A Giving Classic

Learning from the past and planning for the future

Transaction Press has just re-released one of the few books about philanthropy that everybody in the field should read.

The Golden Donors, by Waldemar A. Nielsen, was originally published in 1985 and tells the stories of the 36 biggest non-operating foundations at the time. Though somewhat dated today, it remains the single best one-volume over-view of giant American philanthropic foundations. The book is a goldmine of intelligent insights about the achievements, failures, and promise of organized philanthropy. Not all readers will agree with Nielsen’s biases toward progressive “scientific” philanthropy or his sharply opinionated pronouncements about individual foundations, but philanthropic novices and old hands alike will find much to learn.

To begin with, The Golden Donors offers an excellent introduction to the history of modern philanthropy. The great political controversies of recent decades are all here:

The internal turmoil at the Ford Foundation under presidents McGeorge Bundy and Franklin Thomas, when what was then America’s largest foundation lost three-quarters of its asset value, and Henry Ford II publicly resigned from the board, berating the foundation for showing little interest in the free-enterprise system that made possible its philanthropy.

The wresting of control of the John D. and Catherine MacArthur Foundation by the donor’s son Rod, who took it in a direction completely opposite his father’s political and economic views. The son was helped in this effort by his father’s failure to define the foundation’s mission. “I’ll make the money,” the insurance tycoon told his trustees. “You guys will have to figure out how to spend it.”

The extraordinary achievements of the Rockefeller Foundation in the early 20th century, including the eradication of hookworm, the creation of modern medical schools, and the improvement of educational opportunities for blacks in the South, and in recent decades its dramatic Green Revolution success (together with the Ford Foundation) in improving food supplies in the Third World. Nielsen argues that these “superb achievements in science and medicine” have been accompanied by “mediocre performance in the social sciences, arts, and humanities.”

The community foundation movement started by Cleveland banker Frederick Goff, who sought to free philanthropy from the “dead hand” of past donors. When leaving their endowments to a community foundation, “donors would agree that their charitable directives would be honored so long as they were not obsolete or harmful and that they could be altered by the foundation’s directors as changing circumstances might require.” For instance, in the Buck Trust case of the 1980s, in an effort eventually blocked by the courts, the San Francisco Foundation sought to allocate to other Bay Area counties funds that had been specifically dedicated by the donor to Marin County.

The abandonment by what is now the Pew Charitable Trusts of the mission of the J. Howard Pew Freedom Trust—“to acquaint the American people with the evils of bureaucracy and the vital need to maintain and preserve a limited form of government in the United States. . .the values of a free market. . .the paralyzing effects of government controls on the lives and activities of people.” The Pew Charitable Trusts do much good work today, but except perhaps in the area of religion, they do so without regard to the explicit instructions of the donor.

The populist Patman hearings of the 1960s and the Tax Reform Act of 1969, which, among other things, required foundations to pay out 6 percent of their assets annually (reduced to 5 percent in 1976), and limited the share of private businesses that an individual foundation can own. Though the Tax Reform Act of 1969 was bitterly resisted by most of the foundation world, Nielsen argues persuasively that it “was on the whole a most effective piece of reform legislation” that corrected the worst financial abuses of foundations and raised public confidence in the foundation as an institution.

Nielsen’s bias is toward scientific philanthropy, in which foundations “launch and test new kinds of programs that, if successful, would be adopted and funded on a far larger scale by government.” His favorite modern foundation is the Robert Wood Johnson Foundation, whose mission has been to improve the availability of primary health care, with a special emphasis on expanding the role of government. Whether or not one agrees with this political agenda, any philanthropist who seeks to transform public policy or a large sector of American life can profit from Nielsen’s description of Robert Wood Johnson’s systematic, highly effective strategy, quoted below:

  1. The main emphasis would be on the organization of large-scale field trials of promising new ideas for rectifying deficiencies in the health-care systems.
  2. The foundation would invest heavily in objective, third-party evaluations of the results of these actual pilot models.
  3. It would wherever possible, in order to gain additional leverage, work in collaboration with other relevant organizations: government agencies, medical schools, hospital associations, and so on.
  4. It would put the knowledge gained from the grants to work by a program of wide dissemination to all the institutions that could make use of it.
  5. It was therefore a program scaled to the large resources of the foundation; it represented a new kind of “scientific activism”; and it was carefully designed to achieve maximum practical impact and replication.

Most of the foundation world falls far short of this standard. Nielsen sharply criticizes the intellectual laziness and smugness characteristic of so much of the foundation world. He writes with amusement and color about the conflicts among family and conflicts over corporate ownership that have bedeviled so many foundations and prevented them from focusing on their philanthropic mission. Perhaps his harshest criticism is reserved for business leaders whose business minds desert them when they turn to philanthropy:

“In moving from the profit-making to the not-for-profit sphere, [foundation creators] with few exceptions forgot their accumulated skills entirely. Characteristically they went for advice mostly to their lawyers and accountants. On the substance of what the foundations might do and how it might be best structured to accomplish it, they either consulted no one; or turned to their minister, or wife, or child; or relied on friends and associates as ignorant about philanthropic matters as they themselves. . ..Staffing was most often an afterthought, frequently with the result that the directorship fell to someone—a failed but amiable executive of the donor’s company or the retired head of a local college—with credentials that were at best coincidental.”

In this reviewer’s judgment, Nielsen is insufficiently concerned about the crucial importance of donor intent in maintaining philanthropic integrity. He is also too casually dismissive of foundations that give mostly to local institutions which strengthen civil society in their communities without a larger political agenda. And he focuses too much on the presidents and senior staff of foundations, giving insufficient attention to the central role of board leadership in overseeing foundation strategy, a responsibility that all too many trustees have abdicated.

Yet this beautifully written book challenges foundations to pursue excellence, to set standards, and to make commitments to great causes. “These strange and wonderful inventions [foundations] have a unique freedom from the dependency of other institutions on markets or constituencies that cripple their capacity to take the long view and to bring a competent and disinterested approach to the search for complex problems.” Nielsen goes on: “it is a waste of important potential if foundations do not make use of the special freedoms they have been given: to take the long view; to back a promising but unproven idea, individual, or institution; to take an unpopular or unorthodox stand; to facilitate change rather than automatically endorsing the status quo. . .to act and not merely react; to initiate, even to gamble and dare.”

Since its publication, major newcomers such as Gates, Packard, Starr, and Annie E. Casey have joined the top ranks of philanthropy. Entrepreneurial capitalism and the explosion in charitable giving have made the foundation world much less concentrated at the top. In 1984, the 36 wealthiest foundations accounted for half of all foundation assets; in 2000 they accounted for less than a third of all assets and only 3 percent of all charitable giving in this country.

Even so, giant foundations have enormous influence for good or ill. The world of philanthropy would benefit greatly if sequels to The Golden Donors were written by scholars with the intellectual vigor, political acumen, and mastery of the English language of Waldemar Nielsen.

President’s Note from July / August 2002 issue of Philanthropy magazine

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