October 18, 2010 | Read Time: 3 minutes
Amelia Island, Fla.
It’s a question just about every donor involved in starting a foundation has faced: How long should the institution exist?
Should it last in perpetuity, enabling the foundation to have a continuous impact but stirring concerns about whether it can stick to its founder’s intent? Or should it have an end date, permitting the foundation to give bigger sums of money quickly but limiting the amount of time it can influence the causes its leaders care about?
Leaders of foundations of both types talked about their experiences at a session at the Philanthropy Roundtable’s annual meeting here on Saturday.
In the perpetuity camp: Michael A. Cawley, president of the Samuel Roberts Noble Foundation, and Eugene W. Cochrane Jr., president of the Duke Endowment.
Mr. Cawley said perpetual foundations can ultimately give more money away because of the financial returns earned on their endowments. Perpetual foundations can also be powerful vehicles for helping strengthen family relationships and values, as the Noble fund has been, he said.
He also cited a number of concerns with limited-life foundations. They have to give a lot of money quickly, which isn’t easy, Mr. Cawley said. And he said that he worries that they’ve become fashionable, raising the potential that donors might choose to set end dates for the wrong reasons.
Mr. Cochrane made the case for the Duke Endowment’s ability to offer continual support to its grantees since its creation 86 years ago.
He said that the endowment’s founder, James B. Duke selected organizations, not issues, to support, making it easier for those who came after him to carry out his work. He also required trustees to read the foundation’s indenture of trust aloud once a year.
“Dynamics do change,” Mr. Cochrane said. “But if the donor has done it well and set the parameters right, the foundation staff can continue to evolve in doing its job well.”
Frederick A.O. Schwarz Jr., board chair of Atlantic Philanthropies, and Heather Higgins, president of the Randolph Foundation, argued in favor of spend-down foundations (or, as Mr. Schwarz put it, “do more sooner” foundations).
Mr. Schwarz said that limited-life foundations are best poised to tackle big, pressing issues.
“A limited life where you’re spending more both allows you and encourages you to make bigger bets,” he said—”‘allows’ because you’ve got more to spend and ‘encourages’ because you’re more driven by, can we make a quick difference.”
Ms. Higgins said she sees “real problems to perpetuity.”
Foundations can erode in quality over time, she said. Perpetual foundations, which can accumulate large amounts of money and may not seem accountable to anyone, can also stir scrutiny for the field, she said.
In perpetual foundations, Ms. Higgins argued, a shift away from what the donor intended is inevitable, “however well memorialized it is.”
Also troubling, she said, is that perpetual foundations can easily become more focused on accumulating assets than on achieving program success.
Limited-life foundations don’t have to be nearly as concerned with their financial returns, Ms. Higgins said. They aren’t as constrained by how much they can spend, she said, and they are led by the donors or by people who knew them.
