An op-ed piece a few weeks ago in the Wall Street Journal (behind a paywall) argued that donors should construct their foundations to spend down assets as rapidly as possible, lest the foundations end up supporting causes their donors would revile. This familiar argument comes with a familiar whipping-boy: the Ford Foundation, whose enthusiasm for assisting the poor and marginalized was certainly not shared by its eponymous founder Henry. The op-ed piece, like many of its kind, focuses on the question of donor intent, arguing that only a brief payout period can assure that the donor’s intent is served.
The Nonprofiteer has never cared particularly about the intent of dead donors. First of all, they’re dead, and while death may not extinguish intent as a matter of law it certainly does as a matter of common sense. Second, how much better off do we really think the world would be if Ford’s foundation had spent all its money on Ford’s enthusiasms, such as promoting publication of the scurrilous anti-Semitic tract The Learned Protocols of the Elders of Zion? Third and most important, the tax-free status of foundations is supposed to encourage philanthropy, not the accumulation of permanently idle tax-free money.
The Nonprofiteer has long argued that the minimum expenditure required of foundations is way too minimum, and that setting up a structure to give away 5% of income shouldn’t entitle a donor to a 100% tax shelter–whatever his/her intent. Most likely that intent was to escape from taxation, without too much more thought than that.
So let’s think about the issue not from the standpoint of donor intent but from the standpoint of social good. Which is more useful for a philanthropy: remaining around in perpetuity, to grapple with issues that may arise a generation or three from now, or spending down in the present and relatively short-term future on issues the donor understands and cares about and which in any case are currently urgent? From the phrasing you can tell the Nonprofiteer’s position: spend it down.
Julius Rosenwald saw the wisdom of this approach when he created a program of fellowships for African-American artists for their professional development. Rather than keep the fellowships around in perpetuity, he ordered that the principal be awarded completely within 5 years of his death. As a result, virtually every mid-20th-Century African-American artist you’ve ever heard of received a Rosenwald Fellowship: Ralph Ellison and Romare Beardon and Katherine Dunham and Gordon Parks and many others. The value of what Rosenwald did, giving artists enough money so they could work without fear or distraction, is literally incalculable.
But also as a result, virtually no one remembers Julius Rosenwald, or at least not his fellowship program. So that presents the question: are we in the business of fostering greatness, or memorializing it? Is remembering a donor as important as creating work through a donor’s generosity? Again, to the Nonprofiteer the answer is self-evident. She’d rather be grateful for Ralph Ellison than to Julius Rosenwald.
Look, here’s the deal: people will make money in every generation, and in every generation some people will make a lot of money. If we tax them properly they’ll look for the opportunity to shelter their money in philanthropy. Why shouldn’t we tax them so that they’re motivated to spend it philanthropically, too? Like the proverbial Fifth Avenue bus, another chunk of money will be along any minute.
Sure, there’s a risk of spending too rapidly and with insufficient research (or “due diligence,” as people are fond of saying when they want to pretend that the nonprofit sector is really just like a business). But the greater risk is the situation in which we find ourselves now, where philanthropies give out amounts insufficient to make any significant change. No, philanthropy isn’t supposed to be society’s primary source of support, but while people are busy starving government so they can drown it in the bathtub, private wealth can and should step into the breach.
Consider the contributions of the Gates Foundations to the Global Fund to Fight AIDS, TB and Malaria. Can anyone really argue it would be better to hold back on eradicating those diseases, in case there’s some bigger plague later on? If there is, as AIDS itself demonstrates, we’ll mobilize and raise money for it. Meanwhile, in case of every ailment, time is our enemy: the later we provide resources, the harder it will be for those resources to have impact. Thus wasting money is a less significant risk than failing to spend enough to make a difference.
Two things need to happen: philanthropists themselves need to organize their giving so that it ends within a reasonable time after their death, and Congress needs to modify the tax code to require philanthropies to pay out more each year to retain their tax-favored status. A 10% annual payout–double the current rate–may end up causing philanthropies to dip into principal, maybe even until they’re empty. But remember the words of Citizen Kane as he contemplated the financial difficulties of his newspaper empire: ” I did lose a million dollars last year. I expect to lose a million dollars this year. I expect to lose a million dollars *next* year. You know, Mr. Thatcher, at the rate of a million dollars a year, I’ll have to close this place in… 60 years. ” Let’s take a Kane-like risk of running out of money.
One more story: Some time in the ’90s Joan Kroc stood up at a Ronald McDonald House benefit to announce her annual gift. Rumor had it she was actually going to make a five-year pledge, and the Nonprofiteer’s table indulged in the parlor game of trying to figure out just how much that would be. We figured the previous year’s gift ($5M) plus a little bump (so $6M) for each of 5 years, and settled on $30 million. And then she rose to speak, a little woman holding a torn-off piece of yellow legal paper in her hand. And she said, “I was going to make a 5-year gift, but then I thought: ‘The need is now.’ So tonight I’m giving $50 million to Ronald McDonald Children’s Charities.” Everyone at the table fell back in her seat, literally knocked over by her generosity, and also by her insight: The need is now.
Aside from Ronald McDonald, Mrs. Kroc mostly supported causes her late husband disapproved of. If only he’d given more in the present, he wouldn’t have had to contemplate a future in which his money went to places he despised. So the donor’s intention and the sector’s need are in sync:
Spend it now.
- An executive director position listed for $32K/year. Granted this was described as a half time gig but is there any such thing as a half time ED? Maybe it means you can take weekends off. The job description/requirements were just as detailed as any full time description.
- A director of development position for $20-25K. Again this is listed as 3/4 time. It comes with a very detailed laundry list of expectations but again is this really a job that can be done well with less than full attention?
Something seems really off here. My gut (and review of their 990’s) tells me that these are marginal organizations to be avoided. Do I seem unrealistically fussy in today’s job market?
Signed, Born At Night But Not Last Night
You are not unrealistically fussy, especially when “today’s job market” in the nonprofit sector seems to include a number of jobs that are going begging for want of the right candidate. And you’ve put your finger on why that should be the case: because the job descriptions (and presumably the jobs that accompany them) are a pile of unrealistic expectations held together with the glue of employer entitlement. This glue is particularly thick in the nonprofit sector, where hiring managers presume that their poverty entitles them to your services for less than they’re worth. But, as the workplace sign has it, Bad planning on your part doesn’t necessarily constitute an emergency on my part.
And you’ve identified a favorite gambit of those self-entitled managers/agencies: pretending that a full-time job can be done part-time because they know the proposed salary is an insult. (For what it’s worth, the Nonprofiteer was paid $25K as an Executive Director of a small organization in 1987; if salaries haven’t increased 20% in the past 25 years, they should have!) As you say, it is virtually impossible for anyone to be a part-time Executive Director, and the length of the list of responsibilities demonstrates that the agency knows this as well as you do. You could do it simply by specifying the number of hours you’re prepared to work (e.g., 30), but sure as death and taxes would come a grant application deadline which must be met, and your self-imposed part-time-ness (part-time-itude?) would go out the window.
The Nonprofiteer just had occasion to help a client work on a job description for a part-time professional position. The original description had two problems. First, it specified more than 40 hours’ worth of work for a 20-hour position. Second, its qualifications included both items that couldn’t be expected from someone willing to work part-time for $20 an hour (such as a roster of contacts in high-profile media) and items that shouldn’t be expected from a professional (such as facility with word processing programs). If you’re hiring a professional, don’t ask for secretarial skills. And if you’re hiring a professional, be reasonable about how much professional service you can get for $20 an hour and/or 20 hours per week.
By contrast, another client has recently shifted its budgeting from “How much can we spend based on how much we raised last year?” to “How much do we need to raise to support what we need to do?” Moreover, one of the things the agency realized it needed to do was steadily increase the salary of the Executive Director so that when the current martyr departs, the group will be in a position to offer a living wage to the next group of candidates.
(Consider, by the way, that the people offering such meager salaries are Board members who probably chafe at being asked to give $1000 a year. They don’t hesitate, though, to ask you to forego $25,000 or so of income. This is why the Nonprofiteer doesn’t advocate asking staff members to donate to their agencies: they’re already doing so at a level no other donor is likely to match.)
(Consider also that the sums offered make clear that the agencies are expecting women, and only women, to apply for these jobs. No one would dare offer such a pittance to a man. The nonprofit sector operated for years on the unwaged labor of women, but there’s no reason we have to continue to provide this subsidy.)
Thus, your incredulity at the nerve of some agencies is perfectly well-founded. That won’t help you get a job with them: but hey, why would you want to? You’re a star, and you’ll find a place that won’t also ask for the moon.*
“Oh Jerry, don’t let’s ask for the moon. We have the stars.”–Bette Davis to Paul Henreid, Now Voyager
When Warren Buffett challenged Mitch McConnell to help him pay down the deficit, McConnell paid him no never-mind—but a teenage girl in Northbrook, IL heard and responded, sending $300 to the Feds and asking Buffett to do the same. This is an adorable story, and the video makes it more adorable still.
But let’s not let this young woman’s sense of civic duty and remarkable act of civic participation distract from the real point of the Buffett challenge, which is that without increased taxation of the wealthy, jerks like Mitch McConnell will free-ride on public-spirited souls like Katie Murphy.
As all budding journalists know, every story can be told through judicious use of the 5 Ws: Who? What? When? Where? Why? Here the Nonprofiteer employs this efficient system to tell the story of how reluctant volunteers can become enthusiastic and successful individual-gifts fundraisers.
For most small- and medium-sized organizations, everything about this story is a blank. So here’s a primer on how to fill in that blank.
WHO to ask?: Only two types of people should be asked individually for gifts: people who’ve given to your group before, and friends of your Board members. With anyone else, it’s sheer impertinence: “Hi, nice to meet you, open your wallet.” Ask friends (of the agency and the Board), and ye shall receive.
What to do when your Board members say, “I don’t want to ask my friends for money”? Reply: “You don’t have to ask your friends. Just ask each other’s friends!” So Angela asks John’s friend, and John asks Angela’s. All they ask of their own friends is to come to a meeting, and all they have to do at that meeting is wax enthusiastic about the group and listen while the other one solicits the gift.
WHAT to ask for?: If they’ve given to the agency before, you’re asking for more. You have to make the leap of imagination (from $250 last year to $1000 this year) before the prospective donor can think about making it.
Don’t worry about being too ambitious in your monetary goal. Very few prospective donors are offended by being mistaken for rich people. (Women, though, are more likely to be taken aback than men, so ask for slightly less from women. They’re more likely to say ‘yes,’ so it all evens out.)
If you’re asking a Board member’s friend, ask for slightly less than the Board member gives him/herself, because the first thing the prospect will do is turn to his Board friend and say, “What do you give?” If the Board member doesn’t think the agency’s worth $500, the friend is unlikely to think it’s worth anything.
What if your Board member’s friend is a gazillionaire? (We should all have this problem.) Then prime the Board member to say, “I give $200, because that’s what I can afford. We’re hoping you’ll likewise consider a gift based on your capacity.” Again, few people mind being suspected of success, so if your Board member is prepared to say, “Listen, I know you made a killing last year when you sold your Google stock . . .” his friend is unlikely to want to correct him!
WHEN to ask: The Nonprofiteer is a prompt—some might say premature—fundraiser. As a cautionary tale, she offers the story of how her alma mater took her out for coffee repeatedly to soften her up for an ask, despite her saying, “Guys, I’m a fundraiser. I know what we’re doing here. Just ask me for the money!” By the time they were ready to ask her, she’d been reminded that the school’s investment philosophy would have permitted owning shares in slave-ships, and did permit investing in companies propping up genocidal regimes; and therefore she declined to give, though she wouldn’t have reneged on a preexisting pledge. So don’t delay; get the yes!
“What about cultivation?” you ask. The Nonprofiteer believes that lots of what passes for “cultivation” in individual-gifts fundraising is nothing more than stalling. Don’t hold “cultivation” events and plan to ask for money later; if you hold an event, either get contributions through the ticket price or ask forcefully that night.
All you need to do to “cultivate” people is to demonstrate that you’re thinking about them on a regular basis, and you can do that by forwarding something you think they’d like to read. Better yet, send them invitations to your activities, whether performances or client graduations or river cleanups. People give where they feel they belong, so be on the lookout for “belonging” opportunities. For this purpose, the less special the event, the better. If you do something special for a donor, make it an ask.
One word of caution about WHEN: don’t ask too soon after the last gift. May and June may be two separate fiscal years to you, but your donors probably think (and give) on a calendar-year basis. So they’ll think you bizarre and ungrateful if you respond to their May gift with a June ask.
WHERE?: Over breakfast, lunch or dinner (or possibly bedtime snack). The Nonprofiteer is a firm believer in the power of food to facilitate fundraising. In any case, the advantage of a meal is that it requires the prospective donor to sit still for about an hour, during which time you can a) learn about her; b) educate her; and c) ask her.
WHY?: Why bother with individual gifts? Why not just write some more grants? (asks your Board.) Three reasons:
- Because grants come and go. Institutional funders have the attention span of fruit-flies: this year they’re interested in AIDS but next year it will be architecture. If you’re not the fad, you’re out of luck.
- Because even if they continue to embrace your work, very few foundations or corporate giving offices will give money to support your operations. They want to support programs, the newer the better, often leading agencies to elaborate their programming beyond what their infrastructure can sustain. If you need to pay your light bill—or your employees—you need individual gifts.
- And finally, even if they love you to pieces, most institutional funders want to sustain you while you find broader support. They’re not interested in being your permanent sugar daddy.
By contrast, most individuals give because they’re asked, and what they’re asked for is support for a cause or an agency (not a single program), and once they’ve agreed they keep giving out of habit. So you have to actively offend them before they stop.
So that’s the story of successful individual giving. And if who-what-when-where-why merely piques your interest, you can learn how right here.
Jane Mayer’s excellent piece in this past week’s New Yorker about the brothers Koch, oil billionaires who’ve donated hundreds of millions to nonprofits promoting right-wing causes, finally clarified for the Nonprofiteer her unease at Bill Gates’s campaign to persuade billionaires to donate half their estates to charity. It’s not a question of who has or hasn’t taken the pledge, though that’s an entertaining parlor game. Nor is it the fact that the generosity of extremely wealthy people may not be what the rest of us have in mind when we hear the word “charity.” (The Kochs’ “charity,” for instance, is a term of art encompassing donations to all kinds of institutions, predominantly think-tanks churning out rationales for the economic interests of wealthy people and front groups to make it appear that defending those economic interests is the political will of the non-wealthy majority.)
What’s troubling about the billionaires’ pledge remains so even when the receiving causes are unexceptionable. Gates, for instance, has very generously underwritten substantial efforts by the Global Fund to Fight AIDS, Tuberculosis and Malaria. Good for him, and for the world.
Even the best-intentioned best-directed private donations are a way for moneyed people to work their will on the public, while the rest of us have nothing but the vote. And when the level of contributions is discussed in fractions of $1B, it’s no longer charity within a democracy: it’s benevolent dictatorship.
Maybe our country should be giving less to treat AIDS et al and more to eradicate infant and maternal mortality through the UN Population Fund; maybe not. That’s a decision to be made by the people of the United States, through our government. It’s really not a decision for a single person.
Why not? Well, for starters, the “single person” in question is a billionaire, and thus always a man. That means almost by definition that the highest levels of charitable giving will overlook women, though we constitute more than a majority of the population. And if that’s the case—if society’s needs are met by individual whim instead of collective decisions about the greatest good for the greatest number—then what, actually, is left of self-government?
Of course, billionaires have plenty of assistance in the task of allowing economic power to trump political will. The Supreme Court’s decision in Citizens United, holding that corporations are “persons” with First Amendment rights violated by limits on their campaign spending, already put the nation quite a way down that road. But somehow it’s worse when something that sounds so benign—“half my estate to charity, because I’ve been so fortunate”—actually translates as “I set the agenda for the future of this country, because I’ve been so fortunate.”
What we really want from billionaires is for them to pay a lot more in income taxes: say, the 87% of taxable income paid in 1954, or even the 70% paid at the start of the 1980s. And then we as a group can decide where our group’s money goes. All contribute, all decide.
And what we really want from billionaires’ heirs is for them to pay the 77% estate tax rate in effect in 1941, or even the 70% estate tax rate in effect in 1976. (And let’s not hear any nonsense about “death taxes.” The dead aren’t the ones paying.) Why shouldn’t people who get money by inheritance have to pay taxes on it, just like people who get it by working?
Merely to ask that question is to answer it: no democratic society decides that people who don’t work should be privileged over those who do. Societies like that are called “aristocracies,” and all those so-called Constitutional Originalists running around hijacking elections by screaming about excessive taxation should take a moment to remember that our Constitution was designed precisely to interfere with the establishment of a government by inheritance.
The Constitution prohibits not once but twice the granting of any title of nobility; but the Framers didn’t rest there. They fought to cripple and ultimately abolish entail and primogeniture, the primary devices by which English law kept family fortunes together. Why? Because they realized that, if you’re founding a republic, it’s really not a good idea to let money keep piling up generation after generation in the same few pairs of hands.
Self-governing societies can’t operate on noblesse oblige, and societies that do aren’t truly self-governing. As Dr. Franklin said, “A republic—if you can keep it.”
Editor (and fellow nonprofit consultant) Nancy Worssam and I will be reading from our essay anthology In Our Prime, by and about women 50 and over, next Thursday evening, July 29, at 7:30 p.m. at Women and Children First bookstore, 5233 N. Clark Street in Chicago. I hope some of you can join us that evening.
And please listen that morning—it’s only a week from today!—to Chicago Public Radio, 91.5 FM, when 848 host Alison Cuddy interviews Nancy and me about the inspirations for and origins of the book.