The Edna McConnell Clark Foundation said Tuesday it will drain its endowment, putting about $1 billion in the hands of grantees during the next decade, and then go out of business.
The move to sunset the foundation, which is headquartered in New York and supports nonprofits that help disadvantaged youths, has been in the works for several years, according to Nancy Roob, the grant maker’s president.
“The Clarks did not intend for the foundation to exist in perpetuity,” Ms. Roob said. “We’ve always been driven by maximizing impact.”
The Clark Foundation joins a number of private grant makers that have set deadlines to spend down all assets. Others include the Raikes Foundation, which pledges to exhaust its assets by 2038, and the Bechtel Foundation, which plans to spend down by 2020. The Quixote Foundation will make its last grant this year. Atlantic Philanthropies also concludes active grant making this year and will cease all operations by 2020. Some philanthropy critics have called on more foundations to consider such a move.
Avon Products heiress Edna McConnell Clark and her husband, Van Alan Clark, took over what was then an unstaffed family foundation in 1969. Two of their grandsons, H. Lawrence Clark and James McConnell Clark, currently sit on the Board of Trustees.
The foundation created three funds to support young people. The Youth Development Fund helps nonprofits gather the evidence they need to prove their programs work. Blue Meridian Partners is a collaboration with 12 foundations and donors that invests in charities looking to expand their work. And PropelNext supports nonprofits that want to start measuring their results.
Over the next two years, the Edna McConnell Clark Foundation will decide how much to spend in each area. If its nearly $1 billion is parceled out evenly over the course of the next decade, the resulting $100 million annual payout would more than double its current level of giving.
Ms. Roob will remain as the chief executive of the foundation and of Blue Meridian Partners. Blue Meridian will continue to operate as a separate effort, and Ms. Roob said she expects it will surpass its initial goal of attracting $1 billion in gifts. To date, it has commitments of $850 million.
Early Focus on Data
The Clark Foundation was an early adopter of data-driven grant making, in which grantees are given large, unrestricted grants and required to meet goals for improving their programs and serving more young people.
The stress the foundation placed on measurement caught the attention of other donors. To harness that interest, in 2007 Clark adopted the concept of “capital aggregation,” a process by which it combines gifts from other grant makers and wealthy individuals and directs them to nonprofits that show promise in reducing crime and teen pregnancy and helping to improve education and the foster-care system.
Pooling the capital not only makes life easier for grantees, who expend a lot of effort securing grants piecemeal, Ms. Roob said, but it also allows for larger investments to flow to nonprofits that have demonstrated progress.
The spend-down, Ms. Roob said, was spurred both by the pressing challenges children face today and by the ability of larger, pooled grants to make a difference.
“We need to make significantly larger investments in social-sector leaders who are actively poised to solve these problems,” she said.
Changing Attitudes
According to an Urban Institute study in 2009, only about 8 percent of foundations had opted to spend down. In a study released last week, foundation executives signaled they hadn’t warmed to the idea much since. Just 16 percent of those surveyed by the Center for Effective Philanthropy indicated that spending down held promise as a strategy. One in five executives said they weren’t sure limiting a foundation’s life was a good idea. The response, according to Ellie Buteau, the center’s vice president for research, suggests not only that foundation leaders are ambivalent about whether spend-downs work but also that foundations are often thought as existing in perpetuity regardless of their original donors’ intent.
“A lot of foundations don’t consider it, because perpetuity is the default,” she said.
That may be changing, according to Joel Fleishman, author of a forthcoming book on time-limited foundations with the working title Putting Your Money to Work: Philanthropy Now or Investing for the Future?
Plenty of younger donors continue to create foundations designed to last in perpetuity, he said. But he sees a growing trend among donors to give more rapidly to have a greater impact and with less concern for creating philanthropies that outlive them. That urge, he said, is reflected in the Giving Pledge, a promise made by more than 150 ultrarich people to give the majority of their wealth away during their lifetimes.
The Clark foundation announcement is unique, he said, because it is betting the farm on a model — creating investment pools — that it will now plow cash into.
He added: “They did not decide to spend down first; they decided on the model first, and it’s getting traction.”
