Foundation Scandals (Feb 04)

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You might say that with regards to the recent spate of scandals about self-dealing among trustees of foundations, as a Boston resident, I sit in the belly of the beast. The Spotlight Team from the Boston Globe has found a great deal of low hanging fruit in its recent investigation of philanthropy’s miscreants. It’s difficult to expect the general population to take the integrity of charitable institutions seriously when Paul Cabot Jr., the scion of a deceased local philanthropist, known for his stereotypical Brahmin frugality, explains earnestly that he had to raise his salary as a trustee of the Paul and Virginia Cabot Charitable Trust to cover $200,000 of expenses from his daughter’s wedding — and also, by the way, to provide his wife with her expected $10,000 monthly allowance — “She seems to think it’s not enough, like most women,” he explained. This while the assets of the trust have plummeted, and while its annual disbursements have generally hovered at less than half of his annual salary.

This changes the tone of the conversations that people have with one another about nonprofits. A cab driver recently snorted at me “Sweet deal, huh?” after I responded to his question about what I did.

As you know, from our last issue and my last few emails, the Nonprofit Quarterly takes governance very seriously and we’ve long been confused by some of the behavior of some of the governing bodies of foundations. Some of the recent abrupt changes of focus in foundation funding that we have seen result from a simple change of executive leadership give us the sense that the governance bodies of these oftentimes very large and influential institutions may not always be completely grounded.

But that is a far more subtle issue than those uncovered by Rick Cohen in his article “Time to Stop Excusing the Inexcusable: Foundation Trustees Who Play by Their Own Rules.” This is a story you will find hard to put down — it has a little of everything — family turmoil, fast cars and scandal. Evidently, there is something strangely fascinating to most of us about the unrestrained antics of the more ethically challenged rich. But seeing this vacuous behavior played out in the name of charity is disastrous for any number of reasons not the least of which is the loss of public trust in our sector.

We all need to consider the fact that when a sector refuses to govern itself effectively, declaring and holding itself to ethical standards, it sets itself up for a more restrictive environment.

In any case, once you’ve read all the sordid details, the issue is how the sector can cleanse itself. What do foundations have to do to give more than lip service to getting rid of the bad guys? What roles can and should nonprofits play? And how should government get into the ballgame — if at all — to establish better standards or even simply enforce the skimpy ones on the books now?