posted on: Monday, June 29, 2009

By Yna C. Moore

Bernard Madoff received a 150-year sentence from a federal court in New York today. He was given the maximum sentence, but for many individuals and organizations that have lost an estimated of more than $13 billion to his Ponzi scheme, this brings little consolation.

Among Madoff’s victims were nearly 150 foundations, 105 of which lost between 30 to 100 percent of their assets to Madoff. What can other foundations learn from their mistakes and hopefully avoid being scammed by the next slick operator?

In today’s The Huffington Post, Aaron Dorfman summarizes the findings of Learning from Madoff: Lessons for Foundation Boards. He noted that more than 80 percent of those foundations that showed poor judgment by investing heavily on Madoff had four or fewer individuals serving on their boards. There was also a marked homogeneity among the trustees.

The results of the study puts into question the ability of these small, homogenous groups to make the best decisions for their organizations.

According to Aaron and the study, foundations need to have at least five trustees with a diversity of perspectives to serve on the board. In addition, trustees must implement and maintain conflict of interest and investment policies, and disclose demographic information of the institution’s board and staff.

Were you surprised about the findings regarding board size and diversity among the foundations victimized by Madoff? What do you think about the recommendation to have a minimum of at least five individuals serving on a foundation’s board?

Yna C. Moore is communications director at the National Committee for Responsive Philanthropy.

posted on: Wednesday, April 22, 2009

Since 1970, we have been celebrating Earth Day on April 22nd, following the establishment of the Environmental Protection Agency (EPA) that year. As the EPA’s website states:

“EPA was born in 1970 - a time when rivers caught fire and cities were hidden under dense clouds of smoke. We've made remarkable progress since then in protecting human health and safeguarding the natural environment.”

The EPA site provides an impressive history of progress and related legislation implemented in the United States for each decade through 2007. More recently, an article by ABC News notes that the agency identified six greenhouse gases that “endanger public health and welfare” of the American people. These gases, they said, contribute to climate change, which is causing more heat waves, droughts and flooding, and is threatening food and water supplies.” In the article, EPA administrator Lisa Jackson notes, “It’s a serious problem for us and for the world […] And the impacts of climate change are not just life and death, but they are economic costs that are hard to extrapolate into the future.”

Jackson’s quote reminded me of a recent blog post by Mallika Chopra on the Huffington Post titled “1,500 Farmers in India Commit Suicide: A Wake-Up Call for Humanity.” In that post, Chopra notes that over 1,500 farmers in one Indian state committed suicide because of rapidly dropping water levels and high-levels of economic indebtedness leading to complete devastation and hopelessness. She also notes a similar trend in Australia, where wildfires and resource depletion caused by severe droughts and heat waves, the severity of which are linked to global warming and climate change, have led to a high suicide rate among farmers. One Australian farmer commits suicide every four days.

I was most struck by the similarities between Chopra’s closing paragraphs and Jackson’s statement in the ABC News story:

“These stories are a reminder that our personal wellness is inextricably linked to global wellness. We need to nurture Mother Earth, and address the tangled hierarchy of pollution, global warming, human rights, production, economies, wealth, etc.

With Earth Day approaching next week, I hope that all of us will set intentions, followed up with action, on how we can make the planet, and in turn, the lives of our fellow humans, healthier and more peaceful.”

Many international development agencies and U.S.-based grantmakers prioritize global warming or climate change in their relief work and grantmaking. These institutions are contributing to the global common good and their missions and vision are indisputably laudable.

What I want to focus on in this discussion of climate change are two important issues raised by Jackson and Chopra: the roles of economic inequality and global interdependence. Jackson notes the future economic costs of climate change today; Chopra notes the role of indebtedness coupled with the impacts of global warming on the Indian farmers’ suicide rate. I see an important connection to philanthropy and specifically to those funders whose grants are promoting needed research and development work to alleviate and prevent harms today from becoming tomorrow’s problems.

Some have challenged NCRP’s Criteria for Philanthropy at Its Best’s benchmark for marginalized communities by asking how universalist programs such as climate change research grants can or should target or focus intentionally on the benefit of this work to marginalized communities when they will inevitably benefit them in the long run. I don’t dispute for a second that this is true: will the Indian farmers benefit from grants that eventually restore their water levels to sustainable levels? Of course they will. But why wait for the benefit of such research efforts to trickle down to those who are disproportionally affected by climate change now? Many farmers like those from Chattisgarh simply can’t wait for the undeterminable number of years that it would take for them to benefit from the research. The truth is that climate change is both a scientific phenomenon and a result of political, economic and social decisions of the past. It will take a comprehensive and systemic approach to truly combat climate change, mitigate its effects and increase the resilience of our communities from its impacts. In adopting such an approach, funders with a focus on climate change research need not deviate from donor intent. But by acknowledging the increasing interdependence of global economies and explicitly ensuring that the intersecting needs of vulnerable groups like the Indian farmers are addressed within foundation grants, donors could bolster significantly the impact of their grant dollars.

To Chopra and Jackson’s second point about the growing interdependence of the world, Chopra notes the need to acknowledge the “tangled hierarchy” of global warming, wealth, human rights and production. She hits the proverbial nail on the head: economics is but one element of our growing interdependence. What happens in Australia and India will impact us in the United States. Moreover, we can’t leave today’s problems until tomorrow; we can’t leave future generations to deal with the negative consequences of our actions today; and we are not likely to be successful in addressing the numerous challenges of climate change if the economic needs of farmers in Chattisgarh and other vulnerable groups around the world aren’t included in our strategy to protect the environment.

Our aspirational goal that 50 percent of a foundation’s grant dollars be intended to benefit marginalized communities, broadly defined, does not present grantmakers with an either or choice. For those grantmakers whose missions aren’t directly related to underservered groups, we suggest a lower level of 20 percent (a measure met by just over half our sample in Criteria and we didn’t control for mission.) As I said above, a universalist program that uses the systems approach we present in our Values chapter of Criteria doesn’t force grantmakers to fund only those programs that benefit vulnerable populations. Instead, by employing targeted universalism, grantmakers can increase their impact through an integrated and holistic approach to identifying problems from the outset and finding solutions to those challenges. Grantmakers have an opportunity to see more impact from their grants without in any way violating donor intent.

I’ll end by asking you to join this conversation and share a story like Chopra’s or Jackson’s. Does your environmental grant explicitly intend to benefit an underserved group? I’d love to hear your story; after all, it’s the individual stories that get lost in the overly technocratic discussions of who benefits or what counts, etc. As each of us “sets intentions” in some way to do our part to fix our crumbling ecosystem system today, I ask institutional grantmakers to consider how targeted universalism offers a powerful means to transform philanthropy and make the world a better place for each of us by strengthening our communities.

P.S.: For more on climate change and Criteria, check out our executive director Aaron Dorfman’s op-ed in the Chronicle of Philanthropy.