Notes from the Left Coast

Drummond Pike’s Blog

Madoff. What more is there to say. Pretty soon, we’ll be saying “so-and-so pulled the most amazing ‘madoff.’” Poor Mr. Ponzi may end up being left by the wayside, eclipsed by the shear scale, the unreal duration, and the depth of betrayal exhibited by the now jailed Bernie. But, as we all rue his very birth, I think it worth asking a question about just how and why so many charities and their assets went down the drain.

These charities that invested much or, in the case of several, all their assets with the now notorious Mr. Madoff have exposed just how poorly they oversaw the investment process. Two questions emerge. How could regulators have failed to expose the fraud long before it was made public? Second, are the standards for charities in this regard adequate for the quasi-public nature of charitable funds? The first I will leave to the myriads of people addressing it (though I will be avidly consuming every article I can find on the subject). The second question, though, fascinates me. My conclusion? The answer is a simple “no.”

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The Chronicle on Philanthropy reports on their website this week that the leaders of the Council on Foundations and Independent Sector have come out publicly in opposition to the President’s budget proposal that proposes in 2011 to reduce the tax savings on charitable gifts from top rate-payers’ current 35% to 28%, the lower rate of taxation paid by the vast majority of taxpayers. The example is often given for the high income donor giving $100,000 to a charity of her or his choice; under current law, the donor would save $35,000 in taxes, and in the future regime, this would be reduced to $28,000 for the same gift. The argument of our colleagues in philanthropy is that this will lead to a reduction in charitable giving, though I haven’t seen a study that supports this empirically. If true, I suspect the influence would be most likely marginal; market changes are far more of an influence on charitable giving practices. And, to be sure, no one is suggesting a change in the most important factor: the avoidance of capital gains when gifts are made of appreciated stock.

Let’s look at the other side of the equation. What’s so wrong about doing this? Let me start with the matter of basic equity. Why should two taxpayers, both giving the same $10,000 gift to the same charity, receive differing tax benefits because one earns more money than the other (and therefore pays a higher tax rate)? In some ways, the lower-earning individual is giving away more value relative to net income (and likely net worth as well).

Second, let’s look at just what this proposal is intended to help – the creation of a program for universal health coverage in America. This would address a profound social tragedy, and the deep shadow of embarrassment in which the US lives internationally, if we could achieve it. Wouldn’t it make sense if the philanthropic sector, contrary to expectation, embraced this policy initiative and asked, instead, “how can we help?” Perhaps sacrificing a bit of the privilege we experience, living outside the realm of the taxable economy as we do, in order to contribute to the final outcome would connect us to the deeper social good. After all, aren’t we really supposed to be about the public good?

Let’s instead support the proposal. If it succeeds, 45 million Americans will, for the first time, have access to health care – something that all our grants for many years could never finance.

Also of interest:

hr676.org:

I much enjoyed Pablo Eisenberg’s “A Nonprofit Agenda for the Next President” in the 10/30 issue of The Chronicle of Philanthropy. Nice piece. I even agree with many of the six major points he raises as an agenda for the sector with the next president. But he ends with what, to me, is by far the most important point….”Maintain a strong advocacy role,” and you have to read a long way through to get there. For me, that’s the most important thing the non-profit sector can do. Speak up!

There is a certain civility that extends throughout the sector, sometimes to our detriment. Perhaps it is born of the privileged class of people who create private philanthropies, or maybe it is because the independent sector is so fearful of the government adversely reacting to criticism, but, whatever the antecedents, nonprofits are painfully polite. So when Pablo leaves until last the idea that advocacy from the sector to address the real social ills that we care about, he seems to fall into this pattern.

Instead, I wish he had led with the idea that, with a new administration, NOW is the time to make clear what we hold to be critical, and the ideas we have been working on for how best to address those things. Jim Josephs, whose tenure with the Council on Foundations brought some of the best we have ever seen from that organization, used to talk about the role of philanthropy as being “society’s ‘R&D’ department.” I loved that analogy, for it gave in such a simple fashion, a clear mission for us all. We have the privilege of sitting outside the tax system and, in response, we have an affirmative role to play in solving some of our most challenging problems. We have the resources to think, to experiment, and to imagine new solutions. We also have an obligation to act on them.

So, rather than respectfully asking for an office in the White House, I’d far rather see Bob Greenstein (Center on Budget and Policy Priority) publicly calling for HIS ideas for a new approach to taxation, or Cecile Richards (Planned Parenthood) offering new ideas on how to make reproductive health services broadly available, or Rand Beers (National Security Network) suggesting some viable ways to change our military engagement in the Middle East. That all comes first. Then, well after suggesting a higher payout for foundations, we could say it would be nice to have an office in the White House to help give the sector a higher profile, better accountability, and the like.

Less that 7 weeks are left before one of the most important elections of our times, and it’s a dead heat. Wow. Usually by this time, there is a clear front-runner and the other candidate is trying to hard to catch up. But however the next number of weeks turns out, the one thing progressives should care most about is turnout. Regardless of the outcome, whoever wins will not prevail in a courtroom (God forbid), but they will preside over a fractured polity. America is as divided as it has ever been on any number of measures – culturally, racially, economically, and any other measure you might choose to employ.

Governing a divided country is not easy, nor has it ever been. If one can at least look back and note that more people voted than at other times – both in absolute numbers and as a proportion of qualified voters – the task will be somewhat easier. If one can also say that votes were counted without controversy, even better.

So what can we do?
This week, we are reaching out to any and all who share this view to support the Tides Voter Action Fund, our election protection initiative that support non-partisan, 501(c)(3) organizations working to increase both turnout and election integrity.  We feel this is important and we hope you will join us.

Tides has always encouraged our donors to support efforts to increase civic participation among low income communities, young people, single women, immigrants, and communities of color. Already in 2008, the Tides Voter Action Fund has granted more than $3.5 million toward these efforts.

If you are interested, please contact me or anyone at Tides and we will direct you on how you can help. There are some fantastic organizations out there which are working tirelessly on these issues.  You can get more specific information about the strategy and the grantees of the Tides Voter Action Fund here at TidesFoundation.org.

One of the perennial debates in the funding community revolves around the question of boundaries and role with regard to the groups we fund. Are we venture capitalists where, by virtue of the grants we have made, we have a seat at the table? Should we insist on an E.D. stepping down if we observe poor performance? Should we withhold further funding until changes we believe warranted become reality? Let’s call this the “venture” model, as many have done.

Or, should we see ourselves in a more passive role, financing the work of organizations, holding them accountable to stated goals and objectives, and observing weaknesses with constructive suggestions on what they might do? Let’s call this the “supportive” model.
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I’ve spent the last couple of months working harder, and more excitedly, on something than I ever have, at least so far as my aging, addled memory can recall. It is, believe it or not, all about a repurposed conference that Tides has done a couple of times before. Momentum. Now, you might ask, why in the world would a normal person get so exercised about organizing a conference? Here’s why.

I graduated from college in 1970 in the middle of Nixon’s first term (he was impeached during his 2nd). At the time, the Woodstock generation was in ascendancy and grinding through a social change agenda as though ordained by the gods. Civil rights had finally come to people of color, farmworkers had succeeded in forming a union (still hard fought by agribusiness), the women’s movement was emerging as a force to change seemingly intractable traditions, and the Vietnam War seemed to linger just to remind us why attaining and exercising power was so important. For me personally, Bobby Kennedy’s race in 1968 inspired a sense of what was possible, despite his tragic assassination. Looking forward, at 21, to the coming years, I was so certain that our generation was going to transform American society into an enlightened, tolerant, moral force in the world. How could it not? (more…)

Just traveling back to SFO this morning after a great meeting of the Tides Canada Board in Vancouver. Wow. They are doing great! We helped establish our northern sister organization about 8 years ago under some not insignificant pressure from our friend Carol Newell and her sidekick Joel Solomon at the Endswell Foundation – an active funder of the British Columbia environmental community. As they have on and off and now on again made a commitment to spending out their endowment (truly the highest minded stewardship in my view), they wanted to leave an institutional legacy that supported progressive philanthropy and initiatives in the region to which they are so committed. And, boy, have they delivered. The founding ED, now CEO, Tim Dramin, has done a great job putting the organization on the map and developing a parallel to Tides Center – of which there are NO parallels in the entire country. But programmatically, they are rocking.

Here are some highlights:
• Tides Canada has been at the center of an incredible effort that brought together timber companies, First Nations leaders, environmentalists, US funders and, most remarkably, the Provincial Government in a joint effort to preserve the Great Bear Rainforest – 25% of the world’s remaining temperate rainforest is now permanently preserved while simultaneously a $120 million fund has been committed to support sustainable businesses in First Nations communities. Amazing stuff for an 8 year old institution.

• They have hired their first President to run things day-to-day who was the leading organizer of the Great Bear effort. Ross McMillan hails from Tofino on the west coast of BC, but now is in Vancouver helping to keep up with this rapidly growing enterprise.

• A recent draft strategic plan indicates Tides Canada will be aggressively launching into areas of social justice, climate change, and social finance. There was a long discussion at the Board Meeting about the critical state of low and moderate income housing in all of Canada’s major cities. Vancouver especially, it seems, has seen rental housing replaced by highrise condos that are largely held as investments and unoccupied. Lots to sort through on this issues, for sure.

On top of all this, CEO Tim Draimin is leading a policy initiative to establish program sponsorship and development - done up there by Sage Centre, a parallel to Tides Center - as an accepted and well developed way of doing business. No mean feat, I can assure you, given the complexities of the Canadian tax system.

All in all, I’d say our northern sister organization is in GREAT shape and continuing its innovative ways. Check them out!

I learned recently that the folks at American Idol had decided to launch their own charity called “Idol Gives Back” to replace the infrastructure that we’d help put in place with Charity Projects Entertainment Fund on whose Board I sit. CPEF was formed last year after Fox and Idol had agreed with the incredibly talented Comic Relief folks from the UK to experiment with creating an on-air fundraising effort similar to the extraordinary “Red Nose Day” that has raised tens of millions in the UK for the benefit of groups working to alleviate poverty and to address the AIDS epidemic in Africa.

Comic Relief’s super CEO, Kevin Cahill, had sparked the idea of bringing a media savvy, mission focused charitable initiative to the US. On their way to LA, they’d stopped through SF to meet with us to see if Tides could help with the idea. Skipping down to LA after, they’d managed their way into the inner sanctum of American Idol and got their buy in. But it was on an unbelievable fast track and everyone scrambled to bring whatever they had to the table. Comic Relief provided all the know how, the films from the field that are so essential, and the infrastructure to make sure the money was well-used. They organized the phone banks, on-line giving portal, and all the rest. AI worked the concept into their final week’s competition. It was a collaborative effort, for sure.

The results we all know. Expecting maybe $10 to $20 million, they raised over $70 million for a pre-determined group of major charities like Save the Children, the Global Fund, and others. Desperate for skilled staff, Tides recommended three extraordinary consultants to help shape and evaluate the burgeoning grants. Karie Brown, Allison Barlow, and Anne Moses came together on very short notice to carefully structure $7.5 million grants to the US groups and to assist on the African grants. From the NY Times, yesterday:

Overall officials at the nine charities that received the money said they were pleased with the efforts of the “Idol Gives Back” charity, particularly with officials’ rigor in vetting potential uses of the money.

“Sometimes celebrity or entertainment-industry-based charities might not be the most sophisticated organizations in distributing the money they raise,” said Dr. Irwin Redlener, the president and a co-founder, with the musician Paul Simon, of the Children’s Health Fund. “But the ‘American Idol’ group got up to speed more rapidly than I’ve ever seen before. And they did a tremendous amount of investigation and due diligence among the organizations that could be potential recipients.”

So what did Fox do for this year’s event? They stiff-armed their partners, organized their own charity named after the event, and will be going it on their own. One can imagine that once they saw how much money was involved, they decided they wanted to control the action. Understandable in most circumstances, but it follows a narrative that has been often repeated in Hollywood where effective grantmaking often gives way to other considerations.
Among the first decisions for the “new” Idol Gives Back: to replace UNICEF and America’s Second Harvest with Brad Pitt’s glitzy “Make It Right” project focused on rebuilding the Lower Ninth. Hmmm.

When you google “Make it right” you get news stories about Bush’s original quote that they were going to “make it right” when asked about the abysmal failure of FEMA. When you google “Make It Right Campaign” you are given pages of Hollywood star sites, but nothing about MIR except links to Brad Pitt’s interviews announcing it. So what is it?
Announced last year with great fanfare, MIR has one of the sweetest websites you can imagine, and they’ve recruited notable “green stars” like Bill McDonough & Associates to their “core team.” More than a dozen architectural firms are listed as well. Progress to date? You tell me. I can’t find a press mention of any houses built or families helped. Is it real? Time will tell, but without the kind of rigor last year’s Idol grants program had, it’s anyone’s guess.
PS: you can find their site by googling “make it right New Orleans”. Who knew?

There is an interesting new “issue” on the philanthropic horizon emerging at the moment. Called the Coto bill, this recently introduced California legislation was pushed by the Greenlining Institute – a progressive advocacy outfit that sometimes treads on the toes of the powerful in their drive to make racial justice a central topic of debate. In this case, disturbed by the paltry sums of foundation grant dollars directed to organizations whose boards and executives are persons of color. No one would or could argue with the tiny proportion of grants that go to such organizations. The question is why.

The Greenlining approach has been to shed the light of day on current practices by requiring that every foundation with over $250 million in assets be required to collect and publish demographic data on both themselves and their grantees. Interesting. The premise, I’d imagine, is that by requiring this, large foundations will be embarrassed into doing better in this area. What’s emerged, of course, is a semi-hysterical response that government is again intruding into the private affairs of private philanthropy, and that they may well incur substantial costs in such a process. Even the much vaunted Council on Foundations has issued a call to its members decrying the proposed legislation and calling for its defeat, hoping that if the barons of philanthropy, and the families behind the biggest foundations, can raise the alarm, then the CA state legislature, and certainly the Governator, will see the light and stop the outrage. Outrage? Hmmm.

I think it fair to say that the delicate question of how to balance private, monied interests with the public benefit that foundations are expected to provide by virtue of their privileged status is rarely discussed. Few in the field would be rewarded to do so, either jeopardizing their future careers in philanthropy, or risking ill will among the doyennes of the check-books. It is, though, a fascinating question.

The way it works now is that individuals and families who have accumulated vast wealth can exercise control over great portions of that wealth long after the accumulators die. More than a century has passed since the vaunted and respected Rockefeller fortune was assembled. Today, the grandchildren, great-grandchildren, and, very likely, great-great-grandchildren populate numerous boards of philanthropies established by their families decades ago. These permanent structures invest their funds for returns in the capital markets and are obliged to spend but 5% annually in the form of grants to non-profits.

The legal premise that permits the families to continue to control these foundations requires them to avoid any personal financial benefit. But of course, there are many non-financial benefits that accrue from being in decision-making roles and handing out grants. The quid pro quo is that society benefits from having a flow of resources, which are controlled by neither government nor private business interests. Whether this exchange works to the benefit of society as a whole is the question. Clearly private cultural, educational, and health related organizations scoop up vast sums of untaxed money from generous donors. And, to some degree, they can be seen as benefiting all of society. But religious institutions are by far the largest beneficiary of private philanthropy and personal giving, and, as we become a more spiritually diverse society, questions may arise about how much the government should bless them with untaxed largess.

Personally, I see the role of philanthropy as extraordinarily privileged. Foundations, and the groups they support, live outside the tax system, and yet benefit enormously from all that taxes support, all the infrastructure of government and social systems that enable the accumulation of the very fortunes that create philanthropies. It seems to me that whatever the government might want in terms of transparency is the least we can provide. And, can it really be that difficult to collect and share this information? Really.

There are a lot of fights worth fighting when government proposes restrictions on the sector, like when they try to keep non-profits from advocating for improvements in public policy or social programs. That, in contrast, can be seen as our role. But worrying about the demographics of our grants programs? That’s another kettle of fish.

Videos: Greenlining Institute in Action

ECO Initiative LAUNCHED

Over the past year, a Tides Foundation staff team, headed by Cathy Lerza and Sara Gruen, and aided by consultants Angela Park and Henry Holmes, has been building the mission, vision and values of a new sustainability initiative, now called Environmental Equity, Community Opportunity/ECO. Through a comprehensive scoping/field conversation process that engaged more than four dozen leaders and activists from around the country, ECO now has a mission and goals statement, and is putting the finishing touches on its program, which will include convenings, training, technical assistance, and grantmaking.

On October 17-18, Tides hosted a powerful convening of 20 ECO leaders from across the environmental, economic justice, and social justice fields to advise funding and program strategy; participants included:

• Bob Bingaman (national field director of the Sierra Club);
• Gihan Perera (director Miami Workers Center);
• Maya Wiley (director of the Center for Social Inclusion; and Tides Network board member)
• Dan Chu (vice president for state affiliates of the National Wildlife Federation;
• Deepak Bhargava (executive director of the Center for Community Change);
• Judy Hatcher (director of the Environmental Support Center);
• Eveline Chen (director of Asian Communities for Reproductive Justice);
• Lucy Blake (CEO of the Apollo Alliance);
• Pat Sweeny (director of the Western Organization of Resource Councils);
• Felicia Marcus (vice president of the Trust for Public Land);
• Richard Moore (director of the Southwest Network for Economic and Social Justice);
• and Luther Propst (founder and director the Sonoran Institute).

Participants universally termed it one of the most powerful meetings they had ever attended, expressing a desire “to continue to meet together to help shape a powerful new movement rooted equally in values of environmental protection, social and economic justice and democracy “. The vision of this meeting poured over into the Bioneers Conference .

Not surprisingly, climate and energy were recurring themes throughout the ECO gathering As part of the ECO initiative, we are exploring the ways in which Tides can manifest leadership on climate and energy. Senior philanthropic advisor Cathy Lerza, assisted by consultant Henry Holmes and with great support from Center program director Farnaz Golshani, have begun to explore a Network wide climate and energy gathering to bring together Center projects and Foundation grantees addressing climate and energy along with representatives from Shared Spaces and CCI to identify what we as a Network are already doing and how we could amplify the impact of that work. Preliminary research indicates that over 50 Center projects and 200 Foundation grantees are taking on climate and energy. Still in the scoping phase, a Network climate and energy event might take place in mid 2008, perhaps in conjunction with Momentum. Great work, Cathy, and stay tuned, all!

BTW, I’ll be on the road all next week (in DC, NY), spreading the Tides gospel and exploring new business.