Foundation Leaders Are Too Afraid of Their Donors to Speak Candidly

The calls for philanthropy to do better in these challenging days are loud and clear — from nonprofits in desperate need of more resources, from public opinion polls that show distrust of megadonors, from new research pinpointing the decline in funding from federal sources, and from foundation leaders increasingly discontent with the status quo.

While philanthropy can’t alleviate all the pain communities face today, each of us can do much more. And we can’t pretend that the public will have patience with us for much longer if we don’t change soon.

Some 42 percent of Americans “don’t trust individual megadonors ‘very much’ or ‘at all’ to make decisions about where charitable dollars are spent in their community,” according to a survey commissioned by the Stupski Foundation, which I head, and conducted by the Harris Poll. Seven in 10 Americans find it “unfair to nonprofits” that most foundations don’t give more than the minimum 5 percent of annual asset distribution required by federal law.

How can we turn things around?

As someone who has spent decades working on different sides of the philanthropic landscape — both raising money and coaching those who give it away — I believe the first step is to address the biggest elephant in the room: the mindset of control. 

Too often, our work rests on the premise that those who hold the most wealth know best. Yet the truth is often the opposite. Big donors and their trusted advisers usually aren’t in close touch with the needs of the communities they want to help.

Eliminating Fake Rules

Breaking the deference to philanthropic benefactors requires ditching fake rules that govern so much of how Big Philanthropy works. We can start by eliminating these three:

Fake Rule No. 1: “It’s my money, after all.”

When Joyce Stupski, who co-founded the Stupski Foundation with her husband, Larry, felt we were straying too far from her preferences, she’d lean over, pat my knee, and remind me, “Well, it’s my money, after all.” 

This pervasive — and inaccurate — belief effectively shuts down all opposition to the donor’s wishes and excludes the voices of the communities that foundations serve.

That’s why foundation leaders must publicly talk with their donors and boards about whom the institution’s money really belongs to. We must explain with love and empathy, but absolute clarity, that when a philanthropist gives money to a foundation or a donor-advised fund, she gets a significant tax benefit. In exchange for the tax subsidy, she accepts a stewardship relationship in which she must agree to put the public’s interest first — not her own.

At the Stupski Foundation, we decided the first step toward changing the control mindset was to shift decisions away from our board members and into the hands of program officers with deep relationships in the communities we served.

That strategy forced us to ask hard questions about our work. For example, we measured the success of our grant making to fight hunger by calculating the number of calories our grants delivered. While that metric looked great in board reports, it wasn’t making a meaningful dent in solving the problem. 

Turning to community leaders and organizers, we learned that their main priority was long-term change rather than short-term fixes. They wanted to use their grant dollars to build systems that would lead to sustainable food security for low-income Americans instead of focusing only on the immediate needs of people facing hunger.

This meant our team had to have difficult conversations to help Joyce and the board understand the importance of listening to community leaders. What ultimately worked was emphasizing the greater impact we could achieve through this approach.

Most donors respond well to proof that new methods are making a difference. One piece of evidence we rely on is the Center for Effective Philanthropy’s blind studies of grantees. The Stupski Foundation started off with poor marks but has now climbed to the top of the dataset. In our grantees’ eyes, we have become connected, receptive, and nimble — a true partner.

Fake Rule No. 2: Fear-based environments where donors exert all the control are inevitable.

Many nonprofits assume foundation leaders can change the way their organizations fund. In reality, our power is limited when donors or boards believe they can call the shots.

If you doubt that fear of living donors is pervasive, just try to get a foundation executive to talk candidly.

At a conference I attended several years ago I met a new CEO of a huge foundation funded by a famous, and highly controlling, tech giant. The CEO was inexperienced in philanthropy but had worked for decades in the big donor’s family office. He and I were alone in a room after a session had concluded, swapping stories, speaking freely, and relaxed. 

Suddenly he leaned in toward me, bent his head down low, and started whispering something slightly critical of the donor, his eyes darting nervously around the empty room. When that conversation ended, the CEO stood up straight and continued talking as though nothing had happened — that is until he mentioned his donor and started whispering again.

After a third time, I assured him it wasn’t necessary. He replied that he couldn’t take any chances. “If anyone were to hear me even question [the famous donor’s first name], well, … then …” and trailed off.

This CEO was literally afraid to speak up. That’s not the kind of foundation culture that yields lasting societal change. We philanthropy leaders must summon our courage.  We are beholden, after all, to the communities we exist to serve — not to philanthropic benefactors.

Most donors don’t want to be seen as controlling and scary. They will welcome a better option if foundation leaders present one that works. We must keep pushing alongside the donor to remain accountable to the communities we serve.     

Fake Rule No. 3: Foundation perpetuity matters most.

Donors often believe that the smartest way to build a lasting legacy is to create a foundation that lives forever. But the reality is often the opposite: spending generously over a set time can yield bigger results than hoarding assets with the goal of perpetuity.  

At Stupski, a powerful personal experience prompted Joyce to change her thinking about the foundation’s lifespan. After Larry died of prostate cancer, Joyce was distraught by his prolonged suffering. We decided to use our giving to help others avoid similar end-of-life struggles. Several national organizations urged us to help them jump on an opportunity in California to pass a law that would allow fatally ill patients to request medicine from their doctor that would hasten the end of their lives.

The advocates spoke to Joyce about two approaches to supporting their efforts. The first option was to give small sums over time, keeping in mind the goal of foundation perpetuity. But that option would have taken years to move a policy forward — if it happened at all. Fortunately, Joyce had already chosen the second option: sunsetting the foundation. She was eager to give the organizations the resources they needed to move quickly. 

In the two states Stupski serves, California and Hawaii, change happened quickly. Within a matter of weeks, physician aid in dying became law in California. A few years later, it was also law in Hawaii. 

It’s hard to overestimate the power that comes from spending everything in a set period. If we had chosen perpetuity and given the 5 percent minimum annually, we would have distributed $176 million during the decade I’ve been with the foundation. But because Joyce didn’t want the foundation to live forever, she endorsed giving levels that enabled us to distribute $581 million during that same period.

As philanthropy works to become more effective, mistakes are inevitable. I learned the hard way that I needed more expertise in what real change means to culture, staff, boards, and processes. And I did too little to ask community leaders from the start where we should invest and what time horizon would help them the most.

But we can’t let fear of not doing it right become an obstacle. Foundation leaders need to self-correct before policymakers impose changes on all our institutions. Challenging controlling mindsets and breaking the fake rules they perpetuate is a great place to start.

Glen Galaich is CEO of the Stupski Foundation and author of the new book Control: Why Big Giving Falls Short. He is also host of the podcast “Break Fake Rules.”