With his distinct Tennessean twang and deep faith in God, Hugh O. Maclellan Jr. comes across as the classic evangelist—only richer.
Maclellan makes a point of applying the lessons he has learned in business to the world of philanthropy. An unwavering commitment to God fuels his charitable giving, which he conducts through his family’s Chattanooga-based foundation. With over $300 million in assets, the Maclellan Foundation is a major contributor to evangelical causes, especially in the field of education. In 1999, for instance, the foundation’s two largest grants went to the American Bible Society of New York and to Covenant College in Lookout Mountain, Georgia.
The Maclellan Foundation’s giving is by no means provincial, having targeted Christian organizations in Eastern Europe, Africa, Latin America, and China. The spiritual fervor of the foundation—which tends to favor evangelical-run organizations over other faith-based groups—is captured in its mission statement, which professes a desire to “extend the Kingdom of God in accordance with the Great Commission.”
In his first Philanthropy interview, Maclellan responds to questions regarding his family, his business, the history and nature of his foundation, the relationship between Christianity and philanthropy, the controversial New Era scandal, and a host of other subjects.
PHILANTHROPY: Who was Robert J. Maclellan?
MR. MACLELLAN: R. J. Maclellan, my grandfather, was the son of Thomas Maclellan, the founder of Provident Life Insurance Company. Thomas Mac-lellan was a businessman in Scotland whose bank had fared poorly in the depression of the 1880s, so he emigrated and started an insurance company in 1887 in Chattanooga, Tennessee, writing policies for coal miners. I think we were one of the first to insure coal miners.
Everybody went without a salary the first year. Thomas’s son, Robert J. Maclellan, ran the insurance company for 40 years, and my great aunt Dora Maclellan was the company’s first secretary. The firm had a small beginning. Robert J. and his wife set up the foundation with Dora in 1948.
PHILANTHROPY: Dora wrote a letter about the foundation in 1952.
MR. MACLELLAN: Yes, the letter laid out her “donor intent.” She recommended the future trustees of the foundation, and I’m the fourth generation in the family. Our three foundations have been following her wishes for the past 50 years.
PHILANTHROPY: Her letter speaks about the foundation’s Christian mission.
MR. MACLELLAN: Yes, she primarily says that there are so many needs out there and the physical needs are so evident, but many people forget the spiritual needs that go along with them, that people need help spiritually and emotionally as well. She said, don’t ever forget that people need the bread of life.
PHILANTHROPY: Was she involved in philanthropy?
MR. MACLELLAN: She was very generous with her money and gave to missions overseas and to charities in Chattanooga and Appalachia.
PHILANTHROPY: The Hugh and Charlotte Maclellan Charitable Trust refers to your father Hugh?
MR. MACLELLAN: Yes, that’s really a fourth foundation. The biggest foundation is the Maclellan Foundation. The R. J. Maclellan Trust has now been combined into the Maclellan Foundation, but that was my grandfather’s money and Aunt Dora’s money.
PHILANTHROPY: Is the foundation formally bound in terms of by-laws or some other kind of indenture to pursue Christian activities?
MR. MACLELLAN: No.
PHILANTHROPY: So it’s essentially up to the trustees?
MR. MACLELLAN: Yes. That’s why the donor intent is so important. I encourage wealthy donors, if they’re leaving money to a foundation, to be sure and write an indication of their donor intent, because so many of these foundations have drifted off to other purposes.
PHILANTHROPY: So you think drift is preventable?
MR. MACLELLAN: The best way to prevent drift, probably, is to pick trustees who believe the same things you do, and then make them liquidate the foundation in 20 years with a sunset clause. I think we’re unusual in that we’ve been running with the same donor intent for four generations.
PHILANTHROPY: How do you select board members?
MR. MACLELLAN: We haven’t picked a new board member in ten years, but we do have criteria. They must be Christian and must be generous givers themselves—they have to have given evidence through their church and community that they’re interested in helping people spiritually as well as physically. We want board members who see the importance of helping people change their lives through Christ, so the change in their behavior takes on a more permanent character.
PHILANTHROPY: Your Form 990 shows that you disbursed $23.7 million in 1999, against $326 million in assets. That’s significantly more than the required 5 percent.
MR. MACLELLAN: Well, our objective was to really be aggressive and give 10 percent of our assets, but then our assets dropped, and we ended up giving out 7.5 percent. Last year we again gave 7.5 percent of assets.
PHILANTHROPY: Did the assets drop after the merger between Provident Life Insurance and Accident Insurance Company [now called UnumProvident]?
MR. MACLELLAN: Yes.
PHILANTHROPY: Were the various foundations and trusts principally composed of Provident stock?
MR. MACLELLAN: Yes. Each succeeding generation gave a large portion of their estate to the foundation or to their own related foundation, in the form of a bequest. It was the objective of all giving family members who were deeply committed Christians to leave their money to the Lord’s work.
PHILANTHROPY: The foundation didn’t divest very much of the Provident stock and that left you vulnerable to what amounted to a 50 percent drop in its value. Was the board too attached to the company to diversify?
MR. MACLELLAN: My father was deeply attached to the company. He did say, “Don’t sell one single share of stock.” You do have people who are attached to the company for good reasons, but that leaves you with all your bets on one horse, and you can get hurt.
PHILANTHROPY: Has that changed?
MR. MACLELLAN: Yes, we’re trying to diversify some now. But we have confidence in UnumProvident.
PHILANTHROPY: You’ve talked about the role and the responsibility of Christians to give—what is the relationship between Christianity and philanthropy, or charity?
MR. MACLELLAN: Well, everything belongs to God, and we’re simply here to be good stewards of it. He’s given us the opportunity to be responsible to him, using our time, talents, and resources, and to give the money away properly so that at the end he says, “Well done, good and faithful stewards, enter into the joy of my kingdom.” So a Christian should be prepared to offer all he has—his assets to invest, his assets to give, his time, or whatever it is. It’s basically just a joyful way of saying, “Hey, God, this is your money. What do you want me to do with it?” We try to fund at the root problem, not the symptoms. That is why we don’t go with the usual “answers,” like buying more metal detectors for the schools. On the other hand, we’ve put in one of the best Character Education and Center for Youth Issues (formerly STARS) programs in the Chattanooga public schools. This program reduced the need for detectors by reducing violence. We’ve started voucher programs for 433 inner-city kids to go to schools of their choice where they’re being brought along spiritually as well as emotionally and where they’re taught to read by the first or second grade. So there are many ways to be stewards of God’s money.
PHILANTHROPY: Why do you suppose people don’t give more or give grudgingly?
MR. MACLELLAN: We have statistics that show Americans give on average only 2 1/2 percent of their income and Christians tend to give only 1 percentage point more—but that’s not even close to tithing. This means most people are spending 97 1/2 percent on themselves and taxes and only 2 1/2 percent to help others. The main reason for this lack of giving is a spiritual one. There’s a deep-down feeling that this is my money. But once people see what Christ did for them on the cross and what he does for them in their daily walk with God, they are excited about giving more money, because in effect they’re giving it back. The second biggest reason is that people today have more debt than assets. The third reason why people don’t give more money is that they don’t always see exciting ministries to support. We’re fortunate here at the foundation because we see and hear people all the time, and they give us exciting visions of what God is really doing around the world. And finally, people don’t realize that they can give more money and still meet all their lifetime objectives. They think if they give to charity they’re taking away from their children. That is not true. There are plenty of ways to give to both and also avoid estate taxes!
PHILANTHROPY: Is it true that you give away 70 percent of your income?
MR. MACLELLAN: Yes, starting 22 years ago, when I said in prayer, “You know, God, I just feel like I’m not being challenged in my giving.” Two months later I was hit hard with some real needs:to help save a college, which has been a real blessing, and also to help start a Christian school in town, which is now up to 1,100 students. So if you are going to challenge God like that, he’s going to answer you!
PHILANTHROPY: Should more giving be anonymous?
MR. MACLELLAN: Looking back, there are times when I wish that I had given anonymously. However, at the Maclellan Foundation we tell grantees, if it helps you to use our name, use it, because it’s a sort of Good Housekeeping Seal of Approval. And because all of our gifts are matching gifts, more often than not they like to use the name because it is known.
PHILANTHROPY: Is it a special challenge to stay humble when you’re in a position of tremendous influence and everybody’s trying to curry favor with you? How do you deal with that?
MR. MACLELLAN: We don’t deal with it very well, and I bet that a lot of people who give money don’t, because what you tend to do when somebody comes to you hat in hand and pays you a lot of compliments is get all puffed up. We try to keep in mind that our grantees are the ones on the firing line, and we need to partner with them. And that means we have to accept the fact that they have weaknesses that are going to become apparent. So we work with them for two or three years and help them overcome their weaknesses and build on their strengths. Whoever we’ve worked with—and we’re averaging about 150 organizations a year—if we spot weaknesses, we help them get a consultant. We offer one or two days with a consultant, and we have part-time consultants we partner with across the country. You want your grantees running on eight cylinders instead of just three.
PHILANTHROPY: Why do you give only matching grants?
MR. MACLELLAN: Generally that’s what we do because it’s the best way to encourage grantees to broaden their base of givers. For example, if we say we’re going to give you $15,000 for new donor money, maximum $1,000 each new donor, now the nonprofit must find 15 new donors to pick up the $15,000! Generally, they tell us, “We really dreaded going out for new donors, but, boy, it sure helped us to broaden our base. Thank you for making us stretch.”
PHILANTHROPY: That sounds like a lot to track.
MR. MACLELLAN: We have some great grant managers who keep up with it. But the organizations are pretty much on the honor system. They write us back and give us a list of who they picked up and how much was new money from new donors or in the form of increases over last year’s gift.
PHILANTHROPY: Matching gifts recalls the whole New Era fiasco where investors were bilked out of tens of millions of dollars by John G. Bennett Jr., a man who promised that donations would be matched by anonymous Christian donors.
MR. MACLELLAN: Yes, and I got caught up in it, too. I knew Jack, not well, but I had known him from ten years earlier because he was doing due diligence for some nonprofit organizations—or at least I thought he was. So I knew him, and once you know somebody you think you’ve got the inside scoop. What happened was that he had this idea that he could help charities, but it was all a Ponzi scheme, and he’s in prison now. He was befuddled in his own mind, I believe. So I got fooled, along with a lot of other people.
PHILANTHROPY: You don’t think his goal was his personal enrichment?
MR. MACLELLAN: Well, he stood to serve 16 years in prison but the judge dropped it to 8 years because he said Jack really didn’t derive any gain from it. It was more delusions of grandeur.
PHILANTHROPY: The Maclellan Foundation got taken for $10 million—did you get any of that back?
MR. MACLELLAN: We were not taken for $10 million. Actually we lost very little. Our monies went to help the ministries we support, and they received 92 percent of all monies due them. In fact, this is the first time I know of that a Ponzi scheme was ever resolved with everybody getting back most of their money. All the ministries got back 92 percent of their money. It was really an answer to prayer.
PHILANTHROPY: Under your funding priorities, number one refers to being proactive and funding strategic evangelical Christian organizations. Given that, when an organization—even a Christian organization—applies for funding, how do you make judgments based on the sect or the nature of the organization? For instance, what if it’s a Unitarian group running a soup kitchen—how would your foundation look at them?
MR. MACLELLAN: Well, we know who we are and that forms the basis for how we measure others. We would not see Unitarians as falling within our guidelines. Soup kitchens that get involved in the lives of clients to help them change behaviors are great. Soup kitchens that are only feeding stations would be less important. Frankly, we think [President] Bush is right; faith-based ministries are the ones that are really changing people and making a difference. They’re the ones that really care.
PHILANTHROPY: Sure, but if you’ve got a request from a secular versus an evangelical, or a Lutheran versus an evangelical group, given your funding priorities, would you put your thumb on the scale for the evangelical group?
MR. MACLELLAN: Yes, generally, but once again, when you talk about U.S. programs, we generally don’t fund in other geographical areas and that’s why they’re turned down. Let’s say that somebody from Sioux City sends us a request for a soup kitchen or even for a Teen Challenge center, which is evangelical. We’ll tell them that they ought to get funding out of their own hometown.
PHILANTHROPY: What is the Generous Giving Conference?
MR. MACLELLAN: Generous Giving was established because we believe there is a tremendous opportunity to encourage Christians to strive to be “generous givers.”Generous Giving is seeking to help people develop the right heart, the right perspective, and the right strategies for their giving. We’ve found that people really want to hear this message and they feel empowered by it. They get so excited about giving that they tend to give two or three times as much money—but with a new perspective and appropriate strategies. Our next Generous Giving Conference will take place in March of 2002.
PHILANTHROPY: Any parting thoughts?
MR. MACLELLAN: Giving money away is the greatest thing in the world—there’s a real joy in giving. In my own life I’ve seen that. Giving is especially a joy if you give now, so you can see the results. Don’t wait until after you’ve passed on. There’s too much need right now.