News and analysis
April 05, 2016

Foundation Chiefs Spar on Question of Giving in Perpetuity

Edward Caldwell

Emmett Carson, CEO of Silicon Valley Community Foundation, says foundations that aim to operate indefinitely can peacefully coexist with those that decide to spend all their assets in set period of time.

Defenders of foundations created to live forever fought off arguments that they should give away all their money and close up shop, saying that advocates of limited-life foundations were misguided in their assessments of how to do good for society.

The two sides sparred vigorously Monday at the Giving in Time conference at Stanford University’s Center on Philanthropy and Civil Society over which type of foundation provides the best management of assets dedicated to charity. The conference was sponsored by the Boston College of Law's Forum on Philanthropy and the Public Good and the Stanford center.

Jeff Raikes, co-founder of the Raikes Foundation, urged more foundations to spend fast enough to put themselves out of business within a few decades or less. He offered a business analogy to support his position, noting that because of inconsistent management, few companies survive longer than 75 years.

"The idea that we can have a lot of foundations that are going to exist for more than 100 years that are going to have great managerial strategies consistently, I’m just a real skeptic," said Mr. Raikes, whose foundation has pledged to spend down its assets by 2038. "I think the sense of urgency drives greater impact."

That argument didn't sit well with Emmett Carson, chief executive of the Silicon Valley Community Foundation, the country's largest organization of its type. He countered that while talent ebbs and flows, many social problems are entrenched.

"This is a more complicated issue than, ‘Well, you know, I can’t trust management,’ " Mr. Carson said. "Over any given period of any institution, it will have phenomenal management, and it will have management that sucks."

The comments came during a panel at a daylong event centered on questions of philanthropy and time, including whether there is a moral imperative to spend resources immediately to solve immediate problems. The discussion was moderated by Rob Reich, co-director of the Stanford center and the co-author of a recent opinion piece in the Chronicle calling for more attention on issues of the timing of giving.

In addition to Mr. Raikes and Mr. Carson, the panelists were Cedric Brown, chief of community engagement at the Kapor Center for Social Impact; Larry Kramer, president of the William and Flora Hewlett Foundation; Clara Miller, president of the F.B. Heron Foundation; and Chris Oechsli, chief executive of Atlantic Philanthropies.

Changing World

Foundations account for just 10 percent of charitable giving in the United States, Mr. Carson noted, meaning the vast majority of contributions are being made by individuals for immediate use. Spend-down foundations and those that aim to operate indefinitely can peacefully coexist, he said. But he did hold up the 102-year-old Cleveland Foundation, the nation's oldest community foundation, as an argument for the value of giving in perpetuity.

When the foundation was launched, its Ohio hometown was an industrial mecca that made some people rich, Mr. Carson said.

"Then the world changed in ways nobody then could imagine," he said. "One hundred years later, Cleveland is now hanging on because of the Cleveland Foundation and that perpetual endowment."

Mr. Kramer of the Hewlett Foundation argued that spend-down foundations, with their multidecade time frames, are actually giving at rates only slightly faster than those of perpetual foundations. Moreover, he said, the problems philanthropy is trying to take on are so gargantuan relative to its resources that the gap in spending is insignificant.

Switching to ‘Panicky Mode’

The difference between the two types is only marked at the end of spend-down foundations' lives, Mr. Kramer said, when they switch into "panicky mode" and try to make sure there are, in fact, institutions to carry on the work they were doing.

"A lot of the work we do needs the patience of very longtime commitments," he maintained.

Mr. Oechsli of Atlantic Philanthropies, which will wrap up its grant-making this year and is one of the most visible examples of a spend-down foundation, said that the focus is always on impact. The key question, he said, is whether there are opportunities where a huge infusion of money can be a game-changer.

"We think there is a comparative advantage to be able to use our resources sooner where that opportunity exists," Mr. Oechsli said.

There is also a more personal consideration to opting to exhaust a foundation's funds within a set time, he noted. Charles "Chuck" Feeney, the Irish-American businessman who created Atlantic Philanthropies, wants to see the work himself.

"Chuck wants to be engaged," Mr. Oechsli said. "He turns 85 in a couple of weeks. He has had a good 35 years of very significant personal engagement in grant-making."

It is meaningful to the donors to be able to see their wealth deployed to make a difference in the lives of others, Mr. Oechsli added. "I think Chuck’s message to others is, ‘Try it. You'll like it.’ "

Ready to Take Risks

Mr. Raikes, who in addition to giving via his namesake foundation is also the former chief executive of the Bill & Melinda Gates Foundation, said philanthropy needs the values of major wealth creators — entrepreneurs who bring a high tolerance for risk to their work to confront social ills.

That there's no guarantee subsequent generations of a foundation's leaders will have those values bolsters the case for giving in one's lifetime, Mr. Raikes contended.

"For the last roughly 100 or so years, the default choice has been perpetual,” he said of the timing of foundations’ giving. “The exception, and a more recent exception, has been limited life. And I personally would like to see that reversed. I think society would be better off if the default choice is limited life and the exception is in perpetuity."

Mr. Kramer challenged the idea that later generations in a family of donors are risk-averse. He said he has seen among founding donors at some newer institutions "an immense amount of flakiness, and an immense amount of goofy things coming from lack of experience.”

"The same things that make founders more willing to take risks make them less willing to listen and learn," he said.

Send an email to Megan O’Neil.