A Royal Call to Action for Foundations

Jordan’s queen tells grant makers to increase giving, shun paternalism

“What does philanthropy have to do with the 21st-century era of the cybermillionaire and the venture capitalist?”

That question was offered by Queen Noor, the widow of King Hussein of Jordan, at the opening session of the Council on Foundations annual meeting here, and it was clear that it was a question that was much on the minds of the more than 2,000 participants. The conference theme was “Transforming Philanthropy,” and many of the sessions focused on the wisdom of applying venture-capital approaches to giving, the role of the Internet in making grants and creating new philanthropists, and the ways in which increasing globalism is changing grant making.

Queen Noor, chair of the newly created King Hussein Foundation, said that “in a world buzzing with instantaneous communications, e-commerce, and borderless business, the word ‘philanthropy’ can have an old-fashioned, fairly quaint sound.” To avoid becoming out of date and irrelevant, she urged foundations to adjust their approaches but always to remember that “philanthropy, in its most basic sense, is the love of humankind.”

Grant makers, she said, must “maintain and renew that principle as the foundation of all foundations.

“That love might once have meant a top-down, paternalistic approach to charity work, run by a patronizing kind of patron,” said Queen Noor, who for the past 15 years has headed the Noor Al Hussein Foundation, which supports community-development programs in the Middle East. “But now, in our new world of micro-initiatives and community action, the most effective — not to mention the most palatable — forms of philanthropy are based on respect and partnership with those we are pledging to help. The philosophy of modern philanthropy must be one of service, not diktat.”

Queen Noor also urged foundations to do more to help non-profit groups become effective. “We must invest more directly in people and less in bureaucracy,” she said. “In capacity-building, rather than capital.

“This is as much efficiency as philosophy. It is people on the ground, not the facilities at the home office, that make the difference.”

In her speech, Queen Noor also questioned the spending practices of foundations. At a time when foundation endowments have increased, largely as a result of the stock market, the queen suggested that grant makers reevaluate how much of their assets they give away to charity each year. By law, foundations are required to distribute 5 percent of their investment assets a year, on average.

“The purpose of a foundation is to sustain the most needy, not to sustain or enrich itself,” she said. “For in the final analysis, the criteria for success for foundations are different from those in business.”

The issue of foundation payout was a hot topic throughout the conference — the second year in a row that the topic was discussed vigorously both at the formal sessions and in the hallways.

Much of the discussion was triggered by the release of a report by the Council of Michigan Foundations, which analyzed assets at 33 Michigan foundations over 25 years. It concluded that if a philanthropy distributed more than the legally required minimum of 5 percent, its assets eventually would shrink substantially.

Conducted by Cambridge Associates, a Boston investment-consulting company, the study was the latest in a series of reports on the topic. Other reports released recently include one commissioned by the Council on Foundations, which reached conclusions similar to the Michigan report, and another by the National Network of Grantmakers, which said foundations could safely give away more than 5 percent annually. The Cambridge study, which cost approximately $50,000, was financed by the W.K. Kellogg, Kresge, and Charles Stewart Mott Foundations, among others. However, to avoid skewing the results, foundations — like the Kellogg Foundation — that are invested heavily in a single stock were not included.

Cambridge Associates not only looked at past performance but also conducted a statistical probability study of future returns using a hypothetical portfolio invested 65 percent in equities and 35 percent in fixed-income investments — a typical foundation allocation mix.

The study found that from 1973 to 1997, the 33 Michigan foundations saw an investment return of 5.27 percent, with inflation taken into account. From 1969 to 1998, the hypothetical portfolio produced an inflation-adjusted return of 6 percent.

Based on estimates over the next 25 years, the report said, a foundation that distributes 5 percent of assets a year has a 56 percent probability of maintaining its current value. That likelihood drops to 44 percent for a foundation that distributes 6 percent.

“If donors are concerned about the sustainability of foundations they need to probably keep their payout rate in line with what the feds currently require,” said Robert Collier, president of the Council of Michigan Foundations. Its study “confirmed that, despite the really outstanding returns of the 1990s, you need to be concerned about market cycles.”

However, some of those pushing for an increase in the payout rate said they weren’t worried that doing so would eventually lead to a time when the nation had no foundations. Rick Cohen, president of the National Committee for Responsive Philanthropy, noted that many new foundations were being created and that many donors were adding significantly to their existing foundations.

“Even if I bought the assumption that a higher payout would dissipate assets,” said Mr. Cohen, “how many years would it take?”

This year’s conference brought grant makers a taste of Hollywood glitz — plus plenty of opportunities to see how celebrities as well as non-profit groups and foundations in Los Angeles are looking for ways to deal with the serious problems plaguing the city. At a breakfast session on the conference’s final day, a panel of Hollywood celebrities advised foundations and non-profit leaders on how to work with entertainers — and how not to work with them.

Shelley Fabares, former star of the television show “Coach,” said that what was most needed was a new organization that could act as a matchmaker of sorts, to bring together celebrities and charitable organizations with common interests. Such a group could help non-profit groups identify which celebrities were interested in their causes, she said. It could also help entertainers obtain information about the issues that interest them and connect them with groups working on those issues.

Ms. Fabares, a long-time supporter and board member of the Alzheimer’s Association, noted that she became interested in the group’s work because her mother suffered from the disease and eventually died of it in 1992. She said there are many other celebrities who have a strong desire to get involved in charitable work but who don’t have a similar personal connection to a particular cause, or who simply don’t know where to begin.

The actress Morgan Fairchild said her work as an advocate for groups fighting AIDS grew out of her passion for science as a youngster: When other little girls were reading Nancy Drew novels, she was reading biographies of the scientist Louis Pasteur. As an adult, she read science journals about epidemiology and virology purely for intellectual stimulation. But when the AIDS epidemic surfaced in the 1980s she discovered her quirky habit could now serve a good purpose.

“I suddenly realized that I was probably the only celebrity who could go on national television and explain in layman’s terms what a retrovirus was and how it worked,” she said.

However, Ms. Fairchild and her fellow panel members warned audience members that not every celebrity will take the time to research an issue with gusto, and thus charities need to help educate them about issues so they can serve as articulate advocates. That includes teaching them how to respond to tough questions, she said. “Don’t just feed them the upside” of causes, she advised the audience, but make sure celebrities know how to respond to critical questions and defend their positions with authority.

Rob Reiner, who founded the I Am Your Child Foundation several years ago to draw attention to early-childhood issues, noted that celebrities have the power to draw attention to causes — but that they aren’t always taken seriously because of the characters they have played in television and movies. “I’m perceived as a certain kind of person because you have seen me on ‘All in the Family,’ ” he said, referring to his “Meathead” role as Archie Bunker’s son-in-law. To counter any stereotypes about them, stars need to be especially well-informed about the issues they embrace, he cautioned.

“Celebrities have a tremendous responsibility,” he said. “If you are going to draw attention to a subject, you had better know what you are talking about. Because you will be discounted very, very quickly if you cannot back up your enthusiasm and interest with knowledge.”

“We have to be able to do that as celebrities,” he added. “Otherwise, we are going to do more damage to our issue than good.”

Foundation officers attending the conference had plenty of time to learn about the world beyond Hollywood by participating in “site sessions,” which took them to a diverse array of locales — from South Central to Santa Monica. This year’s conference featured 22 site sessions, double the typical number, as part of an effort by the Council on Foundations to encourage conference attendees to spend more time viewing the work of charitable organizations in their host city and less time in meetings in hotel conference rooms.

In the past, says Kirke Wilson, president of the Rosenberg Foundation, in San Francisco, a chief complaint of conference participants has been, “Why do we travel across the country and never see the town that we’re in?”

At one site session, about 40 people went to Pacoima for a trip coordinated by the Prudential Foundation and the Valley Economic Development Center, a local organization leading a new workforce-development program in Pacoima, a northeast San Fernando Valley community where 40 percent of families have incomes below $15,000 and 75 percent of families lack health insurance.

Carolyn Brooks, Prudential’s manager of local initiatives, said she hoped the visit would help conference participants understand Pacoima’s role as a local “port of entry” for newly arrived immigrants, noting that 85 percent of Pacoima residents are recent immigrants from Mexico. One of Pacoima’s greatest challenges, Ms. Brooks said, is its extremely high unemployment rate — an estimated 35 percent, compared with the national average of 3.9 percent. Many area employers say the main reason they don’t hire more local residents is because they lack the necessary education and skills, Ms. Brooks reported.

Among the local organizations working on this issue is the Valley Economic Development Center, which recently helped create a new technology classroom at the Pacoima Community Center. The tour group stopped in to visit the new classroom, where adults can study to receive certification documenting that they have learned how to use popular software products such as Microsoft Office or Front Page. “We are asking employers, Tell us what you need, and we will train them at no cost to you” in the specific skills they request, explained Mario Matute, director of the Valley Economic Development Center.

The group also paid a visit to Pacifica Hospital of the Valley, home to a new internship program aimed at training adults for entry-level jobs in health care. Veronica Gonzales, a participant in the training program, said she had worked for six years in a mail room but wanted to find a job with more potential for advancement and good benefits. Her new internship has helped her acquire the skills she’ll need in a health-care job and has taught her how to interact with doctors. “Now I know what to expect in the field,” she said.

In a week when some 2,350 foundation officers were headed by planes, trains, and automobiles for Los Angeles, the Conference Board released preliminary findings from a new study that found that a majority of foundation and corporate-giving executives would like to know more about the environmental and employment policies of airlines and hotels so they can better choose which ones are worth patronizing.

In recent years, foundations have begun to recognize that their choice of vendors or where they locate their offices can also double as an opportunity to advance their missions, said Michael Seltzer, the Conference Board’s director of business enterprises for sustainable travel. Now Mr. Seltzer, himself a former program officer at the Ford Foundation, hopes the new study will encourage foundations to view their travel budgets as yet another tool for achieving charitable goals.

Together, the 152 foundation and corporate grant makers surveyed spend some $11.2-million on business travel each year. In the survey, the complete version of which will be released this summer, 36 percent of the foundation officers said that if they had information about a hotel’s environmental practices they would consider it “very important” in selecting a hotel for business travel, while 45 percent said that such information would be “somewhat important” in making a choice.

A slightly higher proportion, 45 percent, said that information about environmental practices would be “very important” in choosing an airline, while 40 percent called it “somewhat important.”

Among other findings:

• Seventy-one percent of the respondents said they wanted hotels to give them the option of reusing sheets and towels during their stay.
• Seventy-four percent would like to be offered easier ways to donate any unused, nonperishable food from their flights to a soup kitchen.
• Forty percent said they would consider whether a hotel employs people who live relatively nearby “very important” in selecting a hotel, while 38 percent rated it as “somewhat important.” For air travel, 36 percent said they considered information about employment practices “very important” in choosing an airline, while 43 percent said it was “somewhat important.”
• Forty percent said it would be “very important” to know whether a hotel supported local non-profit groups and another 40 percent said it was “somewhat important.” When choosing an airline, 34 percent said support of non-profit groups was “very important” while 43 percent said it was “somewhat important.”

The foundation leaders also reported that cultural tourism can be a factor in travel decisions: 82 percent say they take into consideration whether a hotel is located in a historic district. In addition, 79 percent say they are willing to extend their business trips “to gain a better appreciation of the unique flavors of a host community,” and 32 percent would be willing to stay an additional day.

Mr. Seltzer noted that the new survey is intended “to signal to the travel industry that their customers would like this information” because it currently is not readily available.

Copies of the summary are available now from the Conference Board. For more information, contact Mr. Seltzer at the Conference Board, 845 Third Avenue, New York 10022-6679; (212) 339-0335; fax (212) 836-9718; e-mail BEST@conference-board.org; http://www.sustainabletravel.org.