Foundation Investment and Governance Policies Detailed in New Report

Nearly 15 per cent of foundations take special steps to avoid investing in companies that sell tobacco or liquor or otherwise violate the grant makers’ social and ethical standards, according to a survey by the Council on Foundations.

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The proportion of funds that use so-called investment screens grew by more than a third since the council conducted a similar survey three years earlier.

The latest data on investment practices are reported in the ninth edition of the council’s “Foundation Management Series,” a three-volume report that covers grant makers’ finances, governance, programs, and staffing. The report is based on a 1997 survey of 673 community, family, independent, and public foundations.

A fourth volume of the survey, on benefits and personnel policies, is forthcoming from the Council on Foundations.

Private foundations made up 62 per cent of the respondents. Community foundations — which typically raise money and distribute it in a specific geographic area — represented 33 per cent of respondents, and public foundations about 4 per cent.

More than a third of the respondents had assets of less than $10-million. The foundations that participated in the survey had total assets of $90.2-billion in 1996 and made $4.1-billion in grants that year.

The Council on Foundations study found that small grant makers are twice as likely as big ones to use investment screens. Twenty-one per cent of foundations with less than $5-million in assets do so, compared with 10 per cent of grant makers with $100-million or more in assets.

Among the council survey’s other findings:

Investment management. All types of foundations are investing more of their endowments in stock than they did in the early 1990s. Among all grant makers, more than half of endowment assets were invested in domestic and foreign stock at the end of 1996, while one-third of assets were invested in fixed-income securities or cash.

Private foundations held more of their total assets in stocks — about 62 per cent of assets — than did other types of grant makers.

Nearly three-fourths of grant makers said they relied on outside professional managers to handle their endowment investments, compared with 59 per cent in 1994. Community foundations were less likely than other types of grant makers to manage their endowment investments internally.

Board compensation. Nearly three-fourths of grant makers do not compensate board members for their service. Among those that do, 60 per cent pay an annual fee, while 55 per cent pay a per-board-meeting fee, and 27 per cent pay a fee for each committee meeting. The median annual fee for board members is $6,800. For board chairs it is $10,000. (The median is the level at which half the fees are higher and half are lower.)

Annual fees paid to board members range from $500 to $55,000 at family foundations and $500 to $165,000 at independent grant makers.

Less than 1 per cent of community foundations said they pay board members.

Governance. Women made up 33.6 per cent of foundation boards in 1997, compared with 29.2 per cent in 1988. The proportion of female board members was highest among family foundations, at 44.5 per cent, and lowest among independent foundations, at 25.6 per cent.

White males constituted 60.6 per cent of foundation governing boards, and white females made up 29.3 per cent. Blacks constituted 6.1 per cent and Hispanics 2.3 per cent.

In total, members of minority groups made up 10.1 per cent of foundation boards, compared with 6.2 per cent in 1988.

About 8 per cent of grant makers said they had at least one disabled person on their boards.

Board size. The boards of family and independent foundations are, on average, approximately one-third the size of those of community foundations and one-half the size of public-foundation boards.

Mid-sized community foundations have the largest average board size, at about 20 members. Family foundations with less than $5-million in assets have the smallest average board size, at five members.

Staffing. More than 85 per cent of foundations reported full- or part-time paid employees or volunteers on their staffs.

Independent foundations with $250-million or more in assets reported a median full-time paid staff of 21 employees, compared with 29 at community foundations and 17 at family foundations of that size.

Copies of the Foundation Management Series, Ninth Edition are available from the Publications Department, Council on Foundations, P.O. Box 98293, Washington 20090; (888) 239-5221. The price for council members is $20 per volume, or $60 per set, plus $7 for postage and handling per set or $2.50 per volume. For non-members it is $45 per volume, or $135 per set, plus $13.50 for postage and handling per set, or $5 per volume.

The study also can be ordered through the Council on Foundations’ World-Wide Web site at http://www.cof.org.