More than a few philanthropy observers have suggested that foundations are now (or will soon become) a less significant segment of the landscape of U.S. philanthropy than they once were. In a much discussed post more than a decade ago, journalist David Callahan compared big foundations to dinosaurs and celebrated their projected demise, which he called “a very good thing.” (In fairness, a decade later he acknowledged in another post that “the age of big foundations lives on. Philanthrosaurus rex isn’t dead yet.”)
A more recent example comes in a piece published last month in which Jan Masoaka argues that “staffed private foundations have been the locus of attention in philanthropy in the United States for some time.” This is a problem, she suggests, because, “the rules and norms built for foundations are becoming increasingly irrelevant to where the money actually sits.” (Italics are added.)
Masoaka, the former CEO of the California Association of Nonprofits, worries about the lack of accountability of the vehicles she sees gaining prominence, like “donor-advised funds (“DAFs”), LLCs, family offices, and other vehicles.” She is concerned that, “once inside these non-foundation homes, this wealth is subject to fewer and far different rules.”
I am sympathetic to Masoaka’s concerns about accountability. I also agree with her and Callahan that there has been a lot of change in the philanthropic landscape in recent years.
But, perhaps counterintuitively, the data suggest that foundation giving is actually a bigger slice of the charitable pie than it once was. Some data points:
- Foundation giving was about 12% of total giving in the U.S. in 2001, according to Giving USA. Today, it stands at 19%. Put another way, foundation giving represented about one of every $9 of charitable given to charitable organizations 25 years ago; today it’s nearly one of every $5.
- There was about $440 billion in assets in U.S. foundations in 2001. By the end of last year, there were more than $1.8 trillion in foundation assets — well more than double the 2001 number even in inflation-adjusted dollars.
How can this be true given the massive growth in DAFs in recent years or the examples of major donors, such as Lauren Powell Jobs and MacKenzie Scott, who have mostly eschewed the foundation form (although Jobs created Waverley Street Foundation in 2021)?
There are likely a variety of explanations. One is that many newer donors do indeed continue to quietly form foundations — and that a lot of wealth has been created that has fueled that growth. Another is that, in recent years, especially, endowment growth for many perpetual foundations has outpaced grantmaking growth, as my colleague Kevin Bolduc noted recently on this blog. A third explanation is that much of the growth in the establishment of DAFs, which is often assumed to be replacing what would have otherwise been foundations, is likely actually coming from donors who would not have created a foundation if the DAF form didn’t exist. (It’s worth noting that high net worth donors often create multiple vehicles, using each differently.)
Regardless, the point is that, for nonprofits seeking philanthropic support, foundations are a bigger slice of the giving pie, not a smaller one. My own take is that foundations, far from being dinosaurs, can, at their best (and “at their best” are key words here), play a uniquely positive role in our society. Indeed, many (and also not enough, of course) staffed legacy foundations have played vital leadership roles over the past 18 months, as I noted in this post arguing for perpetual foundations to increase their giving levels temporarily in light of the tremendous challenges and demands facing many nonprofits and the communities they serve.
It’s easy to get distracted with what seems new and shiny. In recent months, while social media was lighting up about the potential new money that might (or might not) be coming onto the philanthropic scene as a result of AI fortunes, Lilly Endowment, established in 1937, quietly passed $100 billion in endowment value thanks to the appreciation of Eli Lilly company stock (due to the success of its GLP-1 drugs).
In other news that also got less discussion than I would have expected, we learned last month that the Allen Family Philanthropies (formerly the Paul G. Allen Family Foundation, formed in 1988) stands to grow massively if much (or even a good portion) of the nearly $14 billion from the sale of the Portland Trailblazers and Seattle Seahawks by the Allen estate flows to it, as some expect. This could vault it into the top 10 of U.S. foundations by asset size, depending how much of the proceeds the foundation gets.
The point is, foundations, whether older or newer, are not going anywhere and are more resource-rich and therefore more relevant, not less so, than they were 25 years ago. That matters because it means foundation approaches and practices matter more than ever — both in their own right and because they influence the practice of philanthropy broadly.
Look, it’s certainly true that the philanthropic environment looks different than it did 25 years ago. Here at CEP, we now create resources for — and work with — a much wider assortment of donors and funders than we did at our founding in 2001: LLCs, family offices, intermediaries, DAF-holders. I very much agree with Masoaka that we need to pay attention to these entities and their practices, too.
But I don’t think that should come at the expense of a focus on foundations, especially the larger, staffed ones. After all, they aren’t going anywhere and have only grown. Especially given the challenges the country faces right now, what they decide to fund and at what levels — and how they do it — is especially relevant. At a time when so many institutions seem to be failing us, larger, staffed foundations, in particular, have a unique opportunity to use their perches, and their resources, for good.
Foundations, perhaps unexpectedly, are more important than ever.
Phil Buchanan is president of the Center for Effective Philanthropy, author of “Giving Done Right: Effective Philanthropy and Making Every Dollar Count,” and host of the Giving Done Right podcast which will start its sixth season in September.
