William E. Simon Jr. surprised many observers last year when, as a political newcomer, he won the Republican nomination for governor of California and came within 5 percentage points of knocking off the Democratic incumbent. Mr. Simon has since returned to William E. Simon and Sons, an investment firm he co-founded with his brother J. Peter and his father, who was a successful entrepreneur, a former U.S. Treasury Secretary, a best-selling author, and a prominent philanthropist.
Continuing that legacy, his son co-chairs the William E. Simon Foundation founded by his father and also serves, among other philanthropic commitments, as vice chairman of Catholic Charities Los Angeles and chairman (emeritus) of Covenant House California. With his wife, Cindy, he has established a family foundation that focuses on educational scholarships, physical fitness, and providing young people the chance to improve their own circumstances.
PHILANTHROPY: You’ve been a business leader, a political leader, and a philanthropic leader. What are the similarities and differences between running a business and running a philanthropic enterprise? What do you think government does today that philanthropy could do better?
MR. SIMON: Both philanthropy and business are service activities. In each area, you should be providing a product or service someone wants or needs in an effective and efficient manner, and if you’re not, you should re-examine what you’re doing, or discontinue. In business you live and die by the bottom line, and there are concrete benchmarks, like profit and loss statements, by which you gauge success or failure. In philanthropy it’s just as important to establish appropriate benchmarks to measure effectiveness. Only in recent years have philanthropists paid much attention to this aspect of “outcome assessment.” This is a positive trend, though more can be done in this regard. That said, it is genuinely harder to assess results in philanthropy; because results are not quite as clear-cut, philanthropists must apply good judgment to their efforts. An important difference between business and philanthropy, I think, is that while business is about making money, philanthropy is an investment in human capital, which is priceless and will last long after the last business profit is taken to the bank. Over the years, government funding has displaced philanthropic efforts because government is able to come into a situation with so much more money than private charity. Assisting the poor and providing health care, for example, were activities that at one time were largely funded by churches and charities of one kind or another. Today, the government, and mainly the federal government, provides the bulk of that funding. Private dollars, however, are typically spent more efficiently than public dollars. Often there is a “local control” aspect to private philanthropy—the dollars originate much closer to where they are spent, and the philanthropist is more in touch with the community’s needs. Also, when a person is giving away his own money, he tends to be more diligent with its use. It’s often just the opposite with government bureaucrats spending taxpayer money from their desks in Washington, with no real connection to communities and little accountability for the funds. I’m glad to see President Bush seems to understand this and is trying to bring accountability and measurable effectiveness to government programs.
PHILANTHROPY: Why is America the most charitable country on earth?
MR. SIMON: Well, I think there are a couple reasons. The first is that America was founded on strong Judeo-Christian principles and continues to be one of the world’s most faith-filled nations. Love of neighbor, the Golden Rule, the story of the Good Samaritan—these ideas of helping others in need, of treating people as you would want to be treated, have been part of our country’s fabric since its founding. Indeed, these principles still form part of the backdrop of the lives of ordinary American citizens. Our history of individual responsibility, self-reliance, private initiative, and local control is another reason America is so charitable. These principles bring out the best in people and have helped create the American Dream, which everyone can achieve. We Americans trust our own and our neighbors’ abilities to make good choices with our money, families, and neighborhoods, and we fiercely prize the freedom that preserves our right to make those choices. We do not look to the federal government to take care of us; so when we see people in need, we take it upon ourselves to help them get on their feet. A final reason is Americans’ love of the underdog. This notion is ingrained in our national character—never give up on anyone no matter what the circumstances.
PHILANTHROPY: Bill Gates Sr. argues that repeal of the estate tax will harm philanthropy. Do you agree? What kind of tax policy would best encourage the growth of private wealth that makes philanthropy possible?
MR. SIMON: I don’t agree that repealing the estate tax would harm philanthropy. In fact, research shows that individuals account for 76 percent of all charitable giving, and most of that giving is religiously motivated, which implies that people are not giving just to get a tax break. In my experience, people contribute to nonprofit groups for genuine charitable reasons, not for the tax benefits. In another way, though, repeal of the estate tax may actually have a positive affect on philanthropy. Small businesses are one of the entities hardest hit by the estate tax, and repealing it would encourage the hard work, entrepreneurship, thrift, and intergenerational savings which help small businesses thrive, and which the current estate tax now punishes. As small business thrives, the economy as a whole does better, which would likely cause an increase in charitable giving.
PHILANTHROPY: The last two years of declining markets have devastated the assets of foundations and other philanthropic enterprises. What advice would you give endowment managers this year?
MR. SIMON: First, it’s important to recall these same endowments benefited greatly by the tremendous rise in the stock market from roughly 1982 to early 2000. Over those years, endowments grew more rapidly than ever in the past, allowing more funds to be given to charitable programs. Still, nothing good lasts forever, as they say, and the markets have taken some of these gains back over the past few years. I would encourage people to be conservative with their investments and be prepared for another year of down markets. Over the next 5-7 years, we’ll probably see the market go up, but I expect that performance will be modest compared to what we saw during the ‘90s. Our firm, William E. Simon & Sons, advises a number of endowments, and we have encouraged their investment professionals to be conservative by reducing exposure to equities and long-dated bonds. This is not a time to take investment risks. That time will come, but it is wise to be patient now.
PHILANTHROPY: You’re vice president of Catholic Charities in Los Angeles. What is the distinctive contribution of faith-based as opposed to secular social service agencies? Is it healthy for so many faith-based social services to be heavily dependent on government? What are the best opportunities for an organization like Catholic Charities to make the greatest difference over the next 10-20 years?
MR. SIMON: Many faith-based programs start as storefront operations, whose mission and services grow out of the needs of the local community. It’s a very organic process. By contrast, while there are good secular charities, too many secular groups are large bureaucracies whose employees have no connection to the community beyond a 9-5 workday. The motivation and commitment to their work is not particularly inspiring and seems geared more to process than to truly meeting the community’s needs. It’s really a top-down versus bottom-up approach to service. More significantly, faith programs go deeper with people, to their spiritual needs, motivations, and beliefs about the world, than secular programs do. They are about transforming lives, not merely transforming behavior, and I think that resonates with people and explains why many faith-based programs have such success. I do not think it’s healthy so many faith-based social services are heavily dependent on government, but I would say the same for secular organizations. It’s never a good idea for a charity, secular or faith-based, to be too dependent on any one source of funding, government or private. It is Catholic Charities’ bottom-up approach to service that gives them the opportunity to make the greatest difference in coming years. Catholic Charities and similar organizations that grow directly in response to actual community needs are in a position to be most effective, because they can adapt as the needs of those they serve change.
PHILANTHROPY: Tell us about your father’s intent at the William E. Simon Foundation, and how you, your brother Peter, and your five sisters strive to be faithful to that intent.
MR. SIMON: My father was well known for his unwavering defense of individual liberty and constitutional government. He believed strongly that these things depend upon the responsibility of individual citizens. His charitable giving philosophy was greatly influenced by Andrew Carnegie’s “The Gospel of Wealth,” and by one passage especially: “In bestowing charity, the main consideration should be to help those who will help themselves; to provide part of the means by which those who desire to improve may do so; to give those who desire to rise the aids by which they may rise; to assist, but rarely or never do all.” My father’s, as well as the board’s, vision for the foundation is to assist those in need by providing the means through which they may help themselves. Volunteerism and staying close to the programs we support is a prevailing theme for the foundation. My father believed that anyone can write a check, but being a responsible steward of wealth requires a good deal of work and hands-on involvement. His commitment to this approach to philanthropy appears in a provision in his will that requires Simon trustees to perform 150 hours of community service each year. In the last years of his life, my father spent a great deal of time involved in the day-to-day operations of the foundation. During that time, he also worked closely with the board to help us gain an understanding of his intent. Since his death, the board has exercised its judgment within the general guidelines and direction he left us. In accordance with my father’s will, the foundation will grow significantly over the next 15 years. Although in recent years the foundation has awarded between $7 million to $8 million each year, we expect our annual giving will increase materially over the next few years. My father also required that the corpus of the foundation be given away in the lifetime of his seven children. So it is safe to assume that the bulk of the foundation’s assets will be given away over the next 25-30 years, unless of course someone finally discovers the fountain of youth, which I would be happy to support through my own foundation!
PHILANTHROPY: The Simon Foundation has recently decided to focus on strengthening schools, families, and faith-based institutions in urban neighborhoods, beginning with a pilot program in Jersey City, New Jersey. What is the foundation’s strategy?
MR. SIMON: The foundation’s main charitable purpose is to assist those in need by providing the means through which they may help themselves. We implement this philosophy more specifically by targeting disadvantaged youth through support for organizations that help young people develop the virtues and skills that will enable them to become independent, contributing members of society. We believe that the breakdown of primary institutions—family, school, and community—in urban neighborhoods contributes significantly to young people’s involvement in risky behaviors like dropping out of school, substance use, sexual activity, and violence. Our strategy is to employ a preventive approach to these problems by making grants that will strengthen family, school, and faith-based institutions, and thereby address the root causes of the problems that youth face. To leverage our grants, we take a two-pronged approach: funding direct-service programs and funding research and policy initiatives in these three areas.
PHILANTHROPY: You helped create the William E. Simon Prizes for Philanthropic Leadership and for Social Entrepreneurship. Tell us about some of the remarkable winners of these prizes and how you have been influenced by them.
MR. SIMON: The first recipient of the William E. Simon Foundation Prize in Philanthropic Leadership was John Walton in 2001; the 2002 recipient was Ray Chambers. They are great philanthropists who exhibit a humble, often anonymous generosity. Each has a unique passion, John working tirelessly toward school reform, and Ray putting the bulk of his resources behind revitalizing Newark. For the William E. Simon Foundation Prize in Social Entrepreneurship, our first recipient was Peter Flanigan in 2001, the Reverend Eugene Rivers in 2002. Both men have developed programs that help fill the gaps left in the lives of needy youth. The foundation has been influenced by each of these men and their approaches to charity, and we’ve incorporated ideas from all of them into our own giving strategies. John’s single-issue focus and Ray’s single-city focus have helped move us to set tighter, more strategic program goals and geographic boundaries for our giving. We incorporate Peter’s results-oriented approach to our giving and evaluation of programs, while the Reverend Rivers’ faith-based success is a model we look to as we implement our own faith-based goal for youth. We began to develop the prize program in 1999 and thankfully were able to have extensive discussions with my father on the purpose and goals prior to his death. We created the program to further the ideals fostered by my father and to advance the foundation’s principles of personal responsibility, resourcefulness, volunteerism, scholarship, religious values, and helping people to help themselves. My father hoped this program would have a lasting impact and stimulate the creation and support of charities that promote these ideals. When my father passed away in June 2000, the program also became a way for us to honor him and keep his legacy alive.
PHILANTHROPY: You’ve said you focus on results, not just good intentions, in your charitable giving. Do you think too much of the philanthropic world focuses just on good intentions?
MR. SIMON: Yes, I generally think many people put too much emphasis on good intentions in philanthropy. Although results-oriented giving receives more attention today than in the past, many individuals and well-known foundations take the same approach to philanthropy that they have for decades without measurable results. This could be avoided if effectiveness, not ideology, became the focus of giving. In philanthropy, as in other things in life, results count. If we don’t achieve positive results, we waste money that could otherwise go to a program that makes an impact in people’s lives.
PHILANTHROPY: Which charity have you been most personally involved with, and why?
MR. SIMON: I would say Covenant House. As you may know, Covenant House is a shelter for homeless and runaway teenagers that takes them off the streets, often away from a life of drug abuse or prostitution. Besides providing them with basics like food, clothing, shelter, and health care, Covenant House helps to give kids a new lease on life— completing their education, getting job training, and learning how to become independent. My involvement started when I was young and our family spent time with the kids at Covenant House’s center in New York during the holidays. Early in my professional career, I began to volunteer more regularly, and when I moved to Los Angeles, I continued my involvement. Eventually they talked me into serving as chairman. They’ve had me do everything from tutoring and playing basketball with the kids to fundraising. I’d like to say my work at Covenant House made a big impact on the organization, but the truth is-and anyone who has volunteered with these kids would agree—I got more out of it than I felt I gave. Something about the simple needs, innocence, and general goodness of kids who have had to deal with some very tough situations in their young lives helped me learn a lot about human nature and how truly blessed I have been in my own life.