‘Boston Review’ Asks: What Are Foundations For?

Foundations are sponsors of innovation in solving social problems and a counterbalance to the societal power of government and industry, writes Rob Reich, associate professor of political science at Stanford University, in a Boston Review forum called “What Are Foundations For?”

But grant makers are not merely independent, he argues—they’re unaccountable in a way that politicians and businesses, beholden to voters and the marketplace, are not. And, as such, they can pose a threat to democracy.

“Don’t like what the Gates foundation … has done with $25-billion in grants since its inception in 1994?” Mr. Reich writes in the Review’s April/May issue. “Tough, there’s no way to vote out the Gateses.”

And the few regulations that the government places on grant makers, such as requiring them to file informational tax forms each year, have little impact on those organizations’ activities, he claims.

“Foundations are not simply exercises in personal liberty,” writes Mr. Reich, noting that the American public pays a price in lost tax revenue when fortunes are tied up in a philanthropic endowment.

Nearly a dozen nonprofit experts responded to Mr. Reich’s essay in the Review. Among their contributions:

• Scott Nielsen, a former program officer at the John D. and Catherine T. MacArthur Foundation, writes that Mr. Reich overstates grant makers’ influence: “If foundations were the kind of plutocratic force Reich claims they are, U.S. policy on climate change, race relations, income inequality, election administration, immigration reform, early childhood development, and civil and human rights would look very different. These are issues of interest to many of the largest foundations.”
• Tyler Cowen, an economist and author of Good and Plenty: The Creative Successes of American Arts Funding, disputes the notion that foundations directly serve a donor’s whims and wishes for very long. He writes, “Few if any foundations achieve donor-directed control in perpetuity or even past the first generation.”
• Seana Valentine Shiffrin, a professor of philosophy and law at University of California at Los Angeles, echoes Mr. Reich’s concern about foundations’ lack of accountability, worrying about the influence of grant makers on the institutions, such as universities, that they support. She offers some remedies, such as “tying preferred tax treatment to modest measures of accountability and responsiveness” for grant makers. And “stronger firewalls between fundraising activities and institutional decisions” of institutions that get money from foundations.
• Pablo Eisenberg, a Georgetown University fellow and Chronicle columnist, writes that foundations give relatively little to help the poor and give less in grant money overall than they receive in tax breaks. He points to the expected generational wealth transfer as likely to exacerbate the problem of untold philanthropic riches concentrated in very few hands, and offers some possible solutions. Among them: limiting the size of foundations to no more than $15-billion, requiring that a majority of an organization’s board be unrelated to the founders, and raising the minimum percentage of assets foundations must give away annually from today’s 5 percent to 8 percent.

To read Mr. Reich’s essay and the responses, go to: bostonreview.net.