OPINION
Immortality for Foundations Can Pose Big Challenges in Shifting Times
By RAY D. MADOFF
THE NAMES Ford, MacArthur, Mel- lon, and Pew—as well as many others—are all well known because these are the names of benefactors of some of America’s largest private foundations. Such philanthropic
foundations seem to offer that elusive
immortality that human life lacks. It is
no wonder that so many wealthy people
are drawn to the idea of creating foundations that will give money away forever.
However comforting and inspirational this idea of establishing perpetual
beacons of a donor’s charitable vision
might be, it is also false. Because regardless of what donors and others believe about the permanence of charitable creations, it turns out that the charitable world is just like the larger world.
And that means that the only constant
is change.
Just looking at the short history
of private foundations in the United
States, at least three types of change
have occurred:
Alterations in the legal treatment of charitable entities. Foundations are so ubiquitous that it is hard
to believe that for most of the 19th century in many states, individuals were
not allowed to establish them. If someone wanted to make a charitable gift,
he was limited to making an outright
transfer of property to a recognized
charitable organization. Courts were
generally suspicious of allowing, in the
words of one opinion, “every private citizen the right to create a perpetuity for
such purposes as to him seem good.”
HENRY FORD
JOHN D. MACARTHUR
ANDRE W MELLON
Regardless of what donors believe about the permanence
of charitable creations, it turns out that the charitable world
is just like the larger world—the only constant is change.
In one notorious case, a New York
court set aside a $4-million bequest by
Samuel Tilden to establish a trust to finance public libraries and instead gave
the money to Mr. Tilden’s heirs.
Today—a little more than a century
later—the pendulum has swung the
other way, and charitable trusts are
not only allowed for a wide variety of
purposes but are also favored by the tax
code—thereby subsidizing each person’s
ability to create a perpetuity for whatever purpose seems good. While some
might have been disappointed by Le-ona Helmsley’s decision to direct her
billions of dollars to the care of dogs,
nobody challenged whether it was her
right to do so or suggested that taxes
should have been paid on the money she
left her foundation.
Although today the law favors per-
petual charitable entities, that could
easily change. Already some public-
policy experts have proposed requiring
foundation to give more away annually.
In addition, as federal, state, and local
governments face budget challenges, it
seems more likely that charitable enti-
ties will receive less generous tax ben-
efits.
NAN STONE and THOMAS J. TIERNEY
Donors Must Include Attention to Accountability With Their Gifts
AFTER 10 years of advising phi- lanthropists, we can deeply em- pathize with the feelings of the
woman who recently sent me the fol-
lowing note: “I’m giving away money—
some would say lots of money, And yet
it pales in comparison to the needs I see
all around me. I want my giving to do
the most, but how?”
Her concern is well founded. It’s easy
to write a check, but it is very difficult
to make a difference. Indeed, philan-
thropy’s natural state is satisfactory
underperformance.
Why? Because giving money away
smartly, so that it not only gets results
but also gets more and better results
over time, is excruciatingly hard. Not
for nothing are many social problems
called “intractable.” Helping to change
the life of a child born into poverty or
forestalling the effects of global warming is fundamentally harder than making the proverbial widget.
Beyond the sheer difficulty of is-
sues like generational poverty, failing
schools, and crippling diseases that lead
to underperformance, philanthropists
also must grapple with a paramount
and terrible truth: in philanthropy, ex-
cellence is self-imposed.
KIPP FOUNDATION
Don Fisher financed charter
schools, in part because
of their record of results.
