The California State Assembly recently passed legislation that represents a sharp departure from the traditional American relationship between government and private foundations.
AB 624, introduced by Assemblyman Joe Coto, would introduce new disclosure requirements for private, corporate, and operating foundations with assets over $250 million.
Specifically, this legislation would require foundations to collect and publicly disclose the composition of their staffs and boards of trustees by race, gender, and sexual orientation; the number, amount, and percentage of grants awarded to organizations serving different racial communities and sexual orientations; and the number, amount, and percentage of grants to organizations where 50 percent or more of board members and staffs are ethnic minorities or are gay, lesbian, bisexual, or transgendered.
While the bill requires only disclosure, and does not mandate racial, ethnic, gender, and sexual orientation quotas in foundation governance or giving, the clear purpose of the legislation—and of its principal proponent, the Greenlining Institute of Berkeley, California—is to put public pressure on foundations to take these categories explicitly into account in their governance, staffing, and—especially—grantmaking.
On January 29, AB 624 passed the Assembly by a vote of 45-29. The Greenlining Institute is planning to push for similar legislation in other states. New York and Illinois are the likely next targets.
The legislation is opposed by the Nonprofit and Unincorporated Organizations Committee of the State Bar of California, by the Council on Foundations, and by all three regional associations of grantmakers in California—Northern California Grantmakers, Southern California Grantmakers, and San Diego Grantmakers.
The Philanthropy Roundtable seconds the concerns expressed by the California grantmakers’ associations. The legislation would impose onerous and expensive paperwork burdens on foundations and, even more so, on their grantees, especially smaller grantees. Requiring soup kitchens, hospitals, museums, and other grantees to collect racial and sexual orientation data may in many instances also violate individuals’ privacy. In addition, the legislation could deter the growth of philanthropy in California.
The Philanthropy Roundtable also seconds the concerns expressed by Paul Brest, president of the William and Flora Hewlett Foundation, California’s largest foundation, in his testimony before the Judiciary Committee. Brest was formerly dean of Stanford Law School and served as a civil rights attorney for the NAACP Legal Defense and Education Fund in Mississippi.
In a letter to Assembly members, Brest wrote that “[t]he Hewlett Foundation’s fundamental operating principle is to direct our resources to organizations that have the promise of making the greatest difference in achieving [our philanthropic] goals. Thus, we do not focus on the racial composition of our grantees, but rather on how to achieve measurable impact in improving the lives of the communities that our grant recipients serve.”
“As [Assemblyman John] Laird so aptly pointed out . . . when a hospital provides care to indigent children, what matters most is whether the child was helped, regardless of the race or ethnicity of the doctor or nurse providing the care.”
In the spirit of the Brest letter, one can also look at the growing numbers of schools that are dramatically raising the academic performance of low-income Latino and African-American children. As foundations assess whether they should give to one of these schools, should their focus be mainly on the race of the principal, teachers, and board members, or should it be on the performance of the children?
As for the Greenlining Institute’s goal of strengthening philanthropic support of grassroots organizations in Latino and African-American communities, it is unlikely that AB 624 would be an effective method of achieving this objective. Foundations are not very good at serving as mini-legislatures, forging compromises among all the various constituencies and points of view in a community. Instead, foundations thrive when they specialize, when they focus their resources and develop an expertise in achieving a particular set of charitable objectives—whether that be cancer research, wetlands conservation, K-12 math and science education, employment opportunities for the disabled, or any of the hundreds of other philanthropic purposes that foundations pursue.
The best way to strengthen philanthropic support for minority-led grassroots organizations is therefore not to impose across-the-board standards of giving for all foundations. Rather, it is to encourage a larger number of philanthropists and foundations to make this one of their very top priorities. We need more foundations such as the Steans Family Foundation of Chicago, which concentrates its giving on the impoverished West Side neighborhood of North Lawndale and has developed an expertise in identifying and helping effective neighborhood-based problem-solvers. This kind of deep commitment cannot be mandated by legislative fiat. It instead has to be inspired by persuasion, example, and appeals to the philanthropic imagination of donors.
The Philanthropy Roundtable is also concerned that AB 624 represents a significant departure from the public policy framework that has governed foundations for the past century. Historically, donors and trustees have had wide discretion to define the charitable priorities of foundations, and to determine how best to achieve their philanthropic objectives. The primary concern of legislation and of law enforcement at both the federal and state level has been to ensure that foundation assets are used for charitable purposes, and not, say, for personal inurement or partisan political activity.
Disclosure rules have followed this framework. Foundations have had to disclose their grants, to ensure that they are giving to genuine public charities; they have also had to disclose their investments and (certain) salaries, to ensure they are not engaging in self-dealing. Otherwise, disclosure requirements have been kept to a minimum, as policymakers have recognized that foundations are private organizations that should be free to make their own decisions, including how much to disclose about their grantmaking processes.
AB 624 is inconsistent with this tradition. If it were to become law, the government would in effect be using disclosure requirements to suggest that some philanthropic objectives are preferable to others. This would be a dangerous precedent, and advocates of other kinds of philanthropic funding would surely use the political process to push for new disclosure requirements of their own. It is not the business of government to tell foundations what their grantmaking priorities should be. That is a decision for foundations themselves.
Adam Meyerson is president of The Philanthropy Roundtable.