There are big fires everywhere — literally and metaphorically. Certainly, philanthropy is under fire in some quarters as concentrations of wealth and power are vigorously challenged worldwide.
This heated debate has happened before, in periods and places where imbalances became intolerable to many. Before Jeff Bezos and Mark Zuckerberg, there were the Medicis and the 19th-century industrial barons like Rockefeller, whose family created the organization I serve. What makes today’s backlash more acute is its link to deepening distrust in established institutions and powerful individuals in business, politics, and society.
So it’s no surprise that philanthropy is under a magnifying glass, as the right of the ultrawealthy and insulated institutions to public interests is contested. What, some ask, gives the wealthy the right to determine solutions to social problems that affect us all and what resources should be dedicated to them? Recent news stories contribute to this sense of mistrust and create perceptions that all grant makers use philanthropy to further their personal political or business interests or social status.
At the center of this debate is philanthropy’s social compact — its explicit or implicit agreement with society about the value it creates or its license to operate. Accountability, legitimacy, transparency, and public trust are all at stake.
For all institutions — governments, corporations, nonprofits, and philanthropies — the social compact can change as a result of shifting external circumstances, political and economic conditions, or prevailing views on private wealth and public responsibility. A philanthropy’s social compact can also reflect shifting notions of how it views its role in society, demonstrates value, interacts with stakeholders, and expresses accountability.
Philanthropies are addressing their social compact in a number of ways, as my colleagues and I have learned in research we conducted with more than 50 foundations to better understand how grant makers can cement the social compact.
A growing number of foundations embrace diversity, equity, and inclusion as critical to fulfilling and building legitimacy and trust, particularly where philanthropic activities are seeking to transform the lives of marginalized and vulnerable people.
As a result, organizations are including representation of the communities they support in decision making by creating mechanisms for listening to those communities.
For example, three years ago, the James Irvine Foundation in San Francisco, which supports efforts to empower low-income California workers, developed new approaches to seeking input from the people it serves. Working with a human-centered design firm, the foundation used tools such as sticky notes, drawing exercises, and videos showing people working but struggling with poverty to spark reactions. These approaches prompted people to express their concerns in new ways and often to go deeper into the obstacles affecting their lives. In doing so, the foundation not only enhanced its legitimacy, credibility, and trust but also discovered new ways to help low-income people.
Understanding Grantees
In 2018, to gain a better understanding of public views on foundations in Britain, the United States, and Germany, the Wellcome Trust, an independent charitable foundation in London that supports research to improve health, commissioned a “Good Business” study. The aim was to explore the public’s knowledge about foundations, perceptions of foundations’ role in society, and public trust in them as institutions.
Based on the insights gleaned, Wellcome is implementing several accountability measures and has created an accountability statement that outlines two key commitments. First, the foundation will consider in all decisions the interests of society, the benefit of its mission, and how its independence can provide a public good. Second, it will work to be open and honest about its goals and decisions as well as its successes and failures.
A focus on transparency has also been gaining momentum in the foundation world. For example, the Kresge Foundation recently significantly expanded its communications department to enable it to increase emphasis on transparency, using websites, social media, annual reports, publications, forums, gatherings, and broadcasts through a variety of channels.
Some foundations are making efforts to learn more about their grantees so they can improve their strategies and programs. For example, when the Ford Foundation commissioned independent research into its grant-making practices, it discovered that more than half of its grantees experienced frequent or chronic budget deficits, 40 percent had fewer than three months’ worth of reserves in the bank (many had none), and many lacked critical capabilities such as talent management, fundraising, and program evaluation. Learning from these insights, Ford launched its Build grant-making program, which provides unrestricted funding to promote the strength and effectiveness of organizations advancing the foundation’s mission to reduce inequality.
When philanthropies engage in introspective deliberation about their social compact, we suggest they ask themselves how they define accountability, legitimacy, transparency, and trustworthiness. And then that they ask themselves how people and institutions in their ecosystem define those concepts. This is a crucial discovery process, which will set the course for how they adjust their social compact.
Restoring Trust
Philanthropies seeking to review their social compact may benefit from some of the following strategies that emerged from our research:
Build a common view of how the foundation serves society. Strive for internal clarity and a common understanding of the social compact, including the foundation’s role in society, targets of accountability, sources and arbiters of legitimacy, and the public good the foundation serves.
Communicate what the foundation does and how it operates. Develop a robust external communications strategy to relay to the public what the foundation does, why it does it, who participates in decision making, and how those participants are engaged. Communications can also highlight successes and lessons gleaned from failures.
Listen to people who can strengthen the foundation’s work. Build genuine feedback loops that enable input, participation, and representation of people the foundation seeks to help — and those who benefit from it — in decision making, and support a consultative method of program design. Listening to communities makes it easier to identify needs, increase program effectiveness, and enhance trust.
Demonstrate how a foundation incorporates what it learns. Show the public how feedback loops and consultative engagement have enhanced and fine-tuned the foundation’s grant making and strategies. Make a point to let everyone know that the foundation is committed to consultation — and has been strengthened by this work.
Regularly measure public attitudes. Conduct regular research to measure the public’s temperature toward the foundation’s work and philanthropy generally to adjust strategies and act based on evidence.
Assess effectiveness and share the results. Measure internal operations and external work regularly against a set of indicators that gauge effectiveness, impact, or progress. It is important to openly share and discuss the results internally among staff and externally with grantees, partners, and other key players to devise effective next steps.
Diversify governance and advisory bodies. Broaden board representation, as well as that of others who shape program strategy and design, to reflect interests and viewpoints from an array of places, including government, nonprofits, and experts on the issues at the heart of your foundation’s mission.
To restore and enhance trust, philanthropy must re-examine and re-evaluate its role in society and how it is perceived not only by traditional allies but also by the wider public. Thoughtful, effective philanthropy should give serious consideration to the source of the grant maker’s wealth, organizational transparency, investment choices, interactions with people served by the foundation, and much more.
Foundations can and should be a part of the debate about the role of philanthropy in today’s society. In joining the discourse more fully, they could make the case for the important work they do in combating poverty and inequality or in contributing to the health and well-being of the planet and its people.
Adjusting the social compact to meet new realities is now in part a function of risk management for philanthropies.
Preventing or fending off criticism need not be the sole driver in expanding transparency, collaborating with others, and including the public in decision- making.
An increasingly open, inclusive approach to philanthropic activities can allow institutions to learn lessons from peers, benefit from the insights of key constituents, and incorporate the views of the communities served in their programs and decisions, thereby reducing the potential for criticism born from a lack of inclusion or transparency. This will have the added benefit of harnessing new insights that will enhance the effectiveness and impact of their work and ultimately lead to a better use of society’s precious philanthropic dollars for the greater public good.
Melissa Berman is chief executive of Rockefeller Philanthropy Advisors. This article is based on research from the organization’s new report, “Social Compact in a Changing World.”
