The role and activities of private foundations have been debated since the days of Andrew Carnegie and John D. Rockefeller. Alternately viewed as bulwarks of a class-based status quo or as parties to the inexorable growth of the welfare state (depending on the orientation and depth of one's political beliefs), foundations have had to explain themselves to politicians and a sometimes skeptical public at various points over the past half century.
One such effort to do that, the Commission on Private Philanthropy and Public Needs, better known as the Filer Commission, issued its final report, Giving in America: Toward a Stronger Voluntary Sector, in 1975, complete with recommendations designed to improve and strengthen the practice of private giving and the nonprofit sector. A year later, the Donee Group, a coalition of nonprofit leaders and activists who believed that nonprofits, especially those serving the disadvantaged and disenfranchised, had been underrepresented in both the composition and deliberations of the commission, issued a dissenting report which called attention, in the words of philanthropy expert Robert L. Payton, to the "neglected voices of minorities and others, as well as the need for greater openness and accountability."
In the more than thirty years since the publication of Giving in America, the National Committee for Responsive Philanthropy, the successor organization to the Donee Group, has advocated for foundations and the philanthropic community to provide nonprofit organizations with more resources and opportunities to work toward social and economic justice.
Earlier this year, Philanthropy News Digest spoke with Rick Cohen, the longtime executive director of NCRP, about his definition of responsive philanthropy, the relationship between accountability and foundation effectiveness, the relevance of ideological labels in a philanthropic context, and philanthropy's role in strengthening democracy and the democratic process.
Prior to joining NCRP in 1999, Cohen was vice president of the Local Initiatives Support Corporation in charge of strategic planning and also served as vice president at the Enterprise Foundation, where he directed the organization's field programs. Both LISC and Enterprise work to support the work of nonprofit community-based developers.
Cohen has served in the public sector as Director of Jersey City's Department of Housing and Economic Development and in the private sector as a consultant to nonprofits, foundations, and government agencies. He began his professional career as a planner with Action for Boston Community Development, one of the nation's original anti-poverty agencies, and has worked for the Trust for Public Land in New York City.
He has also authored or co-authored three books and numerous articles and op-eds for professional journals and newspapers. In 2002, 2003, 2004, and 2005 he was named to the NPT Power & Influence Top 50 by The NonProfit Times, and in October of 2003 was one of twelve people from nonprofits across the nation selected to be in the first class inducted into the Public Interest Hall of Fame.
After more than seven years as the executive director of NCRP, Cohen announced in mid-September that he was stepping down from his post in order to write on larger issues of public policy affecting lower-income communities and the nonprofits that advocate for social justice causes, and to devote more time to family and health issues.
Philanthropy News Digest: In advocating for a more responsive philanthropy, what do you and your colleagues think philanthropy should be responsive to?
Rick Cohen: That's the hardest question you could ask. Actually, thirty years after its founding, I'm not sure the word responsivereally captures what NCRP stands for. Rather than trying to induce a meaning from the word itself, however, a better way of figuring it out might be to add up the key components of NCRP's philosophy.
Philanthropy in the United States is still structured around a highly undemocratic dynamic....
Fundamentally, NCRP believes in making philanthropy more democratic. Philanthropy in the United States is still structured around a highly undemocratic dynamic, with few opportunities for the voices of communities, nonprofits, and their constituents to be heard. By that I mean, most foundations are relatively immune to or removed from input, criticism, dialogue, and debate. Second, the structure of philanthropy reinforces that lack of democratic give-and-take, in that foundation boards of trustees are still pretty narrowly comprised in terms of race, ethnicity, and, particularly, social class. Third, although the Filer Commission back in the 1970s urged philanthropy to measure itself against public needs and priorities, much of philanthropy does relatively little to address critical issues in our society, much less put money into the hands of groups that are on the front lines working to address society's most pressing problems and concerns. And fourth, while the foundation field pays lip service to the legality and legitimacy of funding groups that do advocacy work, most foundations still seem reluctant to engage in that kind of work themselves, at least with any passion or vigor. That's particularly evident in foundations' support, or lack thereof, for grassroots, community-based organizations, which most authentically represent the concerns of constituencies that don't get a fair shake in our society.
PND: When you talk about the foundation field, are you talking about the relatively small handful of professionally staffed foundations? Or do your concerns extend to the tens of thousands of unstaffed foundations that most people never hear about?
RC: Actually, we're concerned about both. Our primary focus is on the role of philanthropy as a sector in service to society, and that includes the activities of small as well as large foundations. Fundamentally, we're concerned about supporting a democratic dynamic within philanthropy that, when unleashed, will lead to social change and progress. So we're concerned about both ends of the spectrum. Unfortunately, in our view, many people focus so much on the large foundations that they fail to see that there are needs out there that can and should be met by smaller foundations.
PND: Many people believe the primary concern of any private foundation should be to honor donor intent. Are you suggesting that private foundations should also be viewed as mechanisms to redistribute wealth?
RC: I don't think either charity or philanthropy in this country operate as mechanisms of wealth redistribution. On the contrary, the bulk of charitable and philanthropic giving goes to organizations that serve the needs and interests of the classes that are the sources of that giving. To imagine that philanthropy, which is generated mostly by people of wealth and administered by boards of trustees populated largely by people of wealth, could ever function as a wealth-redistribution mechanism is something of a daydream. The best we can hope for, I think, is that an increasing portion of foundation activity can and should support organizations and constituencies advocating for social change — in other words, that philanthropic grantmaking to nonprofits will lead to an increase not for X cause or Y cause specifically, but for the nation's democratic discourse. That doesn't mean that the half a trillion dollars currently sitting in foundation endowments should be viewed as a substitute for government. Those assets should not be viewed, as many people view them, as a ready source of funding for social causes that government can no longer afford to support. Instead, they should be seen as a resource for promoting the causes and interests of people who are not well served in our society and for engaging people in a revitalized democratic process.
PND: Is that what people mean when they say that, when it comes to poverty and social justice issues, foundations talk left and act right?
RC: Here's what I would say: Philanthropy in general doesn't do that much to advance social justice, and by that I mean the serious imbalances in our society that have led to and perpetuated poverty and racism and other maladies in our society. Do you know the work of Joan Roelofs? Roelofs suggests that the real purpose of philanthropy in a society is to defuse and channel discontent into acceptable places and to protect and undergird the existing socioeconomic system, which is the same system that gave rise to philanthropy in the first place. So, although NCRP has a long history of talking about left- and right-leaning foundations, I'm not convinced there are that many left-leaning foundations out there, in the sense that they're trying to subvert the fundamental market mechanism that helped create them.
Let me give you an example. How many foundations can you think of that have devoted significant resources to seriously monitoring the corporate sector? Not many, right? And even when foundations do work to promote social change, they don't do much to challenge corporations or corporate influence in American society. So I'm not sure the real issue is whether we should be trying to encourage more foundations to think and act "left" rather than "right"; the real issue is how we get foundations to direct their resources to the nation's critical social problems and to constituencies with the least wealth and least opportunity in our economy and society.
PND: Using political or ideological labels in a philanthropic context makes a lot of people nervous. Do you think those kinds of conversations should be avoided, or is there a way to use ideological labels to unite rather than divide people?
If we believe in democracy and the democratic process, then we should be encouraging foundations of all stripes to do more to mobilize constituencies at the grassroots....
RC: I think the sector would be better off having serious discussions not about labels but about how philanthropy, of all stripes, measures up to the critical problems confronting our society. Sometimes ideological labels just muddle the picture, especially when you consider how many organizations deemed to be progressive fund large nonprofits while ignoring grassroots groups that operate on shoestring budgets. Which is why I always come back to my concern about democracy. If we had more foundations thinking about how they can contribute to a vigorous democratic process in our society, that would be a phenomenal change. I don't think that's a particularly ideological position. If we really believe in democracy and the democratic process, then we should be encouraging foundations of all stripes to do more to mobilize constituencies at the grassroots, to support the airing of authentic community voices, to support the empowerment of organizations that truly listen to what communities have to say — as opposed to those that purport to speak for communities but don't show much interest in what those communities actually have to say. That's how you get past ideological labels that divide, by focusing on philanthropy's role in promoting a more vigorous, more dynamic democratic process.
PND: How do you convince foundations that they can fund those kinds of activities without running afoul of regulatory agencies or politicians?
RC: Foundations know the law by now. They know what they can do to promote citizen action and more advocacy by nonprofits without running afoul of the IRS or SEC, no matter how vague some of the guidelines may be. Most of the time, what deters foundations is not the law but the tendency of many of them to avoid risk, to want to steer clear of issues and constituencies that might generate controversy. And that's something the nonprofit sector has to push foundations to start addressing. These kinds of changes won't come about because foundations come to recognize them as important; they'll come about as a result of nonprofits saying to the philanthropic sector, "We need your resources at the table to help promote our sector's involvement in the democratic process."
PND: Moving from the theoretical to the practical, do you think the mandatory payout rate for foundations should be raised? And do you believe the additional dollars generated by such an increase would make a real difference in solving some of the problems we're talking about?
RC: Some people argue that since foundations represent only a small percentage of overall charitable giving, why bother increasing the payout rate when the impact of such a move would likely be marginal. My position is that charitable donations are not fungible. Foundation dollars, foundation resources, are different in how they can and should be used than individual charitable donations or public-sector funding. When she was president of the Council on Foundations, Dot Ridings was fond of saying — and I always quoted her — that foundation grants are, or should be, the risk capital for social change. Well, the more risk capital you have, the better your chances of making something good happen. Which is why I think nonprofits should be advocating not only for an increase in the payout rate — which, by the way, is entirely achievable — but should also be advocating for changes in the way foundations spend their grant dollars.
PND: Do you believe there's a correlation between foundation giving in the aggregate and philanthropy's ability to solve social problems? And to whom or what, in your view, should foundations be accountable when it comes to their effectiveness?
RC: Let me first say that the conversation about foundation effectiveness inevitably involves the issue of accountability, and when I think about foundation accountability I imagine a three-legged stool. One leg has to do with improved and toughened foundation self-regulation. The second leg has to do with improved and toughened government regulation. And the third leg involves more resources for oversight and enforcement of existing foundation regulations.
Now, self-regulation on its own has been demonstrated to be pretty much inadequate to the task, notwithstanding the PR to the contrary from the sector itself. In terms of the bigger picture, however, foundation accountability and effectiveness aren't really issues of self-regulation at all. If I believe that foundations should be doing more to promote and support democracy and democratic dialogue, as I do, that is not going to happen as a result of improved and toughened government regulation. It's going to happen because the nonprofit sector wakes up and begins to constructively criticize and make demands of philanthropy. It is not going to happen because a foundation commissions a study that measures how happy or unhappy their grantees are with the way are treated by their program officer. It's going to happen when grantees and nonprofit organizations and communities themselves weigh in on whether foundations are living up to the trust the public has placed in them.
This is where I'll probably get myself into trouble, but foundations have been entrusted by the public to use their resources for the public good. And the public has a right and an opportunity to weigh just how much good they're getting from those dollars. Harvard professor Michael Porter did a study several years ago in which he argued that, based on foundation spending rates, the federal treasury loses more than a dollar in forgone revenue for every grant dollar awarded. If that's the price of philanthropy, then we ought to demand that foundations deliver big time on the social benefit part of the bargain. That said, the sector would benefit from increased levels of grantmaking, based on percentage of foundation assets and the establishment of foundation-like payout minimums for donor-advised funds and supporting organizations.
PND: As I recall, Porter's study was challenged by foundations and other experts, including former Senator Bill Bradley, who rebutted Porter's arguments in a lengthy article published by the Harvard Business Review.
RC: The one thing Bradley and Porter both agreed on was that foundations ought to spend more money and that foundation assets were not being adequately mobilized to achieve all the good they possibly could. And if I recall correctly, Bradley got into some hot water himself with foundations over that. As I said earlier, if you look at the large number of grassroots organizations around the country that get by on shoestring budgets and are barely holding on, and you look at the steady increase in foundation assets, adjusted for inflation, over the last twenty years or so, I think it's hard to argue that foundations can't do more to support nonprofits and the nonprofit sector.
PND: The difficulty inherent in measuring social benefit is one reason many of the tech entrepreneurs who have become philanthropists have opted to apply a business lens, with its emphasis on quantifiable outcomes, to their philanthropy. Does the increased emphasis within the sector on outcome measurement bother you?
[I]t's important for philanthropy to be able to address larger, system-change issues that don't lend themselves easily and neatly to simple outcome measurement....
RC: I think nonprofits' operating more efficiently and accountability is fine. Too bad so many for-profit corporations have yet to learn the same thing. But if we insist on turning all our philanthropic activity into programs that only address things that can be quantitatively measured, I think we run the risk of turning philanthropy away from the intractable social problems where foundation resources are so crucial. I think it's important for philanthropy to be able to address larger, more complex, system-change issues that don't lend themselves easily and neatly to simple outcome measurement, much less a profit-oriented income-generating model. On the other hand, what some people may be advocating for isn't just more of a business orientation. Some people have the belief, unjustified in my view, that business and the market combined with science and technology are able to solve complex social problems such as poverty and inequality. I think foundations need to keep in mind that it's not only outcome measurement that might be suspect; their reliance on science and technology to solve problems that are actually political and economic and cultural is also an issue.
Let me give you another example. NCRP's Spring 2006 issue of Responsive Philanthropy, our quarterly newsletter, featured a really stimulating debate between the CEO of the Northwest Area Foundation in Minnesota and critics of the foundation regarding Northwest Area's core commitment to anti-poverty work. What was especially interesting to me was how the foundation defined and addressed issues of poverty, and how critics of the foundation reacted to that approach. I mean, here you had a foundation sincerely trying to do the right thing but thinking about it from one theoretical construct, running up against the problem of matching its strategy with the concerns and interests of real people and communities — in this case, several urban Indian communities. This is even more relevant when you consider the Gates Foundation's otherwise laudable commitments to addressing health and poverty in Africa. Social issues and processes don't lend themselves to algorithms and technical fixes; they're about real people and communities. And that's the level at which philanthropy needs to be more engaged.
PND: Do you subscribe to the notion, recently promoted by Warren Buffett, among others, that it's harder to give money away than it is to make it?
RC: No. The most generous people in this nation aren't the Warren Buffetts of the world. They're working people who, statistically, give a higher proportion of their incomes to charity than the wealthy. The problem with the "harder to give than make" formulation is that it reduces our image of philanthropy to a small group of plutocrats who, because they have bottomless wallets, somehow know more about life than the rest of us. Somebody in the Boston Globe actually said that. I would just add that if we're willing to rely on plutocrats to determine what "good" philanthropy is, rather than relying on the judgment of our nonprofits and the communities they serve, well, I don't hold out much hope for our democracy.
PND:I actually interpret that formulation differently. When used by someone like Warren Buffett, I see it as a ready admission of ignorance, for lack of a better word, of how to tackle the pressing social problems of the day.
RC: Sure, there's an element of that. But Buffett's own behavior as an investor was partly responsible for some of problems we are now trying to address through philanthropy. Remember, at a time when American society was coming to grips with the problem of tobacco addiction, Warren Buffett's Berkshire Hathaway made major investments in tobacco companies, and Buffett himself went out of his way to promote those companies as attractive investment opportunities. I have trouble with the idea that, in terms of social and societal responsibility, you can set your judgment aside when making money — and get a pass for doing so — so long as you're able to entrust some of that money at a later date to wise and thoughtful philanthropic professionals. In my view, one's role in addressing social problems should be an element of every aspect of your life, in business as well as in philanthropy. That's why the socially responsible business movement is so important.
PND: Speaking of Warren Buffett, what do you make of his decision to donate the bulk of his fortune to the Bill and Melinda Gates Foundation? And why do you think it got such play in the national media?
RC: I think the size of the gift and its potential impact on philanthropy had a lot to do with the media coverage — although I believe that when John D. Rockefeller, Sr., at the end of his life, donated the bulk his estate to philanthropy, it actually represented a larger percentage of the country's gross domestic product than the combined assets of the Gates-Buffett foundation. Nevertheless, Buffett's decision to team up with Bill and Melinda Gates is a remarkable development — and one that raises some very large questions. On one hand, you have the Gates Foundation, which really has been one of the very best foundations when it comes to most measures of foundation accountability and effectiveness, tackling major problems and investing significant risk capital in addressing those problems, and doing so with a relatively low overhead compared to other giant foundations. Nevertheless, I think we should be concerned when a single foundation becomes so large that its assets exceed the assets of the next nine or ten largest foundations combined — or, more accurately, since Buffett's gift will take the form of annual capital infusions into the Gates Foundation rather than one lump sum, whose eventual grantmaking may comprise roughly 10 percent of all foundation grantmaking in this country.
But what really concerns me is the notion expressed by many commentators in the nonprofit as well as the mainstream press that size alone translates into greater effectiveness and efficiency, in the sense that bigger is better. I'm also concerned by the fact that the major decisions made by this giant entity are in the hands of three or four trustees whose business investments overlap — remember, Bill Gates is a major investor in and board member of Berkshire Hathaway. Those are the issues that the Gates-Buffett philanthropic merger challenges us to think about. Clearly, Bill and Melinda Gates and Warren Buffett have demonstrated an altruism that surpasses pretty much anything our society has seen in recent decades. But that doesn't mean we shouldn't be willing to think about the implications of that merger for a society which has witnessed a startling concentration of wealth over recent decades — a concentration of wealth, in my opinion, that doesn't bode well for our democracy or the democratic process in this country.
PND: Will the altruism you just alluded to inspire others with enormous wealth to follow the lead of Buffett and the Gateses?
RC: Yes. And I would also point out that Warren Buffett has been a major supporter of the estate tax, which, as is well recognized by most people, plays a significant incentivizing role for people of great wealth to set aside portions of their estates for charitable and philanthropic purposes. So Buffett deserves credit for being both a role model and for being wise enough to register the importance of public policies that support this kind of activity.
PND: With the first anniversary of Hurricane Katrina still on everyone's mind, can you talk about what the public-sector and philanthropic responses to Katrina say about American society?
RC: How much time do you have? I mean, it's such a complex issue, and it's still unfolding. For me, after you get past all the critiques of FEMA and the Red Cross and others, the striking thing in both the philanthropic and government response to Katrina is the lack of any impetus at the government level for an inspector general or watchdog agency to monitor how funds earmarked for relief and recovery have been used and to what benefit and impact.
PND: You're talking about the tens of millions in federal funds that have been earmarked for Gulf Coast recovery?
RC: Yep. I mean, the Justice Department has a task force dedicated to ferreting out Katrina-related abuses, but what are they looking at? Mostly at cases of individuals fraudulently applying for FEMA assistance and other government benefits. No one has done real-time inspector general-style digging into government contracting, and no one has pushed for the same kind of thing on the philanthropic side. For all the concern about accountability in the charitable and philanthropic sectors, for all that happened in the aftermath of 9/11 and the Indian Ocean tsunami, you would think that someone on Capitol Hill would have had the courage and vision to insist on that. And in fact, there was such a provision in the Katrina charity relief act that was eventually passed, but it was dropped before the bill went to conference.
Some parts of the nonprofit sector still seem to think that if you don't look, you won't see it, and if you don't see it, you don't have to deal with it....
What's more, as far as I know, we still have the process of expedited IRS approvals for Katrina-related funds and nonprofits, as we did after 9/11, even though most experts will tell you that the process was indirectly responsible for some of the fraud and abuse we saw after 9/11. I think we'll see some of the same thing when we look back on the response to Katrina. You would think our sector would say, "We're concerned about accountability, so let's make it real time, let's do it now, and let's put some meat on it." But that didn't happen. Some parts of the nonprofit sector still seem to think that if you don't look, you won't see it, and if you don't see it, you don't have to deal with it. But, of course, if we're really serious about keeping the public's trust, the misuse and misdirection of philanthropic resources has to be addressed. And that means in the context of Katrina, as well as everywhere else.
PND: Do you think philanthropy and the nonprofit sector have a vision of what needs to be done in New Orleans and along the Gulf Coast to address the racial and economic disparities that were exposed by Katrina?
RC: Well, philanthropy isn't a monolith; it's pretty diverse, so it's hard to say what "it" envisions. But if it were up to me, the vision would look something like this. First, nonprofits and foundations need to view this as nothing less than a long-term reconstruction effort. As part of that effort, they should focus on rebuilding the community base and nonprofit ecosystem in the region. That's critical. While they're at it, they should also make sure that government and major national organizations aren't simply experimenting with people's lives. There are dozens of proposals at the national level for rebuilding the region, but none of them has been adequately vetted by the people in the region. You can't play with people's lives that way.
Philanthropy should also focus its resources on examining why this happened, on doing something about the appalling performance of incompetently managed agencies such as FEMA, and on prodding legislators and government officials who basically sat on their hands as FEMA fell into disarray and pork was handed out like ice cream at a Fourth of July picnic to make sure it doesn't happen again.
Finally, we need to recognize, particularly in the aftermath of Katrina, that there were some significant examples of corporate profiteering under the guise of relief and recovery. It's up to philanthropy, in my view, to play the watchdog role, not just for what government does, but on the corporate side as well.
PND: At the same time, more than a few people have pointed to Katrina as a test of the sector's ability to respond effectively to a major national disaster. Looking back a decade from now, how will we know whether philanthropy met and passed that test?
RC: Again, I think it's less a question of whether philanthropy responds effectively to this kind of national disaster and more about the role philanthropy should play at pivotal moments in our history. Whether it's Katrina or 9/11 or the South Central riots in Los Angeles, there are points in the history of every society where underlying issues surface in a very visible way. And in those moments, I think the response of philanthropy is actually in some ways more measurable than it is on a day-to-day basis. You can see which foundations showed up at the table and which didn't. You can see what they delivered and what they didn't. You can see which foundations talked but didn't back the talk up with money, and which foundations decided talk was cheap and instead brought their resources and talents and skills to bear on the situation. It really comes down to looking at philanthropy at pivotal moments in our history and asking, Who was there and what did they contribute?
PND: Well, thanks for your time this afternoon.
RC: My pleasure.
Mitch Nauffts, PND's editorial director, spoke with Rick Cohen in July. For more information on the Newsmakers series, contact Mitch at [email protected].