Big Issue 1: Fundamental Questions about the Role of Philanthropy

This post is the second in a series of seven excerpting CEP President Phil Buchanan’s new essay, Big Issues, Many Questionswhich explores five pressing issues facing U.S. foundation leaders and boards at this moment in time.

Relative to other sectors, the nonprofit sector continues to enjoy a high level of trust among the public. But foundations should not assume that the trust the public places in operating nonprofits applies to them, as well. As historian Benjamin Soskis noted, we have come out of a “brief, balmy” season — which he argues is a historical aberration — when major donors and foundations received little scrutiny. It is increasingly clear that season is over.

More and more publications — Linsey McGoey’s controversial new book, No Such Thing as a Free Gift, is one recent example — are questioning the motivations and the efficacy of big donors and major foundations. Former Ford Foundation executive Michael Edwards has been among the most eloquent and consistent critics of those, such as The Economist’s Matthew Bishop, who have written glowingly of “philanthrocapitalists.” Edwards argued recently in the Chronicle of Philanthropy that “philanthropy is supposed to be private funding for the public good, but increasingly it’s become a playground for private interests.”

Many of the recent critiques raise fundamental questions about whether major donors and large foundations should be able to wield influence on policy in the ways they do. Nowhere has this played itself out more vividly than in education, where critics like Diane Ravitch have questioned the role of what she has dubbed the “billionaire boys club.” She argues that their efforts have been wrong-headed, ineffective, and anti-democratic — and warns against the blurring of boundaries between business and other sectors, manifested, in her view, in the promotion of market-oriented education reforms.

Concerns about foundations’ role in policy debates are not new, as Soskis noted, but they appear to be on the upswing and coming from both ends of the political spectrum. The appropriate role of each sector is now ferociously contested, with some continuing to embrace the idea of “boundary blurring” and others suggesting that too much coziness across sectors is problematic: that boundaries, like fences between neighbors, serve a crucial purpose. Whatever your views on the merits of the criticisms, foundations ignore them at their peril.

The critiques of philanthropy are happening in an environment in which anything deemed “establishment” is under fire — the very word has become a political liability. The simmering disaffection that manifested itself in the Occupy and Tea Party movements has now gone mainstream. Trust in the institutions we created to protect us has eroded as those institutions have failed to live up to our expectations. From the abuse scandal in the Roman Catholic Church to the practices of our biggest banks pre-Great Recession to the killing of unarmed African Americans by police, citizens are asking whether any institutions can truly be trusted.

What’s the relevance to foundations of all this?

First, there is opportunity. There exists the potential, perhaps greater now than in recent decades, to support and engage citizen movements to mobilize change. There is a restlessness and activism in the United States across an array of issues — and foundations are in a unique position to support those efforts when they align with their goals. However, it will require a level of courage that hasn’t always been on display.

My view, for what it’s worth, is that foundations have not challenged sufficiently the fundamental socio-economic and racial inequalities we seem to have grown accustomed to living with in this country. There is recent bipartisan momentum on criminal justice reform, and some — like Public Welfare Foundation, Ford Foundation, and Open Society Institute — have been out in front on this issue for years. But many foundations have stood silent as African Americans, especially, were disproportionately imprisoned, often for drug-related offenses.

I am not singling out foundations only. It is striking to see, for example, the change in the national debate and media coverage now that drug addiction has become a massive problem in largely white communities. American society and the media often viewed African-American addicts with contempt worthy of imprisonment during the crack epidemic. Now they appear to see largely white opioid addicts with compassion.

As institutions and the “establishment” are challenged, the question is whether more foundations that are working in relevant areas can support movements that challenge the status quo (as some did during the 1960s civil rights movement or on gay and lesbian rights more recently). While this won’t be a role every foundation chooses to play, foundations have a unique opportunity to push for greater racial equity and to fight inequality more broadly. (The Ford Foundation’s strategic shift is a dramatic effort in that direction.) But it will not be easy.

CEP’s research suggests that nonprofit grantees of foundations — who arguably are in a good position to judge — don’t see foundations as adequately understanding the needs of their intended beneficiaries. Really listening to, and engaging with, those you seek to help has always been crucial if you want to be effective. It’s even more crucial now because the distance between the haves and have-nots has widened.

But maybe it’s a moment of opportunity, at least for those whose program goals and program priorities align with the issues I am discussing (and of course not all do). Foundations, if they play their cards right, can have a foot in both worlds — influencing the “establishment” and empowering and supporting those on the ground.

And yet — and here’s the second implication of the anti-establishment fervor — there is also significant risk for foundations that fail to understand the dynamics of the moment. The reality is that, however well-intentioned, major donors can be seen as the very embodiment of the “establishment” — outside powers imposing their will on communities. Funders that seek to design and implement “solutions” in a top-down way will meet increasing resistance as citizens rightly rail against a process that leaves them out of the conversation.

As a CEP board member put it recently in one of our meetings, “We fund a lot of movements, but we can be mistaken for the oligarchs.” Indeed, sometimes foundations have acted too much like the oligarchs. CEP Board Chair Grant Oliphant noted in a recent article about The Heinz Endowments’ strategic shifts that top-down approaches may have worked in a different era but not anymore.

Foundations need to ask themselves:

  • What do we believe about the role of government, the role of philanthropy, and the role of business in addressing pressing social challenges — and what are the implications of those beliefs for goal and strategy selection?
  • How are we ensuring our staff and strategies stay connected to — and informed by — the needs and experiences of those we seek to help?
  • What are the “inside” and “outside” strategy possibilities? How can the foundation use its flexibility to influence systems from within and exert pressure from without?
  • How does the foundation balance its goals with the rising concerns about unelected influence on democratic systems and processes?
  • Are we paying attention to the issues that matter to the most vulnerable in our society? How do we hear from those people? How do we stay connected?

On Tuesday next week, I’ll turn to another big issue for foundations — how to think about endowment.

Download Big Issues, Many Questions here.

Phil Buchanan is president of CEP. He can be reached at philb@cep.org. Follow him on Twitter at @PhilCEP.

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