Opinion
June 01, 2015
Ben Franklin, Meet Phil Knight
Does the challenge grant empower people or plutocrats? The question has vexed philanthropy for more than 200 years.
Looking severe in a black tux and black shirt, Mr. Knight, 75 at the time and the co-founder and chairman of Nike, praised the institute’s work in battling the scourge of cancer.
“It is incumbent on everyone in this room to do what he can to keep the miracles coming,” Mr. Knight intoned.
Then he looked up, gave a stern blink, and added: “And I speak to myself as well as to all the rest of you. Accordingly, I make the following pledge. Penny [his wife] and I will donate $500 million dollars” — and at this point, a few claps, yelps, and gasps rang out from the guests —“to OHSU if it is matched in pledges within two years in a fundraising campaign.”
By the end of the sentence, nearly everyone at the gala was standing. Mr. Knight held up a finger; he wasn’t finished. “If the campaign raises $499 million, we are relieved of our pledge.”
The crowd responded with nervous laughter. The message was clear: Just do it.
The scale of Phil Knight’s challenge is unprecedented: No private donor has dangled such a large conditional grant before the public with so little time to make good on it. Yet the offer embodies in many respects the disposition of megaphilanthropy in our current age: bold, fired with a sense of urgency, impatient with conventional modes of giving, unafraid to wield power, and comfortable with shaping — and not merely responding to — public needs and preferences.
And so, as OHSU nears the $500-million dollar mark — today it is just $18 million away from its target, with more than half a year till the deadline — the Knight Cancer Challenge provides an exceptional opportunity to take stock of the place of the megadonor in American civic life and to focus our attention on the blessings and burdens of big philanthropy. In this case, it turns out, just doing it isn’t enough. We need to think it through as well.
Casting aside his prepared remarks, Dr. Druker did little to hide his surprise — or his exhilaration. A few weeks before, he had met privately with Mr. Knight and told him that with $1 billion, the institute could make major inroads in the fight against cancer by bringing in a corps of top researchers and could secure the institute’s status as the nation’s pre-eminent cancer research center. Dr. Druker had been given some advance warning that a major gift might be in the works, but Mr. Knight had kept its exact terms under wraps. And perhaps with good reason.
As a still clearly shell-shocked L. Keith Todd, president of the OHSU Foundation, the university’s fundraising arm, explained at a news conference a few days after the eventful gala, $500 million was a lot of money and two years was not a lot of time. The foundation had been set up to take on a seven-year fundraising campaign, the typical duration of this kind of endeavor for an academic institution. A two-year sprint would require a radical “refining of fundraising strategies,” Mr. Todd admitted.
“Phil’s backing a winner here,” he said, pointing to Dr. Druker, “and I’ve got to get on board.”
Now, as the campaign nears its conclusion, there is bemusement rather than panic as Mr. Todd recounts its rigors. “When you talk about any campaign, everyone likes to talk about creating urgency,” he says. “Well, guess what? This really did.”
In the challenge’s first six months, OHSU brought in $86 million from 3,700 donors representing 47 states. In March of last year, the Oregon Legislature fast-tracked a $200 million bond offering, which Mr. Knight agreed could be counted toward the $500 million (though the university also pledged to raise another $200 million beyond the Knights’ target).
Then in July, a donor — her identity remained a mystery for several weeks — walked into Dr. Druker’s office and announced that she was prepared to give the institute $100 million toward the challenge. (She was later revealed to be Gert Boyle, chairwoman of the board of Columbia Sportswear, whose older sister was a noted molecular biologist who mentored Dr. Druker.)
By the one-year mark, the challenge had drawn more than 6,000 donors.
Throughout the fall, the contributions continued to stream in. In October, the Oregon Community Foundation chipped in with a $5 million grant. In November, the Ford Foundation offered $5 million. OHSU officials suspect a few more prospective major donors may be biding their time so they can offer the culminating gift to bring the challenge to a close.
Barring any unforeseen drought in funding, it looks as though the Knights’ boldness has paid off. As Dr. Druker told the Portland Business Journal last summer: “What Phil Knight has done is to inspire people.”
In 1750, Franklin helped his friend Thomas Bond raise money to create the hospital, and when the public was slow to subscribe, they turned to the legislature for assistance. To boost his case, Franklin claimed that he could acquire some £2,000 in voluntary donations. Franklin seemed to pull the number from thin air, but it helped persuade the legislature to write a bill establishing the hospital and granting it £2,000 if the founders could raise an equal amount themselves.
Within a month, Franklin and Bond had secured the money, which was now considerably easier to harvest.
“In soliciting Subscriptions among the People, we urg’d the conditional Promise of the Law as an additional Motive to give, since every Man’s Donation would be doubled,” recalled Franklin. “I do not remember any of my political Manoeuvres, the Success of which gave me at the time more Pleasure. Or that in after-thinking of it, I more easily excus’d my-self for having made some Use of Cunning.”
It was not till the close of the following century, with the rise of Gilded Age fortunes and the emergence of modern philanthropy, that challenge grants proliferated. Nearly all the period’s major benefactors used the strategy.
It was the challenge grant, for instance, that provided Frederick Gates, the Baptist minister who long served as John D. Rockefeller’s philanthropic adviser, with his introduction to the field.
Gates responded that Pillsbury should offer $50,000 to the school — on the condition that local Baptists raised the same amount. If they succeeded, Pillsbury could leave another $150,000 to the school in his will, secure in the knowledge that the institution had community support. Pillsbury approved the plan and asked Gates to take charge of raising the money. In six weeks, Gates brought in $60,000; soon afterward, he left the ministry and dedicated himself to fundraising for Baptist educational institutions.
It was in that capacity that Gates met Rockefeller and persuaded him to give $600,000 toward the establishment of the University of Chicago — the largest gift of its kind at the time. This gift, too, came with a condition: that Gates and his allies raise $400,000 themselves.
It was “the most disagreeable, depressing, and anxious work of my life,” Gates later wrote, and for much of the campaign its prospects looked dim. But with a few fortuitously timed donations, Gates and his team finally hit their target.
Gates went to work for Rockefeller full-time and helped implement conditional giving as a fundamental principle of the Standard Oil tycoon’s educational philanthropy. By 1925, conditional grants made by the General Education Board, the foundation through which much of that giving was channeled, had padded the endowments of some 300 institutions with approximately $200 million.
Rockefeller’s embrace of the challenge grant stemmed from a fear of creating a public excessively dependent on its benefactors — on the “pauperization of solvent communities,” in Gates’s phrasing. They worried that giving to institutions and causes without demanding that those who benefited from them pitch in might “dry up the natural springs of charity,” as Rockefeller explained.
And they weren’t just concerned about the generosity of ordinary citizens. Rockefeller complained that as soon as news leaked that he was directing his philanthropy toward a particular institution, his fellow millionaires often withdrew their own support, convinced that their contributions were no longer necessary.
“There seems to be something in human nature that is perfectly willing to throw most of the burden on the shoulders of one who is willing to help,” Rockefeller griped. The challenge grant allowed Rockefeller to throw the burden back.
Many of Rockefeller’s millionaire peers embraced conditional grants for similar reasons. Andrew Carnegie, for instance, insisted that communities that accepted his libraries not only provide the building site but also commit to taxing themselves for the funds to cover the costs of books and maintenance. (If not strictly speaking a challenge grant, this was at least an offer of funding conditioned on the promise of communal financial backing.)
Carnegie libraries, 1,689 of which sprouted up all over the country, depended on a tactic that aligned with the spread of challenge grants: the attempt to leverage private giving to stimulate government support.
In the decade after the Civil War, the Peabody Education Fund, which sought to help build schools in the South, often required districts to provide twice as much money as the foundation was doling out. As one of the fund’s first general agents explained, “The chief benefit did not arise from what the fund gave but from what it induced others to give and to do.”
“People do not value that which is given to them,” Rosenwald declared.
There lurked in this dynamic a fundamental ambiguity as to who held the ultimate power in the relationship.
On one hand, the challenge allowed the public to reject the terms of the philanthropist by leaving his money on the table — as many communities did, for instance, when offered Carnegie libraries (either because they objected to the steel magnate’s treatment of his workers or because they thought the libraries would crowd out other civic priorities, like sewers and paved roads).
The conditional gift incorporates a hint of democratic accountability into the practice of philanthropy, as the donor places himself at the mercy of the public and its preferences (or at least at the mercy of the preferences of a broader network of donors). But of course, the whole point of the conditionality is to shape those preferences, to impose one giver’s priorities on a wider swath of supporters.
“I give not only with the idea of stimulating others to give,” announced Rosenwald, “but to proper giving.”
The larger the proposed gift, the greater the pressure to give properly — according to the dictates of the donor issuing the challenge. And so, a challenge grant could be considered an instrument of philanthropic coercion as much as of responsiveness.
This was a delicate balance and, not surprisingly, one not always appreciated by those absorbing the pressure. In fact, they often resented the effort.
In a 1908 article in the New York Post, the former president of Western Reserve University lambasted Rockefeller’s education fund for relying on challenge grants. “This method carries on its face the implication that the generality of givers must be put under pressure if they are to open their purses in any adequate fashion,” he grumbled. It poisons the donor pool, producing “soreness” instead of “cordiality.”
In the short term, it might be a winning strategy to bring in more money, but the injury done to the relationship between the public and the private institutions they were asked to support would spoil any future partnership.
“Better $5 with good will than $10 with the sense of having been held over the gridiron to extort it,” the former university president remarked.
The challenge grant could even claim an early casualty among the ranks of higher education administrators. In June 1919, George Eastman, the founder of Kodak, issued an anonymous challenge grant: “Mr. Smith” would offer $1 million to MIT if the university could raise another $4 million by the end of the year.
Although in ill health, MIT’s president, Richard Maclaurin, kept up a torrid pace of solicitations to meet the deadline. Soon after reeling in the necessary funds, on the eve of a banquet at which the identity of the anonymous donor was to be revealed, Maclaurin died, one of fundraising’s first modern martyrs.
Even Frederick Gates eventually seemed to sour on the practice.
In 1903, less than a decade after orchestrating a $3 million challenge grant to the University of Chicago, Gates explained his reluctance to initiate one for Denison University: Rockefeller had apparently received considerable grief for his use of the tactic in the past from other wealthy citizens. The grants were considered, wrote Gates, “not quite courteous and in good taste.”
By 1926, had broadened his critique. In a memo summing up his views about Rockefeller philanthropy, he argued that the practice had “always been attended with distasteful and perhaps indefensible features.” According to Gates, “the distributing public” had long believed that those of immense wealth were precisely the individuals best positioned to give without conditions.
And so, in the interest of both Rockefeller and his beneficiaries, Gates advised that they give up issuing challenge grants entirely. When Rockefeller offered the University of Chicago another $3 million gift a few years later, it came unencumbered by conditions.
The Knight Cancer Challenge is heir to the philanthropic tradition established by Franklin, Rockefeller, and Rosenwald. Yet it also represents a subtle divergence from that tradition, or at least from the rhetoric that often surrounded it.
With his offer, Phil Knight certainly courted greater public participation in giving. Yet the danger of a pauperized public overly dependent on its leading benefactors didn’t seem to enter into his calculation. He shows little ambivalence about the power of philanthropists within the polity. Instead, the challenge grant seeks to amplify that power through the zero-sum proposition it offers to the public.
As Melissa Berman, president of Rockefeller Philanthropy Advisors, explains, the Knight Challenge reflects “a real resurgence of interest among donors … all over the world … in leverage.”
Which is precisely why, though other institutions have used challenge grants effectively over the last decades — the Kresge Foundation and the National Endowment of the Humanities, to cite just two examples — the Knights’ supercharged version of the strategy is especially well suited to our current day.
The billion-dollar challenge grant speaks to two developments shaping the contemporary philanthropic landscape.
The first is the surge in giving as the United States makes its way out of the recessionary trough of the last half-decade and a sense of optimism spreads about the potential resources at the sector’s disposal. (That’s accompanied, perhaps, by a recognition that the age of budget retrenchment and austerity stemming from the recession shows no sign of dissipating, and so there’s little chance for an increase in governmental funding on the horizon.)
“As the economy continues to recuperate,” The Chronicle noted last November, “more and more groups are getting over the anxiety they felt during the downturn about raising big money and launching capital campaigns.”
The second development is the increasingly prominent role that megagifts are playing within those campaigns. In fact, according to Patrick Rooney, associate dean for academic affairs and research at Indiana University’s Lilly Family School of Philanthropy, much of the recent uptick in individual giving has come from the proliferation of multimillion-dollar gifts. Although the number of million-dollar gifts has not reached prerecession levels, the total amount given is nearing that range, in part because of an upsurge in gifts of $50 million or more.
In 2013, such megagifts represented 64 percent of total dollars raised from gifts of at least $1 million, an unusually high mark (especially compared with the number in 2010, at the heart of the recession, when the share was 24 percent). As Mr. Rooney recently noted, “the gains and losses in giving are increasingly driven by a smaller percentage of the population.”
Unsurprisingly, the venues that have benefited the most from the resurgence are those favored by the wealthiest citizens — institutions devoted to higher education, medical research, and culture. Many observers worry that such patterns of giving represent a potential threat to the nonprofit sector’s democratic mission.
What makes the Knight Cancer Challenge such a fascinating philanthropic phenomenon is that while it epitomizes the ascendance of multimillion-dollar gifts, it also seems to anticipate something of the democratic critique leveled against them.
In its celebration of a participatory philanthropic ethic and its call to expand the pool of givers beyond the charmed circle of the billionaire, the challenge grant hedges the debate over the role of philanthropy in our civic life.
And so it is not entirely clear how best to understand the Knights’ gambit. Is it an inspiring gesture of civic virtue? Is it Franklin’s ingenious instrument of philanthropic engineering? Is it a discourteous act of presumption perpetrated on the giving public, as Frederick Gates came to suspect?
Or is it a bit of all of them?
In the days after the Knights threw down their challenge, officials at the OHSU Foundation recognized that the campaign would rise or fall with their recruitment of major givers. And in fact, according to the foundation, nearly 90 percent of the funding received has come from million-dollar-plus donors.
But in many respects, the remaining 10 percent has lent color to the whole campaign; its predominant theme has been all-hands-on-deck (first-class and steerage) rallying against the common enemy of cancer.
Keith Todd, a self-described “recovering Southern Baptist,” says the challenge reminds him a bit of a statewide revival. The local media have featured stories of cancer survivors who have contributed to the campaign and of elementary schoolchildren who have sold doughnuts for the cause. The president of a major construction company offered his own million-dollar challenge grant to his employees, which they quickly met. Then there was the coalition of labor and business groups that organized a joint effort to raise money toward the challenge — Unite for the Knight.
“In the fight against cancer, we’re all on the same side,” declared Joe Robertson, president of OHSU.
There was even hope that this revival might extend beyond the battle against cancer and that the Knight Challenge would spark a broader philanthropic renaissance in the state. OHSU officials have frequently referred to the gift as ushering in a “rising ride” that could lift all of the region’s nonprofits by increasing the available charitable dollars in play and, in the words of one local development officer, by “rais[ing], on a national level, Oregon as a philanthropic priority.”
But not everyone has been converted to the millennial promise of the Knight Cancer Challenge.
Alongside the optimism that the challenge will transform the funding landscape for good is trepidation that, like some massive interstellar object, its gravitational force is warping the fabric of the nonprofit sector around the preference of the region’s largest benefactor. And with that distortion, there will be winners and there will be losers.
What are the ancillary effects of large challenge grants like that made by the Knights? Available scholarly research doesn’t offer any definitive answers.
As James Andreoni, an economist at the University of California at San Diego, explains, “This is a big, deep, and difficult question that we have just never had the kind of data or experimental control to learn much about.”
The closest we can come is the research on the “crowding out” question: whether gifts — or government grants — to a nonprofit come at the expense of other voluntary contributions. Some studies have suggested that donations tend to fall when a charity receives a government grant, but this seems to occur less because other potential donors decide to turn elsewhere than because the charitable institution relaxes its own fundraising activity.
Some insight on a large challenge grant’s impact might also be provided by the research surrounding the huge influx of donations directed toward devastated regions in the wake of natural disasters. Scholars have wondered whether giving in response to such exceptional “shocks” expands the total giving “pie” or merely siphons off donations that might have otherwise gone to other charities. Research based on donations to the 2004 tsunami concluded that such contributions did not divert “future expenditure away from donations to other charitable causes.”
And despite worries about “donor fatigue,” most nonprofits did not report significant declines in donations in the year after Hurricane Katrina, which prompted a huge outpouring of giving toward the affected states.
But neither does the evidence suggest that the “pie” is permanently expanded in the aftermath of these shocks. As Mr. Andreoni states, whether or not such gifts represent “new dollars to charity” is “the great unknown question that has eluded us since work on this topic started.”
Last year, the “Ice Bucket Challenge” in support of the ALS Foundation raised a related issue. While many people cheered the effort for drawing more than $115 million to the foundation — whether or not all the supporters actually dumped freezing water on their heads — others expressed discomfort about the ways the challenge reflected an uncomfortable truth regarding the allocation of charitable resources within the health and medical-research sector.
Decisions about where to give often seemed to track receptivity to savvy marketing campaigns more than rational considerations of where money could do the most good. Heart disease and diabetes lead to more deaths each year, yet the campaigns targeting these diseases have received comparably fewer charitable resources than the major cancer appeals; they lack a certain pink-ribbon panache, it seems.
Considering this disparity as it related to the ALS challenge, the online journal Vox declared: “Viral memes shouldn’t dictate our charitable giving.”
The pressure to meet a challenge grant shares something with the “Ice Bucket” gimmick. Each relies, in part, on an attraction exogenous to the cause itself: the first on an aversion to leaving proffered charitable dollars on the table and the second on the magnetic pull of a social-media sensation.
Behind both of these concerns is a deeper one: a fear of philanthropic finitude and the competition it entails. Given a premise of limited charitable resources, fundraising success at one institution must come at the expense of others.
At OHSU, for instance, some faculty members initially worried that the challenge grant would sap funding from other departments. The opposite occurred, though: The Knight Challenge has, in fact, expanded the funding pie for the entire university. Before the challenge, OHSU raised about $100 million a year across all departments. But in the year after the challenge was announced, the university brought in $171 million for purposes outside the Knight Cancer Institute.
The question of how the challenge would affect fundraising in the state more generally, however, is still a vexed one.
According to a survey conducted in March 2014 by the Oregon and Southwest Washington chapter of the Association of Fundraising Professionals, 47 percent of respondents doubted whether the Knight Cancer Challenge would usher in “a rising tide” for the broader region. As a report accompanying the survey noted, “Fundraisers are in general an optimistic crowd. A response of this type suggests an overall pessimism that this challenge gift will increase philanthropy across the board.”
One nonprofit reported that several donors had already informed the organization they would not be contributing that year so they could direct funds to the challenge. Another group claimed that donors had told them the challenge likely meant they would have less money to give to local nonprofits, “especially for safety-net services.” Yet another groused: “Again, the big dogs get the funding [and] little agencies die out, even when they are loved by their community.”
In fact, these sorts of concerns came disproportionately from smaller nonprofits (those that raised less than $500,000 in 2013).
Kevin Johnson, an adviser to nonprofits on strategy and fundraising who helped organize the survey, suggests that the responses might expose a rift between the larger regional nonprofits, which have reaped much of the gains from the recent recovery, and smaller ones, which have lagged behind and might have a keener sense of fundraising as a zero-sum affair. (According to the survey, in 2013, for instance — a generally strong year for fundraising in the region — health organizations represented a quarter of all groups reporting that their funding had increased greatly from the year before, though they made up only 12.5 percent of respondents. Social-service organizations, on the other hand, were the only sector to report no increase in funding.)
There was yet another grievance that one could detect in the responses, one that took aim at the very premise of the Knights’ challenge: the power that a single philanthropist could wield to shape the sector in light of his or her own preferences.
“It doesn't seem fair that control of resources could be limited to such a small number of hands,” one respondent protested. “By proposing the challenge, Phil Knight is deciding that OHSU and cancer research are the priority for our region.”
This is the sort of grumbling that most seem to think impolite — or impolitic — to perform in public. Not only is Phil Knight the region’s largest benefactor but the fight against cancer is such a manifestly noble cause that no one seems inclined to disparage the efforts of a man dedicating significant chunks of his fortune to it. No one wants to play the Challenge Grinch.
Yet the fact that Oregon was committing public dollars to the campaign through the bond offering created a space for some of these concerns to be aired openly. In this regard, the Knight Cancer Challenge taps into the tradition of the early 20th-century philanthropists who used conditional grants to open the spigot of public funding. In doing so, the challenge also touches on a raw nerve running through the history of American philanthropy: apprehensions about the power of private wealth over public good.
In January of last year, when the Portland City Council met to discuss the bond offering, one commissioner, Amanda Fritz, raised her concerns that in supporting the offering, the council would be lobbying for the wishes of a single individual.
Ms. Fritz saw the Knight Challenge in the context of her uneasiness over the ability of a small corps of philanthropists to shape public policy, especially in the education field. She had no doubts about the merits of the Knight Cancer Institute, or that Knight’s donation would bring hundreds of jobs to Portland. But, she pointed out, there were many other institutions in the city that could use $200 million.
“By dangling that carrot, [Knight] was able to get the money.” Ms. Fritz ultimately voted for the resolution, but she voiced her uneasiness “to get people to think,” she recalls.
“There really is no free lunch, and [citizens] need to be cognizant about how people with power and wealth direct public policy.”
Shortly after the gala at which Phil Knight announced the challenge, Dr. Druker told an Oregon newspaper that the Knights challenged us, but they’ve also challenged the nation.”
He was referring to the need for the university to push the fundraising campaign beyond the borders of the Northwest, but his comments echoed a theme in many reactions to the Knights’ grant. In the survey of Oregon fundraisers, for instance, one respondent noted, “The Knight Challenge is like a challenge to be even more effective to those who may fear its impact on their efforts.”
Mr. Johnson, the Portland consultant, agrees. He regards the Knight Cancer Challenge as a wake-up call for nonprofits in the region that haven’t invested sufficient resources in their fundraising capacity. Only by doing so can smaller nonprofits reap the benefit of the philanthropic dollars that Mr. Johnson believes have been sitting on the sideline but that might be put in play as donors are inspired by the Knights’ example.
But the onus can’t fall entirely on the grantees. While other donors should aim to meet the Knight Challenge dollar for dollar, they should also accept the challenge of its corollary: an increased sensitivity to the entire philanthropic ecosystem, the lush canopy of large institutions that has absorbed much of the post-recession funding, as well as the darker, denser understory, where the light does not always reach.
Meeting the Knights’ challenge means thinking carefully about who has been left behind by it, even as the tide rises.
And the challenge extends further still. It confronts all of us with the need to consider the power and the perils of leverage, the blessings and the costs of big philanthropy. So if it takes inspiration, assertiveness, and even a little bit of cunning to issue a well-designed challenge grant, it will take nothing less of us as citizens to muster a response that does it, and the nonprofit sector more generally, justice.
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