Thursday, January 11, 2007

Changing philanthropy - what does it take?

So by now you have heard that The Gates Foundation is going to review its investment policies and actions. Good for them. You can read about it here if you don't want to register to read it at the LA Times.

Larger questions for philanthropy: What does it take to change foundations? I had a meeting in the Fall of last year with several folks deeply involved in the mission-related investing efforts (when foundations invest their endowment dollars in line with their missions). These folks have been advocating for this for decades. We talked about what it would take to really get foundations to do it - potential strategies included emphasizing the benefits, passing new regulations, applying peer pressure, and good old public embarrassment. Gues which one seemed to work? (And, yes, I believe the Gates Foundation spokesperson when she says they were going to do it anyway. But the LA Times story no doubt made the effort more public and more imminent).

But there are still bigger issues here - philanthropy operates within a dynamic system of public oversight, public accountability, public policy and private markets. Strategies for philanthropic action - everything from the structure of the funds to the directions of the grants to the qualifications of the staff to the use of the endowment investments - should be considered within some broader framework of public/private/independent action. But it rarely is. Foundations are ridiculously organizationally isomorphic. Sure - they're all different. But they're also remarkably alike. What makes anyone think 5% payout on invested dollars can actually cause change in the world?

And, the LA Times story shows how the surrounding system is a tad bit broken. Hats off to the paper for its investigation - a rare thing for a newspaper these days. The Times itself is going through editorial leaves, layoffs and buyout talks. What will we lose when we lose the power of an independent press? And what about public oversight? The Foundation did nothing wrong - legally. There are no requirements on how foundations invest their dollars - except regarding majority ownership stakes in the founders' companies. So, even if the attorneys general or the IRS or the Departments of Corporations had wanted to point out the contradictions in these investment policies - there was no legal action to be taken. Governance requirements don't actually require that the dollars be invested for good, just that they be accounted for. Many argue that investing for the greatest financial return is the ONLY standard that should be in place.

Maybe there is a moment here - a moment for foundation executives and trustees to ask these bigger questions. What can philanthropic resources accomplish? How should they be structured to do so? To whom are foundations accountable? Do we, the tax-exempting public, care about these issues and these resources? If so, how do we, can we, should we express those concerns?


No comments: