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The following articles appeared in Left Business Observer #70, November 1995. They retain their copyright and may not be reprinted or redistributed in any form - print, electronic, facsimile, anything - without the permission of LBO.

Foundation culture

by Gina Neff (writing as Gina Graham)

Gina Graham once lived in the world she wrote about, so that wasn't her real name. It can now be revealed that her real name is Gina Neff and she lives in New York City. Her piece on microcredit and the Grameen Bank is on this site.

Most civilians don't think much about the role foundations play in shaping our public lives. A new generation of right-wing foundations has funded America's rightward drift. And despite their aura of generosity and liberalism, mainstream and even "progressive" foundations often act as a constraint on politics.

Foundations may spread around wealth but their purses come with strings. IRS regulations on tax exempt giving limit foundation funding for political activities and lobbying. More important, and more powerful, are the limits that foundations place on themselves. Program Officers describe funding decisions as "maximizing our return," "leveraging our impact," "focusing our portfolio." From cushy offices, foundations tell nonprofit groups how to do their work and shape policy by dictating which nonprofits, which programs, and which issues are worthy of their dollars.

Foundations talk about changing society, but funding for distinct, fragmented one-cause projects does little for real change - and funders' preference for one-shots over general organizational support maximizes the funders' leverage over recipients. And, besides, it's hard to shake the gut feeling that someone making $134,000 a year (average CEO pay at non-family foundations), and giving away $7 million each year (average at independent foundations) isn't really in touch with the grassroots they are "seed-funding." With the political spectrum of the boards of the large foundations ranging from liberal-conservative to ultraconservative, most foundations aren't in touch with the politics of grassroots groups either.

Altruism was rarely the motivating factor in establishing the large independent foundations - ones like Pew, Ford, MacArthur, Robert Wood Johnson that every NPR listener can name. The Ford Foundation was established to help keep the company in the family without paying estate taxes. John D. MacArthur, founder of Bankers Life and Casualty Company, never made any significant charitable contributions during his lifetime, but left his estate of nearly $1 billion to a foundation rather than to his estranged children. One of the trusts founded by the Sun Oil heirs, the J. Howard Pew Freedom Trust, was established to "acquaint the American people with the evils of bureaucracy... and with the values of a free market...to point out the false promises of Socialism...." In one cozy office the staff of the Pew Charitable Trusts now give out $21 million a year of the J. Howard Pew Freedom Trust both to right-wing groups like the Heritage Foundation, the Manhattan Institute, and the National Right to Work gang - and to crunchy groups like the Tides Foundation and the Pesticide Action Network, under terms of a different Pew heir's will.

The right wants to limit the number of years foundations could exist. Citing liberal domination of the megafoundations, reactionaries argue that donors' original intentions would be better expressed by foundations spending down their capital rather than letting liberal program staff grant from income. Yet the dangers of the foundation culture stem not from PC liberalism, but from the illusion of political change it fosters, one that allows liberals to live untroubled by the knowledge that they are merely corporate PR mouthpieces.

Corporate responsibility?

If foundations were as progressive as the right believes, would they be investing in huge stock portfolios at all? If the politics of foundation portfolios get any scrutiny at all, it's only through the soft-focus lens of corporate responsibility.

The progressive and green Jesse Smith Noyes Foundation both owns stock in Intel and funds the Southwest Organizing Project, which has been protesting Intel's plan to expand its water-hungry plant in very dry Albuquerque. Foundation president Stephen Viederman has called on his board and others to dissolve the "iron curtain" between assets management and grant making and file stockholder resolutions in cases like Intel, and by increasing non-corporate investments through venture capital funding and program-related investments (below market loans or investments in the work of nonprofits). Viederman notes that the recent Council on Foundations report on asset management ignores the relationship between a foundation's mission and its investment choices - though even Viederman's critique doesn't question the order of things under which some people get to manage big portfolios while others plead for fragments of the dividends.

Viederman's voice is lonely. Big foundations rarely put any of their capital to philanthropic work. Typically, MacArthur devotes only 2% of its nearly $3 billion in assets to program-related investments.


Funding buzzwords fly off glossy foundation annual report pages as quickly as the philanthropic trends they symbolize will fade: Institutional Responsiveness, Self- Sufficiency, Civil Society, Nonviolent Solutions to Conflict. Swings in program directives leave grantees scrambling for less money and have sometimes caused nonprofits to go out of business. Entire regions become blips on a program officer's screen - South Africa, East and Central Europe, Haiti, all in turn.

"I didn't get into the nonprofit sector to develop 'marketable' programs. I got into nonprofits to do the work that needed to be done," a frustrated administrator of a New England community development group said over a buffet lunch. His group had fallen prey to the trend of funding buzzwords. The "community empowerment" methods they employed are now no longer seen as "innovative," though, by all accounts - including those of their program officers at the foundations that previously funded them - they were effective.



Funders talk to one another. They network through organizations like the Council on Foundations and the National Network of Grantmakers. "Clarity of vision" for funders in these networks translates into fewer dollars for groups on the periphery of that vision. Wise Use guru Ron Arnold, the sharp free-market enemy of the Sierra Club and other fat enviro organizations, drew blood recently when he circulated transcripts of the (Rockefeller-led) Environmental Grantmakers Association (EGA) frankly plotting to shape the agenda of mainstream environmentalism. Occasionally, high-level envisioning leads to dim-witted ideas. At a foundation-organized meeting this spring, environmental organizations and funders discussed the use of the Internet in grassroots organizing. A woman pointed out that computer access alone wouldn't do much for poor communities. Another noted that while most grassroots groups are run by women, a small percentage of Internet users are women. None of the day's speakers, all white guys, had addressed these points - though they did offer to have their legal experts look into the implications of Internet organizing for the IRS 501(c)(3) definition of "lobbying."

Foundations want to be involved in projects they fund. Seeking "partnership" with grant recipients, foundation staffers often help recipients rewrite proposals to include the language, techniques and methodology funders see as important. When grant writers meet, they complain of the foundations' power play: nonprofits pitch ideas that help a foundation shape its program directives - directives that are translated into grants, but not necessarily to the groups that suggested them. Foundations also increasingly administer their own programs, sometimes in conjunction with an existing nonprofit or through a sort of philanthropic insourcing. In an annual report describing a leadership initiative, one progressive foundation proudly calls itself a "partner agency" on equal footing with two recipient organizations. In the ever-more competitive fundraising business, it's a buyer's market, and the buyers typically approach their purchases with corporate eyes.

Corporate culture, corporate pay

Perks like meditation hours and massages may soften the suit-and-heels discipline, but corporate is the dominant culture at many foundations. Lists of foundation board members, even those of "progressive" foundations, read like a who's who of the business world.

Funders are bringing this corporatism to the operations of nonprofits as well. "In some cases we will jump in and have a staff member serve on the board of the grantee if we have an interest in the institutional development of the organization," the secretary-treasurer of the Rockefeller Brothers Fund said in an interview. Budgets are pored over line-by-line by program officers looking to "maximize their return." Grantmaker Cynthia Mayeda recently warned: "We are always concerned about the margin. The small margin can mean greater profits.... We expect nonprofits to be equally concerned as well." Established groups with a wealth of individual support escape this scrutiny.

The World Wildlife Fund received over $232,000 in 1994 from the John D. and Catherine T. MacArthur Foundation. While that's more than many small groups could hope to raise in a year, this take will just cover President Kathryn Fuller's wage and benefits package. MacArthur President Adele Simmons must understand the delicate balance of the good life and good work: she is listed on the Foundation's tax forms as having earned $382,349 in 1994 with a benefits package worth over $85,000. Those apolitical free-market environmentalists, The Nature Conservancy, who paid out over $330,000 to their two men at the top, received over $550,000 from the MacArthur foundation last year for their feeble attempt at environmental protection through leveraged buy-outs of private land. Vanilla politics and corporate flair seem to serve nonprofits well in the fundraising business.

In the same issue of the Chronicle of Philanthropy in which those numbers were reported was a blurb about a (Washington) City Paper article by Bill Gillford. Gillford, who is by his own definition "an eco-wage slave" for Greenpeace wrote, "Each summer idealistic college grads flock to Washington, hoping to land a job to save the planet, but the major environmental groups have been cutting staff of late, and competition is fierce for even the lowliest of positions. Many of the thwarted end up as Greenpeace canvassers" who are required to pull in $120 for four consecutive nights to keep their jobs. Last December, Tony Horwitz of the Wall Street Journal reported that the firm that Greenpeace contracted with to open its check-bearing mail was a classic modern sweatshop, combining minimal wages with maximal high-tech supervision.

Working for funders

Every proposal writer knows the deal: Programs must be measurable, with a neatly defined mission, achievable goals, clear objectives, and a quantifiable method of evaluation written up front. Troublemaking is never that neat. Walk into the offices of any nonprofit and you'll see stacks of information on other like-minded groups, flyers and action sheets, calls for coalition building, sign-on letters, phones ringing with conference calls. Politics requires cooperation, but the disciplines of funding force nonprofits to guard closely their foundation contacts. Organizations send letters in support of other organizations' work only to those foundations where they are not applying for funding themselves. Focusing on individual programs rather than general support for organizations, foundations have tied many hands that should have been building coalitions, and fostered not cooperative approaches to social problem-solving but an individualizing drive to innovate, to generate new projects and proposals, and, more pungently, to compete for funding dollars. Foundations proudly state that their continuing encouragement of "new and innovative approaches," model programs, and giving caps on individual organizations is fostering a kind of new society, rather than fostering atomization and volatility.

Few people working in nonprofits, as critical of the funding process as they are, are willing to give their names in connection with their criticism for fear that their funds will be cut off. One nonprofit executive told me she received a call from a foundation officer who said "I heard you didn't support the position that our foundation presented at the conference." Such tales may lean towards paranoia, but nonetheless groups scrapping for every last dollar are watching their backs and keeping their voices low. Taking on liberal foundations for working on fragmented causes rather than emulating the right's strategy of helping conservatives win political power, grantmaker Margaret C. Ayers of the Robert Sterling Clark foundation was quoted in the Chronicle of Philanthropy as saying, "I don't see any grant maker who considers themselves progressive or liberal articulating what a progressive future would look like." Unconstrained by their lack of vision, grantmakers nonetheless have lots of money to spread around, and with it, influence both agenda and organizational style.

The business end

by Doug Henwood

In economic terms, the larger nonprofits could be thought of as giant stock portfolios, often with marketing operations grafted on.

In 1992 (the most recent year available), nonprofits as a whole held $1 trillion in financial assets, more than twice as much as just five years earlier, making them almost as large as state and local government retirement funds, and just under half as large as private pension funds. The size of their kitties and their preference for blue-chip paper - 42% of their money is in stocks, and 25% in bonds - makes them big on Wall Street. "Nonprofits" is a broad category, including foundations, private universities, hospitals, the Red Cross, volunteer fire departments, unions,the Odd Fellows, and B'nai B'rith. It's a vast, tax-sheltered - publicly subsidized - enterprise run privately, largely by what used to be called the ruling class. The sector's 1991 revenue of $615 billion was 11% of GDP - $60 billion more than total nonresidential investment.

The funders in Gina Neff's article are what the IRS calls "organizations supporting other charitable organizations." In 1991, they had assets of $180 billion, and disbursed $38 billion. Their wealth is highly concentrated; in 1991, under 2% of the nation's 149,544 charitable organizations held 72% of total assets.

Portfolios of the giant foundations are indistinguishable from those of other high-end institutional rentiers. In 1991, the Rockefeller Foundation had $2.1 billion in investments. Among the stocks this dear friend of the earth owned were Boise Cascade, Coors, Enron, Exxon (the family business), Waste Management, and Weyerhauser. The most influential of all enviro funders, the Rockefeller Brothers Fund (the younger hipper wing of The Family), held all those stocks plus American Barrick (great exploiter of cheap public minerals), and Freeport McMoRan. (Thanks to Jeff St. Clair of Wild Forest Review for info on the Bros.) The sweetly liberal Carnegie Corp. didn't name its stocks, but did disclose it held derivatives on the Spanish peseta, New Zealand dollar, and Malaysian ringgit.

Do stockholdings matter? As Mark Dowie wrote in the Chronicle of Philanthropy, big environmental organizations "obey an unspoken dictum: Do nothing to jeopardize the value of your benefactor's endowment. In a social movement where the antagonist is so often private enterprise, that is a limiting edict." Polluting corporations, says Dowie, are members of the Environmental Grantmakers Association, and their executives dot the boards of grantmaking foundations. Add to this the "community" foundations that are really in the grip of financiers and developers and you have a mighty conservatizing force. (Of course, there is a huge net of very right-wing foundations and think tanks - but they're almost too easy a target.)

Rockefellers needn't worry about keeping the mail full of checks, but smaller nonprofits must. In a special supplement to DM News, the trade paper for direct marketers, one Tom Gaffny, a VP for "creative services," touted great advances in "donor recognition" - techniques to treat donors like friends, not mere moneybags. Laser-wielding "charitable marketers" can now "produce mail that looks as much like the 'real thing' as a letter from your favorite aunt." Designers can choose from a cascade of fonts: from "upscale calligraphy" to "handwriting" to fonts with "special icons like a smiling face or a heart." One Harlem-based charity "used a downscale font, with broken letters and filled-in type, which fit perfectly with the organization's image of a poor, desperate, needy charity. Donations went up!" Send donors birthday cards or thank you letters - and donations will go up! Copy headlined with a "please" or with a "thank you" in the lead "consistently outpulls copy that directly asks for help." Tell the truth, but tell it slant.

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