The Philanthropy Roundtable believes that the world of grantmaking can benefit from vigorous debate about standards of excellence in charitable giving. We therefore applaud the title of a new report by the National Committee for Responsive Philanthropy: Criteria for Philanthropy at Its Best: Benchmarks to Assess and Enhance Grantmaker Impact.
Unfortunately, the report does not live up to the title’s promise. NCRP’s standards for excellence are too narrow and arbitrary to be a useful guide for grantmakers seeking to improve their performance, or for media and watchdog groups seeking to assess charitable giving.
We also fear that the NCRP report is part of a political strategy to limit the freedom of donors and foundations to decide where to give away their money. The Philanthropy Roundtable respects and defends the right of NCRP and other private organizations to set voluntary standards for charitable giving. But we are strongly opposed to the use of the political process to impose one group’s set of preferences for philanthropy on the entire field.
Here are some of the criteria a grantmaker must meet to practice “philanthropy at its best,” according to NCRP:
- Provide at least 50 percent of grant dollars “to benefit lower-income communities, communities of color, and other marginalized groups”;
- Provide at least 25 percent of grant dollars for “advocacy, organizing, and civic engagement to promote equity, opportunity, and justice”;
- Provide at least 50 percent of grant dollars in general operating support;
- Maintain a diverse board of at least five people, who serve without compensation;
- Pay out at least 6 percent of its assets annually in grants;
- Invest at least 25 percent of assets in program-related investments that support its mission.
The Philanthropy Roundtable has five central concerns about these criteria:
- This is a very narrow “one-size-fits-all” definition of excellence. Many of the historic achievements of philanthropy—from medical research, to the arts, to environmental protection, to religious education, to the support of private and public universities, to Andrew Carnegie’s construction of public libraries—would fail to meet NCRP’s criteria. One of the greatest achievements of grantmaking in the last decade—networks of schools where low-income children excel academically—doesn’t meet NCRP standards for advocacy.
- NCRP’s standards for governance are completely arbitrary. There are many well-run foundations with fewer than five board members, for instance the Bill & Melinda Gates Foundation. While most foundations have volunteer boards, many find it helpful to offer reasonable compensation to their trustees. For example, the Woods Fund of Chicago paid a young law professor and state senator named Barack Obama to serve on its board. And there are many high-performing family foundations that do not follow the NCRP standard of putting independent directors on their boards.
- NCRP’s standards for effectiveness in grantmaking are unnecessarily restrictive. To cite just one of thousands of potential examples, the St. Giles Foundation is starting a sickle cell anemia research program at Columbia University. This foundation would not be able to achieve its objectives through a general operating grant to Columbia.
- NCRP measures excellence by dollars spent, not by results achieved. That is not a helpful standard for improving the quality of philanthropy. For example, in assessing grants to improve the education of low-income students, the most important measure of performance is the achievement levels of the children. It is not the size of the grants.
- What troubles us most is NCRP’s effort to incorporate its narrow and arbitrary standards into public policy. At its press conference announcing its report, NCRP chairman David Jones said that he and his colleagues “want Congress to look at the criteria and judge whether these organizations [foundations] are serving the public interest.” Also at the press conference, Rep. Xavier Becerra said he expected hearings on foundation performance. “We have an obligation to see that taxpayer money is well-invested,” he said. Becerra also thanked NCRP “for giving us in Congress something to work with.”
NCRP asserts that its report “isn’t a call for regulatory action.” However, it also emphasizes that foundation dollars are “partially public” dollars, and that “the generous tax subsidies provided to donors and to foundations make the government and the public partners with philanthropists in pursuit of the public good.” This premise, based on a misunderstanding of preferential tax treatment for charities and foundations, is an open invitation for legislative and regulatory interference in the decisions of private organizations.
NCRP has every right to push for more grantmaking of the kind it favors—more money for low-income communities, more money for advocacy, more money for multi-year, general operating grants. But it is a serious threat to freedom, and to charitable giving as we know it, to use the law to impose NCRP’s narrow and arbitrary criteria on all of philanthropy.
From Spring 2009 issue of Philanthropy