September 15, 2019; Wired
The cost of accepting a donation from the wrong donor keeps getting higher and higher. The importance of considering the background of a donor, their reputation and the source of their wealth, has never been more important.
NPQ has looked at a growing list of nonprofit organizations, including MIT, Harvard, the Whitney Museum, the Louvre, and Lincoln Center, that have found themselves scrambling to explain gifts from controversial and compromised donors. How did they end up in these situations, and what steps could have been taken to protect future risks?
The quick answer is that a nonprofit should know who their donors are before they accept a donation and give them honors. A Google search and a review of the data provided by many donor management software products should give organizational leaders the information they need to avoid the next Epstein or Sackler Family embarrassment.
Would that the answer were so easy. Every organization dependent on donors to fund their operations and their capital investments has a more difficult challenge: How do you balance the good a donation can accomplish against harm the donor may have done? Oxford University’s Vice Chancellor, Prof. Louise Richardson, captured this difficult equation when she explained the University’s decision to accept a £150 million donation from controversial billionaire Stephen A. Schwarzman to Tom White.
“Do you really think we should turn down the biggest gift in modern times,” Richardson asks, “which will enable hundreds of academics, thousands of students to do cutting-edge work in the humanities?”
Gene Tempel, founding dean emeritus of the Lilly Family School of Philanthropy at IUPUI, made a similar point to Wired’s Adam Rogers: “What if you can make some lifesaving discovery, or provide scholarships? It might be helping the institution with faculty members for a new program. Whatever it is, that’s not going to happen if that money is turned down.”
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Rogers points out that the history of American philanthropy is dotted with people and institutions making good outcomes from money that might be considered tainted.
This country wouldn’t have Carnegie libraries, the Howard Hughes Medical Institute, the Ford Foundation, or the Rockefeller Foundation if very rich men didn’t want to burnish their legacies, which is what people used to call reputation laundering. At least one of those guys was a vicious anti-Semite and another one was a sex predator. Yet today getting a Ford Foundation or HHMI grant is a sign that your work is a high-value contribution to American arts and letters.
Knowing just who a potential donor really is works as a start. Against that knowledge, organizations must bring a clear understanding of the values that drive them and the economic pressures their leaders face. As Rogers writes, “If you’re taking money and associate the institution with someone whose value system might not be in alignment with the values of the institution, then it’s an assault on institutional integrity.”
As financial pressure grows and the gifts get larger, so does the challenge. The more critical the need for funds, the easier it can be to ignore reality. According to Aaron Horvath, a PhD candidate in sociology and a fellow at Stanford’s Center on Philanthropy and Civil Society, processes often make it too easy to skirt having to confront ethical compromises. “Any project I do,” he observes, “I have to run through an institutional review board for research ethics. But my funding doesn’t. It’s interesting to wonder what that would look like.”
Economic pressures will not go away. Imagining the potential good a donation might do push mission-driven organizations to take risks. But dangers lie in how the decisions are made—openly and transparently, or privately and secretly? Can various stakeholders weigh in on the level of compromise? Rogers says:
The entire system for metabolizing philanthropic gifts, particularly private ones…is a poorly illuminated pile of broken guardrails. Even if most institutions and foundations are cautious internally, even if the unfolding scandal with Epstein and the Massachusetts Institute of Technology is an outlier, the system is essentially a pool of dark money. Its sources and goals are often unclear, or occult. But it’s money that research institutions need—or, at least, want. Stipulated, most donors want to help the world. Some also want to build a legacy. Most institutions want the same. But those desires are threaded through an ethical minefield.
Decisions made in private are dangerous. Organizations should be able to proudly explain their agreements with donor and take responsibility for the balance they have struck. To the extent they are helping paper over a troubling reputation, they owe all their stakeholders an explanation in advance. If a gift must remain secret, that may be reason enough to walk away and find funding other places.—Martin Levine