August 24, 2015

No Gift Should Be a Suicide Pact — So Drop the Perpetuity Idea

Nancie Battaglia for The New York Times, Redux

Joan Weill is not an alumna of Paul Smith's, but she and her husband, Sanford Weill, have given millions to the institution, including for a new library.

In a class on board governance and ethical decision making that I taught last spring, my students debated issues regarding the names on buildings around campus.

The conversation was sparked by the news that movie executive David Geffen had just pledged $100 million for the naming rights to what had been known for half a century as Avery Fisher Hall, the main performing-arts venue at the Lincoln Center complex in New York City.

While the gift permitted Lincoln Center to plan needed renovations with financial confidence, a lot of people in New York were puzzled. After all, the deal was made possible only after Lincoln Center paid off the heirs of Avery Fisher, who gave $10 million in 1973 to put his name on the building in perpetuity. The payoff amount was $15 million.

Even though that’s less, in inflation-adjusted dollars, than the original gift, it’s not a bad payback. As one commentator wondered, "It makes sense for philanthropists to give millions of dollars to nonprofits, but why would nonprofits turn around and give millions of dollars to their former donors?"

Thus, the debate among the students in my classroom: Is everything for sale at a charity? And what about that pesky phrase "in perpetuity," which has a meaning until, apparently, enough money comes along, and then it doesn’t.

Charities, it can be argued, are more than mere legal entities. They have a purpose unaddressed by either government or business and, as a result, occupy an otherwise unfulfilled position in society. Some have earned such a special level in our consciousness — and it’s not just the famous ones like Columbia University, where I work, and Lincoln Center — that their existence is akin to exuding a soul. People care when charities start fooling around with their history — and the names that made that history.

Last month Joan Weill, the wife of banker and financier Sanford Weill, announced a stunning $20-million commitment to Paul Smith’s College. In exchange, the name would be changed to Joan Weill-Paul Smith’s College. The Board of Regents approved the name change, the college’s board of trustees accepted the condition, and the Charities Bureau in the attorney general’s office, which oversees charity activity in the state, says it has no objection to the potential change.

But the will of Paul Smith’s son, who donated the land, says the school will be forever known as Paul Smith’s College of Arts and Sciences.

So now the college, with the support of the state’s highest-ranking attorney, is essentially saying that "forever" doesn’t really mean forever.

The soul of the place, to hear some people speak of the offer, is being confronted with a crisis. One alumna says, "I think most alumni feel strongly about our college tradition." She characterizes the name-change approval by the Board of Regents as a "slap in the face."

The two sides battled it out last week before Justice John Ellis of the state Supreme Court in Franklin County.

Some people fault Ms. Weill.

"A philanthropic gift should have no strings attached," Beverly Stellges, a former adjunct professor at Paul Smith’s told the Daily Courier Observer, a local paper that covers the college.

Although that’s naïve, it’s a noble perspective; we want to look for at least some altruism in donors. The thing is, though, Joan Weill is an honorable donor. (No, not all are.)

She has served on the college’s Board of Trustees for two decades and, with her husband, has donated millions of dollars to the institution, including money for a new library and student center. She is not an alumna, so her motives have nothing to do with fond memories of a bucolic campus setting during a coming-of-age time in her life. By all accounts, she’s the real deal. Still, she’s scratching at something existential.

And practical. The college argued in court that removing the name restriction would make future donations more likely. In response, the judge asked the lawyer who represents the college, "What if, next year, someone comes forward with a $40 million donation? Would there be a third name? Is there an irony in what you are asking?"

He may have been thinking of David Geffen’s response when asked about the appropriateness of his insistence that the soon-to-be-renovated performing-arts hall at Lincoln Center be named for him in perpetuity.

"I think it’s appropriate," he said. "How often can you change the name of this hall?"

Well, based on what we know now, it looks like Lincoln Center might have to do battle — this time with Mr. Geffen’s heirs — all over again in 50 years. Justice Ellis did not ask a rhetorical question. The implications in the answer are real.

A contrasting and equally compelling reality, however, is Paul Smith’s financial predicament. The college incurred a $2-million operating loss in 2013, and its woefully undersized endowment cannot provide the budget revenue to adequately supplement tuition revenues.

The school is in a bind. And Joan Weill’s gift is one answer to the problem. With her naming condition, it may not be the best answer and it may not ensure financial security forever, but assuming the numbers have been crunched correctly, for now it’s the only answer.

The Barnes Museum, originally housed in a suburb of Philadelphia, faced a similar dilemma several years ago when a judge had to decide whether to honor the restriction of donor Albert Barnes not to ever move his valuable art collection, which could have very likely doomed it because of inadequate housing, or to help ensure its survival by permitting it to be infused with additional endowment funds and housed in a new building in downtown Philadelphia.

There are times when circumstances are overwhelming. Even if it’s distasteful, we take our medicine. Joan Weill’s generosity, although it’s tempered by her demand for naming rights, is real. And, especially under the circumstances, it ought to be appreciated.

For all charities, the lesson is this: No deed of gift should be a suicide pact. Therefore, no gift agreement written today or in the future should include the words "in perpetuity" or "forever." Not even Joan Weill’s — an irony she should appreciate.

Doug White is director of the master of science in fundraising program at Columbia University. His most recent book is "Abusing Donor Intent: The Robertson Family’s Epic Lawsuit Against Princeton University."