Or should I say, “Climate Week” or perhaps “Clinton Global Initiative” or even “Summit for the Future”, and I am sure i am leaving someone out.
\nThere were programs from the East Side to the West Side, from the Upper East to the Village, from private clubs to the Javits Center, to say nothing of foundations, restaurants, offices, and fenced off gathering areas. My week was probably similar to many others: I went to conferences and receptions with hundreds of attendees and to invitational gatherings with fewer than 10. I managed to squeeze in a protest and saw some friends and colleagues from different parts and years of my professional and personal life. Regrettably I did not see even more of those folks whom I knew were there somewhere, and many more whom I only found out afterwards were there as well.
\nThere were diplomatic meetings, philanthropy gatherings, climate conferences, interreligious conclaves, people of all ages, religions, nationalities, and ethnicities, most hoping to change the world, and some clearly hoping it won’t. Some were selling ideas, some were selling services, some were selling credibility, and some were selling dreams. Most of this happens at the so-called “side events.”
\nI cannot speak for others, but I learned a lot, especially when my schedule actually allowed me to stay for a full session. As much as one thinks one knows, there is nothing that demonstrates our cultural and professional limitations as profoundly as a week such as this one.
\nI wore numerous hats that week: as part of the WINGS delegation [philanthropy], as a quondam leader in the international interreligious space, as an advocate and investor in the climate change sector, and as an invited guest to several diplomatic meetings. I was even the nominal host of a reception for several hundred.
\nAs you can gather it was quite a week as it is every year. It gets bigger each time.
\nMany of us who attend are asked what it accomplishes. For one, it provides an efficiency of meetings, speeches, and articulated perspectives that would be hard to replicate if spread out over time and space. It provides a target date for showing progress or the lack thereof in the major existential and political issues of our world, And, crucially, it often leads to those incidental meetings of those doing interesting and important things whom one might never otherwise meet in person.
Perhaps most of all, a week like this conveys potential. The potential for more effective collaboration on redressing the all too rapid destruction of our human home; the potential for new thinking of the needs of the global majority and the responsibility of the global wealthy; the potential for innovative voices of the young to be heard; the potential to rekindle bridges of humanity too often rent asunder by the madness of conflict, greed, and hubris.
Mostly it is a week of talk. And while some may belittle the value of talk without action or even commitment to act, of talk without end, of talk… , let us remember that words matter. They can lead to action – look at the destructive power of hate speech and misinformation or the redemptive power of the I Have a Dream speech and truth. Even if so many of the words at a week such as this are vacuous or shallow or political greenwashing, many others can emphasize our global mandate, our human interdependence, and the possibility of a better world.
\nFor those who look only cynically at the mountains of words, it is worth recalling those famous words of Churchill who said: “it is better to jaw, jaw, jaw than to war, war, war.” As we look around the world, it doesn’t take much to see how much truth there is in that. It is worth a crazy week in New York to be reminded.
\n", "url": "https://wisephilanthropy.institute/insights/492-it-was-another-un-week-a-feast-with-a-thousand-sides", "title": "#492 It was another \"UN Week\" - A feast with a thousand sides.", "date_modified": "2024-10-11T15:00:00.000Z", "author": { "name": "Richard Marker", "url": "https://wisephilanthropy.institute" } }, { "id": "https://wisephilanthropy.institute/insights/491-this-is-harder-than-i-thought-it-would-be", "content_html": ".This article returns us to philanthropic practice after several posts that dealt with larger issues in our field. While this is not directed exclusively to family funders, the topic should be of particular interest to that very large subsector.
\n….
No one is more surprised than I that there seems to be renewed interest in our philanthropy advisory services, both informally and professionally. I am not complaining.
And once again I have been hearing the same line that I have heard for over 2 decades: “This is harder than I/we thought it would be.” Over the years, there is no line more predictable when someone seeks some outside expertise for their grantmakng practice.
\nWhen you think about it, it shouldn’t surprise. After all, most folks who choose to give their money away for philanthropic or charitable reasons start out with the assumption that it will be a way to do something good, to make a difference, and to be gratified by the experience. The hard part was making it, they often assume, [or waiting for it to be their turn as the family decision makers] This part should be easy.
\nHowever, it doesn’t take long for them to realize that there are real decisions to be made, that there are legitimate competing priorities, that certainty is elusive, and that which got them here doesn’t readily apply. Let’s look at some of these pieces:
\nThere are two challenges to this that funders need to be aware of: learning how to say no graciously and definitively requires a self understanding of why one is saying “no”, and one must work hard not to become cynical or arrogant.
\nThe first, having a clear internally understood strategy makes it much easier, if not always socially easy. We all have social and family connections that come with expectations. We all have passions and compassions that come with emotions. We all wish that we could support everything or everyone we care about. But, while those attributes are highly desirable in a person, they can get in the way of using one’s resources as effectively as one wishes. Of course, there may be exigencies such as disasters that might push us into a funding space we don’t regularly fund, but as long as we make those decisions with awareness, so be it.
\nThe second, though, the cynicism and/or arrogance, is worth real attention. Yes, it becomes challenging to go into every gathering as a walking dollar sign. It can be annoying when long time social friends suddenly have projects they want to pitch. [these apply whether one is the principal or a professional.]
\nThere are two overlapping phenomena that play into this. The first is recognizable to all of us in this field, and all of us have heard this sop many times: never before have we been so good looking, so witty, so insightful, so helpful as when we are funders. While it may in fact be true for a small few, unfortunately many more of us even believe it. It is far too easy to develop an arrogance in how we deal with petitioners if we believe our own hype. And, more important, that attitude guarantees to never allow us to get the information that will really help us make good decisions.
\nThe cynicism piece is driven by the sense of thinking one has heard it all before. It requires a level of acuity to distinguish between legitimate rounding up and inappropriate hyperbole, but if one has heard one too many exaggerated claims and promises, for some it can lead to discounting all non-profit claims, so why bother to meet with people and hear their stories/pitches?
\nIf one is a professional and one reaches this point, it is a red flag that one should do something else. If one is a principal, this may be an indication that an intermediary might implement your priorities more effectively than you.
\nFor some, this leads to analysis-paralysis. We don’t know enough, we haven’t received enough evidence, we might be missing something in the 990 or the proposal or the site visit or… We look for the evidence that this group, this project, this initiative, this organization is the one that is the ONE.
What is the problem? The problem is the search for “Evidence”. Evidence of all sorts can be indicators of how likely a project or organization can deliver. But the key word is “likely”. Philanthropy is funding the future and the future is, by definition, uncertain no matter how much due diligence we do. We can choose to be risk averse and fund projects or programs or organizations with the most proven record. We can dream longer term and accept greater risk.
The choice is not certainty vs uncertainty, but rather what is our own ambition, or our tolerance for risk and failure.
\nHere is the kicker: neither is inherently better than the other. But it is probable that as a new-ish funder you may not have fully worked that out for yourself. Our recommendation, then, is to take two or three years to experiment. Try different kinds of grantmakng or different kinds of recipients or different levels of risk. Find out which ones “fit”.
\nAfter two or three years, assess what actually happened and, more important, how you feel about it. Your funding approach and culture will probably begin to become apparent, and your focus will have become clearer.
\nThe challenges of making good decisions among too many choices will continue; that is part of what it means to be a funder. But it is likely that you will have a much more clear self understanding about which choices you wish to make and why.
\nIt may even become easier than it first appeared.
\nAddendum: An early reader of this post suggested that readers should understand that there are both rigorous and systematic ways to make funding decisions that are beyond the scope of this brief essay. The purpose of this one is only to help folks get un-stuck. The purpose of our teaching and advising is to learn about those rigorous and systematic methodologies and how to apply them to your situation.
\n", "url": "https://wisephilanthropy.institute/insights/491-this-is-harder-than-i-thought-it-would-be", "title": "#491 This is harder than I thought it Would be.", "date_modified": "2024-10-09T13:00:01.000Z", "author": { "name": "Richard Marker", "url": "https://wisephilanthropy.institute" } }, { "id": "https://wisephilanthropy.institute/insights/490-the-20-b-impact-on-philanthropy-of-the-2017-tax-cuts-and-jobs-act", "content_html": "A study by the Lilly Family School of Philanthropy demonstrates that the 2017 changes to USA tax law have yielded a net loss of $20B in charitable giving. As they say, that’s not nothing. It is no wonder that there are strong advocates in the philanthropy sector for adjusting the tax law when it is up for renewal. These advocates call for a special deduction for charitable giving even for those who otherwise don’t itemize. [For our non-USA readers: the 2017 changes significantly increased the “standard deduction” amount. Those deductions include health care, home mortgages, charitable deductions, etc. Increasing the amount to be included in the standard deduction meant that many fewer taxpayers had reason to itemize those deductions since the standard deduction would exceed what the itemized deductions would be. Since charitable deductions are included, it seems that there is less incentive to give than there had been when more taxpayers itemized.]
\nYet not everyone in our sector is in favor of adjustments. So before weighing in, let’s take a look at some of the results of the 2017 tax laws from the perspective of the philanthropy/charity sector and why some do and some don’t advocate changes..
\nMost relevant in the study is who is in fact giving less. The study confirms what the Giving USA study showed and has been consistent with long term trends from the charitable sector. Those who seem to be giving less are middle income donors. The proportional number of donors from the broad middle class has continued to drop along with the absolute number of dollars from this group. These facts seem pretty clear. And it does seem likely that at least some of the reduction is because of the drop in the number of people who itemized deductions as a result of the greater standard deduction, although, as we discuss below, it may not be a complete answer.
\nOn the surface, the argument for a carve out exception for itemizing charitable giving without reducing the standard deduction seems to make some sense. It certainly suggests that it would provide an incentive for some to increase or retore their charitable giving.
\nHowever, it seems to me that asking about charitable giving independent of other questions is insufficient. For example, one might ask, did government support for human services and the arts and education and health care increase by a much larger amount, thereby more than offsetting the drop in charitable giving? After all, philanthropy is a crucial but only partial source of funding for all of these areas. If that were the case, it would weaken the case for the carve out because the net benefit to the sector and to society as a whole would have far exceeded that loss. [I assume that the answer is no but without the analysis, the argument is incomplete.] After all, those of us in the philanthropy sector should care about solving societal problems, not simply reinforcing our own sector.
\nAnother matter to consider is the increased pressure on middle earners independent of any altruistic decisions. Between the pandemic and inflation, the sector with the greatest challenge to discretionary or elective spending has been the group whose giving has dropped. Is it fair to “blame” the loss of the charitable incentive for that? What other areas have felt the cutbacks? Have people chosen to select less expensive higher education? Have they elected lower cost health plans? Have they chosen not to go on vacations? In other words, if all areas where middle income earners have choices have seen a reduction in spending, it may be more important to address a much larger set of issues, some of which can be addressed by tax reform, than arguing for the charitable deduction.
\nEven within the charitable sector, it is only part of the story. It is clear that the emergence of DAFs has created a whole new set of questions that deserve serious attention. While most DAF holders don’t storehouse money in them [i.e., taking a charitable deduction but not spending the money in the funds], enough do that it warrants attention. And should private foundations be permitted to give money to DAFs as fulfillment of their 5% required payout? And should “recoverable grants” given by DAF funds be treated more like Program Related Investments which must be spent promptly for charitable purposes, and not restored to the DAF corpus? And is there a level of giving to or from DAFs which should trigger transparency? [As I have affirmed in prior posts, we are DAF holders; the questions are not about the legitimacy of DAFs as a vehicle, but about some of the rules governing them, especially as they have become so prevalent in the philanthropy world.]
\nAnd, to muddy the waters further, a recently released CAF study seems to show an increase in charitable giving in the USA – and elsewhere in the world. That may not be at odds with the Lilly study since there have been many mega gifts that can distort the averages. Clearly the plot thickens.
\nGiven some of this last set of questions, it is no surprise that some want no changes whatever that would limit their autonomy and anonymity. After all, the tax changes of 2017 provided outsize benefits to the wealthiest whose proportion of societal wealth continues to grow at an historically record amount. Their advocates/lobbyists know that once one begins to look at tax law changes, it is highly unlikely that only one adjustment to charitable deduction will be considered.
\nThere are other voices who have argued that the sector itself has been undergoing significant changes. In addition to DAFs and LLCs, the number of Giving Circles has mushroomed involving hands-on giving in ways that are not typically measured by tax reporting or most other studies. Moreover, impact investments of various sorts are viewed by some as equivalent to philanthropic giving. [Whether that is or should be true is a topic for another time.] Additionally, as we learned from the lead up to the 2020 Census, the level of distrust in giving information to the government is extraordinarily high, especially among certain populations. Many refused to share their own information not trusting that it would not be used against them. It is not a leap to suspect that information about charitable giving among those populations would be kept under wraps.
\nAll of this is to say that our sector needs to give careful thought to the broader implications of any specific policy for which we may be inclined to advocate. But more important, give serious thought to the larger systemic questions that are crying out for our attention and for which we need be leaders. Charitable giving matters; a healthy sustainable just society matters more.
\n", "url": "https://wisephilanthropy.institute/insights/490-the-20-b-impact-on-philanthropy-of-the-2017-tax-cuts-and-jobs-act", "title": "#490 The $20B Impact on Philanthropy of the 2017 Tax Cuts and Jobs Act", "date_modified": "2024-09-05T17:00:00.000Z", "author": { "name": "Richard Marker", "url": "https://wisephilanthropy.institute" } }, { "id": "https://wisephilanthropy.institute/insights/483-conflict-of-interest-are-you-doing-it-wrong-you-re-not-the-only-ones", "content_html": "*An earlier version of this was written in May, but I just learned that it was never published. Here it is, slightly updated from the original. *
\nI admit that the discussion about conflict of interest by those on the Supreme Court has been one reason to post this article. But not the only one. Over the years, I have sat on 61 boards, and have taught several thousand philanthropists and foundation professionals from around the world. In addition, I have facilitated a good number of board retreats. Almost universally participants have heard of Conflict of Interest but quite a large portion have only a limited understanding of how it does and should work. Sadly, that sometimes can be an unpleasant problem.
\nPerhaps I should make clear that any legal references in this piece refer only to the USA. Moreover, I am not an attorney so even when I refer to the law, it is in lay terms for the purpose of extrapolating best practices which apply independent of the legal strictures. The underlying principles and practices would apply universally even to those in other countries and in different legal systems.
\nHaving said that, let’s get a couple of key issues out of the way first,
\nNow, on to some key practices:
\n•\tEvery non-profit, including private foundations, should require all board members and key staff to submit a written declaration about any potential COI. This should be done annually, and relevant parties should update those statements at any time any of that information changes.
\n•\tThis next step is observed in the breach more than in practice, but it is an indispensable part of the COI process. Submitting a COI form is a necessary but insufficient part of the process. After submission, all of the forms should be reviewed – by a designated person or committee – to flag those COIs that will require attention. In other words, the key here is to prevent having to make a decision if or when the conflict surfaces. It is up to that designated group to articulate what the implications would be. [see below for more.] After all, when a decision must be made after a COI situation surfaces, it is hard to avoid it being perceived as ad personam and not organizational.
\n•\tHaving identified a COI, what might be a disqualifying situation? Let’s start with two relatively straightforward but very different situations.
\na.\tSuppose a private grantmaking foundation has a national competitive grants process and one of the organizational applicants for a grant has a board member who also sits on the foundation board, what should they do? Some foundations simply don’t allow that conflict requiring that the board member choose on which board they wish to sit since they want to avoid any perception of favored status. Others preclude board participation in the grants process so that there is a wall between the two. And still others only require formal recusal in the formal meeting minutes.
\nNo matter which of these a foundation may choose, this is a classic case of where a prior decision should be made once the COI surfaces. After all, non-profits are never guaranteed a grant from a foundation, especially in a competitive process, but they do want to have confidence that the process is fair.
\nb.\tA very different answer might apply in this next case: A foundation is very committed to place-based funding and has been funding many organizations in its home community for a long time. It is assumed that leaders committed to this community will sit on multiple boards including, perhaps, the foundation board. If they didn’t, it would rob this modest sized community of many core leaders. In this situation, no one would assume that an interlocking director has an undue influence on the foundation’s decision to continue its long-time support. We would recommend that the record show that the person with the COI formally recuse oneself and have the minutes show that they did not vote on this decision.
\nAs with all boards, the COI should be acknowledged, but those charged with flagging it would probably be fully comfortable not being concerned that favoritism would come into play.
\nNow let’s look at some situations requiring a more nuanced response.
\nc.\tIf the situation in b were slightly different and the foundation was considering new grantees for the first time in a long while, greater sensitivity would be called for. If the new grantees were in addition to the long-time grantees, there may not be any COI concerns. But if long time grantees were being asked to submit competitive requests, the COI needs to be dealt with more carefully since it would be very easy for an outside observer to assume that the insider could/would influence fellow board members.
\nd.\tIt is a long-time frequent practice for foundation grants committees to invite field experts to serve as consultants or participants. Since many of those field experts are also connected to organizations that would apply for funding, it would be hard to imagine that any would serve if their own organization were to be precluded from receiving funds. The record or minutes would show their recusal, but it is also a fair assumption that their organizations will receive funding.
\nThis works only when the outside experts are truly widely respected as are their organizations. It also requires that the number of organizations receiving funds from that foundation is of sufficient number so that it doesn’t appear as if these organizations are receiving a disproportionate amount of the funding pool.
\ne.\tThe emergence of the Participatory Grantmaking process raises an interesting variation on d. When grantees are a formal part of the decision making, they are, in effect, sitting on both sides of the table at the same time. Unlike in d, the non-profit participants are representing recipient organizations [as opposed to being selected for their acknowledged expertise]. The great benefit of the Participatory Grantmaking process is that it helps reduce the endemic power imbalance, improves the usefulness of information sharing, provides more credibility within the recipient community, and allows much more sophisticated communal planning. So, on balance, it is a very welcome contribution to the funder/grantee relationship.
\nThe challenge, then, is how one avoids the insider-outsider perception. After all, the benefits suggested above certainly apply to the existing grantee-funder relationships. However, what about non-grantees? What methods should be used to assure non-grantees that they will be given a fair shot, or if not funded, that they were? The practice suggested in d is a starting point, but I would welcome feedback from those of you who have developed an effective practice on this.
\nf.\tPrivate Foundations in the USA have another set of COI issues that show how sometimes what is legal and what is best practice can diverge. In general, as suggested above, there are certain categories of board and staff who, because of their status or relationship, are not permitted to have any financial relationship with the foundation and still be on its board. However, there is an exception for those providing professional services such as legal, accounting, program management, investments, etc. These folks are permitted to have a financial arrangement with a foundation and also, at the same time, sit on its board.
\nThe issue here is that board members, in general, are supposed to have no personal financial interest in their board decisions, yet here it seems that they can be paid and also make policy. Well, that is the way the US law was written in 1969. [There are all sorts of rules related to how fees can be set, etc. as a way to keep the obvious COI under control. I want to reiterate that this article is not a legal “how-to” and any private foundation should look carefully while setting up or revising its by-laws or deciding with whom to establish a financial relationship.]
\nWhile this situation is legal, it is certainly not a best practice. The general rule should be that someone providing professional services should be subject to hiring or firing by the foundation. But realistically, for example, it is hard to fire the legal counsel or the investment manager if that person is also a board member. Therefore, from a best governance practice, those financial arrangements should certainly be considered a disqualifying COI. However, it does happen, of course, but I can attest from my years as a philanthropy advisor how complicated it can be if and when something goes amiss.
\ng.\tFamily relationships have always been a delicate COI issue. Even beyond the legal parameters, issues of succession and eligibility often arise and need to be addressed with sensitivity. After all, in families everything is personal. In the world in which we live, these issues are exacerbated by the wide range of family structures and relationships. To take two frequent examples of many, should long-time but informal domestic partnerships and/or stepchildren have the same status as others in the same generation or relationship?
\nWhile there are many approaches, the one absolute consistent recommendation is to define eligibility and COI before any situation arises, and make sure that those policies are honored consistently.
\n….
Over the years, I have seen every one of these situations produce COI complications for organizations and foundations. In another context, I would be happy to share real-life examples. Some have not been pretty.
Developing a coherent COI set of policies and practices can sometimes seem daunting. But it need not be. One simple rule of thumb is the smell test. If a reasonable person might suspect that a decision could reflect a favored relationship, it probably is a reliable indication that there is a disqualifying COI. Start from there.
\nNow, about those Supreme Court folks….
\ncode block
What, you ask? Haven’t you been providing seminars and a popular “how-to” on philanthropic partnerships for almost two decades? Haven’t you been a consistent and long-time advocate for the need for various sectors to work together as a sine qua non for addressing true systemic issues? Why are you proposing a reconsideration now?
\nBefore getting to the “why now” question, let me affirm that I continue to believe that a well put-together funder collaboration can make a great contribution to addressing a multitude of issues. And, as you may recall from previous articles and seminars, a not very well put-together partnership is counterproductive to both the grantees and funders alike. Regrettably, I am not innocent in the latter: in the days when I was CEO of a foundation, we were active in many funder collaboratives and partnerships. Some were remarkably successful; some were embarrassing failures. Much of what I learned from both has been embodied in our popular “how-to.”
\nThese insights, though, are not new. The challenge of determining if a collaboration is well considered, if a particular funder or foundation is an appropriate candidate to participate, and if such a collaboration fits within the capacity of a funder or style of funding continues. These questions should continue to inform all funders who are considering such collaborations.
\nIf so, why call for a reconsideration now? What has changed?
\na)\tIntersectionality: It is quite true that no systemic transformation can take place without the participation of all sectors of society. That was the original definition of intersectionality. However, the term has become so politicized that it now has come to mean a total buy-in to a wide range of political, ethnic, racial, economic, and geographic divides. For too many, it has become a means test of how loyal one is to a set of underlying values. This may or may not have philosophical or ideological coherence [a topic for another time], but it is a problematic test for funders and allies. In real terms, it means that someone else decides what is legitimate or not – and, more pointedly, if you are not fully on board with those definitions, you are an outsider.
\nTo be sure, this kind of extreme divide is reflective of the larger partisan divide in the USA and elsewhere. My issue here is its implications for funders. Even if one fully buys in to a particular perspective, very few funders have the fiscal or personnel bench strength to fund across all of the spectrum of a particular point of view. Collaborations are hard enough to do well without having to be concerned that there is an implied expectation of derivative funding commitments. So, while some on the inside will find this reality reaffirming, those who might be willing to sign on to a more limited purpose collaborative may well shy away.
\nb)\tBlended Finance: Here too is a term that, on the surface, should be straightforward. One of the ways in which sectors collaborate is through funding. As we have written so many times before, philanthropy alone does not have the capacity to solve systemic challenges. The for-profit sector has far more resources. And the Public Sector has even more. Each brings a distinct set of strengths and it is clear that each is indispensable. The original meaning of the term is to bring financial resources from all of the sectors to address what many now call the poly-crisis, especially but not only in the Global South.
\nWhy then has the term become so loaded and problematic? It seems that there are both real and perceived problems. The core issue is that the private sector has different bottom lines and stakeholders than the other two sectors, and they are only incidentally aligned with the populations these funds are supposed to support. Since some for-profit entities bear no shortage of responsibility for extractive behaviors and policies, there is understandable concern that these commitments are not fully committed to empowering served communities. The challenge of knowing greenwashing from authenticity is real.
\nAfter all, with financing comes power – and unless these funds are sufficiently co-controlled by those communities for whom they are intended, the power continues to be held disproportionally with those whose agendas history has shown to be problematic.
\nA derivative problem that has emerged is the insistence by the for-profit sector on “de-risking” their investment. In other words, in the area of “investment” for development, they want a guarantee that they will only have profits. Others, e.g., governments, communities, philanthropy, should cover the risk portion of the investment. Many see this as another area of distorted control by the for-profit sector and urge collaboratives to resist this unbalanced blend.
\nAs in a above, it creates disincentives for certain development collaborations on a financial level and a distrust of the motivations on a community level. Because the term itself has now become tainted in the view of some key players, it may be limiting much needed financial partnerships and investments.
\nMany funders underestimate the amount of time and energy required by a successful funding collaboration. Hopefully, though, the collaboration should lead to less burden on grantees – fewer proposals, more direct contact with a single contact person, simplification of reporting and monitoring, and a single contract for evaluation. If the grantees have to maintain robust relationships with all of the funding partners, what have they gained from the funding partnership?
\nYet, there are reports of expectations that grantees serve as conveners and managers of funding collaboratives. As funders endorse the concept but recognize the limits of their own staffing, especially among medium and small sized foundations, they turn to the recipients to take over this responsibility. I honestly don’t know how widespread this phenomenon is but since I have heard of it on numerous occasions, it warrants a yellow flag.
\nIt becomes both more complicated and exacerbated once one adds the concept of “participatory grantmaking” to the mix. Participatory grantmaking can be an extraordinarily useful approach. It works to reduce the power imbalance, leads to healthier and more informed relationships between funders and recipients, and can serve to acknowledge the key knowledge and perspective that only those on the ground can bring.
\nBut that also means that nonprofits must assign staff, take on additional responsibilities, and commit time – all of which are precious commodities for non-profits. Now, just picture how that might work if the funders chose to have a formal collaboration with other funders. Yes, when put together carefully, it produces efficiencies and impact but there is little room for error - jeopardizing the great long overdue benefits of participatory grantmaking and the ever-fragile funding support that a collaborative should help obviate.
\n3, Innovation or Risk Aversion
\nOne of the great incentives for funder collaboratives has been to go where none might have gone alone. Sometimes it is because of the need for expertise that no single funder has; sometimes it is because of the impact of the advocacy that a group of funders can have; sometimes it is to leverage a multiyear commitment of dollars to an area that has been undercapitalized and underfunded. And sometimes it is to take risks that might be beyond the “stomach” of any of the collaborators.
\nIt is this last area where I have noticed some push back. All philanthropic funding carries risk for the simple reason that you are funding the future. Some of that risk is minimal – there is plenty of evidence-based experience and relevant research to comfort the risk averse. But innovation is always going to require a higher risk tolerance.
\nMoreover, the more people involved in decision making, any decision making, the more likely that a risk averse decision will emerge as the one that comforts the largest number. Funders are no exception. So, as time goes on, a funder collaborative may gradually ease into the safer space. What may have started out as an articulated courageous commitment to change became a reliable but markedly less courageous – i.e., more risk averse – partnership. What may have started out as a proud supporter of innovation may end up deciding that innovation is simply too much work.
\nAn Alternative:
\nAs I affirmed above, funder collaboratives should be one of the arrows in the quiver of most funders. If one truly wants to address the most important and difficult challenges on the local, national, or international level, collaborations are indispensable. But what we are learning is that sometimes collaborations are too demanding, or themselves have strings that militate against the goals they are intended to address and the societal ills they are intended to redress.
\nThere is an alternative model that is worth considering for some. This model may be Instead of formal collaboration and for others, a supplement: All of us need to understand where in the continuum our funding fits. If one funds exclusively on a place-based level, we should know who is addressing advocacy and policy change that enables that place-based funding to be fully effective. Conversely, if we are funding at the systemic level, it is indispensable to know how these ideas can and will be implemented. In other words, collaboration need not always be a formal funding arrangement but can be on the shared knowledge level. In those cases where the challenges of formal partnerships may seem to outweigh their benefits, this may prove an alternative worth considering.
\n", "url": "https://wisephilanthropy.institute/insights/488-philanthropic-partnerships-reconsidered", "title": "#488 Philanthropic Partnerships Reconsidered", "date_modified": "2024-08-12T12:30:00.000Z", "author": { "name": "Richard Marker", "url": "https://wisephilanthropy.institute" } }, { "id": "https://wisephilanthropy.institute/insights/487-why-philanthropy-should-be-pro-tax-redux", "content_html": "I recently received one of those phone calls that make one smile. A philanthropist and her philanthropy advisor had recently read an article I wrote and published 3 years ago [#428 – Why Philanthropy Should Be Pro-Tax] and found it both helpful and supportive of their own emerging thinking.
\nThe core idea in that article was and continues to be something quite straightforward: even at our best, we have neither the resources nor the political power to accomplish everything to which we aspire. Any significant systemic issues require multiple sectors, and a recognition that if it were simply a matter of a few – or even a lot of – grant dollars, they would have been solved a long time ago. Indeed, while private sector investments can sometimes provide constructive incentives, and on rare occasion solutions, it is impossible to imagine long term transformation and solutions without government policy and funding.
\nI am not so naive to think that everyone thinks this way. Even within the philanthropy world, there are some who somehow believe that the for-profit sector along with strategically allocated philanthropic investments can solve core societal issues. If so, I have yet to see it. That doesn’t mean that we and the private sector are irrelevant, only that it is inconceivable that long term matters such as education, climate, health care, housing, poverty, and more can be fully addressed without government/public funding and policy.
\nPublic money comes from taxes. To be sure, there are many kinds of tax systems around the world and even significant diversity within the States of the United States. But one way or another, if we want the services of civil society to be available and predictable, it means that we, all of us, pay taxes. And we in the philanthropy sector should be leaders in advocating for both an equitable tax system and compliance as a precondition of us meeting our philanthropic missions.
\nSeems straightforward to me. Oh, of course, there can be disagreement about what counts as an essential core societal commitment and who should have which responsibility, but not about the essential nature of public commitment.
\nSome of this is a rebuke to almost 2 generations of pollical leaders who promise to reduce taxes – as if taxes are a bad thing. I would much rather hear the argument about how they will apply our investment in the public sector to improve education, health care, transportation, infrastructure, etc. That is what the taxes are for, and reducing taxes – as a goal by itself – runs ethically against meeting those societal desiderata. [So there is no misunderstanding: my point is that raising or reducing taxes by itself is an invalid societal goal. Our taxes should align with what we believe should be provided.]
\nWhy am I returning to this now?
\nFor one, we are well into the pollical season, and it is a small anticipatory rebuttal to what I consider a cynical approach by some politicians to simplistically appeal to some constituents’ tragic cynicism toward government.
\nBut, in fact, the precipitating reason for this piece at this time was a session at a recent family office conference I attended. This particular annual family office conference is one I look forward to for many reasons – the setting, the reconnecting with many in the family office field, and the diverse sessions covering topics about which I might otherwise not have expertise, and, of course, that I am one of the presenters.
\nAs at many conferences, sponsors are given public slots. One of those was a company whose speciality is intergenerational transfer of wealth. It was a session of interest to me since so much of philanthropy nowadays involves various implications of generational succession. However, from the first paragraph onward, this firm’s exclusive message was how to avoid paying taxes. In fact, the entire presentation was a comparison of various tax avoidance investment vehicles – concluding, not surprisingly, with theirs as the one that does that best.
\nThis speaker never mentioned philanthropy, but it reminded me of a presentation by another wealth advisor that promised to show that proper use of philanthropy vehicles could reduce taxes to $0. In both cases my response was deep anger. The idea that tax avoidance in itself is a morally acceptable goal for investments or philanthropy is deeply objectionable. And it is particularly objectionable given the target market for these presentations: those of us who can afford it. Why should those of us with more assets be more exempt from paying our share than those who could never avail themselves of these vehicles? And let’s be honest: many of these vehicles were created by shrewd experts who lobbied for particular exemptions or deductions that can only be used by those with sufficient means.
\nNo one wants to pay more for anything, including taxes, than is fair or justified. Myself included. Yes, we take legal and legitimate deductions. But we make no financial or personal decisions because of their tax implication. Those are always derivative of higher priority decisions we make. That is a radically different approach than a financial advisor whose entire message is how to avoid taxes.
\nWhile I cannot advise financial advisors on how to sell their services, I have no problem affirming that we in the philanthropy world should have a different standard based on the value that defines our legitimacy. Some of that value is understanding how we improve at least some part of the world because of our mission. It is rare indeed that our mission can be fully accomplished independent of government policy and funding – and, thus, to affirm once again, that means that we in the philanthropy world must be pro-tax.
\n", "url": "https://wisephilanthropy.institute/insights/487-why-philanthropy-should-be-pro-tax-redux", "title": "#487 - Why Philanthropy Should Be Pro-Tax Redux", "date_modified": "2024-08-05T16:00:00.000Z", "author": { "name": "Richard Marker", "url": "https://wisephilanthropy.institute" } }, { "id": "https://wisephilanthropy.institute/insights/485-a-quarter-century-teaching-funders-my-response-to-the-2024-cohort-s-final-assingment", "content_html": "“When you stop learning, you stop knowing”.
\nThat was my response when someone asked me “Why are you here? Shouldn’t you be teaching this?” The context, well over a decade ago, was a presentation about a relatively elementary philanthropy topic at a philanthropy gathering. I was just one of the registered attendees. At the time, I had already been teaching philanthropists and foundation folks for a long time and was a regular on the philanthropy speaker circuit. So, the question wasn’t out of left field.
\nMy response was not offered aa a simple self-effacing bon mot. As an educator, I truly believe that one must continue to learn – not only for new content, insights, and approaches but also for new and different ways in which ideas are articulated, even if those ideas are not new. After all, the folks I have been teaching in a university setting since 2000 are themselves funders – principals or professionals. I have taught in many countries and many “students” at NYU and Upen have come from many countries. Nothing could be more presumptuous and arrogant to think that because I had experience in the field and had been asked to develop a professional level certificate program, I knew everything I ever needed to know.
\nTo go back a bit. When I became CEO of a well-known foundation [that closed in 2002], I approached numerous colleagues for advice. The most common response was “You’ve met one foundation; you’ve met one foundation.” Given that the field was a whole lot smaller then, the pool was substantially smaller, and, except for a very few large well-known foundations, most foundations functioned locally, independently, and reflected their own unique histories. In many cases, even if there was an executive director, it was the first person holding such a position. So, perhaps, in some ways that mantra seemed reasonable.
\nBut I came to believe that it was wrong – and arrogant. After all, as a field even then we were responsible for billions of dollars, our decisions regarding what we funded were not accountable and, for recipients, often existential, we could influence and shape an entire sector, and we could do so with more autonomy than any other sector. There was, though, no credential. How can it be that there were no best practices, no ethical standards, no useful guidelines about responsible decision making? Even now, one can be a full time executive or program officer in our field and never study philanthropy law or learn its basic ethical principles You get the point.
\nSo, in 2000 when NYU approached me and asked me to teach courses for funders, and a couple of years later, asked me to develop the certificate program, I approached the key organizations and players in the philanthropy field and asked them all the same question: what should a funder know?
\nThere was enough commonality that the content was relatively easy to define. My key challenge as an educator was to put it together so that it was coherent, sequential, and effectively presented. Of course, the content and methods have been updated and modified over the years, but the core structure and understandings have continued to inform my teaching [and advising] for the last 25 years.
\nThe NYU Academy for Funder Education existed until 2018, and since 2016, I have been teaching at the UPenn High Impact Philanthropy Academy. Additionally, through our own Institute for Wise Philanthropy, we have taught funders in many countries and in many places throughout the United States.
\nHaving taught several thousand funders has been the source of and impetus for continued learning. There is a great diversity of cultural, religious, ethnic, national, racial, gender [etc.] influences that everyone brings into the room. One must learn to understand and then communicate what is generic and what is identity-specific. One must learn to understand generational differences – and then teach in a way that honors those differences.
\nAll of that learning from others has not only informed how I communicate, but has helped me develop insights that, for me, would have been impossible without that huge implicit database of experiences. I am proud that my work in philanthro-ethics, culture, and decision making has been so widely recognized. It would be far less sophisticated than it has become had it not been for the teaching. And that would be true even if our field were static.
\nBut our field isn’t static. The philanthropy world is a very different place than it was when I first entered it as a foundation trustee in 1982, or when I became a foundation CEO in the 90’s. It is larger in every way, there are many different kinds of players, there is a much greater awareness of our role in addressing systemic issues, there are open discussions about who should make decisions, there is more consensus on best practices – even if still honored in the breach by too many, there is a recognition that all of our philanthropy designed financial assets can/should be aligned with our grantmaking values, and more. Teaching to and about this much more complex “ecosystem” [apologies to those who dislike that term] requires that we speak honestly about competing values, politics, and transparency. Even the word “philanthropy” has problematic connotations in much of the world. The core concepts and structure of our courses may be much the same, but the courses we teach in 2024 are far from the courses we taught in 2000. And I daresay that they will continue to evolve as we look to future courses, lectures, and consultations.
\nThe concluding assignment for this year’s cohort at the UPenn High Impact Philanthropy Academy was: “What were the most significant changes in your understanding that emerged from this course, and how do you anticipate it will have an impact on how you do your philanthropy in the future?” The responses were predictably diverse, but they were meaningful and often touching. It is clear that this group of funders, some with extensive experience, others with much less, see that they are in a field that requires a sense of self awareness and responsibility.
\nMy message to them was what I suggest to every class: that we funders have a unique privilege: it requires that we be both courageous and humble. After all, there is still far too much hubris and risk aversion. It is a perennial and universal message and has been a key message of my teaching for a quarter century.
\nBut given the changes in our field, there is another message, one that I am only recently accepting must also be conveyed: As our field and its resources and organizations grow, we need to resist becoming just another special interest group. Our justification for being, legally and morally, is to never lose sight of our mandate to use our uniquely privileged resources to improve the world, to do good and to act with moral and ethical rectitude. Only with that imperative do we deserve the influence and warrant the autonomy we have been granted/
\n“When you stop learning, you stop knowing.”
\nMy pithy response those years ago holds as true today as it did then. My commitment to the future is that it will continue to be my mandate as I hope it will be yours..
\n", "url": "https://wisephilanthropy.institute/insights/485-a-quarter-century-teaching-funders-my-response-to-the-2024-cohort-s-final-assingment", "title": "#485 A Quarter Century Teaching Funders - My Response to the 2024 Cohort's Final Assingment", "date_modified": "2024-06-26T17:30:00.000Z", "author": { "name": "Richard Marker", "url": "https://wisephilanthropy.institute" } }, { "id": "https://wisephilanthropy.institute/insights/484-esg-matters-but-is-this-an-esg-question", "content_html": "Recently a social media posting celebrated someone who publicly resigned her position with a bank because of an investment with which she disagreed. [Since the purpose of this piece is not to engage in the political issues, I am being purposely vague about the politics that inspired her resignation.]
\nMost of the comments I saw congratulated her for her courage and conviction. Indeed, I applaud and honor someone who is willing to take personal risks because of deep-seated personal beliefs. It happens all too rarely.
\nYet, upon closer examination of the self-presented rationale, the plot thickens. The articulated basis for her resignation was that she could not continue to work for a firm whose publicly stated commitment to ESG standards [see definition below] seemed to be so inconsistent or inauthentic. That firm, she argued, regularly articulated its commitment and therefore this specific investment would surely violate that commitment.
\nUpon looking further, it isn’t at all clear that this particular firm had a positive record of honoring ESG in its investment practices. To take one example, this firm has a long history of being identified – and challenged - for its leading role in investments in pipelines and fossil fuel. If E stands for Environment, fossil fuel related investments were far more connected to the continuing investment practices of this firm than the one the aggrieved staff person identified. And, while there may be legitimate questions to be raised about the propriety or implications of the investment this staff person challenged, there is no question that continuing active investments in pipelines and drilling have worldwide impact and are among the highest concerns of applied ESG standards.
\nWhy, one wonders, did this impassioned staff person feel comfortable having a career with that firm with that history and only decide to quit with this recent investment?
\nI certainly am not in a position to have a conversation with her that would help clarify this apparent contradiction, but it does seem that the issue at hand had nothing to do with ESG at all, but rather with making a contemporaneous political stance. And while there is much to be lauded about acting on one’s political leanings, it is disingenuous to misapply what ESG means – or should.
As anyone who follows the news can attest, there are far too many who do their best to inappropriately politicize what ESG means, including, in some few cases and circumstances, making it illegal to even use these criteria. However well intended the complainant in this report is, her misappropriation of the term only reinforces its politicization, and does nothing to amplify its intended use. Alas.
….
For those who may not be familiar with the categories, here is a definition from a prominent financial firm. The bold is theirs.
\nESG stans for environmental, social, and governance. These called pillars in ESG frameworks and represent the 3 main topic areas that companies are expected t report on. The goal o ESG is to capture all of the non-financial risks and opportunities inherent in a companiy’s day to day activities.
\n", "url": "https://wisephilanthropy.institute/insights/484-esg-matters-but-is-this-an-esg-question", "title": "#484 ESG Matters - But is this an ESG Question", "date_modified": "2024-06-24T19:30:00.000Z", "author": { "name": "Richard Marker", "url": "https://wisephilanthropy.institute" } }, { "id": "https://wisephilanthropy.institute/insights/482-you-need-new-glasses", "content_html": "I am sure that Parking Enforcement patrols are effective in getting folks to move their cars when parked in the wrong zones or to put money in meters when they are. As one who doesn’t own a car [and haven’t since 1988] I admit that I don’t think about them that much, and, moreover, they rarely have any impact on our daily lives.
\nHowever, as a pedestrian who often observes how frequently speed limits and traffic lights are mere suggestions, at least where we live, I would put a much higher priority on a visible and proactive core of Traffic Enforcement – if only!
\nBut regardless of the relative merits of each, I would expect that drivers of Parking Enforcement vehicles would – or should – be held to the driving standards that should be practiced by all. After all, they are not emergency vehicles, there are no sirens or flashing lights; the only identifier is the text on the side of the front doors saying, “Parking Enforcement.”
\nThus, when such a vehicle drove through a red light at a busy intersection as I was standing at the corner, I wasn’t very happy. When the driver pulled over ½ block away to write some tickets, I decided to tell him that I saw him go through the red light. His response “you need new glasses.” I repeated that I was there and saw it [and, FYI, I am not color blind!], he only repeated his childish response. Was this a playground?
\nIt was clear that nothing productive was going to happen by continuing with this, so I walked away. I did make a note of the license plate and if it were to happen again in front of me, I will certainly send a letter of complaint to the County. Nevertheless, the incident continues to annoy me, not because it is the most radical violation of our fragile system of justice and equity – to say nothing of safety, but it is all too indicative of how cavalier folks are about whether laws should apply to them if it happens to be inconvenient.
\nWhen a uniformed representative of the government overtly flaunts it, only to be dismissive when called on it, it is disconcerting. And reflective of how much work we have to do to rebuild a viable civil society. The social compact is built on both large and small behaviors that reflect our interdependence. When because of selfishness, antinomianism, or dismissiveness, too many people internalize those attitudes and behaviors, it yields hyper partisanship and a tragically vulnerable social order.
Of course, going through a red light when there is no traffic coming is not in itself worthy of an extreme punitive response. But are such folks that different than those who would excuse an attempt to disrupt an orderly process of an election? Or what about those who explicitly argue that one should deduct whatever you want from one’s taxes since it is highly unlikely that you’ll get caught? Or those companies that knowingly hide the health dangers of their products for the sake of short-term profit?
And, lest you think I am giving our own sector a pass, do we really think that we are positively shaping our culture for good when we indulge in dark money contributions or resist transparency? The sole legitimacy of our philanthropy sector is that exists for the purpose of public good. We should demand of ourselves the highest standards of civic behavior and engagement.
\nThere are some very wonderful and admirable efforts in our sector to bridge the destructive partisanship that divides our political commons. [I have written some thoughts on that in #480 – Can Philanthropy Save Us?”] And goodness knows, we have precious little time to find effective ways to restore belief in democracy and its institutions. But at the end of the day, those efforts only are sustainable if there is belief in the commonweal, in the interconnection and interdependence between us all, and that our own destiny depends on others, and that others are sustained by us.
\nThe arrogance of the parking enforcement officer who acted as if the law doesn’t apply to him only underscores how far we have to go and how much we have to do.
Every single one of us.
One would hope that at some point all funders would realize the limited effectiveness, and even counterproductivity, of refusing to fund “overhead.” It is a long-standing discussion, brought on, to a large degree by two things: an incomplete understanding of how any organization works and also by an out-of-date attempt by our rating agencies to apply strict percentage analyses to the budgets of non-profit organizations.
\nThere is, by now, a large compendium of articles, blogs, books, and Ted talks rebutting both so I will be succinct.
\n•\tProjects, no matter how generously funded, don’t function in a vacuum. They depend on all sorts of organizational supports to allow them to work, let alone succeed. Funding only the direct costs ends up costing the sponsoring or host organization money if the relevant organizational support costs are not accounted for. In order to accept a “project only/no overhead” grant requires that an organization redirect funds from other cost centers, raise other money for the project that the funder is committed to, and assign supervisory or executive staff to oversee the project. What is intended as a benefit can turn out to be a burden.
\nIndeed, many of us specifically reject the term “overhead” since it suggests that these costs are unrelated to that which is being funded. I prefer to refer to indirect costs as “infrastructure.” It is a useful metaphor: no part of a building can exist without an appropriate infrastructure. It is not incidental or extra but core to its stability.
\n•\tThe response to the various rating agencies in the field led them several years ago to refute their own earlier methodologies. Of course, as funders we need to understand the finances of any organization we fund and be prepared to ask questions about budget lines that seem distorted. But they and we found that when the percentages were the only key rating metric, it cut off useful analyses of effectiveness, impact, and organizational longevity. Some organizations were so fearful of dropping their A rating that they would gerrymander decision making and budget preparation so that it would support that rating even if it would have been healthier for the organization to make changes. Fortunately, most funders have learned to look beyond those strict percentages to ask more complete questions about an organization.
\nThis too emerged from a distorted or at least limited understanding of how nonprofits work. In young or small organizations, almost everything is operating support – or read differently, everything is program. In most nonprofits, personnel related costs are the single largest budget item, and an organization committed to quality personnel is going to invest heavily in staff training, supervision, recruitment, and retention. Moreover, efficiency, as we well know, is not synonymous with effectiveness.
\nBut, as I suggested at the beginning, this is well worked material. If some funders don’t yet know it, it simply reinforces why courses such as the ones we teach are indispensable for our field.
\nI put this as background to a conversation I had recently with a very respected [deservedly so] leader of one of the national organizations in our field. Our far-reaching conversation included some observations about our constantly changing eco-system [with apologies to those who feel that word has outlasted its usefulness.] Any of us who have been in the philanthropy sector for any length of time has seen affinity groups come and go, grow and shrink, morph, rebrand, and more.
\nThat shouldn’t be too surprising since so many affinity groups are convened as logical extensions of a shared interest or identity. What may have been an informal caucus at a national conference grew into its own entity to provide much needed information sharing, collaborative opportunities, and more focused advocacy. All well and good.
\nThe crunch came/comes around sustainability. After all, foundations and other funders are typically not committed to funding an ever-increasing number of organizations in the field. For very few is that part of their raison d’etre, or priorities. As good sector citizens, most of us, I think, believe that being connected to others in the field is useful, worthy, and even a responsibility. But that doesn’t mean that the budget for those affiliations is unlimited, nor is there bench strength to justify an expanding collection of memberships. At a certain point, every funder steps back and decides to make hard choices among them.
\nMy colleague and I had agreement about this part of the analysis. However, we disagreed about nomenclature. They referred to these membership affinity groups as “infrastructure” organizations for the philanthropy sector. I preferred to use the term “field building.”
\nIn the case of funding nonprofits, I choose to use the term infrastructure because I believe that that is essential. There can be no organization without an infrastructure. Surely there can be many types, many structures, many organizational designs, but having some infrastructure is a sine qua non. it should be a mandate for us to support that infrastructure because it is indispensable to deliver anything we may want to support.
\nI am less persuaded that affinity and membership groups play the same role. Most funders can and do exist without the involvement of an intermediary or affinity membership group. They are not an indispensable sine qua non for effective grantmaking. Therefore, I didn’t agree when my colleague defined support or non-support for affinity groups as analogous to support or reluctance to support infrastructure of nonprofit organizations.
\nHaving said that, let me quickly affirm the value of affinity organizations. Over the years we have been members of many and quite active in a few. They are absolutely valuable for their work in field building, in advancing standards, in recognizing the value of philanthropy education, in convening, and in representation. The challenge, though, is to decide which ones do that, which ones do that well, and which ones would be better as special interest groups of other organizations. And, along those lines, with which ones do we choose to affiliate and why.
\nYou may ask if I am simply nitpicking on the choice of words. Perhaps, but words do convey intention. “Overhead” has become a counterproductive word for funders in understanding how and why to support specific non-profits. I believe that “infrastructure” conveys an understanding of a pre-condition of stability and success of that organization.
\nSimilarly, I feel that “infrastructure” does not describe what the value of field building organizations in our field can be. Without them, unlike for specific nonprofits, our field would continue to exist; but with them we can, as a sector, be much better. It is a distinction worth making.
\n", "url": "https://wisephilanthropy.institute/insights/481-overhead-infrastructure-infrastructure-field-building", "title": "#481 Overhead ≠Infrastructure; Infrastructure ≠ Field building", "date_modified": "2024-05-20T12:30:00.000Z", "author": { "name": "Richard Marker", "url": "https://wisephilanthropy.institute" } } ] }