing his education with student debt from multiple schools, Paul Haaga practiced law in Washington, D.C., worked for a bit at the Securities and Exchange Commission, then entered finance at the Capital Research and Management Company in Los Angeles, one of the oldest and most respected investment firms in the U.S. In 2012, Haaga retired as chairman of the board. Today Capital Group manages assets of around $1.5 trillion. But don’t let his retirement fool you. Haaga is a very active supporter and adviser of prominent charities. He is a trustee of the Huntington Library Museum and Gardens, the Los Angeles County Museum of Natural History, Princeton University, Penn Law School, Georgetown Preparatory School, the Hoover Institution, the Ralph M. Parsons Foundation, and more. Since 2011, the active Republican has been a board member of NPR, and he served as interim president in 2013 and 2014. In a wide-ranging interview, we asked Haaga about ideological diversity at NPR, what makes a good board member, and his namesake dinosaur. We even chatted about his old college friend Mitch Daniels and fellow high-school alum Neil Gorsuch. Philanthropy: How did you end up on the board at NPR? Haaga: When I came back to D.C. to work, my favorite show of any kind was bluegrass music on WAMU on Saturday and Sunday mornings. Then I would hear the newscast and say, “These are pretty good.” I came to love NPR. When they fired Juan Williams, they realized that zero of their 17 board members were Republicans. People said, “Help! We’ve got to find a Republican.” My wife Heather and I had just given our local station a gift for their capital campaign and I’m pretty open about my Republicanness, so they contacted me and I was delighted to accept.
Paul Haaga grew up delivering newspapers, and attended schools on financial aid. But as his wealth grew so did his giving, and today he is a generous mentor, board member, and donor to numerous causes.
Haaga: I don’t think there’s ever been a conscious effort at NPR to favor prospective board members who are Democrats. If the board got lopsided it likely had a lot more to do with drift, the same dynamic Philanthropy: If you were brought on for that makes the investment industry too ideological diversity, do you think it worked? male. You get comfortable with people, SPRING 2017
and you fail to ask, “Am I comfortable only because that person agrees with me?” Many NPR board members are D emocrats, but I’ve never been told that I’m on the wrong side of history when I’m here. I think my views are very well-respected. 11
Philanthropy: I tried to count how many CEOs preceded you at NPR. It seemed like maybe seven in seven years. Haaga: Way too many. Philanthropy: So what were your goals when you were interim president? Haaga: On the board I had been the initiator of what we call the balanced budget amendment. It says that we are never going to approve a budget that doesn’t include realistic income projections and ultimately result in a balance. We made that a formal commitment. We’ve had balanced budgets the last three years now, so it seems to be working. I focused on broader leadership goals like helping people talk to each other, putting the right people in the right positions, getting the stations and NPR to collaborate in fundraising, encouraging an increase in the amount of locally sourced content on the national news programs, and helping with our fundraising and sponsorship efforts. When our previous CEO left, one of the first questions I was asked at the staff
them in a position to take advantage of, rather than get crushed by, all the changes going on in the media world, especially from technology. They needed someone who could see the digital future, and my successor Jarl Mohn is the perfect person for that. And I’m not a really a journalist—although I was the editor-in-chief of the G eorgetown Prep student newspaper 50 years ago! Philanthropy: Speaking of Georgetown Prep, what do you think of fellow alumnus and Supreme Court nominee Neil Gorsuch? Haaga: He’s 20 years after me, so I don’t know him personally, but he’s highly regarded in alumni circles. I think he’d be wonderful. He’s a very good example of the Jesuit high school motto, “Men for Others.” He’s certainly led a career focused on helping others. He’s a true public servant. Philanthropy: You are a generous donor to the American Enterprise Institute and the Hoover Institution, as are many of our
Effective board members realize there’s a right amount of studying, a right amount of analyzing. It’s not zero, but it’s also not infinite. meeting was, “Are we ungovernable?” I really wanted to show the team at NPR that they are not only governable but that it is an honor and a privilege for any CEO to be able to work with them. Philanthropy: Did you actually work for a dollar a year? Haaga: They gave me a dollar, but I gave them a quarter back because I only lasted nine months. That was my only W-2 income that year. I put it on my tax form, and got the dollar framed. Philanthropy: You always knew it was just an interim patch. Haaga: Yes. I could organize a meeting, fundraise, balance budgets, hire good people. But I couldn’t really lead change to put 12
readers. What could someone with that philosophical bent learn from NPR? Haaga: I’ve learned from my experiences on the NPR board the same things I learned f rom serving on the AEI National Council and Hoover board, which is how important it is that the public sphere—policymakers, and voters, and citizens—have access to in-depth analysis of really important issues, and a civil public debate. Hoover and AEI and NPR all avoid bias because they do things in-depth. The greatest antidote to bias on either side is depth of analysis, because you realize that these issues are not simple enough to fit on a protest sign or a bumper sticker. None of those three organizations walks out on speakers or shouts others down, because they are listeners and thinkers. PHILANTHROPY
Philanthropy: I tried to make a list of the boards you’ve been involved with, and it was very long. What drives you to join a board? Haaga: In the earlier part of my career there were many invitations. Every institution in L.A. wanted somebody from Capital Group on its board. Philanthropy was part of our culture, started by our founder and our founder’s son, who was running it when I was first there. I’ve said no many times, but it’s always been because of lack of capacity. I won’t join a board and say, “Yes, you can use my name, but I’m not coming to meetings.” I take boards seriously. My eyes can be bigger than my stomach, but when I’m on multiple boards my strategy is to be a leader on only a few. Take the L.A. Natural History Museum. I’ve been on its board 20 years, but in the beginning, when I was really working hard, and chairing the board of our kids’ school, I told them “I’m a back-bencher. If you can accept me on those terms, I’ll come to the meetings, stay around, and be a leader later. But I’m not going to take leadership roles now.” I was eventually the board chair for seven years. Philanthropy: What do you think makes for an excellent board member? What mistakes have you seen board members make that our readers should avoid? Haaga: One of the mistakes boards make when looking for other board members is to not realize and acknowledge that being a board member is different from other, more singular endeavors in which people might be successful. Board members have to be collegial, they have to process a great deal of information, they have to be sure that all the right constituencies have been engaged, and then they have to make a decision and oversee its implementation. I’ve been on boards with very bright, successful people who always want one more study or who don’t want to make a decision where there’s any risk. Effective board members realize that there’s a right amount of studying, there’s a right amount of analyzing. It’s not zero, but it’s also not infinite. You study things, then take some calculated risks or you’ll never change, never improve.
Courtesy of the Los Angeles County Museum of Natural History
When Haaga joined the board of the Los Angeles County Museum of Natural History, he said he would be a “backbencher” for a couple years before taking more
Courtesy of the Los Angeles County Museum of Natural History
responsibility. Then he made good. Here he contemplates one of the fruits of his museum support, his namesake dinosaur Fruitadens Haagarorum.
New start-up nonprofits can take people who’ve never been on boards before, who have passion and enthusiasm for the task at hand, even if they lack vision and governance experience and financial or other expertise. Get your training wheels and learn to be a board member at someplace small and local. But for major institutional boards, don’t even propose people who haven’t been on other boards before, where you can check how they served. Because it’s different from almost any other kind of work. If you do bring on a first-timer, make sure he or she is the exception, or the entire board might be adversely impacted. Board failures generally take one of two forms.
They either back too far off and just have happy talk. Or they micromanage the staff. This happens because the members don’t know how to tease out and resolve the truly salient issues. They’re either too removed or too involved; they’re not involved at the right level, at a helpful level. I think perspective and experience really helps. I weigh that higher than even things like passion for the mission.
o rganization. An effective board does this by leading, supporting, helping the institution see and prepare for the future, and showing confidence in the staff and administration.
Philanthropy: Let’s talk about your time at Princeton. I hear you have a mutual non-aggression pact with Mitch Daniels, to not spill secrets about your under graduate years. Haaga: He’s a great guy. Could have been Philanthropy: What are the signs of an President. He was a real friend in college effective board? and ever since. Haaga: It’s important for boards to give and raise money and to build things, but Philanthropy: Our readers are often a board is most effective when it presides interested in giving to their alma mater but over a change in the entire culture of the there’s a hesitancy about how the money SPRING 2017
interview will be used. How have you navigated your gifts to Princeton and ensured that the money is used for its intended purpose? Haaga: Money’s fungible. If a department gets a gift, often they’ll get less from the general fund. When Heather and I support things, we mostly do it with unrestricted gifts. But there are occasionally things that come up that wouldn’t happen without a restricted gift. When my friends say, “Princeton’s rich,” I say, “No, it’s big. There’s a lot of stuff going on.” And there are a lot of new things that could happen, but only with an incremental financial gift. Our three biggest incremental gifts have been to the art museum, the rugby teams, and the internship program. In each of those areas—art, rugby, and internships— good things happen that literally wouldn’t happen without us. The latter is called the Princeton Internships in Civic Service. A student gets $5,000 through the university to work for the summer in a nonprofit. The charity has a free person. And the student also gets an alumni sponsor, who often becomes a friend and ends up giving continuing career advice. Heather and I sponsor eight or ten of them every year, and every time I tell somebody about it they say, “My nonprofit would love that,” and I say, “Okay, I’ll do another one.” I love that for every $5,000 we give, one more student and one more nonprofit have a fabulous experience. I use that as an answer when people say “Oh, why throw money into the yawning $2 billion a year maw of Princeton?” I hope I’ll be remembered for mentoring; that’s really important to me. Sharing my experiences and wisdom with young people. Being involved to help organizations work better. But back to the original question. The unrestricted giving we do assumes the university has its own well-founded priorities. Even when we do restricted giving, it is usually for things the university has on its priority list but can’t do without our money. There’s always a panoply of things that you can support. Rarely do we substitute our ideas for their ideas, because then there’s no buy-in, and they’re not going to do it very well if it’s not something they want to do. 14
Philanthropy: I noticed that Princeton adopted in part the Chicago statement in support of free speech on campuses. Haaga: I was very happy that the Princeton faculty led the way in voting to adopt the statement and (alas) remains one of the only professional bodies to do so. Philanthropy: How can donors who care about free speech and intellectual independence pull colleges away from restrictive speech codes, safe spaces, and other efforts to prevent students from encountering ideas they may not like? Haaga: At Princeton, Professor Robert George was the person who got the faculty to adopt the Chicago principles. He runs something called the Madison Project specifically to bring in speakers with conservative and religious ideas that are rarely voiced on campuses these days. So, one answer is to affirmatively support a campus organization like that. Campuses need constructive people who don’t think in the conventional liberal ways that are now campus orthodoxy and who are smart and articulate—and brave—enough to come on campus and engage with people who can sometimes be unruly. Sadly, protesters at Middlebury recently shouted down Charles Murray of AEI and seriously injured the female professor who was accompanying him. They would have done better to listen to him, since Coming Apart was one of the best books I’ve ever read.
One of the reasons I’m a R epublican is that I grew up in the Johnson era, and I saw the havoc that the welfare state wrought. It’s not that I want to avoid paying more taxes— because we actually give away more than we pay in taxes—but because I saw the devastating effect that some well-meaning welfare programs had on breaking up families and institutionalizing the cycle of poverty. Entry-level jobs are not dead ends. I delivered newspapers. I worked as a waiter. None of those things harmed me and they all helped me. Coastal-elite liberals sneering at manual work and service jobs is not helpful. Mobility requires that you start somewhere. How will you know you can be a manager at McDonald’s if you’re not a hamburger- flipper at McDonald’s first? How will you know the importance of getting up, and being on time, and being polite, and helping people figure out things if you don’t have to do that when you are young?
Philanthropy: I read that you’ve coached as many as 30 youth sports teams, and run 21 marathons. How did you have time to do all that? Haaga: I ran one or two marathons a year. I haven’t done one in quite a while; my knees retired long before I did. The coaching piece, I just made time. They were little kids’ teams that practiced one or two days a week. I had to run out the door at 4:00 to make a 4:30 practice. That forced me to delegate more than came naturally to Philanthropy: What are you reading now? me at that point in my life. And that was a Haaga: Right now I’m loving J. D. good thing. I was in my 40s and it was time Vance’s Hillbilly Elegy. It’s intriguing how to delegate more. I was often hovering too in his community, people thought that you much over people who reported to me. got ahead either by being born off-the-charts brilliant, or born lucky—the silver spoon, Philanthropy: What do you think stuparents who paved the way. They didn’t dents can gain from participating in sports relate hard work to dramatic improvements that they can’t get in the classroom? in life. They realized you could go to work, Haaga: Several things. One is a sense of you could get some money, you could pay the teamwork and collaboration that they can’t bills. But they didn’t think you could become get to the same extent in a classroom. The enormously successful from hard work alone. sense of burying your ego and looking at Most of it was because they hadn’t observed what’s good for the team, not just what’s that happening in their communities. They good for you. Crew is a great sport for that; hadn’t seen people making more than modest rugby is too. There’s not a lot of room for changes in their circumstances through sheer stars. There’s not a lot of individual stats, dint of hard work. particularly in crew. It really is a team thing. PHILANTHROPY
The second positive is doing something different from how you’re spending the rest of your time. I think it’s important that there be a variety of things going on in your life because you learn different things from them. Our own children went to a school that was very competitive, called Polytechnic in Pasadena. I remember questioning a graduate: “These kids are all bright, but half of them are going to be below average in their class.” And she said, “There’s so much going on at Poly that no one’s in the bottom half all day.” And I have found that the converse—no one is going to be in the top half all day—is equally important. The best mathematician is not likely to be on top at baseball. The best baseball player gets some humility when he tries to act in the spring musical. Different people are going to be good at different things. You have to challenge yourself and round out your skills. Athletics is one way to do that. It’s also good to get physically tired. The aerobic aspect of sports is a good thing. If your main activity is singing or acting or debating or protesting, make sure you’re also working out a lot. Philanthropy: There’s a big education theme in your giving. Why? Haaga: I had financial aid in high school, college, law school, and business school, so that focused me on the idea of giving back. I was one of only three students in my 66-person high-school class who was on financial aid. I couldn’t have gone there without it. The same for Princeton, the same for law and business school. Princeton is now accessible to anybody. If you’re a poor person, it can actually be cheaper to go to Princeton than to your local community college. It’s more challenging to educate some of today’s students, because they need more than just the classes—expanded counseling, internship programs, mentoring.
istory it got named it after me: F H ruitadens Haagarorum. It’s three pounds, has feathers, looks like a chicken. Because it has feathers, it’s an important link between the dinosaurs and the birds. It’s the smallest dinosaur in North America. On a shelf at my home I’ve got a full life-sized model of a dinosaur, yet it’s not so big that it frightens our grandchildren. You couldn’t do that with a triceratops. Philanthropy: What do you think about donors putting their names on things? Haaga: Some people have asked us why we don’t give anonymously. The answer is that it doesn’t inspire or challenge other people. We like the idea of giving something, like the exercise room at our local Y, and then having people see us driving around in ten-year-old cars and not living in the biggest house in the neighborhood. It causes people to think,
chunks of money. A lot of times, people use a foundation to smooth out income surges, but there was never a year when we needed a larger deduction than came from the gifts we wanted to make currently. So we never felt a need for a foundation. My income and assets went up gradually. There was no moment when I said, “Oh look, I’ve got more money than I need.” We started by giving small gifts. That’s why I always tell nonprofits to not forget small donors. Based on my own experience, you give big gifts later to the places you used to give the small gifts. So make sure you’re getting the small gifts from your supporters. Don’t wait until they’re wealthy and then go try to reintroduce yourself. Heather and I do all this together. When we were deciding to get married we talked about having children, what religion
Entry-level jobs are not dead ends. Mobility requires that you start somewhere. I delivered newspapers. I worked as a waiter. None of those things harmed me; they helped me. “Whoa, maybe I’m thinking of the wrong standard about how much one gives.” Naming things and being recognized does challenge other people. It gives them an idea of what’s normal, and maybe raises their sights about what they could possibly do; especially when they see somebody who they think of as a peer doing something that’s larger than what they were thinking of. I don’t think anything should be forever. When you’re repurposing a building, it’s time to change. You can put that into the gift agreement up front: this will be for a certain period of time.
Philanthropy: It appears that you and Heather give without a foundation apparatus. Was that a conscious decision? Philanthropy: I heard you have a name- Haaga: When we got married, we both had sake dinosaur. a negative net worth from student loans. Haaga: It was a new one they found, and Neither of us inherited anything. I had a through the L.A. Museum of N atural good income, but I didn’t have big uneven SPRING 2017
they should be, where are we going to live, big things like that. But neither of us ever thought we would be lucky enough to end up in a situation where we could make important decisions about which nonprofits to fund. While we each have some interests that are our own, happily we tend to agree most of the time on amounts and recipients, so that has never been a source of contention. Philanthropy: How have you taught philanthropy to your children? Haaga: We’d talk to them about what we were giving to and what it was doing. We wouldn’t crow about it. But we did explain why we disappeared so often in the evening to go to a board meeting, or to go do something for a nonprofit. They had a pretty good idea what we were doing and why we were doing it. I think it became natural. My children are both on nonprofit boards now and are both very generous with their own money. I think it caught on. P 15
IÃ±aki Vinaixa for Lincoln Center; istockphoto.com / Wavebreakmedia
The delicate dance behind some of today’s largest gifts
By Kate Harvey
Iñaki Vinaixa for Lincoln Center; istockphoto.com / Wavebreakmedia
How does a top-flight orchestra in one of America’s great cities find someone to pay for a new hall? Let me set the scene: A symphony fundraiser, a philanthropist, and a maestro are in a helicopter flying high above a wild-horse sanctuary outside of Mexico City. The symphony fundraiser makes the pitch. Stunning in her red dress, she conf idently brings up the new hall and the opportunity for a “lucrative synergy between our two brands.” The philanthropist’s expression doesn’t change. Coolly, he thinks out loud that the proposition is a practical one, one that will make his marketing team happy. The maestro senses an opening. He asks permission to use the sound system, then turns on a recording of “Musetta’s Waltz” from La Bohéme. Turning to the philanthropist, whose eyes have closed in auditory bliss and whose head is gently swaying with the aria, he says: “Now...you don’t buy bloody naming rights for some cross-promotional bulls***. You do it to let the music live.” His hardened facade cracked, the philanthropist puts his arm around the maestro like they’re old friends and, nodding, says, “I like it...I say we make this beautiful music together.” At least that’s how it happens on TV (“Mozart in the Jungle”). Kate Harvey is a writer and classical musician in Charlottesville, Virginia. SPRING 2017
The reality of naming agreements is more mysterious and sometimes messier than an airborne conversation that ends with everyone humming Puccini. Naming-rights contracts are complex business deals. They are crucial to the long-term success of nonprofits. They involve delicate psychological issues for donors. Big bucks are always on the line. These negotiations “can feel unphilanthropic,” says fundraising expert Doug White. “But that’s the nitty gritty of making a big named gift happen.”
Center the same generous $100 million that David Koch had put up. His pot will begin a badly needed modernization of the complex’s other main auditorium— its storied symphony hall. But Geffen wanted the new facility permanently named for himself (even though his gift will cover only about a sixth of the project’s total cost). And so the former Avery Fisher Hall, home of the New York Philharmonic, became David Geffen Hall. Forever, according to their reported agreement. The name change was not easy. When Avery Fisher, an inventor of high-end audio equipment, gave Lincoln Center $10.5 million in 1973 to construct the symphony hall (that’s $56 million today), it was named for him in perpetuity. That is not something the modest Fisher asked for. “When we suggested it,” stated Lincoln Center’s general manager at the time, “he told us that no one ever paid any attention to such things. I remember his asking, ‘Who’s Major Deegan?’” (for whom New York’s busy Major Deegan Expressway is named). Fisher’s heirs felt differently. As far back as 2002 they were threatening legal action if the Fisher name was taken down. In 2014, Lincoln Center was able
Carnegie Hall Archives
At the suggestion of David Koch, his Lincoln Center naming will expire after 50 years, leaving the institution free to seek another large naming gift.
To rename Avery Fisher Hall after donor David Geffen, administrators first had to pay $15 million to Fisher’s children.
gettyimages / Andrew Toth; Iñaki Vinaixa for Lincoln Center
Always and forever? To get a sense of the issues involved, let’s compare two recent high-profile cases. Both involved donations of $100 million. And each allowed a beloved part of New York City’s Lincoln Center campus to get a once-in-a-generation facelift. In 2008, David Koch gave his $100 million to the theater at Lincoln Center housing the New York City Ballet and New York City Opera. That was the largest single donation Lincoln Center had ever received, and it not only paid for the renovation but created an operating endowment for the building. Since then, it has been known as the David Koch Theater. What is perhaps most distinctive about Koch’s name contract is that it will expire 50 years after it was established. At that point, a new donor will have the opportunity to step in and make his or her own naming gift. If Koch’s heirs would like to match any new naming gift, they will have the right of first refusal. Otherwise, the name of the donor from half a century previous fades away. Interestingly, it was Koch’s decision to give the powerful naming tool back to Lincoln Center so it could be wielded in the next great enhancement of the musical mecca. When his gift was first announced, he opined to the New York Times that “a naming opportunity should be a defined length of time, to allow the institute to regenerate itself with another round of major fundraising.” He later said, “fundraising is pretty difficult if there is no place for a new donor to be recognized.” Healthy giving, Koch believes, involves thinking many years ahead, and if charitable institutions are to thrive, the perks of individual contributions should not last indefinitely. That is not the view of David Geffen. In 2015, the pop-music and movie impresario pledged to Lincoln
Carnegie Hall Archives
gettyimages / Andrew Toth; Iñaki Vinaixa for Lincoln Center
to get around its previous agreement by making a $15 million buyback to his children—who confirmed for this story that they feel positively about the final resolution (which will also include tributes to Fisher in the new lobby). Lincoln Center says it settled the Fisher family issue before approaching Geffen. Officials seem to have concluded that it would be difficult to procure a lead gift for their renovation without naming rights. And they appear to believe that the visibility of the Geffen renaming will inspire further giving sufficient to make their project successful. For “a total redevelopment of the hall…a great new naming gift is a catalytic development,” says Vin Cipolla, who is leading the fundraising for the symphony auditorium. Given, however, that this project will require at least $500 million to complete, permanently transferring naming rights to Geffen for a net of $85 million would seem to be a bit of a gamble. How fundraising will be affected for named features inside the hall remains to be seen.
a charitable work in perpetuity. Naming gifts are closely tied to notions oflegacy— efforts to make a difference, to create lasting improvements, to leave a mark that stretches beyond one’s limited time on earth. Reynold Levy, who was president of Lincoln Center until 2014 and knows David Geffen, says naming “is essentially a form of biography and expression of self.” What makes the idea of perpetuity so attractive to some givers, says Melissa Berman, CEO of Rockefeller Philanthropy Advisors, is simple: “That it will live on after they do. I think most people in New York know what the Frick Museum is but have no idea how Frick earned his money or what his business was.” This very human impulse to want your reputation to endure has real power and pull. A permanent name on a storied institution can be viewed as a kind of immortality. In many ways, a naming gift that The price of immortality An even bigger question is how today’s doesn’t expire is simpler for everyone. Can you imagine the name of Carnegie commitment to affix David Geffen’s name across the building in gold letters, Hall changing? At a certain point, a name becomes a landmark, a puzzle-piece forever, will influence fundraising a of a city. There is a value in preserving generation from now. Fundraisers historical fixtures. There is a value in always say having a big name attached remembering early donors who had the to a project helps them attract more vision to build up beloved institutions. donations. But if the terms only allow So David Geffen’s wish for a you to monetize the naming once, there deathless tribute in a city where he may be problems down the road. started out as the son of immigrants The buyback to the Fisher is easy to understand, and far from family raises the obvious question: unprecedented. But there is no ignoring Why establish another contract for the untidiness of a large buyback to naming in perpetuity when you’ve just a previous perpetually named donor, demonstrated that perpetuity can put immediately followed by another the recipient organization in a bind, and might not really mean perpetuity in perpetuity agreement. Is that the fundraiser’s equivalent of eating the the end? What happens when the hall next season’s seed corn? needs its next overhaul? Doug White wonders whether the managers thought through “kicking the can down the road Publicity’s perks Fordham law professor Linda Sugin and making a problem for the trustees of Lincoln Center 50 years from now?” has an idea for discouraging naming There are many reasons why a philan- contracts that tie the hands of nonprofits forever. Her proposal, which thropist would wish to be associated with SPRING 2017
A note from Andrew Carnegie upon the naming of the storied music hall in New York City.
she calls “competitive philanthropy,” would allow naming rights to expire, so successor philanthropists could strive to out-give the preceding donor. “We want to create a circumstance in which philanthropists define success as encouraging someone else to top your gift. How can I as a philanthropist do the most for an institution I love? By motivating other people to give big gifts too.” Sugin’s argument starts with the assumption that naming rights are extremely valuable—even more valuable than we currently recognize them to be. One of the few studies in this area found that major donations with naming rights attached exceeded $4 billion in 2007 alone. In the decade since that study was conducted, naming-rights deals on things like stadiums have soared (see nearby sidebar), and a more complete inventory conducted today would surely find that gifts linked to naming rights total tens of billions of dollars annually. When it was reported in 2016 that 19
Harvard Medical School is considering renaming itself in return for a major donation (as a dozen other medical schools have in recent years), one dean suggested that the likely trigger would be a billion-dollar donation. Names, says Sugin, are vital pieces of an organization’s ability to fundraise and stay afloat. “Naming rights are one of the few things that prominent charities can monetize. They are long term assets. They should be able to produce income over a long period of time.” A perpetuity contract can get in the way of this—just as the Avery Fisher agreement obstructed badly needed renovations at Lincoln Center for more than a decade. Perpetual contracts should therefore be discouraged, Sugin argues. If naming opportunities are time-limited, she suggests, efforts may emerge within 20
philanthropy to one-up previous givers, increasing total donation levels over time. Sugin says tax law needs to better reflect the realities of naming. “I think the law should signal that perpetuity is extraordinary. It’s not normal.” Under her proposal, charitable gifts without perpetual naming would continue to be fully tax-deductible. But in the small number of cases where there is a contract for permanent naming rights, she suggests capping the deductibility at 85 percent. The remaining 15 percent would be treated as a purchase of personal visibility and legacy. ( Just as the portion of a charity dinner ticket that covers your meal is categorized as a purchase of services, and cannot be deducted.) The Fisher family buyback and some other cases suggest a market basis for the choice of 15 percent. PHILANTHROPY
Revolving names Like David Koch, many donors already recognize how perpetual naming can pinch charities and are voluntarily stepping back. Sugin cites Herbert Allen, who announced in 2013 that he would give up the name of the Allen Room, a part of Jazz at Lincoln Center. When Allen donated $10 million in 2004 the naming was offered to him in perpetuity. He chose to surrender that honor in order to help Lincoln Center attract more funding by recycling those rights. Leonard Wilf told Philanthropy that a similar case has influenced his giving. He described how Caroline Amplatz pledged $50 million to build a new children’s hospital in Minneapolis named for her father. Then in 2014, just three years after the new facility opened, she allowed her family name to be removed from the institution so it could be rechristened to attract another important gift. The hospital used the
alamy / Roman Tiraspolsky; Robert Caplin
Naming can be a lightning rod. Some liberal theatergoers have complained about seeing David Koch’s name at Lincoln Center.
The risk is that altering the tax code in this way might discourage not only perpetuity but philanthropy in general. Both Doug White and Melissa Berman, who have made careers out of advising donors, worry that any reduced deductibility could dampen giving. “Taxes do play a factor, and are sometimes a deciding factor in larger gifts,” says White. Berman argues that “getting public recognition for your gift does not count as a personal benefit to you, even if it helps build your reputation. That can’t be measured.” That is the longstanding position of the IRS, which ruled in 1968 that even gifts with enforceable naming provisions can be fully deducted from one’s taxes, because being named as a benefactor has no “significant return benefits that have a monetary value.” Melissa Berman suggests the prudent course is to leave existing rules alone. “To change that principle of naming not having measurable value could cause chaos,” she argues.
alamy / Roman Tiraspolsky; Robert Caplin
newly available naming right to reap a $25 million donation. Wilf says he was so struck by this example that he now regularly thinks about how naming should be handled in his own giving in order to maximize benefits to the groups he supports. Leonard Lauder donated $131 million to the Whitney Museum of American Art in 2008, and five years later he gave his art collection valued at $1 billion to the Metropolitan Museum of Art. These large gifts could have carved his name in marble on both of those august institutions. But he declined, telling the New York Times, “I want both the Met and the Whitney to have a major piece of New York real estate that is unnamed, so if a donor comes along and says, ‘I would like to have it named after me,’ and writes a check, both museums will be better in the long run.” Generous and humble philanthropists will easily flip back and forth between visibility and invisibility to make life easier for charities. For instance, Jim Calaway, who made money in oil and gas and then took up local philanthropy in Colorado, agreed to have his name on several facilities he supported, like the athletic center at the Aspen Institute, and the cancer hospital in Glenwood Springs. “When someone’s name is on a building or a program, it influences others to join in,” he opines. But when Aspen launched an athletic expansion and another set of donors expressed interest in having their name on the new building, Calaway immediately agreed to remove his so that would be possible. Even donors inclined to resist surrendering naming rights can sometimes be won over through savvy accommodation. When the University of Houston announced in 2015 it was building a new basketball arena, conflict erupted between the university and the Hofheinz family—for whom the previous
Charitable gifts are not the only sector where there is some controversy over the value of naming rights. Corporate namings of professional sports stadiums have become a big business. Even in this competitive market, though, there is disagreement over how much goodwill is carried in a moniker. There was originally some reluctance to mix sports and corporate promotion too overtly. When John Taylor built a park in 1911 for his recently acquired baseball club, the Boston Red Sox, he declared that the stadium would be named after its neighborhood. Cynics, however, suggested Taylor may have had his eye on the promotional value to his other business interest: the Fenway Realty Company. Chicago’s Wrigley Field (1926) was technically named for the team owner, though that was also the name of the chewing gum that made his fortune. In 1953 the Commissioner of Baseball rejected as unseemly a proposal to rename Sportman’s Park in St. Louis “Budweiser Stadium.” It was instead renamed Busch Memorial Stadium, after a co-founder of Anheuser-Busch. (The company introduced Busch Beer the next year.) The first overt stadium naming deal was signed in 1973: Buffalo’s complex became Rich Stadium, after the Rich P roducts food company. Naming contracts proceeded only slowly through the 1990s. Such hesitation now seems as quaint as Fenway Park itself. Today, well over three quarters of major league baseball, football, hockey, and basketball teams play in branded facilities. Naming agreements generally run from 15 to 25 years. Both Citi Field in Queens (home of baseball’s Mets) and Barclays Center in Brooklyn (home of basketball’s Nets and hockey’s Islanders) operate under 20-year deals that generate upwards of $20 million annually for the teams. MetLife Insurance recently agreed to a 25-year deal expected to cost $17 million per year for rights at the new stadium shared by the NFL’s Giants SPRING 2017
and Jets. The Dallas Cowboys sold naming rights for their stadium in Arlington, Texas, to AT&T—reportedly for $19 million per year for 25 years. Changes to existing stadium names can be resented. Attempts to rebrand San Francisco’s venerable Candlestick Park as 3Com Field and then Monster Park were so loathed that city voters passed a referendum requiring the name to revert to Candlestick after the contract expired. The park was demolished, though, in 2014 after the 49ers moved to Levi’s Stadium in Santa Clara—a name that cost the jeans maker $220.3 million over 20 years, with an option to extend the deal for another five years for $75 million. Denver Broncos fans were so unhappy when the replacement for the beloved Mile High Stadium was named Invesco Field that the stadium authority was forced to compromise with the unwieldy “Invesco Field at Mile High.” Are these deals worth their costs? The increasingly large amounts paid by companies suggest they believe naming rights to be a valuable investment that strengthens a brand. Economists who have studied these deals, though, are dismissive of such claims. Michael Leeds, a professor of sports economics at Temple University, published a 2007 analysis of more than four dozen major league stadium namings between 1997 and 2003 and flatly concluded that “although some announcement-day effects are positive and significant, the cumulative effects never are.” Early public enthusiasm “quickly dissipates.” Other research has generally backed up his analysis. Corporate naming deals in pro sports show there can be lots of money in a name. How much true value exists is not so clear. —Justin Torres
to make this name change it would lose the $20 million promised by Weill, threatening its ability to fulfill its nonprofit mission. The judge ruled that the school’s argument “falls far short of showing that its name is holding the college back from being a shining success both in enrollment and in producing successful college graduates,” and blocked the shift, deferring to the terms of the founding gift. Joan Weill did not donate the $20 million. The alumni of Paul Smith’s College who had organized against altering their school’s moniker on the grounds that it would disrupt longstanding traditions and strike at the school’s special identity as a mountain educator were relieved. They preferred to protect one well-established name rather than re-brand a 78-yearold institution in return for improved scholarships and facilities, even with long-term financial stability possibly at risk. This case shows how an inartful handling of naming issues can get in the way of even the most productive gifts. The 2011 renaming of the Miami Art Museum also caused public contention. Real estate developer Jorge Perez donated $20 million in cash plus a Latin American art collection valued at $20 million to boost
Andrew Milne; Robin Hill
arena had been named after a 1969 gift of $1.5 million. Legal negotiations commenced. The solution: the Hofheinz name will be kept alive by attaching it to the section of street fronting the new arena, a bronze statue of the original donor will be erected near the arena, and his record of public service will be preserved in university archives. In turn, the family stood down so that naming rights for the new arena could be linked to a $20 million donation from restaurateur Tilman Fertitta. Fertitta’s gift plus other donations (some also linked to namings, as for the hardwood floor itself ) will cover most of the $60 million cost of construction. “We know our father would want the athletic program at the University of Houston to prosper. So we know he would support this move,” concluded Fred Hofheinz, son of the original arena donor. And Fertitta himself, who is chairman of the university’s board of regents, stated publicly in 2016 that if Houston found another donor willing to make a lead gift, he would happily transfer his contribution to some other part of the university and let the Fertitta Center become Someone Else’s Center. Sugin would love to see voluntary actions and negotiations of this sort spread throughout philanthropic practice and culture. She knows that her idea of changing tax law to put perpetual-name gifts in a special category would be difficult. So “I’m really hopeful that people like Herbert Allen are going to bring attention to this and make other people think, ‘Oh, yeah. Now that’s good philanthropy.’” Not without drama There’s no doubt that namings and renamings have the potential to cause strife and controversy. Another highly publicized case from 2015 mixed the strictures of perpetual naming with perceptions of vanity and the problems of “altering a landmark.” Joan Weill, wife of investment banker Sandy Weill, had been a long-time supporter of Paul Smith’s College in the Adirondack region of New York. Then she pledged $20 million, a large sum for the small rural institution, on the condition that its name be changed to Joan Weill-Paul Smith’s College. The school president and the board of trustees (on which she had previously served) agreed to this. But they quickly ran up against a prior naming promise. The college was established in 1937 by entrepreneur Phelps Smith to honor his father, and he stipulated in his will that it should be “forever known as Paul Smith’s College of Arts and Sciences.” The case went to the New York State Supreme Court. The college argued that without latitude
Andrew Milne; Robin Hill
At the Miami Art Museum, four board members resigned when the institution announced a perpetual naming after a gift from Jorge Perez.
the museum’s $220 million campaign to construct a new building. When the institution’s renaming for Perez (in perpetuity) was announced, four board members resigned their posts and some reneged on capital pledges, saying the decision would interfere with the ability to raise other, perhaps larger, gifts in the future. Other observers objected to permanently enshrining one individual who provided only a modest fraction of the total costs of the museum. In 2016, Perez announced an additional gift of $5 million worth of art and $10 million in cash. Invisible and visible Three quarters of a century ago, President Franklin Roosevelt gave a speech marking the opening of the National Gallery of Art. He thanked philanthropist Andrew Mellon, who created the gallery from nothing, with these words: “The giver of this building has matched the richness of his gift with the modesty of his spirit, stipulating that the gallery shall be known not by his name but by the nation’s. And those other collectors of paintings and of sculpture who have already joined…have felt the same desire to establish, not a memorial to
themselves, but a monument to the art they love and the country to which they belong.” American philanthropy is full of self-effacing donors. Jacob Schiff, one of the most generous men of the late 1800s, was known for crossing out his name whenever he saw a plan for recognizing one of his gifts publicly. The great giver Julius Rosenwald did not believe in donating anonymously, because he thought the visible support and credibility lent by a gift was often even more valuable to the receiving institution than the immediate cash. At the same time, he fought aggressively to keep his name from being affixed prominently to buildings and projects—not only out of genuine humility, but for practical reasons. Rosenwald believed that a project is more likely to succeed when multiple supporters step forth and become emotionally invested in it, and that avoiding a single naming can help this. “If no name is used, it will belong to the people,” was his encapsulation. As much as in earlier eras, there are many donors today who don’t want their name on anything. A significant number actually seek invisibility—see the accompanying story on anonymous patrons. Others are simply quiet and manage to escape notice. Even those who would prefer to give quietly, though, are frequently drawn into naming gifts— under the cajoling of recipient organizations. “It’s something we in the development field desperately encourage them to do,” acknowledges Scott Nichols, who has led fundraising at Harvard Law School and Boston University. He and many colleagues argue that self-effacing donors can actually make it harder for charities to achieve their goals. A recent article in Inside Philanthropy, titled “Attention Humble Philanthropists: Your Low Profile Is Hurting Your Cause,” lays out the case. Well-publicized gifts, the author says, are the most effective way to draw attention to a charitable organization. One donor’s visibility inspires other givers to follow. Melissa Berman agrees that a public naming can help bring in additional funding. Donating money, she notes, is a form of community leadership. Doing
Joan Weill offered $20 million to Paul Smith’s College in exchange for an altered name. While trustees agreed, the new moniker was stopped in court. The college did not receive the gift. SPRING 2017
In San Diego, three donors shared the naming rights for a top-notch biological research institute. From left to right: Denny Sanford, Conrad Prebys, and Malin Burnham.
high form of charitable giving, so there are few instances where our name is on something. By and large, we think it’s probably most effective to be quiet. But we will agree to attach our name if there is a valid reason—for example, if the gift creates other contributions, or lends credibility to a project in a way that might bring broader community support.” “I had a policy of no naming for years,” says megadonor Bernie Marcus. “I’d estimate two thirds of my total giving has been unattributed or anonymous. But I loosened up on this when recipients
There is an easy assumption that vanity is at the center of most philanthropic namings. At times that’s true. But more often, the story is rather different. 24
asked for permission to use my name as an aid to raising additional funds.” Many philanthropists have likewise concluded that there are times to fade into the background and times to stand up and be named. John Rockefeller Jr., Ray Chambers, Peter and Jennifer Buffett, Dolly Parton, and John and Tashia Morgridge are examples of donors who have straddled the line. The Morgridges (he was a founder of computer networker Cisco Systems) moved away from years of anonymity after they signed the Giving Pledge and made a conscious decision to become more public in proclaiming their philanthropy. Peter Buffett shifted gears when he realized his name was an asset in itself that he could offer to charitable causes. The fallout Of course, being publicly identified as a generous donor can also attract something
Sanford Burnham Prebys Medical Discovery Institute
it publicly will often trigger other philanthropists to act. There is often a competitive excitement and esprit de corps among givers. Philanthropy asked billion-dollar donor Denny Sanford whether he found it awkward that the biological research institute he spearheaded in San Diego has three names on it: Sanford Burnham Prebys Medical Discovery Institute. Not at all, he said, he would love to see the names of a couple more friends added in the future, to show the depth of the institute’s support. Texas car dealer and prominent donor Red McCombs has been convinced by the leadership argument. He has never sought naming rights in any of his gifts, yet they have often been bestowed by the beneficiary organization. He believes it is normally unwise to refuse this. “I myself have on several occasions persuaded friends who were making big gifts but did not want their name attached to it that this would be a mistake on their part. What I tell them is, ‘The naming right is not really for you. It’s for what you have done in your community, and what your family may continue to do’” to help others. Naming, he argues, draws attention to the recipient organization, attracts other donors, and opens opportunities that an anonymous gift might not spark. “You’re giving a gift to try to create a better situation for the institution,” he notes. Offering your name as well as your money can sometimes be doubly valuable. Denver businessman and major philanthropist Phil Anschutz reports, “We have always seen anonymity as a
Sanford Burnham Prebys Medical Discovery Institute
most donors are wary of: a secondary wave of solicitations from other groups. There’s a philanthropy joke that says if the CIA had really wanted to find Osama Bin Laden before it did, it should have arranged for a building to be named for him. Then it could have looked on as a horde of energetic fundraisers tracked down his home address. There is also the lightning-rod effect. Seeing famed conservative policy funder David Koch’s name on the Lincoln Center theater, or on the plaza he donated $65 million to have built at the Metropolitan Museum of Art, drives some liberal New Yorkers around the bend. The inscription of Koch’s name on a fountain at the Met is characterized by one public commenter as a “political billboard.” Sniping of this sort is another risk any donor takes when he agrees to attach his name publicly to a gift. Berman advises donors that these potential hazards of the territory are not to be taken lightly. She also says that reputational echoes off the recipient organization should be considered. “How would you feel if you put your name on a building of a place that was helping to serve families at risk, and it turned out people there were being abused?” That’s an unlikely scenario, but when you’re tying your name to an organization, it’s crucial to do your research. Donors can also be pulled into naming controversies even when it’s not their names that are being enshrined. In the wake of Justice Antonin Scalia’s passing, George Mason University received a combined $30 million gift—$20 million from an anonymous donor, and $10 million from the Charles Koch Foundation—that was tied to an agreement that the university’s law school be named after him. Liberal members of the faculty protested “the memorializing of a Supreme Court Justice who was a significant contributor to the polarized climate in this country” (apparently seeing no irony in that objection). The administration at George Mason defended the idea of recognizing a 30-year member of the highest court in our land, and the State Council of Higher Education eventually ratified the change unanimously. This sort of “heroic” naming which honors an admired public figure rather than a donor used to be much commoner than it is today. Doug White believes that the modern tendency to want something named after yourself is reflective of a broader “growth of ego” in the field of philanthropy. Gifts made in honor of someone else have a certain nobility about them, and can be a refreshing change from today’s norms.
Philanthropy is a happy virus, and it spreads better if the donors are known. One lesson of all of this is that naming agreements can make donors vulnerable. They invite speculation on who the giver really is, what they believe, and whether their name is “deserving.” It can be a battlefield. It thus takes a measure of courage to put your name up in a public place. There is an easy assumption that vanity is at the center of most philanthropic namings, and that it’s common for donors to demand their name in lights in return for their cash. At times that’s true. But very often the case is reversed. Most philanthropists give generously because they get satisfaction from helping others or improving society. They realize there are risks in sticking their heads up as they act, but they also know that being public in their giving can fuel a virtuous cycle. “Philanthropy is a happy virus, and it spreads better if the donors are known,” summarizes Scott Nichols of Boston College’s Center on Wealth and Philanthropy. “I do think there’s a crowd mentality,” agrees Melinda Gates. “It becomes the right thing to do. And so more will give, because others are doing it.” Though Paul Hewson (known as Bono) of the rock group U2 delivers much of his charity privately for religious reasons, he has praised the Gates family and their ally Warren Buffett for helping “change the rules of the game” by giving away nearly all of their fortunes. When the two richest men in the world publicly hand off their wealth to charitable causes, that redefines what it means to be a “good billionaire,” he suggests. Tom Riley, an executive at the Connelly Foundation in Philadelphia, argues that American citizens should compete to help others. “Could there be a more benevolent and healthy form of competition than to see who has given the most generously and boldly? Bring it on!” He urges that all tools available to inspire, cajole, or encourage charitable gifts—splashy publicity, names on buildings, peer encouragement, whatever—should be considered valid. “We have a civic duty to recognize and be recognized for philanthropic acts, whether large or small. We need to repeatedly be reminded and remind others of how valuable and wholesome it is to be a donor.” P SPRING 2017
P r iva c y
as a Philanthropic Pillar
Why givers prize the right to be anonymous By Karl Zinsmeister
When pop musician George Michael passed away at the end of 2016, the early media coverage focused on his two Grammy awards, his activism on behalf of AIDS prevention, and the sometimes-lurid details of his personal life. But within a few days of his death, a range of beneficiaries began to reveal another side of the man: His charitable generosity—most of it hidden from the public. The singer made anonymous donations totaling many millions to a charity serving abused children, for cancer-patient support, and to myriad individuals in distress. He also volunteered regularly at a homeless shelter. And he did these things in strict privacy. “He really wanted to keep his help secret,” reported the founder of the nonprofit Childline. She described his gifts as “intensely personal.” One recipient states that Michael didn’t want his contributions to overshadow the good work being done by the charity’s volunteers and staff. In a 1993 interview, Michael suggested that the public dislikes “celebrities patting each other on the back saying how generous they are being. And they are right to.” Having lived on a stage for most of his life, perhaps he simply wanted to protect the sincerity of The Philanthropy Roundtable’s Karl Zinsmeister is author of The Almanac of American Philanthropy, and What Comes Next? How private givers can rescue America in an era of political frustration. SPRING 2017
his philanthropy by acting without the weight of his public persona. “It’s difficult to pin down exactly why he chose to keep this side of his life private,” comments Sean Parnell of The Philanthropy Roundtable. “But we know this: Among individuals who donate wealth for public benefit, the impulse to do so without visibility is very common.” Philanthropic ghosts Indeed, quiet, humble, inconspicuous giving has been a norm in America since our founding. The father of our nation, George Washington, was a devoted patron, but rarely a visible one. It was important to his sense of modesty that many of his contributions to charities, churches, schools, and needy individuals be made without notice. In the first half of the 1800s, New Orleans merchant Judah Touro gave away the modern equivalent of $2 billion to patriotic, religious, and medical causes. Most of his gifts were made 28
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For years, MIT students sang songs lauding “Mr. Smith,” the anonymous donor who transformed Boston Tech into a scientific powerhouse. Only later was the donor revealed to be George Eastman, the founder of Kodak.
unattributed, out of natural humility. When his identity as patron of a memorial to fallen soldiers at Bunker Hill was revealed against his wishes, he nearly withdrew the grant. Arthur Tappan—patron saint of the religious revival known as America’s Second Great Awakening, and the many social improvements that grew out of it— often used anonymous gifts to stimulate matching grants from others. He also found that putting up his money in quiet ways could help heal fractious social rifts. For instance, when the American Bible Society was about to splinter over denominational differences, Tappan made a large anonymous gift that got members excited about the prospect of supplying a Bible to every family in America. This mystery intervention and the work it challenged the charity to undertake quickly united the group. Many of J. P. Morgan’s benefactions were also off the record. He often launched new projects at the American Museum of Natural History by putting up unnamed lead gifts, placing the focus of public attention on the new venture, rather than its financier. George Eastman, the founder of Kodak, gave away more money than anyone of his era except John Rockefeller and Andrew Carnegie, yet few people realize that, because the self-effacing Eastman offered many of his contributions on the quiet. One of his large gifts was a half-billion dollars (in current terms) that he provided to transform a sleepy little commuter school called Boston Tech into today’s MIT. Before he acted, the college was so unstable its president tried to save it by merging it into Harvard as that university’s engineering department. Eastman’s unsolicited gift paid huge dividends to all of humanity, via the technological upsurge subsequently powered by his beneficiary. Yet the very private Eastman insisted that his offering not be acknowledged. So for years MIT students belted out songs thanking the anonymous “Mr. Smith” for making their alma mater great. Another generous philanthropist who occasionally operated out of sight for practical reasons was Jacob Schiff. The decades of pioneering medical
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care and social work he funded among miserable tenement dwellers in lower Manhattan were carried out by a younger unmarried female nurse named Lillian Wald. Because the mores of the day looked askance at male-female professional partnerships, Schiff ’s financing and close collaboration with Wald was kept private until her papers became public decades later. Herbert Hoover’s Quaker faith motivated him to be a generous giver. That faith also prompted him to do much of it quietly. Once he became a public figure, he and his wife had additional prudent reasons to remain anonymous in their many extensions of assistance to needy people. Their contemporary William Volker was a self-made businessman who used his fortune for two purposes: building up his adopted hometown of Kansas City, and creating an intellectual movement in the U.S. in support of market economics and individual freedom. Volker was a devout Christian, and wanted to avoid stirring up feelings of obligation, obsequiousness, or superiority via his giving. So he labored, especially in his local work, to follow the Biblical encouragement to make alms in secret. By the end of his life Volker was known as “Mr. Anonymous.” Edward Harkness stewarded Standard Oil money he inherited from his father into an even tidier sum, then gave it to education, medicine, and the arts through some very intelligent philanthropy. He transformed Yale and Harvard through gifts that pushed them sharply in the direction of broad learning and intimate instruction on the British model, rather than the narrower scholarship of German universities. It was only Harkness’s “passion for anonymity” that gave him a lower profile than other givers of the Roaring ’20s. Starting in 1937, drugmaker Eli Lilly built a mighty private philanthropy in Indiana. He very often gave in private and without attribution. Self-effacing to the end, he even requested that there be no eulogy at his funeral. Another modest Midwesterner who favored anonymity in the deepest way was Margaret Cargill. During her lifetime she disbursed more than $200
million from her family’s grain-trading fortune, always on the condition of anonymity. She believed that attention should be focused on the people carrying out charitable work, not on those giving the money. Even at the most literal level, Cargill didn’t want to be recognized. When she would visit charities that she supported, she would have the director of her foundation introduce her as her aunt or mother. Living a quiet life and sharing her money without claptrap or acclaim made it easier to experience the true joy of giving, Cargill believed. The continuing prominence of the anonymous Skewering the undeniable vanity of some patrons has become a kind of parlor sport for critics of philanthropy. Yet faceless giving remains alive and well in twenty-first-century America. Consider
funds, until two unnamed donors put up $12 million, sparking follow-up giving that eventually totaled $60 million. The revived schools now serve 1,500 poor children every year. “If these schools were a monument to certain adult benefactors, they’d be far less effective than when they are properly viewed as belonging to each individual church and neighborhood,” wrote the secret donors in an e-mail. “It is about the children, not the benefactors.” In 2007, an anonymous gift of $100 million made it dramatically easier for low- and middle-income students to attend the University of Chicago without accruing heavy debt. A quarter of all undergraduates got improved financial aid packages as a result. Without a revealed donor identity, all the reporting on the large gift focused on the remarkable scholarships themselves, which quickly became an iconic part of campus culture. At about that same time, another anonymous donor (or group of donors)
When Margaret Cargill visited a charity, she would have her foundation director introduce her as her aunt. She believed living a quiet life made it easier to experience the joy of giving. just a few prominent examples of recent anonymous gifts: Not long into the Afghanistan and Iraq wars, a financial trader placed $243 million of his own money in an account at the California Community Foundation and asked that it be channeled to servicemembers and veterans. And he did this anonymously. When leakers later revealed the donor to be David Gelbaum, a soft-spoken mathematician turned hedge-funder, he explained, “I don’t think that if you…give away a lot of money, you should get a lot of recognition. You shouldn’t be able to buy that.” A mix of religious motivation and desire to educate the poor drove a catalytic anonymous gift that opened the doors of nine Catholic schools in Memphis, Tennessee. Most of those schools had been shuttered for many years for lack of SPRING 2017
put up a similar amount of money—more than $100 million—to increase financial aid at 20 large universities where many attendees are the first in their family to reach college. They were institutions like Michigan State, Binghamton University, Purdue, Montclair State, Southern Miss. The lawyers delivering the checks declined to explain the motivation behind this generosity, but one additional priority of the anonymous donor was apparent: all 20 recipient colleges had female presidents. Just as those secret checks were being delivered, another donor gave a $50 million anonymous gift to Wycliffe Bible Translators, so they could create versions of Scripture in the last remaining 2,000 languages lacking a translation in their own tongue. The arrival of a version of the Bible in an obscure language often spurs a burst 29
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record there. The campus biomedical center was named for James Clark, but Feeney silently buttressed the project with $60 million. Similarly, the new library at Queens University in Belfast, Ireland, is named for Sir Anthony O’Reilly, who provided £4 million toward construction. Feeney gave £10 million to the same building. Though he (like other anonymous donors) has surrendered lasting visibility and acclaim, Feeney relishes his ability to walk streets unnoticed, fly coach, and otherwise enjoy a private middle-American life. By giving anonymously he dodged all the disruptions that would have come with letting his identity be broadcast. Only after decades, when transactions at his businesses and foundation made it impossible for him to remain out of the public eye, did Feeney’s donations eventually become known. Journalists love to mock “philanthro-me” and “egonomics.” But the truth is, peacock donors are not the norm. Donor Chuck Feeney relishes his ability to walk streets unnoticed and live simply like a normal citizen. An Many generous donors are quite reserved inventor of the duty-free shopping business, Feeney has given away $8 billion. He and his wife live in a rented and reticent. “Humility is far more apartment, supported by their remaining $2 million. common in the top tiers of philanthropy than egotism,” acknowledges of literacy and social progress, and this of this invisibly. For many years, no philanthropy watchdog David Callahan. anonymous gift helped speed Wycliffe’s one even knew who had put all of the “Our writers at Inside Philanthropy have linguistic progress from 20 new money into his Atlantic Philanthropies come across innumerable donors who are translations per year to more than 100. foundation. “I try to live a normal life, engaged in high-level giving, with barely Another recent gift prominently the way I grew up” in blue-collar New a peep. They issue no press releases about made off the record is the $275 million Jersey, he says. “I set out to work hard, their gifts, maintain no website, turn given to biotech research in San Diego not to get rich.” If someone does get down all media inquiries, and otherwise in 2014. It propelled the San Diego rich, he thinks, the best way to keep stay mum about great acts of generosity.” area to the forefront of international your head screwed on straight is to “use A common pattern is captured in biomedical science. your wealth to help people” while living this donor interview by philanthropy simply, like a normal citizen. expert Paul Schervish: “We had six Why? Modesty and preference Feeney is an enthusiast for children and wanted a simple lifestyle…. for a low profile bricks-and-mortar philanthropy; more From the very start we decided that One of today’s premier practitioners of than 40 percent of the billions he gave the money we had inherited would be unproclaimed philanthropy is Chuck away went to erecting buildings for used for philanthropic purposes. We Feeney. An inventor of the duty-free charities. Yet not one of the thousand set up a foundation, but—this is very shopping business, Feeney has given away structures he funded has his name on it. important—we gave the foundation an $8 billion. He kept only $2 million of Even at Cornell—where Feeney donated anonymous name which doesn’t relate the vast fortune he earned so he could more than a billion dollars after attending to our family. And we have used the live quietly with his wife in a rented on the G.I. Bill—he has kept his name foundation not only for providing funds apartment in their old age. That means off every edifice and program. but for providing anonymity. And it he donated 99.98 percent of his money. Though his total giving to Stanford is not known in the community that And Feeney, who hates the idea University comes to $135 million, we provide funds for various things…. of “blowing your own horn,” did all Feeney has also remained wholly off the Confidentiality is terribly important to
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us. We live in a very low profile here, and our children in an even lower profile.” The desire for a quiet life needn’t reflect pure modesty on the donor’s part. Sometimes a donor just doesn’t want to be harried by the flood of requests for money that can come with renown. Some donors want to give, without chastisement, to causes that family members may not understand or appreciate. Others want to help organizations that are controversial. Occasionally philanthropists choose to make a high-risk gift, discreetly, to a project they know could fail. Givers of all types and sizes and stages of life prize the right to work off the radar in these sorts of ways. Why? Religious motivations Moral and religious scruples motivate some people to avoid attention while giving. “Anonymous philanthropy is a form of moral identity in addition to a mode of practical action,” summarizes Schervish out of 130 interviews conducted with donors. “Remaining hidden helps donors transcend the corrupting lures of wealth and philanthropy”—things like “publicity, self-aggrandizement, and control.” As one Catholic philanthropist recently explained to me, anonymous giving “is virtuous and respectful, in that it removes pride and servility from the transaction.” Donors told Schervish they believed that leaving their names off of gifts could “counter any feelings of superiority by the donor,” “shield the recipient from embarrassment,” “reduce obligations of gratitude,” “de-emphasize the importance of recognition and other rewards,” and forestall the unhealthy “proclivity to highlight the giver rather than the gift.” There are direct religious injunctions against showy benefactions. In his Sermon on the Mount, Jesus urged: “Be careful not to do your acts of righteousness before men, to be seen by them…. When you give to the needy, do not announce it with trumpets, as the hypocrites do in the synagogues and on the streets, to be honored by men…. When you give to the needy, do not let your left hand know what your right hand is doing, so that your giving may be in secret.” D uring the Protestant Reformation, Christian leaders re-emphasized the importance of pure motives and behavior when helping others. Martin Luther praised anonymity as a charitable method because “giving alms in secret means that the heart is not ostentatious, but is moved to contribute freely whether it makes an impression and gains the praise of the people or whether everyone despises or profanes it.” Describing anonymous giving as “one of the most ancient and esteemed philanthropic practices,” historian James Smith cites a rabbi from the time of Herod who rebuked a wealthy man for giving a large coin to a poor man. Better not to share at all than to give in such a way that puts the recipient to shame,
advises the teacher. A famous text by the medieval Jewish scholar Maimonides establishes a hierarchy of eight types of charity, with various forms of undercover giving hovering up at the top. The Koran likewise counsels that if donors can give zakat to the poor without revealing themselves, “that is best.” Many American donors have anonymized their altruism for religious reasons. For instance, Dave Weyerhaeuser of timber fortune was a major Christian donor during the last half of the twentieth century, giving away more than $100 million starting in 1947. He considered it Biblically sound to do this without putting his name on any projects. S tephen Adams was also spurred to give off the record by religious principle. After great success in private-equity investments he began playing piano and developed a deep love for classical music. He eventually gave $110 million, anonymously, to the Yale School of Music so that all future students could attend tuition-free. When he was later revealed in published reports, Adams explained that “my wife and I are Christians, and the Bible speaks of giving in secret.” After one of my recent lectures on philanthropic history I received a letter from an anonymous giver who explained his method and motivation, and that of other Christian donors: I have given hundreds of thousands of dollars over the last three decades to people in need. I deal with people one-on-one in a clinical situation. When I identify situations that can be solved with my intervention, I steer the person to the proper medical facility and make arrangements directly with the health professional. When the patient arrives, they find the treatment has been fully funded by an anonymous source. I chose my profession to be in a position to do this kind of work and fund this activity. I endeavor to follow the wisdom of a man who spoke on a mountainside two millennia ago. His advice has worked well for over 30 years, and I have been found out only once. These funds go directly to medical providers and are not deducted from my taxes as contributions, much to the chagrin
Chuck Feeney says he hates the idea of “blowing your own horn,” and is trying to “live a normal life, the way I grew up.” A native of blue-collar New Jersey, he says “I set out to work hard, not get rich.” SPRING 2017
of my accountant. The only people who know about this are my wife, my accountant, and God. Currently, none of them are talking. Why? Practical reasons There are also many practical reasons why donors sometimes prefer anonymity. Personal security is one concern. Gert Boyle, who earned her fortune at Columbia Sportswear, made many multimillion-dollar gifts publicly before shifting to an anonymous strategy after she was attacked inside her home by robbers. Giving by Charles and David Koch has brought them egregious threats to their security, as described later in this article. Rather than risk safety and peace of mind, some givers prefer to simply drop out of sight. There are also instrumental advantages to anonymity. It can 32
be a useful veil that helps donors observe recipients without fawning or ostentation. “Aunt Margaret” Cargill’s many quiet site visits helped inform and refine her philanthropy. Chuck Feeney was another billionaire who was often able to “kick the tires” at projects, as he put it, because his lack of prominence allowed him to wander about unescorted. Donors often have managerial insights that can make charities more successful, but only if the person is able to gather reliable information and make critical observations from an unobtrusive vantage point. Schervish describes a faculty couple at Columbia University who managed to fine-tune their gifts for financial aid by assessing involved students and university managers in person without revealing that they were the source of the gifts. PHILANTHROPY
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When Laurene Jobs gives gifts from the fortune of her late husband, Steve Jobs, she doesn’t like to attach the Jobs name, prefering to keep attention on the worthwhile charity.
Another goal of many anonymous angels is to reverse the charitable spotlight so the beam shines on those in the trenches. “We don’t like attaching our names to things,” says Laurene Jobs, an energetic distributor of the fortune her late husband Steve Jobs accumulated at Apple Computer. Her preferred alternative is “amplifying the great work of others in every way that we can.” Indeed, the giving vehicle Jobs uses to distribute her money, the Emerson Collective, is set up as a limited-liability corporation rather than a 501c3 because an LLC doesn’t have to publicly report grants and thus can operate much more quietly. “ Laurene is a private person, they are a humble family, and they have certainly been generous,” observed Ted Mitchell back when he was receiving Jobs support while running the NewSchools Venture Fund. More than modesty is at work here. By not splashing her name around as a benefactor, Jobs believes, she helps keep public focus on the actual work of the charities she admires. Many donors agree that shifting attention to charities and causes rather than funders can help speed good results. From his interviews on this subject, Paul Schervish summarizes that “concealing one’s identity allows recipients to concentrate on their responsibilities instead of constantly looking over their shoulder at the presumed intentions of the donor. Arnold Kaviti explains that being anonymous, or at least ‘less visible,’ can ‘lessen the impact of your gift’ as a form of constraint and ‘increase the impact of your gift’ as a form of empowerment.” Even philanthropists who don’t practice full-blown anonymity often see the value of keeping their profile as low as possible. The great Chicago donor Julius Rosenwald (who built Sears, Roebuck & Co. into a juggernaut) did not believe in giving in secret. He found that his public gifts often lent a credibility to the receiving charities that could be even more valuable to them than his cash. Yet Rosenwald often fought aggressively to keep his name off of buildings and projects. In addition to his genuine humility this reflected his view
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that if donors could convince a community, and fellow givers, to take ownership of a project and become emotionally invested in making it their own—instead of thinking of it as some rich person’s plaything—the undertaking would be much more likely to succeed over the long haul. A prime successful example of Rosenwald’s method would be the Chicago Museum of Science and Industry. He almost singlehandedly willed it into existence, but refused to attach his name because he thought “If no name is used, it will belong to the people.” The institution was indeed enthusiastically embraced by Chicagoans once it opened as a non-named community fixture. Home Depot co-founder Bernie Marcus made the same calculation when he declined to let his name be used on what was ultimately called the Georgia Aquarium. Though Marcus publicly propelled the project from beginning to end, and put up $250 million of his own money to get it built, he wanted the people of the state who had made his Home Depot chain a success to view the aquarium as their own prize possession. Melinda Gates reports she got similar advice from Jimmy Carter (who became a very successful philanthropist after leaving the White House). “No matter what program you do,” he urged her, “you better make sure at the end of the day the community thinks it’s theirs, not yours. Let them own it.” One businessman who has been a large-scale anonymous donor his whole life explained to Philanthropy how he executed a $15 million gift to build up character in young people with no personal visibility. He wanted to see more kids outside, not only to support the childhood joy and health that all such adventures encourage, but also to build Jewish identity in the participating youngsters. His money paid for camp scholarships and marketing. And he stretched his donation all the way across the country by asking philanthropists in more than 40 cities to match his giving 1:1. This very private donor stipulated that he would stay entirely in the background and let his local matching
By visiting charities anonymously, “Aunt Margaret” Cargill got an unvarnished look at the inner workings of the organizations she cared about, a viewpoint she would never be privvy to as a known major donor.
givers get all the credit. In this way, he got a whole cadre of community donors excited about making public commitments, and strengthened the movement to the point where it now serves more than 70,000 youngsters at 155 sites across the U.S., under the oversight of 10,000 counselors who weave Jewish traditions into youthful fun. Oklahoma oil and banking mogul George Kaiser has applied the same trick throughout his philanthropy (to which he devotes fully half of his time). He allows almost nothing to be named for himself. Instead, he approaches potential allies and offers them the public prominence if they will be at least as generous as his anonymous gift. Putting the tech in Texas Two of the great practitioners of anonymity as a technique for spurring SPRING 2017
parallel gifts are Peter and Edith O’Donnell. This Dallas couple relied entirely on invisible gifts in their remarkable effort to put the tech in Texas. Back in the early 1980s, Peter studied data on the two businesses that had built Texas to that point—oil and gas, and agriculture and ranching—and concluded that those fields alone could not keep the state economy healthy in the future. He decided his home state needed to foster high-tech industry. S o he approached the president of the University of Texas at Austin, and offered to endow 32 new faculty positions in fields like computer engineering, microelectronics, physics, mathematics, computer-assisted design, and material engineering. The O’Donnells eventually created at the University of Texas more than 156 separate endowments—with 33
The danger of forced disclosure of donors Earlier in our history, a group of patriotic Americans concluded that our nation was not providing the full measure of freedom Peter O’Donnell and his wife Edith created more than 156 separate endowments at the University of Texas to and justice that we aspire to. Some of these infuse the state with science and technology infrastructure and talent. The couple let anyone who matched citizens were progressive humanists. Most their anonymous gift take the naming right for the faculty chair, program, or facility—with spectacularly positive results. were religious evangelicals. All were anxious to see the country realize its founding market values that now approach half After almost exactly 30 years principles. So they did what residents of a billion dollars—to support science, of privacy, the University of Texas these shores have done since our beginning: engineering, and technology. And they convinced the O’Donnells that their they organized themselves, volunteered did all this anonymously. method had succeeded wildly, and that time, and gave money to charitable W hen announcing the gift in they should shed their anonymity so associations aimed at educating, cajoling, 1984, the college president explained the lessons of this savvy philanthropic and rallying fellow citizens—with the that “our anonymous donor believes strategy could be shared. ultimate intention of changing society. that the future of Texas and the United This secret giving by the O’Donnells That’s how America’s first States depends on building our research made huge ripples across Texas, and our Anti-Slavery Societies were formed. and development capabilities, and he nation. Stepping into the shadows and The backers of these new charities were sees strong programs in science and offering the limelight to partners turned viewed as fanatics by the establishment engineering education as critical.” Over their nine figures of giving into several press, the Democratic Party, and most of the next three decades, the O’Donnells times that much, all of it channeled to polite society. There were quasi-official funded faculty chairs, scholarships science and technology infrastructure. efforts to intimidate the donors and for technology students, and labs and Scores and scores of new professor shut down their organizations. Just buildings. And in nearly all cases, slots, fellowships for talented graduate a few months after formation of the their many gifts carried the exact same students, science labs, and computer national umbrella charity backing condition: Anyone matching their facilities were created. abolition, a backlash crested. Opponents anonymous donation would get the The O’Donnells’ faceless gifts whipped up destructive mobs that right to put his or her name on the built up a critical research mass in their targeted supporters. faculty chair, or program, or facility that home state, and the University of Texas The lead philanthropists—brothers was created. became an incubator of some of the who were relentlessly excoriated by status 34
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nation’s top minds and tech projects. “No one in history has had a greater impact on science and engineering in Texas than Peter O’Donnell,” says leading computer-science educator Tinsley Oden. And turning Texas into a hotbed for engineering, electronics, computer science, and technology has had important effects on the wider American economy. Texas has become the most thriving and diversified economy in the U.S., the home of more technology-industry jobs than any state except California, the home of more IT firms than any state except California, our country’s powerhouse for exports, the top state for medical research, as well as for high-tech energy extraction, one of the business start-up hubs of America, plus a leader in patents, and in Internet connectivity. Much of this was fueled by the undisclosed giving of one humble Dallas couple.
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quo politicians and reporters—had several close calls with attackers. One had his dwelling and all of his family’s possessions destroyed by politically organized thugs. The family business was also assaulted. Those offended by the charitable priorities of the brothers next organized a multi-year boycott of the company, pressuring fellow businesses, customers, attorneys, and other professionals to refuse to work with them. W hen the American Anti-Slavery Society expanded its advocacy campaign with speaking tours, fresh publications, new local chapters, and enough donated cash to mail out one million printed pieces presenting their point of view, an even more formidable enemy lashed out at the donors. The President of the United States called for these “incendiary” mailings to be interdicted before they reached the public. He pressed the U.S. Postmaster General to expose the subscribers and funders of this persuasive operation, so they could be subjected to social pressure and ridicule. Andrew Jackson also asked Congress to pass a national censorship law that would uncover and punish the backers of politically colored charitable efforts like these. Philanthropists across the country faced additional vigilante attacks, break-ins, beatings, and death threats. It was with actual history like this in mind that the U.S. Supreme Court ruled in 1958 that government should not—cannot—force exposure of the identities of charitable donors. Unhappy with activities the NAACP was conducting in his state, the attorney general of Alabama had demanded that the charity reveal the identities of its individual supporters. The NAACP argued that this was an attempt to intimidate and scare away backers, violating their freedom of speech and assembly as guaranteed by the U.S. Constitution. The court decreed, unanimously, that state action to identify donors would leave them vulnerable to “economic reprisal, loss of employment, threat of physical coercion, and other manifestations of public hostility.” Anonymity “may in many circumstances be indispensable to preservation of freedom of association,
particularly where a group espouses dissident beliefs.” The fundamental American right to advance dissident ideas in association with others would be violated by “state scrutiny of…membership lists.” The fact is, anonymity has been closely intertwined with free expression since the founding of our country. Much of the argumentation that fueled the American Revolution itself was produced without attribution (like Common Sense—the most widely circulated polemic in U.S. history, which was only later identified with Thomas Paine). The Federalist Papers (and many retorts) were also published anonymously as our Constitution was created, so they would be judged on their merits, rather than discounted or promoted based on who was behind the effort.
illustrates this is gay advocacy. From 1970 to 2010, far more money was contributed to charities promoting gay causes by anonymous donors than by any named individual or foundation. Today, anonymous givers continue to provide more funding for gay rights than even the biggest public supporters like the Ford Foundation. Is it paranoid for givers to think they still need anonymity to protect themselves from critical scrutiny of their charitable gifts? Perhaps the houndings of philanthropists backing abolition, civil rights, religious freedom, and contested policy reforms are things of the past. Would forced disclosure really expose donors to risks? Alas, continuing events show quite clearly that there is nothing paranoid or outdated about zealously defending privacy protections for givers. Prominent education, arts,
Current events show clearly that there is nothing paranoid or outdated about zealously defending privacy protections for givers. Charles and David Koch alone receive 150 death threats annually. U.S. judges have repeatedly knocked down governmental efforts that interfere with anonymous voluntary action. “Anonymity is a shield from the tyranny of the majority,” warned the Supreme Court in McIntyre v. Ohio Elections Commission in 1995. It protects “individuals from retaliation, and their ideas from suppression.” Whether the flash point was trying to force small groups to disclose their donors (Brown v. Socialist Workers, 1982), or requiring advocates to publicly register before going door-todoor (Watchtower Society v. Village of Stratton, 2002), our courts have rebuffed authorities over and over for demanding the names and addresses of inconvenient activists. Right up to the present moment, donors continue to prize anonymity. One branch of philanthropy that SPRING 2017
medical, and policy philanthropists Charles and David Koch now receive more than 150 death threats annually. The lawyer responsible for monitoring menaces against the Kochs filed a court deposition in 2014 documenting 43 recent threats against the philanthropists, their family members, their company, and the charities they support. Some examples: “My friend Dan would literally shoot a Koch brother in the skull if he got the right angle.” “Can someone assassinate the Koch family already? What’s taking so long?” “Seriously, no joke, find them, kill them, be done with it. Simple. Legal. Justified.” “I hope both of them get cancer and suffer in pain for years.” The Americans for Prosperity Foundation and other charities supported by the Kochs regularly suffer aggressive protests at their public events. Attendees 35
were injured when a 2011 meeting in the Washington Convention Center, for instance, was stormed by violent opponents. At one of the charity’s gatherings in Michigan, saboteurs sliced tent ropes with knives and box cutters, collapsing the heavy structure on those gathered inside. In his ruling supporting the right of the AFP Foundation to protect the anonymity of its donors, federal judge Manuel Real, an LBJ appointee, stated that “This court is not prepared to wait until an AFP opponent carries out one of the numerous death threats made against its members.” S erious donor harassment and bullying is a continuing risk. Many Americans thus believe that preserving the option of anonymous giving remains vital to safeguarding charitable action and freedom.
disclose their grants) specifically when they desire to have their privacy honored. The off-the-record option is clearly something generous Americans value and will go to great lengths to protect from government banishment. Indeed, there are cultural observers who believe privacy is needed more than ever today. We live in an era where any personal action or decision can end up on the Internet—and often does. Meanwhile partisans increasingly proclaim themselves insulted or injured by the opinions or behaviors of others, The coming battle over donor privacy demand retribution, and try to ban actions they find The fraction of all U.S. gifts made anonymously is not off-putting. In this stormy environment, the deeply American right to act, argue, assist, and advocate large. But it will always be a very chunky minority. Duke University philanthropy expert Joel Fleishman through financial gifts to legitimate nonprofits— estimates that around 10 percent of all individual gifts quietly, privately, without public pressure, censure, or are currently made without attribution. That’s tens of reputational attacks—is a cultural bulwark in need of reinforcement. billions of dollars every year. Chris Anderson, who runs the nonprofit behind L ook over a recent decade of large gifts (a today’s popular TED talks, recently announced million dollars or more), and you’ll find that anonymous grants are more numerous than those a new project responding to today’s pressures on of any other philanthropist except Bill and Melinda individual expression and liberty. TED has just Gates. And in terms of total dollars handed over started creating completely anonymous talks on during that decade, the anonymous exceed everyone vital topics of the day. In announcing this venture except the Gates family and Warren Buffett. Anderson asked, “How many people have an In 2016, 89 anonymous gifts of at least a million important message but refrain from ‘going public’ dollars were made—10 percent of all donations of that out of fear of losing their jobs or hurting loved magnitude. That ratio has fluctuated as high as 19 percent ones? How many ideas worth spreading remain in recent years. So charitable action carried out in privacy hidden because some speakers simply can’t publicly remains as popular as ever, and maybe more so. be associated with the very thing the world needs W hether motivated by shyness, practical desires to hear? Our best guess? A lot.” The new TED to limit visibility, concerns about security, religious program is called Sincerely, X. motivations, or other factors, it’s clear the demand Despite the obvious stakes in protecting privacy for anonymous alternatives will not be expunged of personal action within a democracy, despite the from philanthropy. Indeed, the explosive growth of many reasons donors cherish anonymity, and the donor-advised funds at community foundations and multiple ways they employ it, despite the long train private investment firms over the last decade is being of U.S. judicial slaps at people who have tried to driven partly by the ease with which DAF donations expose philanthropic reformers, still government can be made nameless. Many contemporary donors use regulators keep trying to chisel away at donor direct giving or personal foundations for a portion of privacy. (See sidebar on the next page.) Pretty their giving, and turn to DAFs (which do not have to clearly, a showdown is coming. Crusaders bent on influencing personal donations through the glare of forced exposure are going to run headlong into Americans who view the option of giving anonymously as a valuable liberty. The right to offer financial support without attribution is cherished for a wide range of reasons. But millions of citizens agree on one thing: Donor privacy is something worth defending against opponents, in the most vigorous ways. P
In this stormy environment, the right to act, argue, assist, and advocate through financial gifts to nonprofits—without public pressure—is a cultural bulwark in need of reinforcement. 36
The Legal and Political Landscape of Donor Privacy The Peachtree-Pine homeless shelter in Atlanta, Georgia, would not seem at first glance to be a controversial cause. Located in the city’s business district and housing an average of between 500 and 700 men, women, and children each night, the charity provides a wide range of services to those in need, including finding more permanent shelter for homeless individuals and families. But city officials have long targeted the shelter for closure and sought to claim the land it sits on via eminent domain in order to build a combined fire and police station on the site. In 2014, with the shelter behind on its water bill by nearly $580,000, several anonymous donors stepped forward to pay off its debt. The shelter’s director explained to local media the reason the donors wished to remain anonymous: “Anytime a donor appears and is public with us, that donor gets attacked.” The desire of Peachtree-Pine’s benefactors to remain anonymous is illustrative not only of the longstanding freedom for philanthropists to choose whether or not to keep their giving private, but also of the need today to preserve and even expand vital protections for anonymous charitable giving. The freedom to keep philanthropic contributions anonymous isn’t just about the religious, cultural, and practical reasons that motivate many donors’ desire to keep their giving private. The rights to associate privately and contribute to organizations anonymously are also intrinsic to effective exercise of the First Amendment. With this in mind, the U.S. Supreme Court has long recognized that compelled disclosure of the identities of people who give to charity as well as many other organizations and causes is unconstitutional. In 1956, the attorney general of Alabama targeted the National Association for the Advancement of Colored People because, among other complaints, it had “given financial support and furnished legal assistance to Negro students seek-
advocates to publicly register before going door-to-door (Watchtower Society v. Village of Stratton, 2002), or banning anonymous political pamphlets (McIntyre v. Ohio Elections Commission, 1995), repeatedly ing admission to the state university, and rebuffing authorities demanding the names had supported a Negro boycott of the of inconvenient activists. “Anonymity is a bus lines in Montgomery to compel the shield from the tyranny of the majority,” seating of passengers without regard to warned the Supreme Court in McIntyre. It race.” He demanded that the charity turn protects “individuals from retaliation, and over a roster of its members, which the their ideas from suppression…. The interest NAACP argued was an attempt to scare away supporters, violating their freedom of in having anonymous works enter the marketplace of ideas unquestionably outweighs speech and association. In the 1958 case any public interest in requiring disclosure.” NAACP v. Alabama, the U.S. Supreme Court Despite all of this history, some conunanimously rejected this demand, ruling that state action to identify members could tinue to press for mandatory disclosure of donors to 501c3 charities that are not leave them vulnerable to “economic repriengaged in election-related speech. Once sal, loss of employment, threat of physical coercion, and other manifestations of public again today, the freedom of philanthropists to decide whether they will remain anonyhostility.” Anonymity “may in many circumstances be indispensable to preservation of mous in their giving is under assault. One line of attack is to mandate wide freedom of association, particularly where sharing of Schedule B of the 990 tax form a group espouses dissident beliefs.” The that nonprofits have to file with the IRS. fundamental American right to promote This document lists the name, address, and contrary ideas in association with others amount given by each major donor to a would be violated by “state scrutiny of… charity. The IRS considers that confidential membership lists.” tax information, and has stiff penalties for Several years later in Buckley v. Valeo unauthorized release. Though there have (1976) the court carved out an exception occasionally been damaging illegal discloto the principles upheld in NAACP, ruling sures of sensitive donor information from that forced disclosure of donors giving in connection with campaigns for public office the IRS (such as the leaking of National Organization for Marriage donors in 2012), is constitutional. Even this exception only went so far, however, with the court ruling a these have been rare. In 2006, New York attorney general few years later in Brown v. Socialist Workers Eric Schneiderman began demanding that ’74 Campaign Committee that candidates charities registered in his state annually and political parties with little likelihood submit the names, addresses, and total of electoral success and a high probabilcontributions of their major donors as listed ity that their members and donors would on Schedule B. Charities that continued the face retribution could not be compelled to established practice of dropping or redactreveal their donors. “The Constitution proing Schedule B when making their state tects against the compelled disclosure of filings began to be issued citations. political associations and beliefs,” said the Similarly, in 2010 Kamala Harris (then court’s majority led by Thurgood Marshall in California’s attorney general and now a U.S. that 1982 decision. senator) required the same information Later court decisions reinforced this from all charities that solicit in her state. principle, striking down laws requiring SPRING 2017
No new law or regulation was passed to support this mandate. Harris’s office simply insisted on the donor disclosure as a way to help “protect the public against fraud.” Unlike with the IRS, there is no protection in California or New York law against the release of this information. Several lawsuits have been filed challenging these actions. In 2014, Citizens United brought suit against the New York attorney general’s office on the grounds that mandatory donor disclosure abridges free speech and association and conflicts with federal law ensuring the confidentiality of donor information. The challenge lost at the district court level, and is currently being appealed. A 2014 lawsuit challenging the California attorney general’s demands, filed by the Center for Competitive Politics, argued that mandatory donor disclosure violates the First Amendment. Several
contributor information would remain confidential, lists of donors to more than 1,700 organizations ended up posted on the attorney general’s website. Equally damaging was testimony from the attorney general’s chief auditor that the donor names the office forced charities to hand over had never triggered a single fraud investigation in more than ten years, and that in hundreds of investigations for fraud his team had only consulted a donor list five times, proving such names have little use for their proclaimed purpose. In April 2016 Judge Real ruled AFPF could not be forced to submit its S chedule B to the attorney general. He granted a permanent injunction against the state collecting the donor data, noting scores of “threats, protests, boycotts, reprisals, and
Far-reaching legislation in New Mexico could require a church to report its donors if its pastor refers to an elected official in a sermon, or asks congregants to pray for the official. additional 501c3 nonprofit organizations, including The Philanthropy Roundtable, filed amicus briefs in support of CCP’s petition. Though the case lost at the district and appeals courts, and the U.S. Supreme Court declined to hear an appeal, the U.S. Court of Appeals for the Ninth Circuit did allow that a challenge might succeed if a plaintiff could demonstrate concrete harm as a result of the policy. A subsequent challenge by the Americans for Prosperity Foundation, another 501c3 charity, took just that tack. And in February 2015 U.S. District Court Judge Manuel Real granted a temporary injunction, noting that AFPF had presented clear evidence of donor harassment. The case eventually went to a full bench trial that revealed a much fuller picture of the state attorney general’s cavalier approach to donor privacy. Despite promises that 38
harassment” directed at the complainant. The judge dismissed the idea that the state would maintain the confidentiality of donor identities, citing the large number of improper leaks that had already taken place, stating “once…donor information is disclosed it cannot be clawed back.” California’s new attorney general is appealing this decision, so this remains unsettled. More crucially, Judge Real’s ruling applies only to AFPF (the Thomas More Law Center, another 501c3 charity, won a similar ruling from Judge Real in December 2016). So California’s donor-list demand, as well as New York’s, still hangs over other nonprofits that can’t prove in advance that their donors would face retribution, or that are just too poor to finance defensive lawsuits of their own. Federal lawmakers have also targeted the 990 Schedule B for disclosure. PHILANTHROPY
In November 2014 Senator Jon Tester of Montana filed legislation that would require the IRS to make available upon request and put online the 990 Schedule B of any organization that “has or plans to spend money attempting to influence the selection, nomination, election, or appointment of any person to a public office.” On its face, this would seem to exempt charities organized as 501c3 entities, which are not allowed to intervene in campaigns for public office. Unfortunately, the way campaign finance laws are written they often encompass speech by charities related to issues, not candidates or elections. This is exactly what happened to the Independence Institute, a Colorado-based think tank organized under section 501c3 of the federal tax code and thus prohibited from intervening in elections. In 2014 it wanted to pay for radio advertisements encouraging Coloradoans to contact their two U.S. senators and urge them to support criminal-justice reforms, something well within the scope of proper activity for a charity. But because one of the state’s two senators was running for re-election at the time, the Independence Institute would have been forced to reveal its major donors if it had run the ads within 60 days of the election. It decided not to run the ads and sued to challenge the application of campaign finance law to organizations that cannot legally engage in election campaigns. (The Philanthropy Roundtable filed an amicus brief urging the court to protect donor privacy and free speech in this case as well.) But in February 2017, the U.S. Supreme Court upheld a lower-court ruling enforcing the disclosure requirement. Meanwhile, politicians, activists, and bureaucrats in other places are trying to force disclosure of the identities of donors to a broad range of organization types, including 501c3 groups, through legislation, ballot measures, or administrative rules. A recently passed state referendum in South Dakota could have forced charities to reveal their donors for such acts as hosting a forum on agricultural issues where elected officials are invited speakers, or notifying supporters that an elected official has introduced legislation
relevant to their interests. A state judge enjoined the law as unconstitutional shortly after it was passed, however, and in February South Dakota’s governor signed legislation repealing the law. Other states have also considered efforts to strip away donor privacy for charitable organizations this year. Far-reaching legislation in New Mexico could, for example, require a church to report its donors if its pastor references an elected official in a sermon, even just to ask congregants to pray for the official as he or she carries out official duties, or impose disclosure on a social services charity that acknowledges a public official’s aid in securing state funding in a newsletter that is distributed to clients, vendors, donors, and others. A bill filed in South Carolina at the beginning of the year could likewise force charities to disclose their donors publicly if they were to urge the state’s residents to contact their state legislators on any issue. Protecting individual American citizens against the dangers of forced disclosure of their charitable giving should be a nonpartisan and non-ideological issue—the movement to curtail this vital component of philanthropic freedom has certainly drawn support from both sides of the political divide! For example, it was Republican U.S. Senator John McCain who teamed up with Democrat Russ Feingold to pass the law that muzzled the Independence Institute’s ads calling for criminal-justice reform, and the legislation described earlier in New Mexico and South Carolina have Republican sponsors. But today’s demands for eviscerating donor privacy come largely from progressives hell-bent to strangle the flow of private money into political campaigns and willing to accept or even hoping for harassment and retribution directed at philanthropists who fund causes they oppose, with diminished charitable giving as collateral damage. For some, reducing the amount of money flowing into charitable groups that are involved in public policy isn’t an accidental byproduct of disclosure, but a goal to be sought in and of itself. David Callahan, the progressive founder and editor of Inside Philanthropy, is a leading critic of donor
privacy for charitable giving and recently wrote the following: “When wealthy donors speak loudly in the public square, using nonprofit proxies, citizens deserve to know who they are, along with what motives they may have—and all the more so when donors are using tax-subsidized dollars. There is a compelling public interest at stake here, one that trumps the ideal of donor privacy. Too often, it has turned out that such privacy is desired for the wrong reasons…. As for disclosure-related fears of donors, I don’t see a clear solution here, except to ask them to live with it on those occasions that arise…. And if the donors can’t, they can choose not to give. A little less philanthropic money flowing into today’s polarized policy and advocacy battles probably wouldn’t be a bad thing.”
But there is no consistent pressure from the left to protect association and the freedom of donors to give anonymously to charity. Instead there is constant sniping from progressives about “millionaires and billionaires” who give to support organizations and causes out of favor on the left. This is deeply misguided. Even Callahan predicts that with Republicans now in power and charities that support liberal advocacy ramping up their “resistance” to President Trump, the many organs of civil society operating from the left may regretfully discover that they too need protection from vindictive backlashes by government or the populace. Let’s hope that by the time they recognize the need for donor privacy and protection of philanthropic freedom, philanthropic freedom still exists. For all Americans—conservative, progressive, or apolitical—protecting donor privacy is crucial to the health and freedom
Many organs of civil society operating from the left may regretfully discover that they too need protection from vindictive backlashes by government or the populace. Callahan states that he isn’t interested in removing donor privacy for “traditional charitable organizations such as hospitals and museums,” but that’s an almost meaningless distinction—for example, nearly every hospital lobbies at the local, state, and federal level, and most are members of national trade associations that engage in the sort of public-policy advocacy and debate that he finds so problematic. Museums and other “traditional” charities would be in the same situation. There are notable exceptions from the progressive community’s general indifference or hostility to donor privacy. The American Civil Liberties Union and Alliance for Justice are left-leaning groups that sometimes weigh in on behalf of donor privacy, and the NAACP Legal Defense and Educational Fund filed a brief in Americans for Prosperity Foundation v. Becerra supporting donor privacy as well. SPRING 2017
of our s ociety. In its amicus brief in support of the Americans for Prosperity Foundation, the NAACP declared that “In an increasingly polarized country, where threats and harassment over the Internet and social media have become commonplace, speaking out on contentious issues creates a very real risk of harassment and intimidation by private citizens and by the government itself…. Thus, now, as much as any time in our nation’s history, it is necessary for individuals to be able to express and promote their viewpoints through associational affiliations without personally exposing themselves to a legal, personal, or political firestorm.” This is exactly right, and philanthropists across the philosophical spectrum should be aware of the threat to philanthropic freedom posed by misguided calls for donor disclosure in the charitable sector. —Sean Parnell 39
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Human kindness and charitable success aren’t necessarily linked. That’s one of the paradoxes of philanthropy.
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By Grant Smith
Kindly donors with sterling characters and good intentions don’t always yield good charitable results. That’s one of the fundamental realities of philanthropy. What’s rarely pointed out is the reverse. Uninspiring—even deeply unlikeable—donors sometimes produce amazingly powerful results. Some of our country’s most consequential giving was advanced by an all-star assortment of human train wrecks. The introduction to The Almanac of American Philanthropy cites J. Paul Getty, Russell Sage, and Leland Stanford as examples of givers who pulled off huge good works for not-so-good reasons, and notes that part of the magic of the American charitable mechanism is that you don’t need to be an angel to succeed. The genius of our philanthropic tradition is that it takes people just as we are—kind impulses, selfish impulses, confusions and wishes and vanities of all sorts swirling together in the usual human jumble—and it helps us do wondrous things, despite our flaws. Even donors of dubious moral
quality can make our society better, as the following eight examples show.
A business prodigy who opened his own brokerage firm at age 22, Charles Yerkes made his first fortune trading public bonds. At the end of the Civil War he became a financial agent to Philadelphia’s City Treasurer, speculating with public monies in the dizzying post-war markets. As was the custom of the time, a considerable portion of the massive returns he racked up with taxpayer money went straight into the pockets of local political leaders—and Yerkes’s too. But the Great Chicago Fire caused a financial panic and wiped him out. Unable to make payments he owed the city, Yerkes was convicted of larceny Grant Smith is the pseudonym of an executive at a large foundation. SPRING 2017
When real-estate mogul Leona Helmsley was convicted of 33 tax-related felonies, spectators in the courtroom cheered for joy. But today, the medical patients and others served by her billions in giving are the ones cheering.
of history’s most consequential supporters investors in New York City, and shortly of science. after meeting Leona he offered her a position as senior vice president. Shortly Leona Helmsley after they began a torrid affair. In 1971, Leona Helmsley may have been the face Harry left his wife of three decades of a luxury hotel empire, but her hauteur to marry Leona. Together they built was the stuff of late-night comedy. When a massive real estate and hospitality she was convicted of 33 tax-related empire worth $5 billion at its peak. Their felonies for billing the costs of a home holdings included the Empire State renovation to her company, and sentenced Building, the Flatiron Building, and a to four years in prison, spectators in the nationwide chain of 30 hotels, including courtroom broke out in cheers. When she the St. Moritz, the Park Lane, and the died in 2007 and left $12 million to her Helmsley Palace. beloved Maltese terrier, the dog received Leona’s exacting standards and death threats. mercurial temperament earned her a It was an unexpected ending to nasty reputation. Her lavish lifestyle a life that began with much promise. became fodder for Manhattan gossip Leona Mindy Rosenthal grew up columnists. Her reluctance to pay in Brooklyn, the third child of an contractors for their work ultimately immigrant Polish milliner. She led to release of the false invoices that dropped out of college, married (and sparked the tax-evasion charges. Harry divorced) three times, and eventually was too ill to stand trial, but Leona entered real estate. She was tough and ended up serving 18 months in prison. plain-spoken. Through force of will, In her final years, Helmsley became she became one of the most successful increasingly committed to philanthropy, agents in Manhattan, with a specialty making gifts of $25 million to New York in brokering conversions of rental Presbyterian Hospital, $5 million to apartments into co-ops and condos. the victims of Hurricane Katrina, and Accounts differ as to how Leona met $5 million to the families of firemen Harry Helmsley, but it’s clear she made killed on September 11. When she died an immediate impression. Harry was in 2007, most of her estate went to the among the most successful real-estate Helmsley Charitable Trust. Today the PHILANTHROPY
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and embezzlement and sentenced to 33 months of hard labor in the dreaded Eastern State Penitentiary. Yerkes tried to secure a pardon by blackmailing several prominent politicians. The effort failed, but his allegations were serious. Fearing their potential repercussions on the 1872 elections, President Grant intervened. Yerkes received his pardon on the condition that he retract his accusations. Seven months into his sentence, he walked out of the prison gate. After obtaining a quickie divorce in the Dakota territories, Yerkes acquired a 24-year-old trophy wife and moved to Chicago, where he made his next fortune in municipal public transportation. By means fair (massive borrowing) and foul (blackmail, bribery), he methodically acquired one street railway after another. Eventually exhausted by his adventures in Chicago’s bare-knuckle politics, Yerkes later moved to England and led a massive expansion of the London Underground. He died five years later, mistress at his side. In his will, Yerkes made provision for two magnificent institutions. He donated his extensive art collection (he was the first American to acquire a Rodin) and his elegant home on Fifth Avenue for a public gallery. He also allocated funds to create a charitable hospital in the Bronx, “opened to the public without regard to race, creed, or color.” Unfortunately, debt finally caught up with Yerkes, and creditors claimed the majority of his estate, so the home and art had to be sold, and plans for the hospital were scrapped. Yet the string puller did leave behind one massive philanthropic accomplishment. In what he admitted was an attempt to burnish his image, he pledged $300,000 in 1892 so the newly founded University of Chicago could build what was then the world’s largest telescope. The Yerkes Observatory integrated observation equipment with on-site laboratories, marrying astronomy with earth sciences. It became a nonpareil research facility, and the birthplace of modern astrophysics, making Yerkes one
trust has a corpus of $5.5 billion, and has already awarded more than $1.1 billion in grants for medical research, education, and local nonprofits serving Israel and New York City. Its reputation among biomedical researchers is second to none, matching the unapologetic perfectionism of its benefactor.
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One of the greatest business minds of the Gilded Age was a woman named Hetty Green. Born into a wealthy Quaker family, she invested her inheritance brilliantly. Avoiding speculation, she sought and found value in stocks, bonds, mines, railroads, and especially real estate. When markets panicked, she kept her head, thus building riches that, by one calculation, would place her somewhere between Warren Buffett and Bill Gates today. Not that she ever enjoyed any of this. Tales of Green’s miserliness are legion. She wore the same outfits, day in and out, until they were little more than rags. Her daily lunch consisted of oatmeal, which she unceremoniously heated on an office radiator. She raised her two children in a series of shabby apartments in Hoboken and Brooklyn, never staying anywhere long enough for the tax authorities to find her. As a person, she ranked somewhere between disagreeable and disreputable. At 21 years of age her Aunt Sylvia died and left millions to charity. Though Green was already at that point a millionaire herself, she claimed to have found an alternate will that left everything to her instead. At trial, the estate offered evidence that Green’s will was almost certainly a forgery. The disgraced skinflint spent the next six years hiding in London. At her death, the newspapers trumpeted that she left nothing to charity. But that conclusion may be inaccurate. “I am of the Quaker belief,” she once explained. And “one way is to give money and make a big show…. That is not my way…. An ordinary gift to be bragged about is not a gift in the eyes of the Lord.” Biographers have reconstructed Green’s anonymous philanthropy, and it appears she was among the largest funders of Mary Garrett’s campaign to build a medical school at Johns Hopkins, contributed to many women’s colleges, and donated land and monies for schools, nursing homes, and settlement homes. Moreover, the two children she raised eventually directed the remainder of her wealth almost entirely into philanthropy. When Green’s daughter died in 1951, about $200 million went to dozens of colleges, hospitals, and churches. Whether obscured by Quaker modesty or extreme thrift, Green’s ultimate generosity was real.
John MacArthur was medically discharged from the Navy in 1917 for “dementia praecox,” a diagnosis that today might be called schizophrenia. On a good day, he was one of the world’s greatest salesmen. It’s somewhat ironic that such an absurd risk-taker made his fortune in the insurance business. At a time when the life-insurance industry’s cheapest plans started at $10 a month, MacArthur sold policies for $1. In his early years, he was slow in paying benefits, and barely stayed ahead of state and federal regulators. He steadily bought
The genius of our philanthropic tradition is that it takes people just as we are and it helps us do wondrous things, despite our flaws. out rivals, ultimately turning Bankers Life into one of the nation’s largest insurance companies. In the 1960s, he began snatching up Florida real estate, becoming the state’s largest private landowner. MacArthur ultimately became the second-wealthiest man in the United States. Not that you would guess as much. He and his wife lived in a modest apartment, with a view of a parking lot. He worked out of a hotel coffee shop, making deals over the phone, drinking endless cups of black coffee, and filling ashtray after ashtray. Through it all, he was fiercely combative. A good fight was something MacArthur relished, and he waged spectacular legal battles with any competitor, authority, or tax collector who got in his way, often descending to nastiness and vulgarity. He was as unpleasant in his personal life. His reputation as a “bottom pincher” was a euphemism for what by many accounts was a long history of outright sexual harassment. He married his second wife, Catherine, by mail order in Mexico under bigamous circumstances. He established the John D. and Catherine T. MacArthur Foundation in 1970. Today, it is the nation’s twelfth-largest foundation by asset size. His motivations were not uplifting: he wanted to avoid SPRING 2017
pieces orphaned in the insecure arms of what he called “suckers who had invested all their money in flimsy securities.” He stacked up scores of Cézannes and Matisses, Picassos and Renoirs, Soutines and Seurats. Barnes also developed a highly idiosyncratic view of how art should be appreciated. Informed by the pedagogical theories of John Dewey, he believed that art spoke through color and shape more than through representational theme, and that even uneducated viewers could grasp the elemental meaning of any work. At the same time, he detested casual viewers of art. He set up his Barnes Foundation to shepherd small numbers of guests through his collection while teaching his very didactic theory of art interpretation. Barnes made enemies effortlessly, and often. When critics panned one of his few public showings, he wrote profanity-laden replies, then hounded them for years afterward. He had contempt for many of Philadelphia’s Albert Barnes was a natural at enemy-making, sending profanity-laden replies to critics and hounding them educational, artistic, and civic leaders. for years afterward. Yet the art he left to be enjoyed has uplifted more than a million souls. When he died in 1951, several of an estate tax that would require selling “genius” grants and a major gift to Barnes’s enemies challenged the strictures Bankers Life. He showed no interest in help localities reduce jail populations. he had placed on public access to his the foundation’s mission, declaring to Recently, the foundation announced it art, and tried to liberate the collection his trustees that “I’m going to do what will award an eye-popping $100 million from Barnes’s eccentric rules. Leading I do best. I’m going to make [money]. grant to fund “a single proposal that the charge was Walter Annenberg, You guys will have to figure out after will make measurable progress toward owner of the Philadelphia Inquirer. I’m dead what to do with it.” These solving a significant problem.” Though Annenberg did not live to see instructions are frequently cited as an it, the effort his foundation spearheaded example of what philanthropists should Albert Barnes ultimately broke the donor-intent not do if they want to protect their Philadelphia, in the words of historian restraints that kept most of the public donor intent. John Lukacs, is a city of patricians and from ever experiencing the magnificent Fittingly, given its benefactor’s philistines. Albert Barnes somehow paintings and sculptures gathered by Barnes. Since 2012, the Barnes bellicose temperament, what happened managed to be both. after MacArthur died in 1978 was He grew up in a tough, working-poor Collection has been located in downtown war. A struggle for control of the neighborhood, then won a scholarship Philadelphia, where more than a million to attend the University of Pennsylvania, visitors have toured it—including many foundation board, and direction of its untrained, casual viewers. lucre, developed. Eventually, estranged where he earned a medical degree in son Rod MacArthur wrested the 1892. He launched a pharmaceutical foundation away from conservative company, then sold it just months Larry Hillblom board members, turning it into a before the 1929 stock-market crash for The “H” in DHL, the package express firm, stands for Hillblom. It’s an prominent funder of progressive causes. $6 million. Just as the world sank into Despite the turbulence, the depression, Barnes became a Croesus. understated testament to an unlikely MacArthur Foundation has promoted Barnes was drawn to early modern entrepreneur. Raised in a middle-class a number of consequential initiatives, art, and the global downturn offered home in California farm country, Larry Hillblom worked his way from including the fellowships known as him a perfect opportunity to gather 44
peach canneries to Berkeley’s law school. While there, he took a night job as a courier, hopping on commercial airlines and flying bags stuffed with commercial documents up and down the West Coast. It gave the perpetually disheveled 25-year-old an idea: express delivery from the mainland United States to Hawaii, and from Hawaii to East Asia. He met Adrian Dalsey (the “D” of DHL) in a grocery-store parking lot, and the two men decided to launch a trans-Pacific delivery service. Its couriers flew commercial airlines, their luggage stuffed with time-sensitive documents: bills of lading, original canceled checks, and signed legal papers. At a time when the Post Office took two weeks to get a letter from Los Angeles to Honolulu, DHL guaranteed overnight delivery. Plagued by suffocating regulators and relentless lawsuits, the company nevertheless thrived. When Hillblom died 26 years later, the company flew to almost every nation, employed 33,400 people, and had annual sales of approximately $3 billion. In the mid-1980s, Hillblom had stepped away from the day-to-day management of the company. He moved to Saipan and became a citizen of the Northern Mariana Islands, taking side jobs as a bartender, backhoe operator, pawnshop owner, and auxiliary justice of the commonwealth’s Supreme Court. Much of his free time was spent prowling the brothels of Southeast Asia. On May 21, 1995, Hillblom’s twin-engined SeaBee crashed into the Philippine Sea. The bodies of the pilot and a fellow passenger were recovered, but not Hillblom’s. To this day, some people believe he survived and lives under an assumed identity in Thailand. Hillblom’s will left his entire estate of about $600 million to the University of California for medical research. But the will was immediately contested by lawyers representing women in Vietnam, Micronesia, and the Philippines who claimed to have borne children by Hillblom. For two years, a brutal and often bizarre legal battle raged. In exchange for $1 million cash and a share of a French chalet, Hillblom’s mother eventually offered a blood sample so her DNA could be used to verify paternity claims. With that evidence, four women eventually received about $50 million each on behalf of the children they produced with Hillblom.
After these paternity payments, legal fees, and taxes, approximately $240 million was left to fund the Larry Hillblom Foundation. It went to work on health problems. Today it is a leading funder of cutting-edge efforts to cure, treat, and manage both diabetes and diseases associated with aging.
Henry Frick was one of the Gilded Age’s most controversial figures. His eulogy in the New York Tribune was a little rough. “The name of Frick,” it stated, is “abhorrent to great numbers of his fellow citizens.” Whether or not that was true at the time, it wasn’t true later—thanks to the charities he endowed in his will. Frick made his fortune in coke, the fuel essential to the steelmaking process. By his 30th birthday he was the world’s largest coke producer, running some 12,000 ovens. At age 32 he partnered with Andrew Carnegie, and when Carnegie retired in 1889 Frick was named chairman of Carnegie Steel. The Johnstown Flood was the first blot on Frick’s name. He had helped found a hunting club that created magnificent grounds, charming cottages, and a stately clubhouse near a mountain lake in Pennsylvania. Largely neglected, however, was the South Fork Dam that created the club’s private water body. When heavy spring rains descended, the earthen dam broke, flooding nearby towns with apocalyptic force. More than 2,200 people died. Frick and his partners in the club contributed to the relief effort, but were never held liable for the death and destruction. Three years later, Frick put down a strike in one of the bloodiest episodes in the history of American labor. Workers at the Homestead steel mill demanded higher wages in 1892. When the union and Carnegie Steel could not reach terms, workers surrounded the mill and dared strikebreakers to approach. Frick hired 300 Pinkerton agents, armed them with Winchester rifles, and ordered them to maintain access to the plant. In the ensuing battle, 10 men were killed, and dozens more wounded.
Some of our country’s most consequential giving was advanced by an all-star assortment of human train wrecks. SPRING 2017
Order was restored by 8,000 state militiamen. Frick was again denounced, and soon an anarchist walked into his office, shot him twice, and stabbed him three times. After that, Frick avoided public notice. In his remaining three decades, he devoted himself to business and his art collection. He supported local charitable causes in western Pennsylvania, but quietly. Only after $117 million of his $145 million estate was dedicated to charity did he gain a reputation for philanthropy. His beneficiaries included universities, schools, parks, and hospitals. His signature gift was bequeathing his Manhattan home and remarkable art collection to New York City with a $15 million endowment. Thus did a man excoriated in life for ugliness become remembered after death for beauty.
Howard Hughes would have kept Shakespeare busy for years. He was a tinkerer of staggering genius whose business interests extended to industrial tooling, aircraft manufacturing, and Hollywood 46
gettyimages / Bettmann / Contributor
Howard Hughes lived and died under strange circumstances, progressively defined by addiction, hypochondria, and mental trauma. His will, though, established one of the world’s leading biomedical research centers.
filmmaking. He bought TWA and turned the struggling letter-carrier into a major global airline. Hughes’s companies created precise weapons systems crucial to the Navy and Air Force. When a Las Vegas hotel manager tried to kick Hughes out of a penthouse, Hughes bought the property. Then he spent the next few years methodically buying more real estate, casinos, and television stations throughout the city. Amid all this, he set world records as a pilot, and as a pursuer of Hollywood starlets. But when Hughes’s star collapsed, it burned itself out with as much intensity as it had emitted while red hot. His last years were spent in self-imposed isolation and madness: a miserable existence in blacked-out hotel rooms, malnourished, unwashed, naked, strung out on codeine. His mental decline was linked to head trauma he had sustained in more than a dozen serious car and airplane crashes. His tertiary syphilis didn’t help. Even the circumstances surrounding his death were bizarre: it’s not exactly clear where he died. Hundreds of claims were made against Hughes’s $2.5 billion estate, some of them laughably fraudulent. Hughes had a crippling hypochondria and all-consuming fear of germs. His interest in medical issues dated back to the premature deaths of his mother when he was 16 and his father about two years later. His first will, signed at age 19, dedicated his resources to a Howard Hughes Medical Research Lab to be launched “as soon after my death as practicable.” Hughes refined and deepened this idea as he aged and grew wealthier. In 1953, he created the Howard Hughes Medical Institute and endowed it with all the shares of Hughes Aircraft, a huge gift for which he was hailed. The IRS for years contested the idea that the medical organization owning Hughes Aircraft could be a tax-exempt charity, but ultimately conceded and granted it nonprofit status. Today, the Howard Hughes Medical Institute is among the world’s largest—and most brilliantly innovative—funders of biomedical research. It invests approximately $660 million annually in basic research, and devotes an additional $85 million annually in support of science education. It is best known for giving top minds great freedom to experiment— quite appropriate for an organization fathered by a prominent polymath and free spirit. P
Good Giving from the Grave
How donors and charities can plan wisely to avoid posthumous punch-ups BY DOUG WHITE
Though “giving while living” is a growing trend in the United States, many donors still extend their philanthropy beyond the time of their deaths. And charities that intend to be in business far into the future often secure present-day gift commitments that won’t be realized for many years. Givers and receivers alike must take measures to ensure that these time-release contributions are executed in ways that respect the donor’s values and the charity’s needs. Many legal battles illustrate the risks of ignoring the original terms of a gift. Earlier in this issue (see page 22) we read about the misfire of a proposed $20 million gift to Paul Smith’s College from Joan Weill due to a failure to recognize that the original benefaction to the college would not allow a renaming. A judge ruled that “Mrs. Weill’s money did not give the college license to violate a provision in its founder’s will that enshrined his father’s name on the college in perpetuity.” Different donor language produced a different outcome in the related case of Newcomb College. The will of Josephine Newcomb established Sophie Newcomb College in honor of her daughter, and to elevate women’s education. Amid financial difficulties and damage after Hurricane Katrina, the board of directors voted to establish a new, co-educational entity, Newcomb-Tulane College. Family descendants claimed that this would violate Josephine’s will, but the college countered that the language of Newcomb’s gift did not forbid them from making this change. After a contentious battle, the Louisiana Supreme Court agreed with the university in 2011. In both cases, the donors established bequests. Because the charities accepted the money, they also accepted the terms of the gifts.
If a charity makes a promise when accepting a gift, the courts and public opinion take it seriously. If there is something important that is not spelled out, however, future adjudicators will decide as they wish. Any long-term contribution that has specific aims should have those goals, and any necessary restrictions, made clear. The celebratory feeling after a large charitable gift has been made is special. The donor receives the satisfaction of investing in a cause close to his or her heart. The charity’s staff feels ratified and reinforced in its work to make the world a better place. But it doesn’t end there. Too many organizations learn belatedly that the real work begins the moment the gift is made. Stewarding a gift is far more important than cultivating one. Staff and board members at charities need to realize that when an organization enters into a gift agreement, an obligation that extends into the future—sometimes far beyond current lifetimes—is being accepted. The phrase “in perpetuity,” all too common in charitable agreements, often presents unanticipated challenges and should generally be avoided, as neither donors nor charities can predict the future. But even where the snare of “forever” is avoided, gift agreements need to carefully align donor desires, the ability of the charity to honor commitments, and reasonable periods of time. Take buildings. Gift agreements connected to structures should be directly connected to refer to their useful lifetime. Whether they require only maintenance for generations, or periodically need enough substantial renovation, or become outdated enough to need replacement, all buildings will need future outlays, and therefore patrons. Raising funds for that can be SPRING 2017
ifficult, so when naming opportunities are d offered to those who invest in a building, care should be taken not to overpromise. Causes can be more long-lived than even the most enduring buildings. Charities need to be cautious when accepting gifts related to current causes, crusades, and policies—as these can change and even be mooted entirely by new events, evolving technology, and changing social conditions. Charities need to be bound by their contracts and their promises as much as businesses and governments are. Indeed, charities could be considered to have heightened obligations to respect the intentions and wishes of benefactors. Donors also need to be realistic about their expectations. Neither givers nor receivers of charitable gifts can be certain of conditions in the far future. Conditions “inevitably change; hence, no wise man will bind trustees forever to certain paths, causes or institutions,” wrote Andrew Carnegie. Not every philanthropist feels that way, though. Most want to perpetuate a set of values into the future, even if the expression of those values might evolve. In 1961 Charles and Marie Robertson donated $35 million in A&P stock for the sole benefit of Princeton University to endow the graduate program at the Woodrow Wilson School of Public and International Affairs. Forty years later, in 2002, the Robertsons’ children sued Princeton because they thought the university had not been doing a good job following their parents’ wishes—wishes Princeton agreed to. The research for my book about this lawsuit (see “Benefits of a Gift Gone Wrong,” Summer 2014) showed me that there are steps both charities and donors Doug White is the author of Abusing Donor Intent: The Robertson Family’s Epic Lawsuit Against Princeton. 47
should take to improve the odds that the aspirations behind a gift are honored. Six steps for philanthropists Honestly consider whether the gift’s purpose is enduring, and aligned with the organization’s long-term mission. Does the animal shelter need another building or does it really need operating money to care for more animals? While a new building would be nice and provide a naming opportunity, the current structure might be adequate, and the real need is for more skilled personnel to care for the animals. The shelter may succumb to a generous offer but find it hard to stick to the result over the long run. Consider an “escape clause” in the gift agreement in the event that circumstances change strongly over time. Legal battles between a donor’s descendants and charities are traumatic. If a charity can be given a little wiggle room within basic guidelines, that might be avoided. What if cancer is
to honor your wishes should be backed up by a tangible forewarning that your heirs have the ability to pursue legal action if they feel it necessary. If the donor is concerned about the heirs’ commitment past the first generation, he or she should seek legal counsel, as it may be possible that a funded trust—say for 50 years, or whatever the state maximum is to comply with the applicable state’s rule against perpetuity—can be established. In the end, however, as happened in the Sophie Newcomb case, the more distant a donor’s death, the less likely it will be that the court will be able to find anyone with standing to make a claim, and it will be perhaps equally unlikely that anyone would be able or willing to pay to pursue the claim. And the attorney general’s office, which has standing, may not be willing to get involved. The Robertsons were fortunate to have access to funds to pay for their lawsuit. Be specific. Even those with opposing perspectives in the Robertson lawsuit agreed that specificity is crucial to reducing potential conflicts after a gift is made. In that case, the agreement called for Princeton to place
Even when the snare of “forever” is avoided, gift agreements need to carefully align donor desires, the ability of the charity to honor commitments, and reasonable periods of time. cured one day and there is no need for endowed programming addressing that affliction? Could the charity’s trustees be permitted to re-designate the income to another disease in need of treatment? If a donation is an endowed gift, assess— ask and follow up—whether its income adds to the budget for the intended purpose, such as a scholarship or a professorship, or whether it merely replaces other budgeted income that can now be used elsewhere. Most donors don’t ask this question, and that’s fine if they don’t care and only want their name associated with the purpose, but donors who want to increase the organization’s capacity in a particular area should be sure to make certain that is happening, and that the gift income is not providing a cushion for the costs of other operations. Designate someone to have standing in court in the event a legal action becomes necessary in the years after your death. The requirement 48
“particular emphasis” on sending graduates of the Woodrow Wilson School into international-relations careers in the federal government. A percentage or number of students might have made that less fuzzy. If that kind of stipulation is too restrictive or specific, a provision in the agreement could require ongoing person-to-person reporting to ensure the donor’s heirs are satisfied. Require reports and other communications. Donors—or if they are deceased, their representatives—should hold the charity accountable for providing relevant information in a timely manner. It’s reasonable to expect financial and narrative reports that track the progress and impact of a substantial gift. Six steps for charities Involve the board. Require board members to approve the terms of endowed gifts that will create obligations over a long period of time. PHILANTHROPY
Resist perpetuity. Try to avoid the phrase “in perpetuity” in gift agreements. Its meaning is far different in different kinds of charitable work, and conditions, missions, target populations, programs, and buildings can change over time. Keep previously agreed obligations in clear sight. Just because a restricted gift was made before current board members began their service doesn’t mean they can be ignorant or unconcerned about the duties of that transfer. Cost, practice, and fiduciary responsibilities need to be reviewed regularly. Don’t forget overhead. Every gift meant to support or create a program should designate a portion of the funds for administration. Good charities need good infrastructure to operate effectively. The board needs to establish a policy—say, 20 percent to keep the program operating—and the staff soliciting gifts needs to communicate that. If a professor’s position is to be endowed at, say, $100,000 per year—while the gift would need to be $2 million, assuming a 5 percent endowment spending rate—an additional $400,000 probably needs to be set aside for office space, administrative support, and other costs. Have an effective and fair whistle-blower policy. If an employee discovers that something is amiss with the accounting of a gift, he or she should be protected for reporting this. Develop a comprehensive stewarding policy. Donors should not be forgotten or marginalized after the gift is made. This is true for any gift, but it is particularly necessary for those who have made an endowed gift. In addition to clear, regular reporting of finances and results, charities should foster ongoing communication with donors. There is no ironclad legal language to guarantee that donors, their descendants, and recipient charities will remain aligned in all future executions of charitable work. So in addition to good policies, donors and charities need to establish open communication, cooperative attitudes, good faith, and as much trust as possible, both in advance of gifts and after they are made. Those can be fragile qualities, but are much likelier to exist and endure when long-term gifts are founded on respect for the donor, the donor’s family, and the donor’s wishes. P
As Time Moves On Forever is a long time, they say. That can definitely be true of charitable bequests. So what do courts and trustees do when faced with a perpetual gift that has outlived its usefulness, or even its connection to reality? Today’s most common legal solution is to apply the ancient legal doctrine of cy pres (“as close as possible,” pronounced “sigh-pray”). Under cy pres, a bequest or charitable gift can be “reformed” by a court when strict adherence to the donor’s original intent is no longer practically or legally possible. Judges have permitted trustees to use funds in ways that deviate from the donor’s specific instructions while hewing as near as they can to the spirit of the original gift. One of the oldest examples of cy pres is the case of Attorney General v. Earl of Craven. In 1687, on the heels of a plague outbreak, a public-spirited English earl endowed the “Pest House Field” near London to build and maintain in perpetuity a facility for quarantining and caring for any of the local poor who “as should thereafter, at any time, happen to be visited with the plague.” By 1856, it had been 180 years since the last plague outbreak, and the earl’s descendants (who served as trustees) were keeping the grounds and funds for their personal use. The British government sued, arguing that reformation of the gift was necessary “to carry into effect the objects of the founder” by devoting it to “some charitable purpose which falls within the general charitable intention.” The court directed the fund to be used to found a hospital where sufferers could be treated for infectious diseases such as smallpox and cholera, and other maladies. Earl of Craven was an easy case. It was fair to assume that the earl would prefer his money be used to treat contemporary plagues rather than to line the pockets of ne’er-do-well relations. In more mixed
circumstances, courts have historically been hesitant to apply cy pres, since it conflicts with the fundamental precept of trust law that a person can dispose of his assets as he sees fit. Those arguing for redirecting trusts typically had to offer convincing evidence that there was no part of the original bequest that was legal or practically feasible, and that the proposed reformation itself did not run afoul of some other deeply held belief of the donor. Courts preferred to let a gift revert to heirs or to the general treasury rather than go to a purpose that violated donor intent. The reluctance of courts to reform gifts reached its apotheosis in the American case of Thatcher v. Lewis. Bryan Mullanphy, an Irish immigrant who made a fortune as a merchant and later was mayor of St. Louis, left a substantial fund to “furnish relief to all poor immigrants and travelers coming to St. Louis…to settle in the West.” By 1902, with such travelers down to mere dozens per year, it was clear that the fund had far outlived the need, and the Missouri attorney general commenced litigation to reform the gift. But not for another three decades did the court apply cy pres and alter the terms of the trust. Even then, the court insisted that though modern-day “poor travelers may be outfitted in ‘Model T Fords’ rather than ‘Prairie Schooners,’ there still must be poor travelers who need assistance.” The court would thus only permit funds to be used for “the relief and assistance of other poor immigrants and travelers,” and on condition that any voyagers passing through St. Louis on their way West be helped first. Contemporary courts have adopted a looser—some say, too loose—view of the SPRING 2017
cy pres doctrine that permits reformation of gifts that have become merely constraining, as opposed to impossible or infeasible. The protracted fight over Philadelphia’s Barnes Foundation is the most famous example. Self-made pharmaceutical magnate Dr. Albert Barnes was a man of unflinching will. When he endowed an art school and museum to house his remarkable art collection in 1925, he constructed the gallery to exact specifications that included the precise placement of individual paintings, in accordance with his eccentric pedagogical theories. And Barnes decreed that the collection could never be moved from its location in suburban Lower M erion, Pennsylvania. He placed stringent restrictions on investments of the trust money, and appointment of new trustees. By the 1990s, these restrictions had caused the endowment of the Barnes Foundation to decline substantially. The trustees sued to reform the foundation to permit the collection to move to a new facility in downtown Philadelphia, permit traveling shows, and diversify the endowment. Though the trustees lost in the lower courts, the Pennsylvania Supreme Court eventually concluded that while “the sanctity of the donor’s intent should be honored and upheld whenever possible,” in this case the donor’s intent had become so out of step with contemporary economic and artistic imperatives that the foundation needed relief in order to achieve Albert Barnes’s larger charitable intent. Many observers were worried by the court’s breezy hat-tip to donor intent “whenever possible.” Most judges, however, remain rightly wary of rewriting perpetual gifts in order to suit current trustees. Cy pres is a doctrine that will always allow some subjectivity, but within limits—which is all the more reason for donors to be crisp in the instructions they leave with their long-term gifts. —Justin Torres 49
ideas The Dark Side of Transparency
Private decision-making can be more effective than openness BY BOB REID
Ability to insulate grant decisions from political considerations. Whether parochial or national in scope, there are political dynamics and potential controversies within many grants. Being able to make clear decisions without fear of how outsiders might react will often bring better results. Grantees report that private foundations that have retained some privacy in their deliberations are much more likely than other funding sources to offer support based on the merits of projects rather than factors like potential reputational risk. For example, two national nonprofits emerged repeatedly in interviews with foundation insiders: Planned Parenthood and the Boy Scouts of America. Both have often found themselves at the center of hostile attention. Foundation executives felt that if they were to fairly consider grant proposals from controversial nonprofits like these, on their merits, some insulation from controversial publicity was necessary. Shielding grant programs from external influence. Foundations report that elected officials, civic leaders, businesses, colleague donors, neighbors, and friends often seek to influence grant decisions. Resisting such efforts depends upon the extent to which grant decisions can be shielded from influence-peddling. Foundation trustees and executives see this as important to their ability to protect the independence
Foundations that are able to keep some control over the privacy of their deliberations are more willing to experiment and take a chance on high-risk projects. 50
and integrity of their programs, and often close ranks, and close doors, to avoid interference in grant d ecision-making. Embracing risk and innovating. Grantees report that foundations that are able to keep some control over the privacy of their deliberations are more willing to experiment and tolerate project failures, in pursuit of greater overall impact. Grantees appreciate foundations that are able to embrace risk, test ideas, be intellectually honest about outcomes, and learn together with grantees through trial and error. It may be necessary to drill several dry holes in order to hit a big one, said some interviewees. Since most foundation money was originally made through a willingness to take risks, trustees want the ability to make some calculated gambles in grantmaking as well. Encouraging an entrepreneurial approach. Study participants suggested that effective foundations often act like venture capitalists—bringing to the table not only money but intellectual resources, access to essential networks, technical assistance, legal help, aid in recruiting other investors, a spirit of activism, and an “all-in” approach that grantees appreciate. This investor-like orientation requires strategic discretion and tactical quiet at times. These various positive outcomes argue against constant, simple-minded openness in all philanthropic deliberations. Being somewhat closed at times and in places encourages effectiveness, independence from herd thinking, and innovation. This is not just a theory. Both foundations and Bob Reid is executive director of the J. F. Maddox Foundation and lead author of the study on which this article is based. Interested readers can find details at https:// shareok.org/handle/11244/45378.
Boy Scouts of America
It is now almost impossible to read donor literature or attend charitable conferences without being bombarded by growing demands for greater openness, transparency, and self-revealing in giving. It’s said that foundations won’t realize their full potential, and may even fall into ineffective and self-serving ways, unless there is a transparency surge beyond existing disclosure requirements. However, in interviews I conducted for a dissertation at O klahoma State University, “The Opacity of Private Philanthropy,” both grantmakers and grantees reported several reasons why quiet, discreet foundation practices can lead to better giving. Most foundations, interviewees said, practice a mix of open and closed deliberation and action—shifting back and forth to optimize results in different circumstances. Making decisions more privately permits foundations to make important grants that would be unlikely to be approved if they took place under a bright spotlight. Specifically: The ability to work outside of a public glare helps insulate grant decisions from political considerations. It helps protect the integrity of grant programs by shielding them from unhelpful external influences. It encourages experimental risk-taking. And it allows givers to take a much more entrepreneurial approach to grantmaking. Let’s examine each of these factors in turn.
Boy Scouts of America
grantees in the O klahoma State study reported that private foundations take full advantage of these capacities in service of fresh, high-impact grant programs. In fact, grantees said that opportunities to work with donors in relative privacy yielded unique rewards in their ability to experiment, and to build consultative relationships founded upon genuine candor. More privacy correlates with less bureaucracy, more flexibility, and improved efficiency, according to charitable recipients. Is there a drawback? To top it off, these findings do not support concerns about insider entitlement and misconduct in private philanthropy. To the contrary, foundation operatives with an acute obsession for achieving significant beneficial outcomes from charitable activities were often most adamant about preserving non-public action as a philanthropic tool. The main drawbacks from retaining some limits on transparency, this research revealed, accrue to fundraisers. Privacy limits their prospecting—g athering information on grantmakers, their organizations, and their interests. More private donors—who may lack websites, formal grant application procedures, or explicit giving criteria—are harder to solicit. Charitable fundraisers overcome this by developing relationships and deeper levels of mutual trust with more private donors. All of this is a matter of degrees. It’s worth noting that private foundations are already remarkably transparent entities. They annually disclose extensive information in publicly available tax returns, including their assets, trustees, key personnel, information regarding compensation, grant recipients, and amounts, as well as how and with whom assets are invested. With tax returns soon to take machine- readable formats, this information will soon be subject to mass data-mining and detailed analysis and republication. The additional transparency sought by advocates is usually in the vein of
Foundation leaders report that in order to make grants to nonprofits like the Boy Scouts of America, their institutions need some measure of privacy and insulation from political considerations.
ecision-making. What criteria were d used in grant decisions? Why were certain grant requests approved and others denied? Who are the crucial deciders? What are their soft spots and armored points? How can outsiders exercise greater influence over the grant decision process? This is where my research suggests that greater transparency could inadvertently erode essential capacities unique to private philanthropy. It’s understandable that recipients would like more details, but this should not come at the expense of foundation effectiveness. Arguments in favor of greater transparency are sometimes based upon a presumption that private foundations are essentially public entities, since they manage tax-protected funds. But private foundations are private entities, the product of private earnings and private gifts. They don’t receive public funds. And they provide society with many public benefits. What’s at stake What if private foundations had to account to outsiders for risky gifts, political controversies arising from their grants, or failed experiments? What if outsiders could insist on fixed grant criteria? What if social pressure, state steering of monies, and cronyism were allowed to compromise SPRING 2017
the independence of the thousands of private foundations in America? Not having to slavishly account to external stakeholders is one of the things that makes private foundations rare, uniquely precious and useful in the process of social invention, culture reform, and public p roblem-solving. The hard truth is that greater transparency could elevate risk aversion, lower interest in experimentation and innovation, expose grantmaking to political considerations, increase rigidity, and diminish entrepreneurialism in private foundations. It is often suggested that if foundations fail to voluntarily engage in greater transparency, they are likely to face externally imposed requirements. Our findings caution against such steps. Far too little of today’s glib discourse on transparency has benefited from rigorous research on the effects of limiting outsider influence and protecting philanthropic independence. There is a need to extend and deepen understanding in this area. Meanwhile, each private foundation should decide for itself if, when, and how becoming more transparent will improve its philanthropic results. This latest research suggests that foundation trustees and executives, guided by a genuine passion for benefiting society, are typically quite pragmatic and public-spirited in this regard. P 51
ideas Rethinking Disability
Donors launch an experiment that could spark seminal social reform BY THOMAS MEYER
Our system for handling veterans with disabilities hasn’t been properly modernized in a century. It is based on antiquated medical notions, and it enshrines completely outdated technological, legal, and social understandings of what people with disabilities are capable of. The current system, which was created soon after the World Wars, tallies up the number and severity of medical ailments logged for a servicemember, then condenses that into a single number that represents that person’s disability rating. (This is often increased in subsequent years via appeals, which are unlimited.) Lifelong cash payments, plus eligibility for other benefits like lifelong health insurance for family members, then flow directly from that. The higher the rating, the larger the checks. The nation now spends more on disability payments to veterans than it does on all of their physical and mental health care, or on the rich G.I. Bill benefits to support their further education, or on the entirety of its programs to help veterans buy a house. In 2016, the V.A. mailed out disability-compensation checks totaling more than $68 billion. That’s three and a half times as much (after adjusting for inflation) as we spent as recently as 2000. In that same short period, the percentage of U.S. veterans who are categorized as disabled has more than doubled. And the number of veterans claiming the very highest levels of disability (rated 70-100 percent) more than tripled. About half of all war-on-terror veterans are now applying for lifelong disability benefits. These funds do not help people recover. They are not for physical therapy, or counseling, or devices to assist them at work, or training that will allow them to shift to a new occupation where their disability isn’t an obstacle. This cash just says “Sit down. 52
No need to get better. We don’t imagine you being independent, or supporting yourself.” These non-rehabilitative cash payments send the implicit message that the recipient is unfixable—delivered with no expectation or encouragement that he or she, no matter how young, will heal and become self-reliant. That’s why veterans on disability compensation (studies show) respond to treatment and recover at much lower rates than people not receiving checks. Rather than getting better, the much more common pattern for veterans on disability is to climb up steadily to higher and higher ratings. The result is less and less social and occupational activity, and more isolation and unhappiness. Veterans with higher disability ratings are much more likely to drop out of the workforce—not because of functional limitations, but because of the economic incentives these checks impose. Then they end up in a precarious position: disability benefits are enough to dissuade many recipients from getting healing therapy and building a career, but they aren’t enough to support a family in the long run. This is a badly broken system. It is begging for a creative reimagining.
role by funding a careful pilot program to demonstrate that there are better ways to treat veterans with disabilities. Together, we formulated a plan that would provide charitable funding to design and run a voluntary test of new supports, one that would invest in veterans with disabilities on the front end of their transition, support them in pursuing improved health and steady work, and reward them for success. We presented our idea at a meeting of philanthropists in late 2013 and received strong interest. The Anschutz Foundation, Milbank Foundation, and Daniels Fund quickly stepped up to provide the initial funding to develop the idea. Carl Helstrom, then of the Milbank Foundation, described his reaction this way: “We are a small foundation, and always asking how we can be most helpful with our limited funds. This was a classic pilot-project scenario where you need someone to jump in first, show other donors that you think it’s promising and valuable, and give the creators enough resources so they can demonstrate whether their idea really works. It was a calculated risk, but it was one we thought worth taking, and very congruent with our mission of helping Americans overcome disabilities.” That kicked off a process of developFrom problem to plan In 2012, The Philanthropy Roundtable ing the idea into a focused business plan. launched a new program advising donors We studied examples of other disability interested in veterans’ causes. Karl systems around the world that had been Zinsmeister, who previously led veterans’ policy at the White House, provided guidThomas Meyer is director of ance to the program and hired me to run it. the Roundtable’s veterans He also introduced me to a former memprogram, and author of ber of his policy staff—Daniel Gade, an the just-released guidebook Iraq-war combat veteran and amputee who Uniform Champions: A had gone on to earn a Ph.D. in social polWise Giver’s Guide to icy, and a position teaching at West Point. Excellent Assistance for The three of us wondered whether private Veterans, from one chapter of which this article philanthropy could play a constructive is excerpted. Ashley May contributed reporting. PHILANTHROPY
modernized in recent years. We took inspiration from U.S. programs that reward work, like the Earned Income Tax Credit. We drew lessons from the rising tide of philanthropic programs that are now helping economic strugglers hold jobs. We met with former V.A. secretaries, policy experts, and high-ranking military personnel for advice. We sought input from leading scholars like David Autor at MIT, Mark Duggan at Stanford, Rich McNally at Harvard, Sally Satel at AEI, and Chris Frueh at the Baylor College of Medicine. Most important, we took our ideas to individuals in the process of transitioning out of military service, and veterans with disabilities. Gade led the work running surveys and focus groups to better understand what these men and women feared, aspired to, and needed most to make successful jumps into civilian success. This research found deep dissatisfaction with the current disability system for vets, and a powerful hunger for alternatives. The three of us designed a program that would test the effectiveness of different combinations of supports side by side. There would be flexible funds for training or equipment that would position individuals to garner attractive jobs. There would be wage bonuses to reward early transitions to work. There would be intensive mentoring, peer support, and high expectations. The goal of all this would be crystal clear to participants—independence. Indeed, we chose that as the name of the initiative: The Independence Project. By the fall of 2014 we had a detailed 60-page business proposal, including a plan for tracking outcomes and a basic budget. The Anschutz Foundation became the pioneer funder with a $1 million grant that transformed the effort from fresh idea to actual undertaking. The Milbank Foundation re-upped its commitment, and the Wilf Family Foundations signed on too.
oundation, learned about the IndepenF dence Project and asked Josh McGee, an economist on his staff, to take a look. At first inspection, he says, “it fit our interest in evidence-based policies, and testing new ideas to figure out better ways of solving hard social problems.” But the Arnold Foundation is an extremely picky grantor. “We ask, ‘Is this an intervention with a solid probability of success? Is it new, or has this subject already been explored?’ We care a lot about the evidence any project will produce, and whether the charitable intervention includes hard tests of its own effectiveness,” notes McGee. He asked for exact details of the various tools the Independence Project would
A wide range of donors find common cause Doing the experiment at this depth and quality was going to require more than $10 million. With a rich design now in hand, we approached other funders. A dozen eventually signed on. (These grants were not to the Roundtable but to a separate fund to execute the project, as described below.) All had their own motivations and particular interests—which strengthened the project. The Anschutz Foundation, the
Veterans with high disability ratings are more likely to drop out of the workforce—not because of functional limitations, but because of incentives.
use with participants. Is there any prior precedent for the flexible training funds you’re proposing? Where has career coaching worked in the past to help people get jobs? No one had ever tried any of these supports with American veterans, so analogies from other fields had to be explored: Field tests with dislocated workers, welfare families, civilians with disabilities, veterans in other countries, and so forth. The Arnold Foundation agreed that veterans are a worthy population to assist. It also believed that any lessons about better ways of providing disability compensation among veterans would have valuable implications for the larger population of Americans stuck on disability. It wanted in. But it wanted a strong evaluation process so no opponent could shrug off results as an “anomaly,” or “not reproducible.” After several rounds of rigorous refinement, the Arnold Foundation board approved the plan. And in the summer of 2015, they committed $4.1 million of Big funding to hone the project In 2014, Denis Calabrese, then pres- support. The Independence Project was no ident of the Laura and John Arnold longer pie in the sky. SPRING 2017
first major donor to commit, wanted to see veterans thrive over the long run. Fellow Coloradans at the Daniels Fund, whose patron had been formed by military service before he went into business, followed a key motto of Bill Daniels: “Value people for what they can do, not for what they can’t.” The Morgridge Family Foundation invested as part of its founder’s commitment to promoting self-sufficiency. The Lynde and Harry Bradley Foundation saw triple potential in the project: a chance to help patriotic veterans, to improve government effectiveness, and to avoid a fiscal drain of billions of taxpayer dollars. The Harry and Jeanette Weinberg Foundation found many of its cherished interests embedded in the project: disability issues, workforce development, and veterans. And the Kovner Foundation made the project the core of its new venture into supporting veterans. For the Independence Project’s largest donor—the Diana Davis Spencer Foundation—the project aligned with several crucial priorities. The foundation is a dedicated supporter of charities that aid military families. 53
ideas It has longstanding interests in improving the quality of public policies. And perhaps the highest priority for the foundation is national security. Ensuring that veterans with disabilities transition successfully into the workforce both strengthens the U.S. economy and extends the viability of our all-volunteer military force. And all the donors cherished high hopes that the lessons of the Independence Project could be broadly applicable to all individuals, and help civilians with disabilities thrive as well. Building an all-star team The Philanthropy Roundtable developed and incubated the Independence Project. But the Roundtable is not an operating philanthropy. A great charitable service provider was needed to implement the program. Top researchers would be required to handle the evaluation. The first option considered was to launch an entirely new nonprofit. But that would require legal incorporation, staffing, and startup energy. Most importantly, a new organization would lack deep trial-and-error experience at delivering high-quality services. Rather than reinvent the wheel, we went looking for the very best nonprofits working with people with disabilities and with veterans. We had several criteria: • M ission alignment. The organization needed to share the underlying philosophy of the project that veterans should be invested in, not given incentives to sit on the sidelines. • Experience at delivering similar services. Some components of the Independence Project had never been applied to vets, but others were drawn from the best practices of existing nonprofits. The Independence Project hoped to find a partner already very experienced and successful in connecting veterans to jobs. • Capacity for growth. Any organization taking on the initiative would need to be 54
able to manage a large budget, staff, and complex programs at a high level of quality, without getting overwhelmed. • Infrastructure for collecting data. Understanding how participants are doing, and later being able to prove what factors allow veterans with disabilities to thrive, are crucial to this project’s ultimate success. So the executing partner had to be savvy and capable at collecting data.
this ambitious experiment. It was also a challenge to balance getting the program operating quickly and efficiently with the pace and procedure of academic evaluation. So the Independence Project first launched a smaller pilot version of the Dozens of potential organizations were program so that procedures can be tested assessed. We relied heavily on guidance from and adjusted before heavy investments funders like Dan Goldenberg at the Call of are made in gold-standard evaluation. Duty Endowment who were already supporting organizations in the running. After Governance of an months of searching, Hire Heroes USA unusual donor collaborative proved to be an ideal partner for the job. A With a dozen donors involved in the strong theme of self-reliance underlies all Independence Project, each with different of the organization’s programming. Several giving priorities and levels of funding, we elements of the Independence Project, like had to give considerable thought to a govintensive job coaching, are already part of erning structure that could fairly oversee its standard procedures. The organization the project as it developed over a multihas superb leadership, and a proven ability year period, and make course corrections to recruit and train good staff. Hire Heroes if needed. We wanted to make sure that USA was also already a sophisticated collec- all donors to this pioneering project would tor and user of data, as it methodically studies remain informed, without demanding too the impact of its own programs and how much of our oversight. Instead of having many separate relathey can be improved. Finally, the group had demonstrated many times that it knew how tionships between the 12 funders and the to open new ventures and expand program- program operators and researchers, the ming without sacrificing quality. HHUSA project pooled most grants in a special fund oundation brought on a director who would be respon- opened at the Communities F sible for executing the program—Ross of Texas. Contributions are safely parked Dickman, who was just leaving the Army there for distribution as pre-agreed mileafter 12 years as a combat veteran, helicopter stones are reached by the project. As incubator of the project, The pilot, and trainer of cadets at West Point. HHUSA and the program’s new Philanthropy Roundtable took responsidirector brought their on-the-ground bility for releasing payments and reporting experience in service delivery to bear, progress back to all donors. Having a single turning the paper plan into a con- monitor of the funds allows HHUSA and crete program. They incorporated their other grantees to focus tightly on running already-successful practices into the a successful project. To keep donor intent Independence Project, developed proce- at the fore, a small oversight committee dures for new components, and hired and with special expertise was created to release grants and make any course corrections. trained an execution team. First put into operation in early We searched simultaneously for external evaluators who could carry out 2017, the Independence Project is still rigorous tests of the program and pro- in its infancy. But it serves as a model for vide an independent assessment of its major donor collaborations that marshal impact. Finding the right evaluator was charitable funds, philanthropic expertise, tricky—top-rated private firms charge and nonprofit management to address exorbitant fees, while individual academ- America’s biggest and most complex ics rarely have the resources required by social problems. P PHILANTHROPY
Business, Love, and Service Three human impulses led to history’s number-one charitable donation BY NOE MIE E M ERY
It happened slowly, and then all at once. That’s how traveling salesman Ray Kroc took over a little hamburger chain called McDonald’s and then transformed it into an international behemoth. It happened all at once—aflame at first sight. That was the tumultuous love affair of Ray and his third wife, Joan. The offspring of their partnership was not a child but a $3 billion fortune. As Lisa Napoli recounts in Ray & Joan, one partner produced the baby, and the other gave it away. Ray Kroc was a 52-year-old struggling milkshake-machine salesman in 1954, with nowhere to direct his supersized energy until he came upon a hamburger stand in San Bernardino. He fell in love for the first time, with the fast-food business. The McDonald brothers had perfected the form, cutting away expensive and time-wasting elements of restaurants—the waiters, the tables, the napkins and cutlery. They created a drive-in experience that produced a nonpareil modern meal of hamburger, fried potatoes, and milkshake in 30 seconds, for less than 45 cents. The arches, the name, the ambience of the joint struck him as something unique and yet universal, aspirational yet simple, serving down-to-earth hungers in practical, completely American ways. After talking the brothers into letting him franchise their operation, Kroc went barnstorming through veterans’ halls, churches, and chambers of commerce for the right sort of people to hire as managers. His grandiose vision of the company eventually brought him into conflict with the McDonald brothers, nearly resulting in bankruptcy before he snatched their name and their brand out from under them. Kroc would say later he “founded” McDonald’s, which was untrue, but he did create the system that made it a worldwide phenomenon. And that phenomenon made the scrapper who had been a perpetual flop until that point suddenly and fabulously wealthy. Kroc’s travels threw him in the path of a dazzling blonde named Joan Smith. She was playing the organ in an upscale St. Paul restaurant where Ray had gone to talk her boss, the restaurant’s owner, into buying a share of his enterprise. Her boss joined the team, then hired Joan’s husband to manage a franchise in South Dakota. Ray dropped in on the Smiths often, and had long talks with Joan on the phone.
Ray & Joan: The Man Who Made the McDonald's Fortune and the Woman Who Gave It All Away By Lisa Napoli
In 1961 Ray proposed, and he and Joan went to Las Vegas for the six-weeks residence needed to make their divorces final. But frightened of losing her young teenage daughter, Joan called it off and went home in week five. Eight years later Ray met Joan again, and finally managed to marry his second obsession. The match was both close and contentious, as both had strong wills. One thing they fought over was how to spend money. Philanthropy was important to both of them. Joan cheered when Ray gave hefty sums in their names to the Salvation Army and the R onald McDonald houses created to shelter families near hospitals where they had sick children. But she was a liberal, and her inner flower child rebelled when he donated to Richard Nixon and ordered the flags at his restaurants to be raised back to full staff after they had been lowered for the student protesters shot at Kent State. When Ray had a stroke and became largely an invalid, though, Joan nursed him devotedly until he died. She had paid her dues, Napoli opines, and earned her inheritance. Early on, she made two huge decisions about how to use it that shook the world of organized giving, as her husband had rattled the restaurant business. First, she decided to let her fortune die with her, having more faith in organizations she had worked with than in future generations of foundation executives she would never know. Second, she would dispense the cash herself, relying on her own instinct and experience rather than relying on professionals. She heard a speech against war that she admired and sent the orator $6 million to start a foundation; sat next to a doctor on a plane and gave her $15 million to launch a hospice; saw a Midwestern city stricken with flooding and dispatched $15 million to be doled out to the displaced. Her giving to anti-war causes might have driven Ray crazy. Nor would he have approved of her $225 million gift to National Public Radio. But no matter where her personal checkbook took her, she continued to love and respect Ray. She gave the bulk of her funds to his favorite charity. And she did so in a way that was as visionary, practical, tough-minded, and shrewd as her husband’s methods of business. One day in 1997, Joan went on a car tour of poor sections of her hometown of San Diego. The desolation and squalor shook her. “I remember her saying ‘I’ve got to do something,’” recalled Michael O’Neill, the local cop who drove her around. “I could tell from the tone of her voice it was going to be big.” 55
books “Think big,” Ray had told the McDonald brothers in San Bernardino. “Think big,” Joan now told the Salvation Army in San Diego. She urged the staid old organization to imagine things “bigger than you’ve ever thought before.” What Joan had in mind was a community center the size of a village, with swimming pools, theaters, ice rinks, and classrooms and places for meetings, set in the middle of underserved neighborhoods, where people of all ages could go. Soon engineers working for the Salvation Army were doing what Ray had done in locating his restaurants, checking traffic patterns and family patterns to find the optimal location. A community center was erected for $50 million, with an additional $40 million earmarked for upkeep. At the opening ceremony in 2002, Joan invoked Ray’s memory. But it was not until after her death one year later that people realized that Joan, like Ray, actually had her eye on something bigger—a franchise, of which the San Diego building was just the beginning. In her will, she donated a staggering $1.5 billion to the Salvation Army for the creation of up to 30 new centers. It was the largest philanthropic gift ever made to one charity. And today, all across the country, Ray and Joan Kroc Community Centers serve Americans who are hungry in body and soul. Some of these ministries operate quite near one of the 35,000 outlets spread throughout the world that serve even more basic human needs, under golden arches. Noemie Emery is a contributing editor to the Weekly Standard and columnist for the Washington Examiner.
Preservation and Prosperity What could property rights do for Indian reservations? BY DANIE L F I S HM A N
Within the United States, the richest country in the world, many of the most visceral pockets of poverty exist on Indian reservations. Instead of the Edenic oases conjured to mind by legend, most reservations are reminiscent of third-world countries. Health, economic, educational, and social data paint grim pictures. The Pine Ridge reservation in South Dakota, for instance, has the lowest life expectancy in the Western Hemisphere outside of Haiti—an average of just 48 years for men and 52 years for women. 56
The New Trail of Tears: How Washington Is Destroying American Indians By Naomi Schaefer Riley
In The New Trail of Tears, Naomi Schaefer Riley colors these facts with anecdotes that illustrate the consequences of a broken system. She also crafts a compelling case for property rights and political transformation, though ultimately she fails to square the need for bone-deep reform with the unique character and challenges of tribes. Here, philanthropy may be able to help. The crux of Riley’s argument is essentially this: market forces have allowed communities throughout America, and indeed the world, to flourish. But these powerful forces for prosperity have been strangled on reservations. Natives “are the highest regulated race in the world,” as one Crow tribe member states. Major shortcomings in property rights, economic opportunity, and democratic governance yield a system devoid of personal responsibility and mobility. Owing to policies dating back the better part of a century, most Native Americans living on reservations can’t own their land outright. They are therefore unable to make investments in real property that would turn their abundant land into an income-producing asset. Riley cites this as an example of Hernando de Soto’s notion of “dead capital”—something that belongs to people on paper, but can’t be used to economic advantage because of legal and political blockages. Riley sees this as a root cause of the myriad ills befalling reservations: derelict homes that are in essence unowned, rich soil and minerals that lie unused, barren main streets where there is no commerce or development. Riley is at her most compelling when she chronicles failed efforts by Natives to build businesses or use property for greater gain. She cites a large hotel development that could have created many jobs, which fell apart because development on tribal land typically takes four to six times as long as it would on non-tribal land. She notes that there is a 49-step process for Natives to gain approval to extract resources from their land. Riley quotes one Native comparing his legal autonomy to that of children and the mentally incompetent. This compounds one of the great tragedies of reservation life: a brain drain of the most capable citizens to locations that offer more economic freedom. The collective economics of the tribe stifle upward mobility and concentrate power in the hands of a few. An ambitious policy-oriented philanthropist could work with tribes to improve public policy here. A donor could, for instance, work with entrepreneurial Natives to purchase land just off a reservation where Indian-focused businesses could be developed without the sclerosis that kills business on tribal and Federal land. This could prove that ownership rights and over-regulation are central problems, and that tribe members can prosper if there is economic liberation. But Indian tribes and free-market capitalism have had a difficult relationship for generations. When the
1887 Dawes Act transferred some tribal lands to individuals, most plots were sold away in quick-cash sales that produced no lasting economic improvement, leaving tribes poorer in land and resources, and individual tribe members no better off long term. The bitter taste from the Dawes Act lingers. Today as well, Riley points out over and over, individuals who come into money from windfalls like tribal casino gaming tend to lose it in rapid and fruitless fashion. So it’s not surprising that many tribal leaders have strong desires to keep lands collectively owned, believing that a continuous block of land will make it easier to preserve environments, religious beliefs, language, and culture. They maintain the century-old idea that “Your money is not as good as our land.” Jointly held land is one of the strongest ties that binds together many tribes today. If territory disintegrates, some Native Americans believe, so will their remaining identity. To create new paradigms for community and individual prosperity, donors might support promising young Native Americans who are interested in balancing economic development with cultural preservation. There are other communities that have made the transition from collectivism to individual enterprise; these could be studied. There are opportunities for donors with a love of art, traditional culture, wise resource use, and healthy tourism to creatively encourage Native Americans and their tribal governments to find new models for operating reservations. While a painful shift, it’s possible for tribes to survive without the land that nurtured them. Riley cites the Lumbee tribe of North Carolina, which has no reservation, as a relative success. Yet according to historian Fergus Bordewich, the Lumbee “have no memory of the tribe from which their ancestors may have come, nor the language they spoke, nor of any religion older than the… Baptist faith.” Riley sees this as proof that tribes can prove more prosperous without reservations, while many Natives see this as evidence that a landless tribe loses its character and beliefs. If preserving religion, culture, and language are one’s highest priorities, isolated, homogenous communities distinct from the larger society might have value. That will carry many economic penalties. These ultimately make tribal thriving unlikely. But
clearly a standard free-market toolkit will not work on many reservations; creative adaptations will be necessary. Another major gateway to opportunity, as Riley notes, is education. But attempts to bring education to reservations have yielded repeated heartbreak, with outcomes landing somewhere between bad and abysmal. Riley describes entrenched opposition to reform efforts such as charter schools and Teach For America, and deep resentment against high-achieving Catholic schools. As in a number of other communities, political considerations squelch the needs of children. Some Native schools allow Indian language and cultural education to trump the teaching of core subjects. This often sparks impassioned political support. But it dooms generations of young Indians to weak, often sentimentalized, and fragmented education. Of course, challenging home conditions burden many Native students when they enter classrooms. How should schools overcome these? Riley seems to advocate an approach Amanda Ripley documented among successful Norwegian teachers in her book The Smartest Kids in the World: don’t focus on what the children experience outside of school, lest pity and low expectations creep into a teacher’s thinking. Instead, compensate aggressively in the classroom. That’s why Ben Chavis, a Lumbee Indian and charter-school founder, promotes a hard-nosed mentality in his classrooms. He “sees American Indians as immigrants to the dominant American culture,” writes Riley. “They’re poor, just like immigrants, and starting from behind, so he’s proposing strategies that have helped immigrants succeed.” Chavis’s results are impressive, but until more tribes are willing to hold teachers and parents accountable for improving student achievement, Chavis will fight a losing battle. Donors might think it wise to support existing and new programs to train the next generation of Native leaders for school reform; however, as someone with teaching experience on a reservation, let me suggest there’s little hope that swapping out leaders within failing school systems will bring about lasting change. Instead, donors should seed and bolster quality public charter schools, low-cost private schools, and parochial schools that can reach Native children. There are also intriguing opportunities for donors to support new technologies that can SPRING 2017
bring rigorous schooling to reservations in new online forms. Prudent donors beware: layering technology onto broken systems will also inevitably lead to failure. Riley’s dim view of the current state of tribal governance doesn’t provide much hope for legislated government solutions. “The ambiguity of the relationship between tribal leaders and the federal government has created a situation whereby Indians demand more autonomy but instead are offered more money." This trickles down. Tribes with casinos or other cash cows write free checks to members, with predictably destructive results. The distance between the dominant American experience and Indian reservations—there are both physical and mental separations—makes many of their problems feel deeply foreign and gut-wrenching. Instead of thoughtful policy changes, the default solutions from non- Natives are just more contrition and more money. Family homes falling apart? Physical and mental ailments everywhere? Schools graduating illiterate students? Just back up the money truck, because structural reform and discipline are too slow and agonizing. This is a warning to donors as much as to politicians. Philanthropy layered onto reservations as a patchwork of social services may ameliorate some immediate problems, but it will not address underlying issues. Givers should nurture and support organizations or businesses that encourage individuals and the tribe to take ownership of their problems and generate homegrown solutions. Native Americans would be well served by a number of Riley’s proposed solutions. Yet those measures will only be tried if they can be reconciled with existing Native desires that their land and culture be preserved. Given the desperate failures of today’s political leadership, it’s possible that a measure of creative destruction, inherent in any capitalist effort, would provide a necessary shakeup of an entrenched, outdated system. But creative adapting and explaining and synthesizing is needed—as today’s Indian leadership will mostly meet free-market solutions in their purest forms with staunch opposition. Daniel Fishman, former director of K-12 Education Programs at The Philanthropy Roundtable, taught high-school history on a New Mexico reservation as a Teach For America corps member. 57
face face TO
Annual Meeting 2016
The Philanthropy Roundtable celebrated its 25th Annual Meeting on November 16-17, 2016 in Charleston, South Carolina. Keynote speakers included authors J. D. Vance and Angela Duckworth, and there were sessions on constitutional interpretation and “freedom from speech” on campus. Bruce and Suzie Kovner accepted the William E. Simon Prize for Philanthropic Leadership, followed by a performance by a violinist studying at Juilliard as a Kovner fellow, Randall Goosby.
(individuals listed left to right) 1. Randall Goosby,
Juilliard School 2. Ambassador Frank and Kathy Baxter, K & F Baxter Foundation 3. Alicia Manning, Lynde and Harry Bradley Foundation; author J. D. Vance 4. Angela Duckworth, University of Pennsylvania 5. Kelly Compton, Sally Hoglund, Forrest Hoglund, Kristy Robinson, Shelly Dee, Hoglund Foundation
(individuals listed left to right)
6. Gerard Robinson, AEI 7. Laura Sandefer,
Acton Academy 8. Betsy DeVos, Dick DeVos, DeVos Family Foundation; Arthur Brooks, AEI 9. José Quiñonez, Mission Asset Fund 10. Claire FiddianGreen, Richard M. Fairbanks Foundation 11. David Odahowski, Edyth Bush Charitable Foundation; Harvey Massey, Carol Massey, Andrea Massey-Farrell, Harvey and Carol
reform proposals—even better, to universalize the deduction so it is available to all, including non-itemizers. Since 1917, America has recognized the value of the charitable deduction, which has served as the bedrock of our altruistic society and is a model for the world. It’s also an important protection for the independence of private organizations. Whatever one thinks of President Trump, most of our The deduction tells political leaders that money given to countrymen would agree with his statement in his Inau- charity is not theirs, but belongs to civil society. It is good to have allies in this battle. This is a tumulgural Address that “Americans want great schools for their children, safe neighborhoods for their families, and tuous time in our political culture, and on many issues good jobs for themselves.” of national debate today, members of the Roundtable This hope appears out of reach for all too many. will take different positions than those of the Council Millions of children are being held back by failing on Foundations and Independent Sector. But our three schools, families are collapsing, and more Americans institutions all agree that charitable giving is central to are dying from drug overdoses than traffic accidents American life, and we are working together to protect or guns. Our current systems for protecting and charitable giving incentives. Our three organizations advancing the American Dream aren’t working. As were a key part of a coalition that brought 200 charity Nicholas Eberstadt writes in Commentary magazine, leaders from 37 states to Capitol Hill on a single day in “if our nation’s work rate today were back up to its February to meet with members of Congress of both start-of-the-century highs, well over 10 million more parties and to describe the crucial importance of the Americans would currently have paying jobs.” charitable deduction for their states and districts. Can Washington alone fix these problems? Of The Philanthropy Roundtable is also committed course not. The freedom to experiment in philanthropy to protecting your right as an individual to give anonis an essential ingredient for our nation to find solutions ymously, a right Americans have enjoyed throughout to these challenges. So long as Americans remain free to our history. The Supreme Court ruled unanimously give, smart philanthropy can continue to innovate and in 1958 in NAACP v. Alabama that the right to give help find answers for these crises. anonymously is fundamental to the freedom of assoAnd this is an important reason for one of our core ciation protected by the due process clause of the 14th guiding principles at The Philanthropy Roundtable: Amendment. As Karl Zinsmeister and Sean Parnell “Philanthropic freedom is central to a free society.” show in this issue of P hilanthropy, this historic right is If you are involved with a foundation, donor- under attack now, including from the attorneys general advised fund, or other form of charitable giving, our of California and New York as well as state legislators of mission at the Roundtable and our legislative arm the both parties across the nation. The Roundtable has filed Alliance for Charitable Reform is to protect your free- amicus briefs in three important cases designed to condom. Your freedom to support an unpopular cause. firm and build on the NAACP decision. We are working To develop and test an unconventional hypothesis. To closely with organizations such as State Policy Network, merican Legislative Exchange Council, and the participate in the policy debate without fear of IRS the A harassment. To give without burdensome and frivolous Center for Competitive Politics. And we hope that our regulation. To spend down your assets, or to establish a friends in the progressive and social-justice communities perpetual endowment. To choose your grantees, includ- will join us in building a broad coalition to protect this ing in this time of America First, your freedom to give fundamental freedom. If you would like to become more active in the overseas. And to protect your independence of action, we are committed to protecting your freedom to choose fight to protect philanthropic freedom, please contact your own board and staff, and your freedom to decide me (AMeyerson@PhilanthropyRoundtable.org) or Sean what to disclose about your philanthropic strategy and Parnell (SParnell@PhilanthropyRoundtable.org). with whom. Protecting your freedom requires keeping charitable assets out of the control of politicians. This is the 100th anniversary of the charitable deduction, and we call on President Trump and the new Congress to protect the full Adam Meyerson, President scope and value of the charitable deduction in their tax The Philanthropy Roundtable
Our Mission: Protecting Your Freedom
How to Do Philanthropy for Veterans Right Useful verdicts out of five years of study
Available at no charge to Philanthropy magazine readers To order your free printed copy of Uniform Champions: A Wise Giver’s Guide to Excellent Assistance for Veterans, e-mail Main@PhilanthropyRoundtable.org or call 202.822.8333 To download an e-book or PDF, please visit PhilanthropyRoundtable.org/guidebook
Donors anxious to offer charitable assistance to veterans asked The Philanthropy Roundtable in 2012 to establish one of the country’s very earliest advisory programs on this subject.The first product was a practical guidebook, called Serving Those Who Served, which profiled nonprofits (many of them brand-new) showing promise in this field. Five years later, here is a valuable successor volume. It looks at assistance for veterans from the other side of the table—chronicling the most successful funders in this area, and what they’ve learned through real-life experience about the best ways to boost men and women entering civilian life after military service. In these pages, you’ll hear the stories of more than a dozen of the country’s savviest donors to veterans—a mix of individuals, foundations, and corporate benefactors. Some of these givers focus their charitable work entirely on vets. Others added this worthy population to other philanthropic priorities. All are paragons of smart, efficient, effective giving. This guidebook is built on years of advisory work, scores of firsthand interviews, and careful research and analysis. It includes a statistical appendix offering a range of indicators on the status of veterans (some of them pointing in surprisingly different directions from conventional news portrayals), an up-to-the-minute review of services provided by government, and many details for donors anxious to be as helpful as possible to those who have worn our nation’s uniform.
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October 26-27 Arizona Fairmont Scottsdale Princess
Bringing donors together to explore, collaborate, and solve our nationâ€™s greatest problems through meaningful philanthropy. ONLINE PhilanthropyRoundtable.org/annual E-MAIL AnnualMeeting@PhilanthropyRoundtable.org
PHONE 202.822.8333 HOTEL RESERVATIONS Fairmont Scottsdale Princess 480.585.4848
Reg is te A u gu r by s t 9 TH and re ceive an gistra tion rate o f $1,09 5.
Registration is now open A $50 group discount is applied when three or more participants register at the same time. Attendance at our Annual Meeting is limited to donors who make charitable grants and contributions of at least $100,000 per year or who expect to do so in the future.
Published on Apr 7, 2017
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