Riskier days ahead for stodgy foundations
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Heinz Endowments President Max King is not shy about pushing the secretive, old-money world of Pittsburgh philanthropy to embrace greater risk, first doing so in 2002, when he led a highly public effort to pull local foundation money from the city's embattled school district.
Starting today and continuing tomorrow and Tuesday, the former Philadelphia newspaper editor has a chance to push the same message to the rest of the country as newly named chairman of the Council of Foundations, a Washington, D.C.-based trade group hosting its annual conference at the David L. Lawrence Convention Center.
Mr. King knows it will be tough to change old habits.
"There is an old culture at foundations, an old culture in philanthropy, that tends to want to be quiet, cautious," he said. "There are some factions in the Council of Foundations that are uncomfortable with being proactive, aggressive and very public about the work."
But, he said: "The old paradigm of charity -- writing checks to good people -- is not good enough. We have to think more like investors. We have to be very clear about the results we need to get and we need to be accountable for those results."
Heather Arnet, of the Women & Girls Foundation of Southwestern Pennsylvania, put it another way: "What you are seeing on the part of foundations is more holistic thinking: How do we leverage our grant-making to see systematic change?"
The call for renewed activism among tax-exempt foundations comes at a time when the country's 1.3 million nonprofits and grant-makers are facing the possibility of increased government oversight in the wake of management scandals at the United Way, the American Red Cross and the J. Paul Getty Trust and other big charities.
Concerned about the reports of fraud, excessive salaries and questionable spending, U.S. Sens. Charles Grassley, R-Iowa, and Max Baucus, D-Mont., who speaks at the convention center tomorrow, are leading the drive for more aggressive nonprofit regulations that mimic stricter financial reporting requirements for U.S. businesses put in place after abuses at Enron, WorldCom and several other firms.
Perhaps in a nod to the new scrutiny and potential changes in federal charity law, the 2,000-member Council of Foundations hired a new day-to-day director last year who knows his way around Washington, D.C. Steve Gunderson, who served 16 years as a Republican congressman from Wisconsin, acknowledges the need for greater transparency, yet he is concerned about government micro-management of salaries or business costs, noting that a foundation in Alaska uses a private jet to get around the state because of the vastness of the terrain and that such an expense should not be considered an abuse.
"We are very concerned we don't go down this road in the way of one size fits all," said Mr. Gunderson, the council's president and chief executive officer.
It can be argued that American philanthropy began here with steel-maker Andrew Carnegie and the great fortune he gave away in the first decade of the 20th century, building libraries and universities. It was Mr. Carnegie who said, "The man who dies thus rich dies disgraced." Oil man John Rockefeller, another early philanthropist, made much of his money in Western Pennsylvania, money he later gave away. Together, the men, the two richest in the world, handed out $14 billion in today's dollars during their lifetimes.
Because of the great fortunes accumulated in this region in the late 19th century and the early half of the 20th century, Pittsburgh remains one of the top philanthropic cities in the country, giving away about $500 million a year, according to The Foundation Center. It has more than $9 billion in foundation assets, and it is fourth among major metropolitan areas in total giving per capita, according to the center, using the most recent figures available. Only San Francisco, Minneapolis and Seattle give away more.
But there are people who argue that Pittsburgh's foundations could do a better job of demanding results from the organizations they support as a way of improving Pittsburgh's poor rankings in fields such as the health of the economy, the strength of education and the amount of diversity on local boards.
"To say that the foundation community could improve its performance in evaluating how its money is spent -- absolutely," said Mark DeSantis, a local management consultant and adjunct professor at the Heinz School of Carnegie Mellon University.
"Are they making the most out of what they have? Are we making the most out of what we have right here and now?
"I don't know."
Mr. King, of the Heinz Endowments, Pittsburgh's second-largest philanthropic group after the Richard King Mellon Foundation, agrees that more accountability for results is needed.
"We can be a lot better at that than we are. At the Heinz Endowments, we can be a lot better at that than we are. But I would say I think we are much more risk-taking in this community than almost any other community I know of."
In 2002, for example, Mr. King persuaded two other foundations, The Pittsburgh Foundation and The Grable Foundation, to join Heinz in yanking more than $3 million in grants to Pittsburgh Public Schools, citing a "sharp decline of governance, leadership and fiscal discipline."
What made the move so unusual, and attracted national attention, was that the three foundations went public with the news, even calling a news conference. Several other foundations declined participation because the move was so public.
Mr. King's campaign touched off a lot of discussion nationally about the role of foundations in pushing for social change. Some said Heinz, Grable and The Pittsburgh Foundation did not go far enough, while David Bergholz, retired director of the George Gund Foundation in Cleveland and former assistant director of the Allegheny Conference on Community Development, called the three "fair-weather friends" who had "cut and run" when the schools needed their support. The funding was reinstated in 2004.
Mr. Bergholz told a national trade publication that the move was too public and heavy-handed.
"I am someone who gets very worried when foundations start defining and setting community agendas, as opposed to responding to the organizations and people who ought to be setting the agenda," he said in 2004.
But Mr. King continues to press for more activism. In an essay published last year, he argued businesses in Pittsburgh could no longer be the primary "driver of social and community life" and that nonprofits "must learn to be as efficient as the most successful businesses." He warned that grant applicants should no longer expect money without being able to prove they can achieve results, "articulated in advance," and that "we are weakening ourselves by accepting wasteful, redundant and scattered approaches."
Asked last week about where foundations can show more leadership, he mentioned economic development and diversity.
"This is not a community that is famous for its embrace of diversity and inclusion," he said. "I think that's an issue, both race and gender, for this community to pay more attention to."
Foundations, he said, also have to examine the issue of whether there are too many economic development groups, many of which survive on philanthropic support, or whether certain groups, such as the Allegheny Conference on Community Development, are working effectively with the money and resources available to them.
About 1,600 of the country's top philanthropists, including financier George Soros, are expected at the Council of Foundations convention. Former Carnegie Mellon professor Richard Florida, author of "Rise of the Creative Class," will give a speech today about the state of philanthropy. Mr. Soros speaks Tuesday, along with former Republican House Speaker Newt Gingrich.
First Published May 7, 2006 12:00 am