posted on: Thursday, December 03, 2009

By Kevin Laskowski

More than forty D.C.-area leaders in philanthropy gathered Tuesday to discuss the new book Change Philanthropy: Candid Stories of Foundations Maximizing Results Through Social Justice (Jossey-Bass, 2009). Authored by Alicia Korten Epstein, the book features case studies of foundations and organizations working successfully for change, bringing to life “the real challenges and exhilarations of grantmaking that seeks to address critical social issues of our day.”

Deepak Bhargava, Executive Director of the Center for Community Change (CCC), opened the event to explain why the Center sought to publish the book.

“Real change always comes from expanded democracy,” he said. “Now what is the role of philanthropy in this? The challenge for us is to move beyond charity and give life to democracy.”

He noted the mounting challenges before the sector, including economic instability and inequality and climate change, joking, “Not to put too much pressure on you, but the fate of our society and planet hang in the balance.”

Marjorie Fine, Director of CCC’s Linchpin Campaign and project director for Change Philanthropy, moderated a panel discussion with Korten and representatives from two of the book’s featured philanthropies: Dave Beckwith, Executive Director of the Needmor Fund, and Christine Doby, Program Officer at the Charles Stewart Mott Foundation.

Korten outlined “Six Principles of High Impact Giving,” lessons learned from the more than 200 interviews that resulted in the book:

1. Develop a theory of change.
2. Match your goals to your resources.
3. Use all your resources.
4. Know your potential grantees.
5. Amplify grantee voices.
6. Evaluate work.

She noted how these might be principles for any grantmaker looking to be more effective. However, she said, the case studies in the book featured foundations who brought an additional “equity lens” to their work.

Beckwith related how such a lens lead the Stranahan family, the family behind the Needmor Fund, to fund community organizing and to invest in a socially responsible way.

“I’m from the Needmor Fund and we fund community organizing,” Beckwith said, tracing the development of Needmor’s grantmaking from its beginnings in 1956 through its “two nuns and a fax machine” phase to its current support of local community organizing groups.

“We’d give grants to organizations, and they were basically two nuns and a fax machine,” he said. “We’d give them a grant to raise hell.”

Several events in the 1980s pushed the Stranahans to consider the relationships—and contradictions—between their values, their investments, and their philanthropy. In one instance, The Champion Spark Plug Company, founded by the family, was building a factory in apartheid South Africa, and a shareholder resolution had been introduced to have Champion adopt the Sullivan Principles. The question was raised: how would the foundation vote its shares in the family business?

“What are our responsibilities as owners? How do we apply our values to all of our dollars?” Beckwith asked, saying that foundations need not give up their values or their expectation of return in the realm of investments. “Ninety percent of our assets are screened.”

He pointed grantmakers toward community development financial institutions (CDFIs) as an easy entry point into the world of mission-related and socially responsible investing.

Foundations carry a portion of their assets in cash for a number of reasons, Beckwith explained. Foundations can easily purchase insured certificates of deposit from CDFIs and not only secure a return but do good in communities as well.

Doby noted that her foundation’s practices were rooted in the founder’s vision of community and democracy.

“For Mott, democracy worked best when individuals were related to the community and its institutions, and when institutions were related to individuals,” Doby said.

She explained that community organizing becomes important because policymakers often already know what ought to be done but are “held captive” by other interests.

“The point is to build community voices so that policymakers have the political cover to do the right thing,” she said.

Tuesday’s event was sponsored by the Center for Community Change, Emerging Practitioners in Philanthropy, the National Committee for Responsive Philanthropy, the Greater Washington Social Justice Forum, and the Hill-Snowdon Foundation.

Kevin Laskowski is a Field Associate with the National Committee for Responsive Philanthropy.

posted on: Thursday, August 27, 2009

By Kevin Laskowski

In a previous post, I noted the announcement of a Philanthropy Policy Project and highlighted NCRP’s potential contribution to the discussion. Our Criteria for Philanthropy at Its Best could provide an excellent starting point for the Project’s discussions of social inclusion, diversity, accountability, transparency, ethics, effectiveness, and more.

At the same time, I hope this Policy Project is a sign of a philanthropy more willing to change the rules—and not only those governing itself. As NCRP prepares to release its third Grantmaking for Community Impact report, I’ve been thinking about philanthropic involvement in public policy more broadly. I’d like to see this Policy Project set its sights high so that we don’t forget what all this policy is really about.

Because I’ve heard this before. The banking and investment sector created a number of fascinating financial vehicles that few understood or questioned. We called it financial innovation. We moved money around, and we called it profitable and productive. It made some people very rich.

Now our sector is fantasizing about the possibilities presented by its own new toys. These instruments are designed to facilitate a certain type of philanthropic activity, activity that’s already possible in a lot of ways, but we’re assured the tools will make philanthropy easier and more effective. Now the Policy Project proposes to contemplate the regulatory environment that will best facilitate and incentivize these capital flows. What prevents all this from turning out the same way? Nearly three years ago, Business Week was discussing the securitization of microloans. The Wall Street Journal reported earlier this month on the coming “bubble” in microfinance.

For all our engagement in policy, we may end up simply moving money around. The process may get a new alphanumerical designation. Intermediaries will take their cut and call it “innovation,” but that’s not change anyone believes in anymore. If philanthropists wish to dip their toes in policy discussions with real impact, there are matters that could use the Policy Project’s attention, ingenuity, and collective resources more.

If the past year has taught us anything, it’s that philanthropy is not as independent a sector as it might think. The greatest threat to philanthropic assets is not inefficient capital flows, or those who might reinterpret donor intent, or those campaigning for greater diversity on foundation boards, or a regulation-happy Congress. None of those things ever wiped out a third of our foundations’ philanthropic wealth. That took an increasingly unstable, unequal, and unsustainable world economy. Philanthropy may not seek profits or votes, but it remains at the mercy of those who do.

What policy changes would create a foundation that was, in the words of the F. B. Heron Foundation, “more than a private investment company that uses some of its excess cash flow for charitable purposes?” What policy changes would transform our sector into something more than an emergent effect of forces beyond its control? What kind of tax policy, economic policy, industrial policy, environmental policy, or health-care policy would support the stability and growth of philanthropic capital? Because these policies affect our organizations and their missions by orders of magnitude that dwarf anything that typically occupies the Taste section of the Wall Street Journal.

And philanthropy as a field is woefully unwilling to engage in these debates, ultimately to its own detriment. Our sector’s ability to weather public scrutiny hinges on how it deals with the weightiest of public concerns. What if, instead of weathering economic ups-and-downs as the inert beneficiaries of capitalist largesse, foundations stepped up as a group to influence the economic decisions being made? To make sure that, whatever changes came, they were equitable and sustainable? The public would leap to its defense should an enterprising congressperson ever seek to capitalize on scandal. As it is, even the civically engaged can’t name a foundation on their first try. And the benefits that philanthropists do create often do not trickle down to communities that may need them the most, leaving us without perhaps our best champions—the public we serve.

Are we moving toward a more prosperous, more equitable, more sustainable state of affairs, or is our greatest genius in creating “new” philanthropic instruments? A Policy Project that confined itself to narrow sector issues and the endless contemplation and reproduction of the giving tools already in use would be a recipe for irrelevance.

Bernholz says, “This is a perfect opportunity to invite nonprofit and philanthropy professionals, social entrepreneurs, social capital market makers, data wonks, think tanks and others to reimagine the regulatory and policy structures that guide and inform philanthropy.” It’s a perfect time for us all—perhaps led by philanthropy—to reimagine the regulatory and policy structures that have guided and informed our public life in general. And, thankfully, we already have a word, a true giving vehicle, for that discussion: democracy.

“What policies or regulations would improve philanthropy?” It’s a great question, but the discussion shouldn’t stop there. What policies or regulations would improve our world? And what is our field’s role in championing those changes? Philanthropists have got to start going there.

That’s not a shot on the Policy Project, just a vote for pushing the conversation through the sterile, inward-looking ground of giving vehicles and incentives to the more fertile, productive frontier of what all this philanthropic policy is for. Philanthropies can convene panels and exert collective power at the drop of a hat when it comes to things like charitable incentives or combating perceived threats to those incentives. However, when it comes to the policies that will do more to determine our shared impact and common fate than any proposed tweak to the accounting rules, we don’t have much to say, at least not together.

“What would better philanthropy look like?” For starters, better philanthropies would band together for something more than the continued comfort of their individual assets. Here’s hoping the Philanthropy Policy Project goes there.

Tell us about your own hopes for the new Philanthropy Policy Project in comments.

Kevin Laskowski is Field Associate at the National Committee for Responsive Philanthropy.

posted on: Friday, April 10, 2009

By Meredith Brodbeck

The Rockefeller Philanthropy Advisors and the As You Sow Foundation have released a new report titled Proxy Preview 2009, which is “designed to help foundations navigate these [shareholder] proposals and identify those that are relevant to their mission and grantmaking agendas.” For many foundations proxy voting is left to financial or investment managers; Proxy Preview 2009 concludes that as a result, foundations are often making investments that conflict with their own missions.

Similar issues about proxy voting and mission investing are echoed in NCRP’s Criteria for Philanthropy at Its Best. As part of our Commitment criterion, NCRP states that a grantmaker practicing Philanthropy at Its Best invests at least 25 percent of its assets in ways that support its mission, which include the following:

· Screens: Screening traditional investments for social or environmental factors can help a foundation seek corporations whose practices do not conflict with its mission. Screens can be either positive or negative; that is, a screen either can seek out a certain trait such as paying employees a living wage or it can avoid a certain trait such as companies that produce tobacco products.

· Shareholder advocacy: Foundations can leverage stock portfolios to introduce shareholder resolutions and to vote proxies. Foundations also can involve their grantees when appropriate to improve corporate practices.

· Proactive mission investing: Proactively seeking out investment opportunities that advance a foundation’s mission such as investing in affordable housing and providing direct loans to nonprofit organizations.

In Compounding Impact: Mission Investing by U.S. Foundations, FSG Social Impact Advisors discovered that only 2.6 percent of foundations assets were used for mission investments[1]. This figure and the modest amount of mission investing currently done are greatly due to concerns about financial responsibility and/or lack of motivation.

Criteria explains that grantmakers can work to identify mission investment opportunities in various ways. They can increase board-level understanding of these three strategies; include investment and program staff in the process; involve grantees in shareholder activism; and enlist experts like mission investment intermediaries. Doing so allows mission investing to become part of a grantmaker’s financial investment strategy and can prove to be beneficial for the funder. Such investments not only show a foundation’s commitment to using tax-exempt dollars for charitable purposes, but also demonstrate it leveraging its private sector power to broaden the impact of its community contributions. Foundations can also leverage their tremendous assets in non-financial ways that support their missions by, e.g. moving their offices to blighted communities, showing real commitment to those underserved populations.

The report maintains, “Studies show the results of shareholder resolutions and engaged proxy voting: honest and reasonable compensated corporate management, socially responsible corporations and independent boards of directors lead to stronger financial returns.”

Is it important to you that a grantmaker demonstrate its commitment to using tax-exempt dollars for charitable purposes and why?

[1] Sarah Cooch and Mark Kramer. Compounding Impact: Mission Investing by U.S. Foundations (Boston: FSG Social Impact Advisors, March 2007)

posted on: Tuesday, April 24, 2007

Last week I attended a panel on “democratizing philanthropy” at a conference sponsored by the Greenlining Institute. One of the reporters who wrote the Los Angeles Times’ recent series on the Gates Foundation’s investment practices was on the panel, and talked about the role of the press in shining a light on foundations. The reporter’s comments reminded me, sadly, that the Gates Foundation’s reaction to the Times series may carry a lesson for NCRP and other groups who seek to influence foundation behavior. (Full disclosure: I wrote about the ironies of Gates Foundation's investment practices a while back at the Stanford Social Innovation Review, but here will focus on questions of strategy for NCRP.)

The LA Times series highlighted the foundation’s holdings in companies abroad and in the U.S. that cause significant health and environmental problems – ironically, the very problems the foundation aims to redress, in the very same areas of the world. Within days, the Gates Foundation first announced changes to its investment policies and a more comprehensive review of its strategy, then backtracked and said it would maintain its prior approach. Despite being hard hitting and receiving extraordinary attention (front page headlines in the LA Times, extensive coverage in other outlets, wide circulation and discussion within the philanthropic world) the Times stories failed to induce the Gates Foundation to change its policies.

The LA Times-Gates episode raises a number of questions for groups like NCRP that aim to influence the behavior of foundations. The dose of “shame” that the LA Times applied, in this instance at least, didn’t take. (In the long run, the Gates Foundation may well join the the ranks of the handful of prominent U.S. foundations that, as the Times noted, already consider the social impact of their investments – Ford, MacArthur, Rockefeller, and Mott, among others). In fact, while a recent study showed that negative media stories about foundations doubled in the five years from 1998-2003, it is hard to name many clear trends or shifts in foundation behavior arising from those stories. Foundation leaders have been pushed out of office in connection with corporate ethics scandals, like Barry Munitz at the Getty (though here it was probably the perception of arrogant, selfish behavior and lack of board oversight that did the trick), but examples of foundations changing their grant making practices because of media pressure don’t readily come to mind.

If high-profile shaming failed to induce the Gates Foundation to change its investment practices, how much more difficult it would be to get a foundation to change its practices in how and to whom it makes grants, an area that is much more closely tied to its core function and to the professional worldviews of its leaders? Fortunately, shaming is only one possible approach. Strategies for trying to influence foundation behavior can be divided into “outside” and “inside” approaches. The most common outside strategies are sunshine or “shaming” strategies (exposing and publicizing disfavored practices, or requiring disclosures), or directly trying to compel behavior through changes in the law or regulations (for example, the tax rules on minimum payout). In contrast, two examples of “inside” strategies are trying to change how foundation’s behave by changing how their leaders think, or trying to change who the leaders of foundations are, such as through Greenlining’s campaign to increase diversity on foundation boards.

Trying to to increase funding to grassroots, social justice and progressive organizations is NCRP’s central purpose, in my view. (I must emphasize here this is only my personal view – NCRP is currently conducting a strategic plan and may come to a consensus that is different.) Groups like NCRP should consider what mix of strategies to pursue, and I think an “inside” strategy of supporting and highlighting good grant making practices would have several advantages. Among other virtues, highlighting good progressive grant making would suggest concrete positive alternatives, would foster more discussion within philanthropy of how to improve, could lead to promising collaborative relationships for NCRP, and could help lead to the emergence of more champions within philanthropy for the kind of grant making NCRP wants to promote. This last virtue may be the most important, since it seems the opinions foundation leaders care most about are those of their peers.

In contrast, trying to compel behavior through changes in public policy is expensive, brings into play very well funded opponents, and because it gives advocates little control over what final decisions legislators or policy makers may make, brings very high risk of unintended consequences. This isn’t to say that groups like NCRP should cease being “watchdogs” and pushing for policy change, but rather that where they can add an inside strategy they should strongly consider it.

So, while articles like the Times series can in some cases lead to changes, and legislative changes, if achieved, can promise the broadest impact, the question is whether either approach is likely to produce the results we want – more funding for groups we care about. For my two cents, I lean to the view that much broader improvement in funding social justice and grassroots groups is more likely to happen when foundation leaders see their peers be recognized and praised for doing so.