The Spend-Out Presumption And The Value Of Enduring Institutions

Friday, February 26, 2010

By Charles H. Hamilton
Senior Fellow, Philanthropy New York

Foundations should explicitly consider their lifespan options. However, in my last contribution, I wrote that focusing simply on foundation perpetuity or spending out was, per se, a distraction from: (1) attending to mission and effectiveness first and foremost, and (2) considering other forms of foundation “existence,” such as foundation mergers. I remain distracted by two things: (1) much of the discussion about foundation lifespan tends to skew in favor of spend-out, and (2) the value of enduring, independent philanthropic institutions to civil society is unfortunately ignored.

First, for instance, some outsiders and policy people emphasize the advantages of spending out because they fear the independence of foundations; don’t trust staff and boards to do the perfect thing; or desire getting the money out of foundation coffers now. Foundation staff may not admit it, but spending out may be in their self-interest, since it increases their “power.” Some board members, foundation staff, and donors favor spending out because they believe only they can make the best decisions; they hate the idea of passing control to others; or they are flummoxed by how to negotiate the generational transfer of intent and governance. Spending more funds on particular issues now may hold the promise of greater immediate impact. But for many of the issues foundations address, spending more now may be a temporal illusion: the philanthropic version of the short-sighted, short-term thinking that plagues American corporations in search of profit.

These are not the only reasons to spend out, of course. My point is simply that the case for spending out isn’t quite as obvious or neutral as it is sometimes portrayed; there can be some less attractive motivations for it.

There are, of course, less attractive reasons for perpetuity as well. It is, for instance, the unthinking, default position for far too many foundations and donors. Sometimes, a false belief in donor immortality and control from the grave is at play. In any case, all motivations, good and bad, should be discussed before deciding whether spending out or a longer lifespan will best serve mission and effectiveness.

Nonetheless, I believe there is a good reason to take a longer-term view about foundation lifespan, one that is rarely raised. In an “exit interview” published in The Chronicle of Philanthropy before she left the Ford Foundation, Susan Berresford talked passionately about the importance of long-term institutions: “Our society values enduring institutions…we treasure them because they express and reinforce our values.” And justly so.

Strong, diverse, and long-lasting institutions are a vital part of a sustained civil society. New foundations and other philanthropic formations constantly help to renew civil society, and that is a good thing; at the same time, foundations that have long histories, existing cultures, experience, and working capital are immensely valuable as well. As enduring institutions, foundations can represent significant, independent organizations within civil society. They are “countervailing” institutions, to use a phrase now out of fashion. They stand separate from governmental, corporate/commercial, and other special interests. They can cooperate with and influence these interests with a legitimacy and independent status that comes from their long-term knowledge and endowments. Both centuries of history and events in recent decades—in the United States and internationally—should remind us just how important enduring and independent institutions can be to society. If one is going to talk about the public good, surely having long-lived foundations can be one such public good.

I wrote “can be” because one of the challenges for us is how to make sure long-lived foundations don’t merely become calcified dinosaur bones. How can they remain vital and renewed, and use their history, knowledge, and cultures to enrich civil society and the causes for which they care? Foundation mergers and exploring other organizational models may be some ways. Having regular discussions about mission and effectiveness—along with explicitly considering the time horizon for a foundation—can be another. Developing staff and board leadership (from within and without) with a comprehensive time horizon in mind is crucial.

We also need foundations with long-lasting commitments to issues that require enduring attention. All too often, the short-term belief that we can, for instance, eliminate poverty or cure cancer in ten years is supremely presumptuous and wasteful. Indeed, few issues addressed by foundations have been solved in a lifetime. While that is certainly partially due to foundation ineffectiveness, many problems are immensely complex and may even be part of the human condition. Foundations represent not only a workshop for passion and innovation, as many have remarked. They also represent the financial and human capital needed to address issues—and passion, innovation, and financial capital are sometimes best utilized with a longer-term perspective.

Assuming perpetuity as the default or presuming spending out is the better choice are both mistakes. Spending out or enduring can both be legitimate strategies if they help meet a foundation’s mission. In any case, the values to society of having sustained and independent philanthropic institutions should be an explicit part of what we consider, though I suspect individual foundations rarely think that way. Perhaps, then, when one looks at mission and impact, one value to include is a foundation’s role as an enduring, independent institution; as a long-term, committed philanthropic citizen; as a countervailing power within the complex workings of modern civil society.

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