How Foundations Are Hurting the Poor

By JANET SHENK

When the Council on Foundations met last month in Los Angeles, many grant makers had the opportunity to learn firsthand about a city that some refer to as “the new Ellis Island.”

They found themselves in a city still amazed by its own reaction to street demonstrations, marches, and traffic tie-ups. Just days before the council’s conference began, 8,500 janitors — members of the Service Employees International Union — had settled a three-week strike that generated enormous public sympathy.

Lawyers and bankers in luxury office buildings poured into the streets to offer money and solidarity to the strikers. The mayor of Los Angeles said that the janitors deserved even more than they were seeking. And an anonymous donor sent a million-dollar check to the union strike fund.

All that support helped the janitors, most of them recent immigrants earning $6.80 an hour, win a 26-percent wage increase over the next three years and preserve a hard-won gain — full health benefits for janitors and their families — that had come under attack.

It was an unprecedented victory for the working poor, a constituency that more and more foundations are calling their own. But organized philanthropy played a contradictory role, one that may surprise some foundations that didn’t even know they were involved.

As “living wage” campaigns have spread to cities across the country, many foundations have supported research, advocacy, and organizing efforts to improve conditions for workers who hold full-time jobs or who piece together multiple jobs, yet who still fall below the federal poverty line. In California, groups such as the Los Angeles Alliance for a New Economy and Working Partnerships USA, with grants from major foundations, have exposed the conditions that low-wage workers face. But in Los Angeles and other cities, foundation investments may be working at cross-purposes from their grants.

Many foundations and other non-profit organizations pool and co-invest a portion of their endowments through the Investment Fund for Foundations, known as TIFF. Foundation participants, numbering more than 160, include the Carnegie Corporation of New York, the Commonwealth Fund, the John D. & Catherine T. MacArthur Foundation, the Public Welfare Foundation, and the Woods Fund of Chicago.

Through TIFF, some of those foundations — precisely which ones cannot be determined from public records — participate in two real-estate-investment funds managed by a company called Douglas Emmett, the third-largest building owner and manager in Los Angeles.

Roughly 25 percent of Douglas Emmett properties in Los Angeles are cleaned by non-union contractors, who pay their workers the minimum wage ($5.75 an hour) and offer no health benefits. By refusing to have all its buildings cleaned by union contractors, the company undercuts the labor standards set by the recent strike.

Since 1997, the Investment Fund for Foundations has invested at least $10-million in real-estate funds managed by Douglas Emmett. The amount that any one foundation has invested in Douglas Emmett is probably not very significant. But that’s not the point.

The real question is whether foundations that care about issues of fairness and shared prosperity want their names associated with an investment manager that promotes poverty-level wages. Foundations that would shun such an association do not necessarily need to race off and demand that TIFF divest its holdings in Douglas Emmett funds.

Rather, they should do what other institutional investors have done under similar circumstances. For example, the California Public Employee Retirement System and the New York Common Retirement Fund — two large public pension funds with combined assets of $250-billion — have adopted “responsible contractor” policies for their real-estate investments.

Those policies require their property managers and cleaning contractors to pay fair wages and benefits and to obey the law. Douglas Emmett would have failed that test on buildings it owns and manages.

By establishing clear investment guidelines and holding their money managers accountable for enforcing them, foundations can help set a “living wage” standard through their investments as well as their grant making. Other institutional investors have found ways to secure competitive rates of return and to invest their assets prudently while at the same time making sure their investments don’t perpetuate poverty among workers.

Industry studies have shown that paying decent wages and benefits to building-services workers raises the quality of services to tenants by reducing turnover and raising the skills of workers. Quality services to tenants translate into higher rents and better investment returns. Foundations should insist that the Investment Fund for Foundations, or any other investment group in which they participate, adopt and enforce policies that guarantee that investments will only be made in buildings that are served by companies that provide a living wage, health benefits, and all legal rights to their employees. Foundation influence would be powerful, particularly if some natural allies joined in.

Harvard, Yale, and other universities where students are working to change university policies that tolerate exploitative working conditions — whether among Nike workers sewing athletic uniforms in Vietnam or janitors cleaning classrooms — also put part of their endowments into the Investment Fund for Foundations. Together, they could begin to change the way the real-estate industry, and other industries, do business.

After Los Angeles, janitors went on strike in Chicago and San Diego and won significant gains. But that’s still just the beginning of a “Justice for Janitors Campaign 2000″ that will affect more than 100,000 building-service workers in cities from Seattle to Hartford. Andy Stern, president of the Service Employees International Union, which represents the L.A. janitors, said recently: “We as a union want to open this century focusing on the economic divide and bridging the income gap in this country.” That sentence could have appeared in many a foundation’s annual report.

Janet Shenk is the former executive director — and a current trustee — of the Arca Foundation, in Washington. She is also special assistant to the president of the AFL-CIO and a member of the Working Group on Organized Labor and Community, a project of the Neighborhood Funders’ Group.