To the Editor:
Vincent Robinson deserves credit for saying publicly what many people in the philanthropic sector have expressed privately (“Opinion: MacArthur’s Choice of a White Man With a Pedigree Set Back the Fight on Racial Equity.”)
To some, though, the frustration goes beyond hiring “another white man” as the head of a major foundation. It’s also a longstanding tendency for the sector to assume that pedigree — usually in the form of Ivy League credentials, social capital, or former positions in elite institutions — trumps other kinds of experience that can be just as (if not more) valuable in assuming leadership positions, especially in the nonprofit world.
For the past decade, the sector has mirrored the larger culture’s fascination with markets, metrics, and a highly educated meritocratic class whose interactions with and exposure to people outside this ever-narrowing club often extends no further than the last Davos conference.
Auspiciously, this seems to be changing, albeit slowly. The election of Donald Trump sparked a much-needed conversation about the cost of ignoring and, sometimes, disparaging a wide swath of the electorate who aren’t in that club. Racial inequity and economic inequality are front and center in policy and candidate forums. And scores of (mostly) powerful men are being toppled by movements like #MeToo and #TimesUp.
We’ve seen this in philanthropy as well, with a growing number of scholars and journalists stepping forward to challenge and critique foundations and wealthy donors — something that was relatively unheard of 20 years ago. Donors are being encouraged to solicit and apply feedback from nonprofits and “real people.” Some are even partnering with them in making grant decisions.
So is it any wonder that the MacArthur hire left some scratching their heads?
Perhaps rather than bemoaning this appointment (which is in no way a judgment about John Palfrey himself), we should view it as an opportunity for a more honest and public exploration of the kinds of credentials we’d like to see more of in our sector, as well as to what extent those become a standard component of hiring, especially for leadership positions.
When we start looking not only at race, ethnicity, or gender as critical hiring factors but also at things like whether potential leaders have ever worked in a nonprofit (especially one that has less than a $5 million annual budget, which is true of about 95 percent of all nonprofits) or have worked with real people working in real communities to grapple with real problems or who have struggled to support themselves in a minimum-wage or working-class job, perhaps then the sector will be able to truly say it’s reflective of — and has a deeper understanding of — those it serves.
Cynthia Gibson
Strategy consultant to foundations and nonprofits
Providence, R.I.
Rebutting the Case Against Impact Investing
To the Editor
Thanks to Larry Kramer for his critique of impact investing, as it will certainly make the field stronger (“Hewlett Foundation’s Leader Makes a Case Against Impact Investing”).
His comments are worth our collective time, and his willingness to listen to all arguments makes his positive intentions clear. An enthusiastic skeptic is helpful to unabashedly optimistic people like me. We need serious pragmatists to make this work even better. (The Hewlett Foundation is a financial supporter of the Chronicle of Philanthropy.)
I would share my belief that three of the elements at the core of Mr. Kramer’s assertions underpin the very reasons why impact investing is a critical evolution of investing generally.
First, he touches on the basis of what I believe is a true misunderstanding throughout the for-profit and for-impact (what some call nonprofit) sectors — that if an opportunity has a market rate of return, money will flow to it. In my view, this is overly general and perhaps only partially true. Not all market rate opportunities are fully funded — and that is surely true for opportunities that are not on the public exchanges — as is the case with many private opportunities, such as mission-related deals.
This point relies on a mostly debunked mythology that the market is a perfect machine. It is not. Some scholars have suggested it is closer to a garden that favors certain areas and neglects others regardless of return. We only need to look at the middle-market challenges to see this play out.
The second element I would touch on is one Mr. Kramer has asserted in other venues — that the opportunity cost between “neutral” investments and impact investments may be considerable.
I am grateful he makes clear we don’t have enough longitudinal data to prove that one way or the other — although some would debate that point.
My additive point to his is that making sure your investments are at least neutral to impact (I’ll define that as not negatively impacting the environment or our social fabric) is an achievement in and of itself, that takes a great deal of intention and effort. If Mr. Kramer defines impact-neutral investing as investing for maximum return regardless of impact (positive or negative), then my point is certainly counter to his.
Evidence the many human-trafficking and child-labor stock screens that turn up egregious harm even in companies we utilize frequently and invest in via simple indexes and mutual funds.
Mr. Kramer also shares his view that impact investing will not change markets. I appreciate the mathematical argument that all the foundation assets in the world, even if aligned on principles, might not change the behavior of a fund executive with hundreds of billions under management or truly move the needle in a market worth trillions.
However, what if people begin to read our 990s — and not the section most read to understand how much we grant each year and how much our top executives are paid — but the investment section? And suppose they research what funds foundations invest in and how those funds might be involved in some of the issues our grants try to alleviate? Or what if people use their influence and ownership of shares to speak to management about their practices and how they need to change to reflect a just society?
For example, suppose a foundation focused on fair housing practices finds the distressed-credit asset fund it’s invested in is foreclosing on homes in a predatory manner, taking advantage of the gray space between public policy and ethics? And suppose that foundation demands an explanation. Do you think the investment manager might think twice before investing that way in the future? If they want to keep that client, they might.
Markets move every day simply on emotion. Let’s work together to move them with our intentional actions instead of believing there is nothing to be done.
Lastly, I would add that all investing should be focused on including the full costs (positive or negative) of impact. If an enterprise is extracting private value from the market and in doing so creates public harm that we all pay for, this is certainly something we should be working to correct.
Let’s hope these conversations lead us to a more mature form of capitalism that rewards creating value in an investment via financial performance and measurable social or environmental impact.
Doug Stewart
Executive Director
Max M. and Marjorie S. Fisher Foundation
Southfield, Mich.