Founded by the former president of Coca-Cola, the Robert W. Woodruff Foundation is as much of an Atlanta institution as the company Woodruff helmed for over 30 years. The foundation’s largest grants fund institutions such as Emory University, the Robert W. Woodruff Arts Center and the Joseph W. Jones Ecological Research Center at Ichauway, demonstrating its dedication to education, culture and conservation. Yet, with 82 percent of its assets ($2.3 billion of $2.8 billion) invested in the Coca-Cola Company, the Woodruff Foundation maintains a risky investment strategy, which compromises its ability to accomplish its mission.
NCRP’s recent Philamplify assessment of the Robert W. Woodruff Foundation recommended that the Woodruff Foundation diversify its holdings to allow for more flexible and strategic grantmaking. Author Elizabeth Myrick explains:
“In spite of the fact that Coca-Cola is the source of the foundation’s wealth and has performed well over time, such a risky investment strategy limits the ability of the foundation to make certain kinds of grants. The volatility of a highly concentrated portfolio makes providing multi-year and general operating support more challenging.”
Here are three reasons why the Woodruff Foundation, and other foundations, should diversify their stock portfolios:
1. One-stock investment ties fortunes to a single company, which may experience hard times.
While the Coca-Cola Company dominates the beverage industry and has consistently ranked as one of the world’s most valuable brands, it is not immune to fluctuations in the market. For instance, Coca-Cola stock declined considerably in the early 2000s, which led Emory University, similarly endowed with Coca-Cola money, to divest from the company.
2. Reliance on one source of income can make a foundation more cautious in its grantmaking.
Woodruff tends to prioritize large, long-established organizations and shies away from newer and smaller nonprofits. The foundation also generally refrains from providing multi-year grants and general operating support.
3. Monolithic investment may prevent a foundation from engaging in mission-related investing or result in a foundation being primarily invested in a company whose practices are at odds with its mission.
For example, the Woodruff Foundation supports environmental and health causes. However, Coca-Cola has been critiqued for negative environmental impact of its manufacturing practices, especially in India and Latin America, and health effects of its products.
There are a number of notable organizations that have completed the process of divesting from one primary source of stock revenue, and they have all come out the stronger for it. Examples from the philanthropic sector include the William and Flora Hewlett Foundation, which moved to diversify its holdings and sell Hewlett-Packard shares after 2001. In addition, the W.K. Kellogg Foundation successfully reduced ownership of Kellogg Company stock beginning in 2005.
The Lilly Endowment is one of the more outstanding cases of diversification. Founded in 1937 through gifts of stock in Eli Lilly and Company, a top ten pharmaceutical company, the foundation bestows more than $270 million in grants each year, drawing from a $7.7 billion endowment. In 2006, the Endowment adopted an asset diversification plan to sell $2 billion of its Eli Lilly stock. In April 2014, the Lilly Endowment resumed selloff, which had been suspended since the 2008 financial crisis.
While Woodruff will surely maintain its relationship with Coca-Cola, should the fate of Atlanta and the Woodruff Foundation’s grantees be so closely tied to the Coca-Cola Company? Make sure to visit Philamplify, where you can comment and vote on NCRP’s recommendations for the Woodruff Foundation!
Special thanks to Kevin Laskowski, NCRP senior research and policy associate, for his assistance with this post.
Caitlin Duffy is the project assistant for Philamplify at the National Committee for Responsive Philanthropy (NCRP). Follow NCRP on Twitter (@ncrp) and join the #Philamplify conversation.