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The Donor Has the Final SayMartin Morse Wooster on Donors,
Foundations and Philanthropy
Summary: Friends and supporters of theCapital Research Center
turned out to honorCRC senior fellow Martin Morse Woosterupon the
publication of a new edition of hisexemplary book, The Great
Philanthropistsand the Problem of ‘Donor Intent.’ CRCpresident
Terry Scanlon hosted a cocktailreception and book-signing for
Wooster onJune 20 at the Center’s headquarters build-ing in
Washington, D.C.
October 2007
The Donor Has The Final SayPage 1
CONTENTS
Capital Research Center held a summertime reception to launch
the latest edition ofMartin Morse Wooster’s The Great
Philanthropists. From left to right: William Schambra,director of
the Hudson Institute’s Bradley Center for Philanthropy and Civic
Renewal;Wooster; Whitney Ball, executive director of DonorsTrust;
CRC President TerrenceScanlon; Adam Meyerson, president of
Philanthropy Roundtable. (Photo by Doug DeMark)
Martin Wooster has been writingabout donors, foundations,
andphilanthropy for more than a de-cade. The first edition of
Wooster’s book TheGreat Philanthropists and the Problem of‘Donor
Intent,’ published by Capital Re-search Center, appeared in 1994.
In the yearssince, Wooster has revised and extendedthis cautionary
study of how some ofAmerica’s largest foundations have ignoredor
repudiated the ideals of their founders andwhat donors can do to
ensure that the foun-dations they endowed carry out their
inten-tions. The current third edition contains awealth of new
material and was made pos-sible through the generosity of Mr.
Christo-pher Haig of Honolulu, Hawaii, a benefactorwho cares deeply
about the responsibilitiesof donors and the philanthropic
institutionsthey create.
Readers familiar with Martin Wooster’swork know that it is
grounded in history butleavened by his sharp eye for the
entertain-ing and the absurd. And the man is prolific.In addition
to The Great Philanthropists,Wooster has written at least 30
newsletterarticles and reviews for Capital ResearchCenter as well
as two monographs: Return to
Charity: Philanthropy and the Welfare State(2000) and Should
Foundations Live For-ever? The Question of Perpetuity (1998). Heis
the author of at least 50 articles and reviewsappearing in
Philanthropy magazine, a publi-cation of our friends at the
PhilanthropyRoundtable. And he is the author of fourother books
published by conservative thinktanks: Great Philanthropic Mistakes,
pub-lished in 2006 by the Bradley Center for Phi-lanthropy and
Civic Renewal at the HudsonInstitute; By Their Bootstraps: The
Lives ofTwelve Gilded Age Social Entrepreneurs,published in 2002 by
the Manhattan Insti-tute; The Foundation Builders published in
2000 by the Philanthropy Roundtable andAngry Classrooms, Vacant
Minds: What’sHappened to Our High Schools? , publishedin 1994 by
the Pacific Research Institute.
Philanthropy NotesPage 8
Reception PhotosPage 5
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FoundationWatch
2 October 2007
Editor: Matthew Vadum
Publisher: Terrence Scanlon
Foundation Watchis published by Capital ResearchCenter, a
non-partisan education andresearch organization, classified bythe
IRS as a 501(c)(3) public charity.
Address:1513 16th Street, N.W.Washington, DC 20036-1480
Phone: (202) 483-6900Long-Distance: (800) 459-3950
E-mail Address:[email protected]
Web Site:http://www.capitalresearch.org
Reprints are available for $2.50 prepaidto Capital Research
Center.
The following selections illustrate Martin Wooster’s keen
interest in the lives of donorsand his concern that the
philanthropies they support remain faithful to their intentions.
Thefirst is Wooster’s summary overview of The Great
Philanthropists. It was prepared at therequest of Christopher Haig
as a guide to the book’s content.
The second selection, “Giving to College Endowments,” taken from
the November 2002issue of Foundation Watch, describes some of the
promises, made and broken, that collegeshave made in their pursuit
of donors.
Please remember
Capital Research Center
in your will and estate planning.
Thank you for your support.
Terrence Scanlon, President
Capital Research Center’snext online radio shows
air live onOctober 23, 3:05 p.m.
November 20, 3:05 p.m.December 18, 3:05 p.m.
(Eastern time)at http://www.rightalk.com(replays follow at 5
minutes
past the hour for thefollowing 23 hours)
The Great Philanthropists and theProblem of ‘Donor Intent’
A Summary Overview
By Martin Morse Wooster
Study the lives of great philanthropists andyou’ll find a
curious paradox. Most of theimportant philanthropists—Henry
Ford,Andrew Carnegie, John D. MacArthur—wereheroic entrepreneurs
who strongly believedin free enterprise and traditional virtues.
Butliberals or leftists control the foundationsthat serve to
perpetuate their names—theFord Foundation, the Carnegie
Corporationof New York, the MacArthur Foundation.
It’s usually the case that the longer a foun-dation lasts, the
longer it drifts away from theideals of the donor. This
drift—technicallyknown as “the problem of donor intent”—isa problem
every donor must face. But it’s aparticularly acute problem for
conservativeand libertarian donors, given that the sorts ofpeople
who want to be program officers orpresidents of foundations are
usually liber-als or leftists.
This book includes seven case studieswhere donors created
foundations thatstrayed from their principles. It then includesfour
case studies of foundations that havestayed relatively true to
their donors’ inten-tions.
The seven case studies showing bad ex-amples of donor
intent:
· Henry Ford and Edsel Ford created theFord Foundation largely
to avoid punitiveestate taxes on the wealth they created.They left
no instructions as to how the FordFoundation should be run or what
it shoulddo. In addition, Henry Ford’s grandsonand heir, Henry Ford
II, signed a documentin 1948 that largely renounced family con-trol
over the Ford Foundation. The resultwas that liberals quickly
seized control of
the foundation, and Henry Ford II resignedas a trustee of the
Ford Foundation in aprotest over the foundation’s leftward
drift.
· Andrew Carnegie spent most of his lifecreating nonprofits with
specific, limitedgoals. These nonprofits, such as theCarnegie
Institution of Washington, theCarnegie Hero Fund, and the Carnegie
En-dowment for International Peace, still largelyreflect Carnegie’s
wishes. Carnegie, how-ever, ran out of ideas while he still had
halfhis fortune to spend. He therefore createdthe Carnegie
Corporation with no instruc-tions or restrictions on what the
organiza-tion was to do. Freed from any restrictions,the Carnegie
Corporation became a pillar ofliberalism.
· John D. MacArthur did not want would-be grantees haranguing
him for money. Hetherefore vowed to use his wealth to createa large
foundation that would not come intoexistence until after his death.
He trustedhis lawyer to carry out his wishes. Whilethe MacArthur
Foundation board was origi-nally made up of conservatives, a
powerstruggle led by MacArthur’s son, J.Roderick MacArthur, forced
nearly all theconservatives out of the MacArthur Foun-dation within
three years after the donor’sdeath. As a result, the MacArthur
Founda-tion is today one of the most left-wingfoundations in
America.
· The members of the Pew family werestalwart conservatives. J.
Howard Pew, anarticulate and forceful defender of freedom,created
the J. Howard Pew Freedom Trustto fight “Socialism, Welfare
stateism [and]Fascism.” But after the Pews died, the foun-dations
they created were taken over bypeople who did not share their
values andbeliefs and had no ties to them. The PewCharitable Trusts
have drifted far to the left.
· Albert C. Barnes was an art collector whocreated a gallery,
the Barnes Foundation,
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3October 2007
FoundationWatch
to house his collection. He could not fore-see who would run the
gallery after hisfriends and associates on the board passedaway. He
made the mistake of authorizingLincoln University, a historically
blackcollege, to pick the foundation’s trusteesafter his friends
and associates died. TheseLincoln University-appointed
trusteesspent years trying to break Barnes’s will,which had
extremely explicit instructionson what the Barnes Foundation was
sup-posed to do. After a series of court battlesthat lasted fifteen
years, the Barnes Foun-dation was taken over by the art
establish-ment that Barnes despised.
· Beryl Buck wanted to leave her wealth tohelp the people of
Marin County, Califor-nia. Her mistake was in allowing the
SanFrancisco Foundation to administer theBuck Trust. The San
Francisco Foundationwanted to use the Buck wealth to aid peoplein
the San Francisco Bay area. After aprotracted legal battle known as
“the SuperBowl of Probate,” the Buck Trust was sev-ered from the
San Francisco Foundation. Anew community foundation, the
MarinCommunity Foundation, was created withBuck Trust money.
However, as part of thesettlement, the court ordered the creationof
three new national nonprofits devotedto gerontology, combating drug
abuse,and education—even though there is noevidence that Beryl Buck
had any interestin these issues.
· Charles and Marie Robertson wanted tohelp Princeton
University, CharlesRobertson’s alma mater, train students
forcareers in government work in internationalaffairs. They trusted
Princeton so muchthat they created the Robertson Founda-tion, and
allowed Princeton to fill four of theseven seats on the
foundation’s board.Afterwards, the Robertson family foundthat
Princeton was using the RobertsonFoundation’s wealth (which amounts
to sixpercent of the entire Princeton endowment)for purposes other
than that which thedonor intended. The Robertson family isnow suing
Princeton to sever the relation-ship between the foundation and the
uni-versity so that the foundation can remaintrue to the donor’s
intentions.
By contrast, there are four positive casestudies in The Great
Philanthropists and the
Problem of ‘Donor Intent.’ They show howdonor intent can be
preserved.
· The JM Foundation is a small familyfoundation controlled by
the grandchil-dren of its founder, Jeremiah Milbank. Itstill
focuses largely on what its founderwanted the foundation to do—aid
the dis-abled and support free-market nonprofits.
· The Lynde and Harry Bradley Foundationcommissioned a biography
of its foundersto understand their intentions. It tries toremain
true to what the founders wantedthe foundation to do—help civic and
edu-cation groups in Milwaukee, Wisconsin,and provide support for
organizations thatare devoted to limited government and
freeenterprise.
· The Duke Endowment is the best exampleof how to preserve donor
intent. James B.Duke made his instructions extremely ex-plicit. He
identified the causes to which theendowment should make grants. He
evenspecified the exact percentage of grantsthat would go to
particular organizations—32 percent to Duke University, 32
percentfor nonprofit hospitals in North and SouthCarolina, 10
percent for orphanages, andthe rest to other strictly defined
causes. Tomake sure the trustees understood his in-structions, Duke
required that the inden-ture be read aloud at the first
trustees’meeting of any given year. As a result, theDuke Endowment
still remains relativelyfaithful to its founder’s
intentions—81years after James B. Duke’s death.
· The Conrad N. Hilton Foundation alsoreceived explicit
instructions on what itwas supposed to do: it was meant to
helpCatholic Sisters and organizations thatimprove the lives of
children. The founda-tion remains in the control of the
Hiltonfamily, whose members are the majority ofits trustees.
What can donors do to enforce their inten-tions? Unfortunately,
there is no “magicbullet.” All the evidence suggests that within30
years after a donor’s death—that is, afterpeople who knew the donor
personally havepassed away—a foundation will drift awayfrom the
donor’s intentions.
Therefore, I recommend that all donors
voluntarily place a time limit on the founda-tions they create
so that these organizationsspend themselves out of existence within
30years of their founders’ deaths. In addition,donors should make
their intentions knownin documents and they should be as explicitas
possible. The more detailed the descrip-tion of what a donor wants
to do, the morelikely it is that a foundation will honor thedonor’s
wishes. But donors should act onthe premise that their wills will
be challenged,either by heirs who want the foundation’smoney or by
foundation professionals whowant to use a donor’s wealth for their
own petcauses.
Finally, donors should be very skeptical ofprofessional advisors
who assume that adonor’s wishes are unimportant. People whomake
money are smart enough to know howthey want their wealth to be
used.
Still, the best way to preserve donor intentis for the donor to
spend his fortune while heis alive and can see his wealth put to
gooduse. Living donors are better able than deadones to ensure that
their fortunes are appro-priately spent.
Giving to College Endowments
It happens every spring. If you’re pros-perous or well-known,
chances are thatyou’ll get a call from your college’s fundraising
office, asking why you haven’tcontributed to your alma mater—or if
youhave contributed, why your contributionisn’t larger. Donating to
education is, ofcourse, a worthy endeavor. But there’s agreat deal
of evidence that shows the mostinefficient way to contribute to
scholar-ships is to give unrestricted gifts to auniversity. Even
restricted gifts frequentlyare misused when universities choose
toviolate the donor’s intent.
Despite some setbacks in recent years,university fund raising
offices remain large,sophisticated enterprises. This June,
theColumbus Dispatch profiled the Ohio StateUniversity development
office. Ohio Statedidn’t even begin major fund raising drivesuntil
1985; today, the school has a $1.1billion endowment, and it
collected $210million from alumni in 2001. The Ohio
Statedevelopment office has a $14.5 millionbudget and a staff of
158, including four
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FoundationWatch
4 October 2007
branch offices in the U.S. and a fifth to beset up in Asia.
Ohio State’s most lavish fund raisingevent is its annual Winter
College, held fortwo days in Naples, Florida. Alumni, mostof them
retirees, pay $175 to hear lecturesfrom faculty, mostly on topics
of interestto seniors, such as health issues and es-tate planning.
The alumni then respondgenerously: Ohio State president
WilliamKirwan returned from the 2002 WinterCollege with four
$100,000 checks and onefor $250,000.
As fund raising enterprises go, OhioState is a medium-sized
endeavor. Largeprivate schools raised more cash, particu-larly
during the boom years of the 1990s.Between 1994-2001, 11 schools
(includingOhio State) successfully completed bil-lion-dollar
capital campaigns. The Univer-sity of Virginia, for example,
finished itsbillion-dollar drive in February 2000, andthen
announced that the drive would becalled “Beyond a Billion,” with
premiumseats to football games reserved for bigdonors.
Harvard ended a five-year drive in 2000with $2.6 billion,
raising its endowment toan all-time high of $19.6 billion—a sum
solarge that a Harvard Crimson writerboasted that his school was
“one of therichest non-profit institutions on theplanet” with an
endowment “second onlyto the Vatican.”
In an October 2000 interview, Harvarddevelopment officer Andrew
K. Tiedemanntold the Harvard Crimson that universitydevelopment
officers were dissatisfiedwith the 34 percent rise in alumni
dona-tions between 1999 and 2000. Harvard hadto be the number one
university in America,and thus had to have more money thananyone
else.
“We don’t persuade alumni and friendsthat we need money,”
Tiedemann said. “Ifwe stood still we could get along, which isnot
true of many other institutions, but theopportunity costs for
Harvard and societywould be great and we would quickly notremain on
the forefront. Harvard would notbe Harvard in a very short period
of time.”
Harvard wasn’t even the most success-ful fundraiser in the Ivy
League. Columbia
raised $2.74 billion between 1990-2000,thanks to 300,000 donors,
including 29gifts of between $10-25 million, six gifts ofbetween
$25-49 million, $50 million fromthe Bill and Melinda Gates
Foundation,and $85 million from telecommunicationsmagnate John R.
Kluge.
It should be noted that among the moregenerous donors to
colleges and universi-ties in the 1990s were CEOs of now-dis-graced
corporations. Among them:
· Tyco International CEO L. DennisKozlowski, who contributed so
much toSeton Hall University that theinstitution’s business school
is housedin Kozlowski Hall.
· Global Crossing CEO Gary Winnick do-nated $11 million to C.W.
Post Univer-sity, which named its administrationbuilding Winnick
House.
· There are at least 40 Arthur Andersenprofessors of accounting
at various col-leges.
· Enron cancelled plans to endow twochairs at the Rice
University manage-ment school. But there’s still an EnronProfessor
of Economics at the Univer-sity of Nebraska (Omaha). And
formerEnron CEO Kenneth Lay, through hisLay Family Foundation, has
endowedchairs at the University of Houston(where Lay obtained his
doctorate ineconomics), Rice University, and theUniversity of
Missouri (Columbia). TheLos Angeles Times reported in Februarythat
the University of Houston is stillcounting on the Lay Foundation to
en-dow a second professorship at thatschool, along with a proposed
Ken LayCenter for the Study of Markets in Tran-sition…
Asking for Money Why do donors contribute to colleges?If
fundraisers were certain they knew theanswer to this question,
their jobs no doubtwould be much easier. But whatever thedonors’
motives for giving, universitiesare not shy about asking them for
money.Sometimes college presidents offer pecu-liar enticements.
Several schools have entered the burialbusiness. Mount St.
Mary’s College in
Emmitsburg, Maryland expanded its cem-etery in the early 1990s;
alumni have bought325 of the 450 new plots available, at
feesranging from $500 on up. The University ofVirginia has sold 130
of the 180 slots avail-able in its new burial ground, at a cost
todonors of $3,000 per plot. The Universityof Richmond has gone
farthest. It spent $1million to build a columbarium designed tohold
ashes from cremations. The schooloffers 2,970 niches to hold burial
urns, ata cost to donors of $3,000 each.
Other schools offer donors the pleasureof personal attention.
The Harvard Crim-son in 1999 observed that wealthy poten-tial
donors would receive an invitation tohave lunch with capital
campaign co-chairRobert Stone at the New York Yacht Club.“Bob takes
you to lunch at the Yacht Cluband orders a plate of oysters,” said
capitalcampaign co-chair Rita Hauser. The wait-ers “all call him
‘commodore’ and at theend of the lunch he says, ‘Wouldn’t it benice
if you gave a few million?”
If lunch with Stone didn’t work, theHarvard prospect received
two follow-upvisits—one from then-president NeilRudenstine and a
second from provostHarvey V. Fineberg. “You get a call fromNeil and
you chit-chat about the world andabout the weather and then he
says, ‘Thisschool needs money,’” Hauser said. “Andif that doesn’t
work, you get a visit fromHarvey. He doesn’t waste any time andasks
you immediately. I have never knownthis trio to fail.”
But some university presidents get di-rectly to the point.
University of SouthernCalifornia president Steven Sample toldthe
Los Angeles Times how he attracted anine-figure gift from
biomedical entrepre-neur Alfred E. Mann. Mann graduatedfrom the
University of California (LosAngeles), but negotiations between
Mannand UCLA had broken down. In May 1997,Sample heard about this
and cold-calledMann. “Mr. Mann, you don’t know mefrom Adam,” Sample
said. He then tookMann to lunch at the Pasadena Ritz-Carltonand
explained that, as a private school,USC was better able to respect
Mann’swishes than the state-run UCLA. Eightmonths later, Mann
donated $112.5 millionto USC to establish the Mann Institute
forBiomedical Research…
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5October 2007
FoundationWatch
The Great Philanthropists Book Launch at Capital Research
Center,June 20, 2007 (photography by Doug DeMark)
Krista Shaffer of the Hudson Institute’s Bradley Center
forPhilanthropy and Civic Renewal (left), with Phil Brand,
CRCEducationWatch director
left to right: Terrence Scanlon, Dawne Winter, Abby Winter,and
Tom Winter, Editor-In-Chief of Human Events
Terrence Scanlon (left) and CRC supporterWilliam Lauttamus
(right)
Competitive Enterprise Institute’s IvanOsorio, a former Labor
Watch editor (left)with CRC fellow Bonner Cohen (right)
Martin Morse Wooster autographshis new book
left to right: Whitney Ball of DonorsTrust, SaraSalupo, director
of development for the Na-tional Taxpayers Union, NTU President
JohnBerthoud
CRC Executive Vice President RobertHuberty (left) with Jill
Lacey, editor ofCompassion and Culture (right)
CRC intern Stephen Albert (left) meetsWilliam Schambra
(right)
Delores Parker (left), Jay Parker, presidentof the Lincoln
Institute (center), with LukeLee, CRC’s office manager (right)
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FoundationWatch
6 October 2007
What’s In It for the Donor? After the deal is struck, what do
donorsget in return? Often the deal schools offerdonors is this:
Give us enough money foran endowed chair, a scholarship, or a
build-ing, and we’ll name something after youthat will ensure that
you will be remem-bered forever.
Colleges offer an amazingly diverse port-folio of “naming
opportunities.” Visit theUniversity of Arizona alumni
associationbuilding, and you’ll f ind the DickMcDonald restrooms,
named becauseMcDonald, a plumber, donated $30,000.“It was serious
from the donor’s point ofview,” alumni association president KentD.
Rollins told the Chronicle of HigherEducation. “It has certainly
alerted us asto what donors might be interested in.”
The Minneapolis Star-Tribune reportsthat college athletic
departments are in-creasingly entrepreneurial in offering nam-ing
opportunities. At the University ofIowa, 35 of the 50 students on
the footballteam hold endowed positions. ($250,000creates an
endowed chair for the quarter-back). Penn State offers alumni who
playedfootball the chance to put their names ona locker for
$25,000. Clemson, for a $75,000donation, offers football
season-ticketholders the opportunity to will their 50-yard-line
seats—and a good parkingspace—to their heirs.
However, a donor can’t always assumethat a school will fulfill
its agreement. A“head of advancement for an establishedcollege on
the East Coast who prefers toremain anonymous” wrote an article
forPhilanthropy exposing the tricks of thetrade. Some schools sell
the naming rightsto a building to several donors, placingone
donor’s name on one door and an-other donor’s name on another.
Otherschools hyphenate names, changing the“Jones Building” to the
“Jones-SmithBuilding” or placing the “Smith Center”inside the
“Jones Building.”
Take the case of California State Univer-sity (San Marcos). In
1995, entrepreneurDonald Owen Van Ness donated $1 millionto the
school with the understanding thatits business school would be
named afterhim. But in 1998, shortly before Van Ness’sdeath, he
agreed to a codicil to his willstating that, instead of the entire
school,
Van Ness’s name would only be posted onone room of the business
school’s library.
Van Ness’s friends sued, saying the do-nor was coerced, and
citing as evidence anemail where Van Ness asked for his moneyback.
But in September 2001, a mediatorruled in favor of the university,
statingthat the school did nothing illegal in reduc-ing the reward
for Van Ness’s donation.
The Endowed Chair There are particular perils in giving to
the“endowed chair.” In Britain, the MargaretThatcher Foundation
raised two millionpounds to endow a Margaret Thatcherchair of
enterprise studies at Cambridge.But according to Spectator writer
JustinMarozzi, the first holder of the chair, AlanHughes, was a
Labour Party supporterwho contributed a paper to
RebuildingSocialist Economies: A New Strategy forBritain. In an
interview, Hughes refusedto say whether he was a free-market
econo-mist , supported the ideals of LadyThatcher, or if he
believed in capitalism.
Institute of Economic Affairs presidentJohn Blundell observes
that securing theagreement of Lady Thatcher to raise moneyto endow
the Thatcher chair was a “verybad, deeply flawed strategy from the
start.”He notes that the donor “might secure thefirst appointment,
but in time they loseinterest or die, and the chair becomes
cap-tured by the academic establishment.”
But it’s not only conservatives who havereason to be suspicious
of fundraisingcampaigns to endow chairs. There havebeen instances
where liberals faced oppo-sition in trying to endow
controversialchairs. Supporters of Anita Hill, for in-stance,
raised $250,000 to endow a chair inher name at the University of
Oklahomalaw school. In 1995, the Oklahoma statelegislature matched
the grant, despitegrumblings by some legislators.
From the beginning, the Anita Hill Chairwas fraught with
controversy. The Uni-versity of Oklahoma accepted donationsfor the
chair, but refused to do any fundraising for it. Newhouse News
Service re-porter Elizabeth Bryant observed in 1998that “Hill and
some of her supporters be-lieve the foot-dragging [by the
university]is calculated and reflects an atmosphere inwhich
conservatism is entrenched and
controversial viewpoints—like Hill’s onsexual harassment—are
shunned.”
“The fear of just the research (on sexualharassment,) and my
name being attachedto it,” Hill told Bryant, was one reason whythe
University of Oklahoma was not in ahurry to fill the chair.
In 1998, Hill left the University of Okla-homa for Brandeis
University. And in May1999, the university dissolved the endow-ment
for the Anita Hill Chair, claiming that$500,000 was not enough to
hire a nation-ally-known sexual harassment scholar. Theschool said
that it would work with Hill toeither return the money to donors
withinterest, set up another endowment at theschool, or give the
funds to a foundation.
Is Fool-Proof Giving Possible? How should donors give to
colleges?My best and only advice is: Be careful.Perhaps the worst
way to contribute is togive unrestricted funds to an endowment.If
you do this, you sign away all controlover how your money is spent.
It’s likelythat your gift will help your alma mater insome way, but
it’s not inconceivable thatthe school will use the funds for a
purposethat has nothing to do with education. In2000, Eckerd
College president PeterArmacost and vice-president for finance
J.Webster Hull were forced to resign whenit was found that $19
million—three-fifthsof the school’s endowment—was spentwithout the
knowledge of the school’sboard of trustees. Most of the money
wentto support a home for the elderly and ahousing complex, both of
which went bank-rupt.
Donors with definite political or philo-sophical commitments
should avoid giv-ing money for endowed chairs. Remember:Believers
in the principles of free enter-prise and limited government can’t
as-sume that endowing a chair of free enter-prise or
entrepreneurship will add a pro-freedom scholar to a school’s
roster. Uni-versities can legitimately argue that it is aviolation
of academic freedom for a donorto have veto power over
appointments.And even if the chair goes to someone whoshares your
beliefs, don’t forget that moneydonated to colleges is fungible —
themoney a school saves by not having topay the salary for an
endowed chair ismoney that can be spent on causes a donor
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7October 2007
FoundationWatch
FW
An Important Reminder for CRC Supporters 70½ Years of Age or
Older
The Pension Protection Act of 2006 permits taxpayers to directly
contribute funds from their Individual RetirementAccounts (IRA) to
a 501(c)(3) nonprofit organization. Specifically, this law lets you
transfer funds from your IRAto a qualified charity without paying
tax. Under the previous law you had to report as taxable income any
amounttaken from your IRA. Any tax deduction you took for
charitable contributions was limited to 50% of your adjustedgross
income. By contrast, the law now allows IRA gifts without these tax
complications. You may take advantageof this law if:
*You have attained the age of 70½ on the date of transfer.*You
own a traditional IRA or Roth IRA.*You transfer no more than
$100,000.*Your transfer is an outright gift.*Your transfer is made
directly from the plan administrator to the charity.
The law does not apply to gifts from 401(k), 403(b), defined
benefit, profit-sharing, Keogh, and employer-sponsoredSEP
accounts.
This option is only available for gifts made on or before
December 31, 2007. Capital Research Center does notoffer legal or
tax-planning advice. Contact your investment professional for
additional information.
GOOD DEEDS,SQUANDERED
LEGACIES
A cautionary tale first published in1994, this third edition by
MartinMorse Wooster testifies to the con-tinuing importance of the
issue ofdonor intent. It contains new mate-rial focused on the
ongoingRobertson Foundation v. PrincetonUniversity case and an
update on thetragic battle over the Barnes Foun-dation. An
Executive Summary is alsoincluded.
Wooster, senior fellow at CapitalResearch Center, tells a
cautionarytale of what has gone wrong withmany of this country’s
preeminentfoundations. But he also showsthat other foundations,
such asthose established by Lynde andHarry Bradley, James Duke,
andConrad Hilton, safeguard theirfounders’ values and honor
theirintentions.
$14.95 (plus shipping) To order, call 202-483-6900
or visithttp://www.myezshop.com/capital_research/
or mail your check and book order to:Capital Research Center1513
16th Street, NW Washington, DC 20036
may oppose.
To make sure that their intentions areobserved, donors to
colleges and univer-sities can take several actions.
1.They should state their wishes as explic-itly as possible.The
case of Lee Bass is well known. Heoffered $20 million to Yale to
create a Pro-gram on Western Civilization only to seethe proposal
collapse when Yale wanted touse the money to pay for professors
whowere hostile to the principles of WesternCivilization. Donors to
colleges shouldassume that, unless proven otherwise, thecollege
executives they deal with are liber-als hostile to conservative
principles.Donors should have escape clauses intheir donations to
colleges that terminatethe grant if a school violates donor
intent.In addition, donors should also insert “add-on” clauses to
their gifts stating that theirmoney adds to, but does not replace,
thecollege’s budget. This ensures thatschools use your gift to pay
for causesyou espouse.
2.They should make their gifts term-lim-ited.Donor intent for
gifts made in perpetuity isusually ignored within one generation
af-ter a donor’s death. At Princeton, forexample, the heirs of
donor WilliamRobertson are suing the school becausethey charge that
the school is takingRobertson’s gift, designed to aid theWoodrow
Wilson School of Public andInternational Affairs, and spending it
onsomething else. Had Robertson, who diedin 1981, placed a time
limit on his gift, hisheirs would not have to deal withPrinceton’s
violation of Robertson’swishes.
3.They should consult with trusted thirdparties, such as the
American Council ofTrustees and Alumni (ATLA) and DonorsTrust—and
Capital Research Center.These groups have experience in dealingwith
colleges, and they can identify whichschools are most trustworthy
in keepingfaith with the intention of donors.
4. Above all, donors considering settingup a grantmaking
foundation to supporthigher education ought to ask themselvesthis
question: Which is better:
a) to make gifts while you are alive tospecific programs so that
you can see howyour money is spent? Or
b) to establish a perpetual endowment andhope that students in
future generationsremember that you gave the money?
The great donor Julius Rosenwald pro-vided the wisest answer to
this perennialquestion in philanthropy. In his important1929 essay
“Principles of Public Giving,”Rosenwald concluded that donors
couldnot assume that a perpetual gift wouldensure that they would
be remembered in
the future.
“If some men are remembered years andcenturies after the death
of the last of theircontemporaries,” Rosenwald wrote, “it isnot
because of endowments they created.The names of Harvard, Yale,
Bodley, andSmithson, to be sure, are still on men’s lips,but the
names are not those of men butthose of institutions. If any of
these menstrove for lasting remembrance, they mustfeel kinship with
Nesselrode, who lived adiplomat, but is immortal as a pudding.”
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FoundationWatch
8 October 2007
PhilanthropyNotesThe Philanthropy Roundtable has awarded this
year’s William E. Simon Prize for Philanthropic Leadership to Frank
J.Hanna III for his national leadership in K-12 education reform.
Hanna helped found three Catholic high schools in the Atlantaarea
and is a trustee of the Papal Foundation. He is also vice chairman
of the Acton Institute for the Study of Religionand Liberty.
Wal-Mart Stores Inc. announced that Margaret A. McKenna , former
president of Lesley University, will be the newpresident of the
Wal-Mart Foundation, which gave $264 million in cash to charity
last year, making it the largest cashcontributor in the U.S.
McKenna was also previously White House deputy counsel under
President Jimmy Carter.
Celebrity philanthropy is often highly overrated, reports the
New York Times. “I think there needs to be greater skepticismabout
celebrity involvement than I see in the media right now,” says
Stacy Palmer, editor of the Chronicle of Philanthropy.Palmer said
she was surprised that among the constellation of wealthy
celebrities promoting charity, just one prominententertainment
industry figure — Oprah Winfrey — donated enough to get on the
Chronicle’s list of “America’s Most Gener-ous Donors” last year.
Winfrey ranked 36th for pledging and paying out $58.3 million last
year, well below 1st-rankedWarren E. Buffett, the investor who
pledged $43.5 billion.
Experts warn that continued volatility or a sharp downturn in
the stock market could hurt nonprofit groups, the Chronicle
ofPhilanthropy reports. “There could be trouble ahead for charities
even without a sharp dip in stock values. The real challengeis
intense market volatility, which creates a lot of uncertainty.
Uncertainty makes many people hesitate to make a commit-ment,” said
Melissa A. Berman, president of Rockefeller Philanthropy
Advisers.
Some U.S. charities are taking advantage of the weak American
dollar by soliciting donations in Europe, the NonProfit
Timesreports. Christian Relief Services of Alexandria, Virginia,
seeks donations in the United Kingdom and France, whosecurrencies,
the pound and the euro, are worth about US$2.00 and US$1.36
respectively. Prospect mailing in Europe ischeaper and response
rates are higher, said Paul Krizek, vice president and general
counsel of CRS, which plans to moveinto Germany this year.
Nonprofit tax experts told the House Ways and Means Committee
September 6 that many universities and large foundationsare
investing billions of dollars in “offshore blockers” –overseas
companies— in order to avoid large tax liabilities from hedgefund
income, the Chronicle of Philanthropy reports. Current law provides
an incentive for foundations that invest in hedgefunds to place
those investments in offshore tax havens such as the Cayman
Islands, Janne G. Gallagher, vice presidentand general counsel of
the Council on Foundations said. The Council urged lawmakers to
rewrite a longstanding rule thattaxes income generated through
debt-financed investments. A Chronicle survey of 268 nonprofits
with endowments above $1billion found that hedge funds accounted
for 18% of those groups’ portfolios.
President George W. Bush is expected to sign a bill approved by
Congress that would forgive student loan debt for somecharity
workers, the Chronicle of Philanthropy reports. The measure would
allow borrowers to erase their loan balances after10 years of
payments if they have worked during that time in a “public service”
job. “Public service” includes employees ofnonprofit legal-advocacy
groups and tax-exempt charities, government employees, public
school teachers, law enforcementofficials, and public health
workers.
Former Senate Majority Leader Bill Frist is working with Save
the Children and the One Campaign to highlight pediatrichealth
issues, the New York Times reports. A physician by training, the
Tennessee Republican plans to lead a drive tohighlight diseases
such as diarrhea and pneumonia that kill millions of children
worldwide but are not as well publicized asAIDS. Frist also plans
to work with One Vote ’08, a project of the One Campaign that is
supported by the Bill & MelindaGates Foundation that aims to
press presidential candidates to focus on development issues,
including children’s health.
The U.S. Department of Justice co-sponsored a civil rights
convention organized by the Islamic Society of North America,an
unindicted co-conspirator in the federal case against the Holy Land
Foundation for Relief and Development, theWashington Times reports.
The Holy Land Foundation was accused of funneling funds to the
terrorist group Hamas, itselfdesignated a terrorist organization
that has been shut down by the U.S. government.