By RICK COHEN
The foundation created by William Hewlett, the computer pioneer, portrays itself as “society’s risk taker,” a fund that makes “big bets with big potential payoffs.” With its recent $400-million grant to Stanford University -- the largest foundation award ever made to an institution of higher education -- the William and Flora Hewlett Foundation has lived up to its commitment to being “big.”
But just because it’s big doesn’t mean that it’s bold, or that the potential payoffs will necessarily be significant.
In reality, all the foundation did was to plow a big chunk of its corpus into Stanford’s endowment, which already was worth $8.6-billion -- more than all but three other American university endowments. If the venture capitalists who work near Hewlett’s Silicon Valley headquarters had decided to start investing all their resources in government bonds instead of start-ups, they would be run out of town, and in essence, Hewlett has committed the equivalent act in its grant making.
The Stanford grant is so lackluster that it’s hard to consider it philanthropy, let alone the style of giving that meets the foundation’s stated desire to “marshal its growing resources to add the greatest possible value to society.” It is a particularly worrisome precedent for the foundation, which will become one of the wealthiest in the United States when it receives the billions of dollars bequeathed by Mr. Hewlett, who died in January.
No one is questioning the right of the foundation to make a major gift to Stanford. And while some eyebrows may be raised about the cozy institutional ties between Stanford and Hewlett’s top management -- Hewlett’s president, Paul Brest, is the former dean of Stanford Law School -- the real issue is the merit of endowment asset transfers passing as philanthropy, especially when the transfers are among the nation’s most-elite institutions.
Although Stanford’s 1999 annual report bemoaned the university’s endowment size in comparison to those at Harvard, Yale, and Princeton, one can hardly feel sorry for the institution. From 1998 to 2000 the university’s endowment grew by 89.7 percent, and the university raised more from private sources -- $580 million -- than any other higher-education institution.
Imagine the difference a $400-million infusion would have made to a struggling institution, such as a historically black college or university. With the amount it provided to Stanford, Hewlett could have more than doubled the endowment of Howard University, in Washington.
While I might be more supportive of a gift to such an institution, I still would be troubled by the emphasis on college endowment building by one of the nation’s wealthiest grant makers. It’s bad enough that most big foundations don’t exceed the federal requirement to distribute 5 percent of their assets each year, but most college endowments don’t even come close to spending that percentage each year to finance their operations. In general, college endowments are little more than places to park assets that could be better applied to improving education.
Many foundations have demonstrated that there are plenty of ways to award large grants that do more than build endowments, and that lead to real social change. Among the noteworthy recent efforts: The Bill & Melinda Gates Foundation’s grants of $750-million to the Global Fund for Children’s Vaccines and its grants of $100-million or more to fight AIDS; the Ford Foundation’s $330-million commitment to an international-fellows program; and the Robert Wood Johnson Foundation’s recent announcement of a $100-million addition to the $40-million it has spent on faith-based programs to assist the elderly and disabled.
Consider the social return that the Hewlett Foundation could have achieved had it invested its $400-million elsewhere. It could have quadrupled the amount that the top 100 foundations spent on civil-rights and social-action projects last year. Or it could have made a significant difference to community development, one of the foundation’s grant-making priorities. That $400-million grant would have financed the average annual operating budgets of one-third of the nation’s community-development corporations, which serve poor rural and urban regions.
In announcing the Stanford award, Walter Hewlett, chairman of the foundation, said the $400-million was intended as a tribute to his father. A more-fitting tribute would have been for the foundation to demonstrate that it was as much of a risk taker in philanthropy as William Hewlett was in the technology business.
Rick Cohen is president of the National Committee for Responsive Philanthropy, a watchdog group in Washington.