How to give away money well

Book recognizes foundations' contributions, challenges them to do better

Review Philanthropy

January 07, 2007|By Glenn C. Altschuler | Glenn C. Altschuler,Special to the Sun

The Foundation: A Great American Secret: How Private Wealth Is Changing The World

Joel L. Fleishman

Public Affairs / 357 pages / $27.95

Idon't want to achieve immortality through my work," Woody Allen has said. "I want to achieve it through not dying." In the United States, rich people have found a more viable strategy to perpetuate their names. About a hundred years ago, they invented the philanthropic foundation. And America continues to lead the world in charitable giving. In 2005, 68,000 foundations gave away about $30 billion. The endowments of 49 of them topped $1 billion.

Foundations are among our most powerful and least visible institutions, suggests Joel Fleishman, a professor of law and public policy at Duke University - and the former president of the Atlantic Philanthropic Services Company. Drawing on scores of interviews and an analysis of 100 major foundation initiatives (available in greater detail on a Web site and an on-demand book), Fleishman provides a useful and judicious - if sometimes dry - introduction to the "third sector of the American economy." He emphasizes that foundations enrich civic life, making it more responsive, dynamic and diverse. Fleishman also challenges charitable organizations to "raise the level of their performance by reducing their insulation from beneficial external influences while retaining the independence they need."

Through "instrumental giving," Fleishman demonstrates, foundations have had a substantial impact: "Where traditional charity treats the symptoms of social ills, social entrepreneurship seeks a long-term cure." In 1943, for example, the Rockefeller Foundation gave new meaning to the phrase "seed money," launching the "Green Revolution," which developed new varieties of wheat, corn and rice, sustainable in various climates, and increased crop yields in Latin America, Asia and Africa. To nourish political freedom, the George Soros Foundation spent more than a billion dollars in Eastern Europe and Russia between 1987 and 2003. Sometimes small sums made a big difference. Soros' gift of 200 Xerox copiers helped universities and libraries in Hungary spread information freely and rapidly.

Closer to home, grants from the Rosenwald Foundation in the 1920s and 1930s facilitated the construction of 4,977 schools for African-Americans in the rural South. The Carnegie Foundation funded the Children's Television Workshop, which developed Sesame Street in 1969. And the Robert Wood Johnson Foundation was the catalyst for the 911 emergency response system.

Seeking to prod as well as praise, Fleishman focuses on foundation failures as well. In the 1990s, the Annenberg Foundation spent more than $500 million to enhance education in 2,400 public schools. The "impact was negligible." Equally disappointing were the efforts of the Robert Wood Johnson Foundation to curb binge drinking by college students.

To increase the odds for success, Fleishman wants to change the foundation culture, which all too often substitutes hope and sentiment for experience and rigor. His recommendations are sensible. But they have a downside as well: An increase in foundation bureaucracies and administrative costs could reduce the sums available for the grants themselves.

Fleishman urges foundation presidents and boards of trustees to identify a programmatic focus and allocate resources to it, reserving perhaps 20 percent of the budget for opportunities outside the target area; match the strategy to the problem; specify desired outcomes with precision; include relevant stakeholders in planning and implementation; hire competent and inspiring leaders; and conduct thorough program evaluations.

Fleishman also wants foundations to overcome the institutional equivalent of attention deficit disorder, with its addiction to change for its own sake. Perpetual foundations should take the long view, prevent the urgent from driving out the essential and support basic as well as applied research. They should stop limiting grants to three years or less - and refusing under any circumstances to create endowments or build physical plant.

Passionately and persuasively, Fleishman makes the case for greater accountability. To learn from their failures, foundations should follow the lead of the Robert Wood Johnson Foundation and post on a Web site all internal program evaluations. Foundations should wear their failures as "badges of honor signaling that they are trying harder to serve the social mission that justifies their tax-favored treatment."

They might also create a foundation equivalent of the Freedom of Information Act, hire an ombudsman and subject themselves to peer review. Foundations might band together to establish a code of accountability and a board of enforcement. As the great jurist Louis D. Brandeis once observed, sunlight is the best disinfectant.

These reforms, Fleishman believes, will foster public confidence in the good stewardship of foundations - and prevent politicians from mandating a higher annual payout rate or forbidding tax-exempt institutions from funding organizations that engage in public advocacy. Most importantly, as a Business Week article proclaimed in 2006, "Smart Companies Learn from their Flops."

With his gift of $31 billion for use by the Gates Foundation, Fleishman concludes, Warren Buffett "has inspired a whole new explosion in the world of philanthropy." And the spotlight is now on foundations to "give away mountains of hard-earned money" wisely and well.

Glenn C. Altschuler is the Thomas and Dorothy Litwin Professor of American Studies at Cornell University.

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