Philanthropic Agency: The Downside of Separating Givers from Their Giving

In 2020, responding to both increased community needs resulting from the pandemic and consequent lockdowns and calls for racial equity, many foundations and individual donors willingly suspended their stated missions, usual procedures and customary payout rates.  

The Council on Foundations (COF) asked foundations to alter their grantmaking in a variety of ways that year: eliminating restrictions on current grants; making more new unrestricted grants; considering previously unknown nonprofits; reducing application and reporting requirements; listening to and communicating regularly with grantees about how best to assist them in delivering services and contributing to community-based funds so resources might be pooled to focus on those most in need.  

Finally, COF advised, “Learn from these emergency practices and share what they teach us about effective partnership and philanthropic support, so we may consider adjusting our practices more fundamentally in the future, in more stable times, based on all we learn.” 

Before long, these practices were also being touted by advocates of “trust-based philanthropy,” a term that has spread widely in conversations, articles and webinars about charitable giving since 2020. Pia Infante, senior fellow at the Trust-Based Philanthropy Project, has noted that the thinking behind trust-based philanthropy originated in 2009 when – in the midst of recession – the Whitman Institute decided to accelerate its giving and wind down its operations by 2022.  

In its early conversations with its grantees about how best to work with them during the remaining decade, Infante recounts, “They conveyed a sense of ‘shoulder to shoulder’ collaboration that felt markedly different from conventional philanthropy, which often prompted an anxious power dynamic of ‘dancing for your supper.’” The word Whitman heard most frequently, she added, was “trust.”    

As noted in earlier articles about trust-based philanthropy, however, that concept is not merely about the adoption of certain good grantmaking practices that were in use even before 2009. In fact, a new term has appeared recently – “trustwashing” – to describe donors who are claiming that label without fulfilling all its demands, particularly those about redistributing power and pursuing racial equity.  

In September 2023, Shaady Salehi, executive director of the Trust-Based Philanthropy Project, cautioned philanthropists, “It’s not about checking the boxes of the six practices [we recommend], but rather committing to the iterative work of aligning power consciousness and equity across your organizational culture, structures, leadership and practices.”  

That warning, along with calls for increased power-sharing in philanthropy, came at a time when many nonprofit leaders reported in a Center for Effective Philanthropy (CEP) survey that they “perceived an increase in trust during the past year from their funders.” CEP said, “Our data indicate continued positive change in relationships between funders and nonprofits.”  

Much of the rhetoric around trust-based philanthropy revolves around the claim that donors exert too much control in making their grantmaking decisions, and this imbalance between donor and grantees can be remedied only by arrangements which “democratize” power. One of the recommendations is participatory grantmaking. “At its core,” Candid has noted, “this approach to funding cedes decision-making power about grants to the very communities impacted by funding decisions.”  

In previous blogs I have acknowledged the power imbalance, and have no doubt there are some individual donors and foundations who abuse their position by micromanaging the work of their grantees. In response, I have advised that donors “should certainly develop respectful relationships with grantees and should also utilize helpful practices like streamlining applications to collect only that information they need to make mindful decisions.”  

Another practice for gathering relevant and timely information may well be launching a community advisory committee. But, as I remarked to The Chronicle of Philanthropy, when dealing with institutional philanthropy, “Foundation boards have a fiduciary responsibility that cannot be fully shared with others.”  

The calls to separate the givers from the act of giving continue. Last fall an article on the Center for Effective Philanthropy website presented yet more suggestions for removing donors from the grantmaking process, suggestions that were collectively labeled “philanthropic agency.”  

Author Stephen Kump is co-founder and CEO of Charityvest, a sponsoring organization of donor-advised funds. He explained philanthropic agency is a call “for funders to relinquish their grantmaking rights and place trust in someone (an agent or agents) who has an impact-oriented mind and is partnered with organizations ‘on the ground.’”    

Kump provided several examples of philanthropic agency, including: 

  • Donor collaboratives with the decision makers as proximate experts/leaders 
  • Setting up sub-funds and giving grantmaking authority to proximate leaders/experts 
  • Giving money to another funder who has more proximate partnerships in place 

There is nothing inherently wrong with any of the recommended mechanisms in themselves. They can all be utilized to expand and enhance a donor’s philanthropic reach. Donor collaboratives, for example, are helpful tools to pool funds from donors who share an interest in the same locality or issue.  

A giving circle of small individual donors fits the definition, as does Blue Meridian Partners, a multi-billion-dollar collaborative focused on changing the lives of young people and families in poverty. In both cases, however, donors continue to play an active role in decision-making, although they may also be receiving advice from those more knowledgeable about local needs or specific issue areas.  

At Blue Meridian, donor-partners benefit from the collective’s internal expertise in “identifying promising strategies and programs, supporting the development of scaling plans, structuring deals, aligning capital from multiple investors, providing ongoing support to investees and monitoring performance.” But they also have opportunities for site visits and personal interaction with the organizations they are supporting.  

Full grantmaking authority is vested in the General Partners (donors who commit $50 million or more over five years), with more limited decision-making options awarded to Impact Partners (those who commit at least $15 million) and Contributors.  

Regarding sub-funds, an increasing number of donors are already establishing donor-advised funds at community foundations or other sponsoring organizations where final grantmaking authority rests with the sponsor. Donors, however, can recommend gifts and are thus able to express their personal values and interests in their philanthropy.  

The same is true for donors to field of interest funds that support a specific population, geographic region or issue area. Even unrestricted gifts to a community foundation’s endowment or to one of the nation’s over 1,000 United Ways reflect a donor’s commitment to a local community.  

And we have also witnessed the actions of billionaire Warren Buffet, who continues to donate his wealth to four foundations run by his children and – most famously – to the Bill and Melinda Gates Foundation where Buffet’s donations now total over $50 billion. Buffet did serve on the Gates Foundation board for 15 years but described himself as having been an “inactive trustee” when he resigned in 2021, adding “My goals are 100% in sync with those of the foundation.”  

Where philanthropic agency diverges from the above examples is in its deliberate motivation – as expressed by Kump – to distance donors from their grant decisions to resolve “the tension between the ‘effective giving’ paradigm of the last few decades and the emerging ‘equity’ paradigm.” Donors themselves, along with the program officers they typically trust to represent them with grantees, are replaced by “proximate experts and leaders” who share experience, identity or geography with the populations a foundation seeks to serve.  

Individual donors are, of course, free to opt for this sort of arrangement, as are foundation donors who ensure they observe all legal obligations. But they may want to consider the assumptions made by the champions of participatory grantmaking and philanthropic agency. Some are critics of private philanthropy in general, focusing on what they regard as unwarranted donor control. They note “the oft-cited truism that philanthropic money is generally twice stolen in that it’s frequently derived from worker exploitation, race-based oppression or countless other unethical means—and then taken out of our tax streams.”  

Kump has practical concerns, asserting, “A single grantmaker can’t build close partnerships with 20 organizations, nor can a nonprofit leader have 20 funders requiring their time to ‘learn.’” Yet, this is precisely why foundation donors bring program officers on board to develop such partnerships, and why funders develop channels of communication and issue/geography-focused affinity groups to share what they have learned from the communities they serve.  

Finally, one question those encouraging increased distance between donors and grantmaking decisions fail to ask is what is lost in the process. Successful fundraisers know understanding an individual donor’s motivation is essential to developing close and enduring relationships with nonprofit partners. My own experiences have convinced me it is no different for foundations whose donors are also driven by their values, principles and passions.  

Honest and direct communication about motivation between donors (or those they have selected to represent them) and prospective grantees promote far more sustainable relationships. Donors who choose to take an active role in grantmaking decisions are part of a productive learning process that benefits all parties involved.  

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