Adam Meyerson, President, Philanthropy Roundtable: Donors and Philanthropic Intent

November 29, 2006
Adam Meyerson, President, Philanthropy Roundtable: Donors and Philanthropic Intent

Whether their passion is public health, the environment, alleviating poverty, or reforming education, philanthropically minded individuals across the political spectrum are looking for novel ways to advance their goals and increase the effectiveness of their philanthropic dollars. As John J. Miller argues in the September 2006 issue of Philanthropy magazine, donors increasingly are interested in identifying successful models, best practices, and new ideas. "Their challenge," he adds, "is to build and sustain a set of enduring institutions that truly matter."

While that has always been true, what's different today is the eye-opening range of choices and giving vehicles available to the individual donor. As Adam Meyerson, president of the Philanthropy Roundtable, a national association of donors, foundation trustees and staff, and corporate giving officers, notes, there has been "an entrepreneurial explosion of new service providers, some for-profit, some nonprofit, offering advice, information, and investment opportunities" to donors. And what is especially significant about these new services and vehicles is that they empower and leave the individual donor in charge as never before.

Recently, Philanthropy News Digest spoke with Meyerson about his organization's efforts to assist donors in achieving their philanthropic intent, calls for greater regulation of the charitable sector, the success of conservative foundations in the public policy arena, and the role of competition in the marketplace of ideas.

Meyerson joined the Roundtable as president in October 2001. From 1993 to 2001, he was vice president for educational affairs at the Heritage Foundation, where he coordinated the conservative think tank's civil society projects, its publications on the Founding Fathers, and its "No Excuses" work on high-performing high-poverty schools. Meyerson also was editor-in-chief of Heritage's magazine,Policy Review, from 1983 to 1998.

From 1979 to 1983, Meyerson was an editorial writer for theWall Street Journal and editor of its "Manager's Journal" and "Asia" columns, and from 1974 to 1977 was managing editor of the American Spectator magazine, then based in Bloomington, Indiana. He is, in addition, co-editor ofThe Wall Street Journal on Management, a book published by Dow Jones-Irwin in 1985.

Mr. Meyerson graduated summa cum laude and Phi Beta Kappa from Yale University in 1974. From 1977 to 1979, he attended Harvard Business School and completed all requirements but the dissertation for a doctorate in international business.

He and his wife, Nina, live with their three sons in Washington, D.C.

Philanthropy News Digest: What is the Philanthropy Roundtable?

Adam Meyerson: The Philanthropy Roundtable began in the late 1970s as a small, informal network of grantmakers whose aim was to increase political and intellectual diversity within the philanthropic community. We also worked to promote greater respect for donor intent and for private voluntary approaches to improving communities and helping people to help themselves. Originally, we operated under the auspices of an organization called the Institute for Educational Affairs. The Roundtable became a free-standing organization with an independent board of directors, a small staff, and an expanded calendar of conferences and other services in 1991.

Today, our mission is to foster excellence in philanthropy and to help donors achieve their philanthropic intent, to protect philanthropic freedom, and to assist donors in advancing liberty, opportunity, and personal responsibility, both in America and abroad. We have an annual budget of more than $3 million, a staff of thirteen, and a membership of over four hundred and fifty philanthropic organizations and families.

PND: What kinds of things does the Roundtable do to help ensure donor intent is honored in the long-term administration of foundations and charitable trusts?

AM: The history of modern philanthropy is a story of one foundation after another violating and, in some cases, directly contradicting the most cherished values of their founding donors. For that reason, the Philanthropy Roundtable recommends to donors who care about the preservation of their intent that they give very generously while living and that they consider establishing a sunset provision for their foundations that kicks in, say, a generation or two after their deaths.

That said, we understand that many founding donors are interested in establishing foundations in perpetuity, and we are committed to protecting their freedom to do so. In those cases, we offer some suggestions to donors and future boards of directors that will make it more likely that the founding donor's intent will be adhered to.

It is vitally important for the founding donor or donors to articulate and put into writing a clear mission statement for the foundation....

First, it is vitally important for the founding donor or donors to articulate and put into writing a clear mission statement for the foundation, preferably in its charter or trust document. Second, it is important for the founding donor to establish a long pattern of giving while living and to reflect on and record what he likes and dislikes in his giving. A knowledge of giving style, a time horizon for expected results, and a donor's likes and dislikes, as well as the principles that have formed his or her giving, can be a very important supplement to a mission statement.

Donors and boards can also establish outside review processes to enforce adherence to donor intent. One such process is to give legal standing to outside organizations to sue the foundation's trustees if they determine the foundation is not following its founder's intent. Another is to give independent analysts the authority to review the foundation's grants, say, every five years, and to make sure they comply with the founding donor's intent.

It's also important to choose trustees with the judgment and understanding to ensure adherence to donor intent after a new generation assumes leadership of a foundation. In many cases, family members are best for carrying out the founding donor's charitable objectives, but not always. Finally, there are three kinds of trustees to avoid at all costs: trustees with a world view that differs dramatically from that of the founding donor; trustees who will abdicate to staff the responsibility of setting the strategic direction of the foundation; and trustees who will ignore their fiduciary duties and think of the foundation's assets as their own money to distribute.

Many of the violations of donor intent we see in foundation grantmaking can also be found in endowment giving. We recommend that donors be very cautious about endowing universities or other cultural institutions unless they are convinced that those institutions will continue to remain faithful to the values the donors cherish most.

PND: Are you and your colleagues guided by a specific theory of change when designing your activities and programs?

AM: Yes. In 2003, the Roundtable embarked on a new strategy designed to provide philanthropists with more in-depth service and greater opportunities for strategic collaboration. To that end, we established a number of specialized affinity groups. We call them breakthrough groups, and they have been a major source of growth for us. To date, we've established breakthrough groups in K-12 education, environmental conservation, higher education, and national security, and we are considering others. In establishing these groups, we ask two questions: First, is it an area where we can make a distinctive contribution not offered by other organizations? If another organization is addressing the issue as well as we can, we'll refer donors to that organization. And second, is it an area where philanthropy can help achieve dramatic breakthroughs in the next ten to fifteen years? As for our theory of change, let me illustrate that briefly with our K-12 education program.

Our primary objective with the K-12 program is to leverage philanthropic resources to help achieve breakthroughs in the education of low-income children over the next ten to fifteen years. We think that's possible because breakthroughs in that area have already been achieved on a small scale. And in many cases, philanthropists and the social entrepreneurs they have supported have been the drivers of those breakthroughs. We think it's possible to extend the improvements that have already taken place, and that philanthropists are key to making that happen. To that end, we are putting significant resources into working with donors across the political spectrum to solve one of the great crises our country faces, which is the mis-education of low-income children.

PND: I'd like to come back to that. But first, I want to ask you about a couple of technical issues. What's the Roundtable's position on estate tax repeal?

AM: We don't take a direct position on that issue, although we do hold that repeal of the estate or death tax may affect the form and timing of charitable giving. But it is not likely, in our view, to affect the scope and scale of philanthropy in general.

PND: I'm not sure I understand.

AM: The remarkable tradition of American philanthropy long antedates the establishment of the federal estate tax in 1916. Stanford University, the Chicago Symphony Orchestra, St. Patrick's Cathedral in New York City, and Massachusetts General Hospital are just some of the thousands of institutions that owe their origins to private philanthropy in the days before the estate tax, or, for that matter, other tax incentives for charitable giving were instituted. Moreover, for the last several decades, despite a variety of tax policies, overall charitable giving in this country has remained fairly constant at about two percent of national income. This strongly suggests to us that charitable giving is best increased not by specific tax incentives but rather by boosting economic growth.

The motivations driving most philanthropists...will not disappear with repeal of the estate tax....

Now, just as the estate tax creates an incentive for giving on one's deathbed, it is possible that if it were repealed, bequests might decline. We might also see reductions in instruments such as charitable lead trusts, charitable remainder trusts, and charitable gift annuities, which offer tax advantages when transferring assets to younger generations. But the motivations driving most philanthropists — the desire to help cherished institutions, to assist the needy, to cure disease, to expand opportunity, to reform public policy — will not disappear with repeal of the estate tax. The most effective philanthropy on one's deathbed builds on the knowledge and habits gained from a lifetime of giving, and that wisdom will not be affected by changes in the estate tax. In fact, repeal of the death tax will likely encourage more giving by donors while they are living, which we believe will lead to greater thoughtfulness in philanthropy.

Instead, we believe the case for and against estate taxes should be made on other grounds than their influence on philanthropy. The central question to be debated is whether it is just and good for parents to be able to pass on their homes, their businesses, their farms, and other property to their children — whether inheritance is compatible with a free society and our ideals as a nation. If the answer is yes, estate taxes should be abolished, or at least limited. If it's no, than they should be retained, or perhaps strengthened. In either case, philanthropy will flourish.

PND: Does the Roundtable support the charitable reform provisions included in the 2006 Pension Protection Act?

AM: Historically, the Roundtable has not gotten involved in legislative issues. However, in January 2005 we established the Alliance for Charitable Reform as an emergency initiative to respond to legislative proposals on Capitol Hill that would affect private foundations and public charities. The mission of ACR is to offer commonsense solutions for abuses in the charitable sector while protecting the freedom of donors and foundations to use their best judgment in carrying out their charitable objectives.

For us, common sense starts with the proposition that government should vigorously enforce existing laws before announcing sweeping new ones. We recognize that new, narrowly targeted laws may be necessary to correct specific abuses not covered by current rules. But most of the transgressions in our sector that have caught the public's attention are violations of existing law. There is no need to rewrite the fundamental public policy framework governing philanthropy, which historically has given private philanthropic organizations wide discretion in how they use their resources to achieve their charitable missions.

We expect that the big battle over philanthropic freedom will take place in 2007. We will do everything in our power to resist requirements for foundation accreditation, five-year reviews of tax-exempt status, arbitrary limits on trustee and staff compensation, federal micromanagement of the boards of private organizations, limits on the compensation of family members who sit on family foundation boards, and other freedom-threatening measures that have been proposed in the last two years by Senate Finance Committee and/or Joint Tax Committee staff. As it becomes ever clearer that Sarbanes-Oxley has imposed significant costs on small-cap companies and is responsible for keeping new businesses from listing on American stock exchanges, it will become increasingly important to resist applying the Sarbanes-Oxley mind-set to charities and foundations.

As for the Pension Protection Act that passed this summer, we think that a number of its charitable provisions were quite sensible and that some could have benefited from more open debate. Some provisions now require technical corrections because the way the legislation was introduced did not allow for a full discussion of the issues, and a number of unintended consequences are now coming to light.

On a related matter, the Philanthropy Roundtable is opposed to formal industry-wide self-regulation as an alternative to congressional legislation. We believe that overreaching legislative proposals can and should be resisted on their own merits, without substituting a private, self-regulatory regime that could be equally overreaching and intrusive.

For instance, the Roundtable does not currently, nor do we intend to, set certain governance standards or codes of conduct as criteria for membership, as some of our sister philanthropic service associations are advocating. We believe it is consistent with the principles of a free society for private membership organizations to set eligibility standards if they wish. But we do not believe our membership would appreciate such a code, nor do we believe that it would be an effective way for us to improve foundation effectiveness. While foundations should be free to participate in voluntary accreditation or certification programs if they wish, the Roundtable is strongly opposed to any requirement that accreditation be a condition of tax-exempt status. An accreditation requirement could pose a very serious threat to independent thought in philanthropic foundations.

So long as they obey the law, foundations do not have to be, and should not have to be, directly accountable to anyone except their own donors and trustees....

Moreover, accreditation simply isn't necessary for foundations. There is a public-interest rationale for accrediting hospitals or day-care centers, where health and safety issues are at stake. Public charities may also find it helpful to be certified or accredited on a voluntary basis in order to win the confidence of donors, and there are some very impressive models in that area, such as the Evangelical Council for Financial Accountability. Foundations, on the other hand, are not taking investments from others, nor are they entrusted with the safety of members of the public. Indeed, so long as they obey the law, foundations do not have to be, and should not have to be, directly accountable to anyone except their own donors and trustees.

PND: It's not uncommon these days to hear liberals suggest that conservative foundations — organizations like the Olin Foundation, the Bradley Foundation, the various Scaife foundations, the Smith Richardson Foundation— have, over the last twenty-five years, hijacked the political agenda in this country and have managed to do so at a cost of only $70 million a year. Are they correct? And if they are, how did conservative foundations manage to pull that off?

AM: Foundations across the political spectrum have had an influence on public policy over the last thirty years. On the liberal or progressive side, public policies such as campaign finance limitations, Head Start, racial quotas, the Public Broadcasting System, population planning assistance, medical marijuana initiatives, and many of our healthcare and environmental policies result substantially from the work of liberal and progressive foundations and philanthropists. On the conservative side, foundations have effectively pushed for K-12 education reforms, including charter schools, vouchers, and the standards and accountability movements; welfare reform; a renewed emphasis on serious constitutional interpretation in judicial decisions; deregulation of transportation, banking, telecommunications, and other industries; a renewed appreciation for the benefits of capitalism; and reforms in policing and sentencing, which have led to dramatic reductions in crime in New York and many other cities.

But whether one is liberal, conservative, or somewhere in between, there are certain approaches that foundations interested in influencing public policy follow, and I'd just like to mention a couple of them.

First, they know what they stand for and are deeply committed to clear principles that they will not compromise. Second, they influence public debate through ideas, strategic investments, and collection of the right data. Third, they think long-term and give long-term support to institutions that are well positioned to advance their public policy objectives. Fourth, while they're always looking to achieve measurable results in the short run, they keep their focus on the long term and are patient because they know public policy reform takes time. Fifth, they work to build broad-based coalitions, usually across party lines. Sixth, they are not afraid of controversy, although they do not seek it. As a funder, if you are not prepared to be criticized, you probably shouldn't be in the public policy business. Seventh, they study and work to establish models of success. These can include demonstration projects or field trials that illustrate the case for a broader reform agenda. And last but not least, they keep control of their own funding decisions. They're willing to work closely with other funders who share their principles and public policy agenda, but in the absence of long-term agreement on principles and strategy, they are cautious about formal collaboration with other private donors and about matching funds provided by public agencies.

PND: Are ideological labels useful when discussing philanthropy? Or are they a distraction from the real issues and work that needs to be done?

AM: There's enormous ideological diversity in philanthropy. Just look at the donors and foundations working for and against gay marriage, for and against school choice, for and against the decriminalization of marijuana, for and against the living wage, for and against the introduction of personalized Social Security accounts — this diversity is one of the glories of a free society. Our system of self-government assumes that citizens have the intelligence and initiative to make the important decisions that affect their lives, including how to direct their charitable contributions. Freedom of philanthropy, like freedom of the press, religious freedom, and economic freedom, is essential to the American experience, and the Philanthropy Roundtable is committed to defending the right of donors and foundations to determine their charitable missions. It's one reason why we plan to fight vigorously against accreditation requirements, five-year reviews of tax-exempt status, and other measures that could give government officials the opportunity to suppress political views with which they disagree.

My favorite quote about philanthropy comes from the late Waldemar Nielsen, who said: "These strange and wonderful inventions [foundations] have a unique freedom from the dependency of other institutions on markets or constituencies that cripple their capacity to take the long view and to bring a competent and disinterested approach to the search for solutions to complex problems." Nielsen went on to say: "It is a waste of important potential if foundations do not make use of the special freedoms they have been given to take the long view; to back the promising but unproven idea, individual or institution; to take an unpopular or unorthodox stand; to facilitate change rather than automatically endorsing the status quo;...to act and not merely react; to initiate, even to gamble and dare."

There is no one right way to improve our communities, our nation, or the world....

If we take Nielsen seriously, and I think we should, we need to discourage the groupthink that characterizes much of the foundation world. There is no one right way to improve our communities, our nation, or the world. Instead, we should be pushing for more ideological diversity, not less; we should be pushing for more diversity in the strategies and approaches we fund, not less; we should be encouraging more, not less, diversity in our dreams and aspirations.

PND: I take it you believe there's a role for competition in philanthropy?

AM: Competition dramatically improves performance, whether one is talking about business, education, scientific research, sports, or most other areas of American life. At the Roundtable, we believe philanthropy would be stronger if there were more competition within the field. For example, there is no penalty today for mediocre performance in philanthropy. In highly competitive fields, mediocre performers have to adapt and improve or find a new line of work.

Having said that, there are three important elements of competition in philanthropy. The first is the competition among grantees for charitable and philanthropic dollars. The second is the competition among different visions of philanthropic effectiveness — something we try to encourage at our own conferences through vigorous debate and the exchange of ideas. And third, and perhaps most important, is the competition for the philanthropic imagination of new donors. As you know, there is an entrepreneurial explosion of new service providers, some for-profit, some nonprofit, offering advice, information, and investment opportunities to new donors. And it's partly because of this competition that new donors are providing so much of the vitality in philanthropy today.

Warren Buffett's "merger" with the Gates Foundation offers some interesting possibilities in this regard, and I predict that more donors will follow his example and choose to align themselves with an already established funder, or perhaps take more of a portfolio approach by giving through a variety of funders rather than a single one. If that happens, we could see a very interesting situation in which funders compete with each other for new philanthropic capital. It would be extraordinarily healthy for philanthropy, in my view, for funders as different as the Open Society Institute, the Carnegie Corporation, the Bradley Foundation, the Robin Hood Foundation, and/or various community foundations to compete with each other over who has the most effective philanthropic strategy for addressing society's greatest challenges.

PND: Do we have adequate metrics to measure foundation effectiveness and/or the social benefit delivered by foundation resources?

AM: The study of philanthropic effectiveness is still in its infancy. In addition to quantitative analytic tools, it would be very helpful to develop a case study literature of great philanthropic achievements and failures, both in the academy, on the model of business school case studies, and in the philanthropic press. During the next decade or so, we are likely to see major advances in this area, as more and more business entrepreneurs, acting either as donors or as service providers for donors, apply their penetrating intelligence, understanding of strategy, and insistence on defining and measuring results to philanthropic questions.

In a free society, different philanthropists will define the meaning of effectiveness differently....

I am not sure that it is possible or even desirable to develop general metrics of social benefit generated by philanthropy as a whole. This is because in a free society, different philanthropists will define the meaning of effectiveness differently. What we need is new analytical tools to help individual philanthropists to better define and achieve their objectives, not across-the-industry measures of net social benefit.

PND: Is philanthropic effectiveness a function of the amount of resources available to address a problem, the quality of the ideas behind those resources, or some combination of both?

AM: The quantity of resources and the quality of the ideas behind those resources are both important. The experience of the federal government certainly shows that money alone is not sufficient to achieve results. We spend $400 billion per year on public K-12 education, yet 40 percent of our fourth-graders cannot read at grade level. Similarly, there are some very large foundations that have made very little difference in the world.

On the other hand, you don't have to have bottomless resources to have impact. Small and medium-sized foundations can and frequently do exercise extraordinary philanthropic leadership by focusing their resources on finding breakthrough solutions to specific problems.

PND: Is it your view that private funding and initiative is always preferable to public sector engagement with an issue? And is there any issue that is simply too large or complex for the private sector to solve on its own?

AM: Advocates of limited government, in which we include ourselves, have always said that government has important responsibilities, including national defense, the administration of courts and our system of justice, the protection of public health and safety, and so on. In addition, many of the leading reforms pushed by some of our members — for example, Social Security reform or school vouchers — are really aimed at redirecting, not limiting, government spending. Moreover, regardless of what members of the Philanthropy Roundtable think, big government is a fact of life for the foreseeable future and almost every philanthropist today must determine his or her strategy in the shadow of massive government spending. To give you just one example, the National Institutes of Health spend $30 billion per year on biomedical research — almost as much as what all foundations combined give, to all causes and programs, in a year. Any philanthropist who wants to make a difference in the area of biomedical research would be foolish to replicate what NIH already does. Instead, many philanthropists are having an impact in biomedical research by focusing on a specific hypothesis or field of study or kind of research that is not funded by NIH.

In recent decades government funding has come to dominate many areas of American life that historically had been the province of private charity and initiative. We think it would be useful to have a national debate about a number of government-funded programs and initiatives, including FEMA disaster relief, medical care for low-income families, the Legal Services Corporation, the National Endowment for the Arts, and so on, and to ask which of these functions could be delivered more effectively, more efficiently, and more compassionately through privately funded organizations.

PND: Since the 2004 election, there has been grumbling within conservative circles about the growth of federal spending and the size of the budget deficit. Has the conservative movement — and conservative philanthropy as a manifestation of that movement — reached a high-water mark in terms of its influence in the marketplace of ideas?

AM: We see enormous amounts of new energy pouring into philanthropy of all kinds, including conservative philanthropy. The field is being revitalized by successful business entrepreneurs who are applying their leadership skills, institution-building know-how, out-of-the-box entrepreneurial imaginations, passion to innovate and serve, and money to a range of charitable initiatives. Some are conservative and some are not. At the Roundtable, we see this as an enormously fertile period for philanthropy of all kinds.

PND: Globalization has brought any number of transnational issues, including climate change, nuclear proliferation, and the spread of infectious diseases to the fore. Partly in response to these challenges, philanthropy seems to be evolving from a field of independent institutions and individuals to one increasingly comprised of networks. Do you see that trend continuing over the next decade or so?

AM: I'm not sure I share your premise that philanthropy is moving away from independent institutions and individuals. On the contrary, we're seeing an extraordinary explosion of new services to help donors make wise decisions and achieve their charitable objectives. Some of these services offer high-level information and analysis about potential grantees. World-class business consulting firms and venture capitalists are also exploring how to apply their principles and techniques to philanthropic giving. Donor partnerships and networks are another service to philanthropists who want to achieve leverage with their grants.

One of the most exciting developments is the growth of intermediaries — public charities that themselves make grants and frequently provide management assistance to grantees. In many respects, they act like a kind of nonprofit mutual fund, providing two important services: first, they lower the information-gathering costs for each grant, increasing accountability for both donors and grantees. Second, by pooling the funds of a number of donors, they diversify the risk of any particular philanthropic investment by sharing financial responsibility. These intermediaries are especially important in international giving, where donors may not be confident they have enough local knowledge to make informed decisions on their own.

What is significant about all these new entrepreneurial services is that they leave the individual donor in charge....

What is significant about all these new entrepreneurial services is that they leave the individual donor in charge: rather than replacing the donor, they empower him with more information, more choices, and more confidence in his giving program. And because the various networks, intermediaries, and other services compete for the dollars and — more important — the mental attention of the donor, the donor has a growing opportunity to receive high-level help in defining his charitable objectives and selecting the most effective philanthropic vehicles for achieving his objectives.

PND: We've been talking about a field that has grown rapidly over the last decade or so and, increasingly, is celebrated as the best hope for incubating solutions to a long list of problems. Is the time ripe to have a national discussion about philanthropy and its role in American society?

AM: As a relative newcomer to philanthropy, I would say that I've been surprised by how little serious discussion there is of this amazingly vibrant and important sector. Outside of a few academic programs and the occasional scandal or an eye-opening announcement such as the Buffett-Gates merger, you don't see much attention paid to what foundations and philanthropists actually do. We don't have many observers of the field these days with the wisdom and insight and knowledge of someone like Wally Nielsen. Instead, the field is dominated by a kind of insularity and suffocating groupthink — in part, because philanthropic families and foundation trustees and staffers are regularly flattered and lionized by their grantees, to the point that they begin to believe their reviews. As a result, they rarely have to respond when their assumptions are challenged or their effectiveness as grantmakers is questioned. I think philanthropy would be a much stronger field if there were more debates, more and better watchdog groups, and more attention paid to the field by serious journalists, scholars, and experts in areas where foundations are trying to make a difference.

PND: Well, thank you for your time this morning, Adam.

AM: Thank you for your questions and the opportunity to share our views.

Mitch Nauffts, PND's editorial director, spoke with Adam Meyerson in October. For more information on the Newsmakers series, contact Mitch at mfn@foundationcenter.org.