March 18, 2004 | Read Time: 3 minutes
The Ewing Marion Kauffman Foundation, in Kansas City, Mo., should change the way its board operates, more clearly state its commitment to its hometown, and rewrite its ethics policies, the Missouri attorney general says. In a report on the foundation’s operations that was made public this month, Attorney General Jeremiah W. Nixon also cleared the foundation of any illegal activities or conflicts of interest.
Kauffman officials said they will review Mr. Nixon’s findings and submit a report on what the foundation is doing to respond to his recommendations by September 1.
Mr. Nixon began his investigation in September, after several former Kauffman trustees accused the fund of offering a paid consulting job to an outgoing trustee on the eve of a board vote on whether to retain Carl J. Schramm as Kauffman’s chief executive. Mr. Schramm won the vote (The Chronicle, October 2, 2003).
What’s more, leaders of some Kansas City charities had called for the attorney general to look into questions surrounding the foundation’s interpretation of the instructions left in 1966 by its founder, Ewing Marion Kauffman, the pharmaceutical magnate who started the foundation, now with assets of $1.6-billion. Some officials said that, under Mr. Schramm, the foundation had begun to withdraw support from Kansas City causes. Kauffman officials deny that they were providing less money to Kansas City groups. The attorney general’s report noted that nearly two of every three grant dollars from Kauffman have gone to Kansas City programs in the past five years.
Appearance of Conflict
The report concluded that Kauffman’s board never discussed compensation with the outgoing trustee, Brian O’Connell, but added that not disclosing the discussions to the full board before the vote led to the appearance of a conflict of interest. To prevent similar episodes, the report urged the foundation to review and strengthen its ethics policy.
To allay fears of local charity leaders that the foundation was pulling support from Kansas City, or possibly moving the foundation out of town, the report recommends that the grant maker’s board amend its bylaws to require a unanimous board vote and public hearings on the issue in Kansas City before the fund can relocate, and to require that the chief executive live in Kansas City.
At the time of the accusations, Mr. Schramm lived in Baltimore. He now splits his time between Baltimore, where his family lives, and Kansas City, said a Kauffman spokeswoman.
Foundation officials said the attorney general’s findings uphold their view that the foundation had done nothing wrong.
“We expected to be exonerated, and we expected the attorney general to find consistency with donor intent,” says Mr. Schramm. “We also expected he might have some recommendations for how we could improve the foundation.”
A former Kauffman official said that while the report found nothing illegal in the foundation’s operations, the grant maker’s leaders would do well to heed the report’s recommendations.
“The foundation is publicly treating this like it’s a slap on the wrist, but when you look at each item in the report, it actually has some pretty strong things to say,” says Bob Rogers, president from 1990 to 1998. “Instead of looking at whether what they did was legal or not, the foundation should take a hard look at whether what they’re doing is right.”
The full text of the state’s report on the foundation can be viewed at http://www.ago.state.mo.us/newsreleases/2004/kauffmanreport030404.htm.
