Spending Down vs. Existing in Perpetuity: The Historic Foundation Debate Continues

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March 9, 2012; Source: Wall Street Journal

A thoughtful and forthright observer of philanthropy, Adam Meyerson heads the Philanthropy Roundtable, sometimes seen as the conservative counterpart to the more mainstream or liberal foundations seen in the Council on Foundations (though many “liberal” foundations are also Roundtable members).

In this WSJ op-ed, Meyerson raises a common concern of conservative philanthropists: the issue of “donor intent.” Many conservatives have argued that modern foundations such as Ford, MacArthur, and Pew have strayed far from the intentions of their founders. For example, J. Howard Pew’s stated intention was that the Pew Charitable Trusts “acquaint the American people” with “the evils of bureaucracy,” “the values of a free market,” and “the paralyzing effects of government controls on the lives and activities of people.”

Prompting Meyerson’s op-ed was philanthropist Chuck Feeney’s gift of $350 million from his Atlantic Philanthropies to Cornell University, his alma mater, for its planned technology campus on New York City’s Roosevelt Island. Feeney is engaged in an aggressive plan to spend down the assets of Atlantic Philanthropies by the end of 2016. To reach that goal, it will have to give away more than $2 million every working day, an amazing grantmaking agenda.

Meyerson calls the spend-down plan “Feeney’s refusal to fall into a trap that has snared many other philanthropists.” He says, “When a foundation is set up to dribble out its funds in perpetuity, there is a high risk it will eventually drift into projects the donor did not believe in.” Meyerson acknowledges that the original donors often leave vague or general philanthropic goals, allowing trustees and family members to stray from the donors’ personal and political philosophies. As an example, he cites the letter of resignation submitted by Henry Ford’s grandson as he left the board of the Ford Foundation: “The foundation is a creature of capitalism, a statement that, I’m sure, would be shocking to many professional staff people in the field of philanthropy. It is hard to discern recognition of this fact in anything the foundation does.”

While Meyerson recommends that donors who want to create foundations to last in perpetuity get a lot more explicit about their directions to their foundations, his op-ed revives the debate about perpetuity vs. spending down. Many nonprofits would love to see foundations giving out more than an eyedropper’s worth (i.e., less than five percent of their assets). However, if the challenge of spending down means giving mammoth grants to mammoth institutions like the $350 million to Cornell, some nonprofits might be less than happy with the results. Do NPQ readers see spending down as a desirable, preferable philanthropic policy to foundations existing in perpetuity? Let us know.—Rick Cohen

  • David Lynn

    The question for each foundation should be finding the most appropriately spending methodology to achieve their mission. If a $350M grant to Cornell is the best way for that foundation, then it’s appropriate. For others, smaller grants over a long time may be the best. But in either case, the critical factor is clarity of mission.