A scandal at the Silicon Valley Community Foundation has roiled the world of philanthropy. As reported by Marc Gunther and Megan O’Neil in the Chronicle, it’s a tale with dramatic elements worthy of an HBO miniseries: An imperious and (until now) impervious CEO, secretive billionaire donors, abusive treatment of employees, sexual harassment, and operational dysfunction.
Since the Chronicle’s article appeared — and other journalists have added details to the nature of the leadership issues at the foundation — the board has taken a more assertive role, hiring two law firms to conduct an investigation, putting the CEO, Emmett Carson, on leave, and accepting the resignations of two other officials.
But the problems at Silicon Valley Community Foundation went well beyond everyday poor management. Its downfall came from its obsession with pleasing rich donors, a striking lack of transparency, and an embrace of growth for growth’s sake. And I would argue that what amplified these characteristics into such a public meltdown was SVCF’s primary role as a sponsor of donor-advised funds.
Let me explain.
Silicon Valley Community Foundation is not alone in trying hard to please its biggest donors. Every nonprofit worth its tax exemption works to cultivate and provide stewardship to its major supporters. But here’s the difference. Most charitable organizations have a compelling mission describing why they exist. They are saving an endangered species, counseling veterans, curing diseases, teaching immigrants, providing housing, training nurses, feeding children, preserving a historic home, or what have you. These organizations try to get donors to connect with the organizational mission and to see that work as vital. The contributions then follow. This is the building block of charitable fundraising.
But what about an organization whose mission, essentially, is whatever the donor says its mission is? At a basic level, that’s how a donor-advised-fund-sponsoring organization operates. If the donor cares about saving elephants in Africa, that’s the mission or the organization. If the donor cares about educating orphans in New Brunswick, that’s the mission, too. The SVCF mission statement reads: “Silicon Valley Community Foundation is a comprehensive center of philanthropy. Through visionary leadership, strategic grantmaking and world-class experiences, we partner with donors to strengthen the common good locally and throughout the world.” I read that to mean: “Our mission is whatever the donors think the mission is.”
Not Bound by Geography
For commercial gift funds like Fidelity Charitable, where the interaction between the organization and the donor is purely transactional, the mission is indeed whatever the donor says it is. But historically, community foundations have been about much more than that. Community foundations have been about making their cities and states better places. They have been about providing community leadership. They have been about supporting and representing nonprofits. They have been about focusing attention (and charitable and governmental resources) on critical issues. And, yes, community foundations have helped their donors be philanthropic in an informed, efficient, and effective way.
Most community foundations continue to strive to do just that. But the leaders of the Silicon Valley Community Foundation found the notion of geographical community too limiting. As Emmett Carson wrote in 2013 in the Stanford Social Innovation Review, SVCF serves “a community whose geographic location, interests, and identity cannot be placed on any one map.” Similarly, last year Carson wrote in the Chronicle, “In a region known as the global epicenter for innovation and connectivity, should its community foundation be bound by a fixed geography?”
Emmett Carson and SVCF wanted to attract donors with broader interests — and they made it clear that because the donors’ interests were their interests, the foundation’s focus was not limited to a geographic region. Yes, SVCF distributed gobs of money around Northern California – the foundation was so enormous, it could hardly help but do that. But even though there were communities of great need in and around Silicon Valley, SVCF made it clear that its interests — that is to say, the interests of its donors — were far broader. And SVCF not only gave much of its grant money thousands of miles from Silicon Valley, but it sought donors from other areas, going so far as to open offices in San Francisco and New York City.
If a community foundation draws from donors all over for causes throughout the world, is it still a community foundation? Certainly not one with a focus beyond growing ever larger. It’s clear that for Emmett Carson, Mari Ellen Loijens — the No. 2 leader who resigned a day after the Chronicle published allegations of abuse and poor leadership — and the other top executives, becoming as big as possible became SVCF’s be all and end all. (The salaries of Carson and Loijens rose accordingly — but you could have guessed that already.) And the way to get bigger was to make the organization as welcoming as possible for the high-tech billionaires of Silicon Valley. The donors’ interests were the foundation’s interests.
A Black Box
Meanwhile, the foundation was a black box. People could speculate about what was going on behind the scenes, but nobody knew. Transparency was simply not a value at SVCF, particularly if providing information conflicted with protecting the privacy of its donors. A few months ago, as reported in the Chronicle, SVCF announced that its assets had increased by an astounding $5.3 billion in 2017. Further analysis showed that most of that growth seemed to come as a result of investment returns, not donations. But the foundation wouldn’t explain these extraordinary returns. Observers speculated that SVCF was holding a significant amount of specific company stock — such as Facebook, perhaps – presumably at the request of its donors, who include Mark Zuckerberg. But we couldn’t know for sure. In fact, we still don’t.
If SVCF were a private foundation, that investment information would be a part of its IRS Form 990-PF. But SVCF, like all community foundations, is structured as a charity and doesn’t have to reveal the details of its investment information or describe its grant making or investing on a fund-by-fund basis. Nor would Silicon Valley Community Foundation have been interested in sharing that information. That’s because SVCF’s primary customer was not the public or the nonprofit organizations it supposedly supports or the community in which it was based. The primary — and, in truth, only — customer who matters for a community foundation that has lost its way is the donor, and the way SVCF so carefully kept its records private was part of its big attraction to the 16 billionaires and other donors who have opened funds there.
So now we have the spectacle of the country’s largest community foundation, and the third-largest charitable foundation of any type, losing its executive leadership — and, more important, its credibility. An article published last week by Forbes speculates that many of SVCF’s large donors may be transferring their funds to DAFs at other organizations, such as Fidelity Charitable.
We can shake our heads and dismiss what has happened at SVCF as a one-of-a-kind story of failed leadership — and, certainly, there’s only one Silicon Valley and consequently only one community foundation with this kind of size, visibility, and potential for hubris. But community foundations that lose their mission focus and forget the meaning of “community” — and, for that matter, nonprofits of all types that lose sight of what they are and why they exist — can find themselves following this same sad and self-destructive path.
Alan Cantor is a consultant working in the areas of development, strategy, and governance.
