The Case Against Foundations
Branch, Taylor
The Case Against Foundations by Taylor Branch One need not be a Marxist, or even a Democrat, to deduce that foundations are unlikely to be restless with the world. After all, they are...
...I think it’s fair to say that the four per cent tax on foundation income was the one element of the bill that received the most criticism from the university constituency,” said David Freeman of the Council on Foundations...
...The same bunch that supports us also supported the early civil rights movement and the early peace movement...
...There’s a mood not unlike what the networks are under...
...The grants are likely to be for work which is interesting, highly laudable in the abstract, creative, and clearly on this side of the Good...
...Even a national philanthropic lottery, throwing out $5-million chunks to individuals for their non-consurnp tive use, would be better than giving the money to only one group in the society-the very group that has the least to gain by change and the most reason for believing that the system under which they made it is basically an equitable one...
...Although the idea of legal representation for the poor and consumers had been pioneered by civil rights groups, the OEO Legal Services program, and a few Nader-inspired projects, it was still a touchy matter for so visible and heavily criticized an organization as Ford...
...Even through the Depression, foundations were the largest contributors to medical schools and higher education...
...Now, ‘ by contrast, most voters see tax exemptions as a disguised expenditure of public funds, the people’s money being rebated to private institutions...
...Until the Depression, charity was the principal source of relief for the poor...
...We sometimes kid about being on the cutting edge of social change,” said a candid Ford staff member...
...Do you give scholarships to the most brilliant students, who will most likely pile up an impressive list of credentials that will shine on the foundation, in the hope that one of them will achieve a theoretical breakthrough and advance the power with some new technology or idea...
...The Peterson Commission also surveyed foundations on activism and found that they considered 0.1 per cent of their 1966-68 grants “controversial” and three per cent “innovative...
...The great bulk of the nation’s 22,000 foundations will hardly feel shackled, but they are smarting under the new four per cent excise tax on their earnings and the new provisions against tax-shelter wheeling and dealing between charities and their benefactors...
...In philanthropy such blessings are about as rare as biological mutations...
...The tax bill also overlooked the informal philanthropic quid pro quo, through which a foundation-owner can extract dignity and homage from prestigious institutions by means of strategically placed grants...
...Rep...
...Unknowns are also problematical because they are more prone to failure-if only because they lack the credibility to declare their projects a success, or to have highly regarded friends comment upon their stimulative meaning...
...I worked in a large foundation for almost 10 years and never heard an honest statement from anybody on the outside...
...Employees used to fly first class, period, but now they fly tourist except for overseas flights longer than four hours...
...I think it is arguable whether the private charitable dollar is spent more efficiently than the comparable government dollar,” he declared, dashing one favorite conviction of private institutions...
...You have no expectations of really good things, but the little hope you have is realnot the tinsel stuff you see in foundation reports or feel before you really think about them...
...I’m cautious, but generally encouraged,” said one foundation tax lawyer who is involved in negotiations with the IRS...
...The old causes had become a public responsibility rather than the beneficiaries of tax-exempt compassion...
...Education gets 30 per cent of foundations expenditures every year...
...Past Glories Therefore, charitable people were taken aback when this motley crew assembled the votes to hamstring, regulate, and tax foundations-whose unfettered domestic tax privileges date back to the establishment of the Smithsonian in the 1840s and whose international reputation stems from the early Egyptian Pharoahs...
...In a speech before the Chicago Economic Club on May 8, 1969, Yale president Kingman Brewster set forth the pure innovation argument for foundations’ tax exemptions: Justification rests, I submit, on the great importance of giving each new idea a chance to find a sympathetic sponsor by offering it more than one doorbell to ring...
...If so, why shouldn’t the public’s feeling for crippled children bring care for them all, rather than relying on charity to help them randomly, here and there, and without obligation to continue...
...Innovation is the essence of progress...
...The war will just play out...
...You can’t say, “Hell, I didn’t know he’d do that...
...The plan dates back even before the era of hookworm and the squeamishness about taxing the rich, while the Brewster argument has grown rhetorically only as these reasons for foundations have eroded...
...When the IRS detects a violation of any of the vague taboos above, a number of penalties follow...
...He had labored for seven years in a virtually solo investigation, issuing thousands of pages of documented rascalism by charity, without provoking more than a few peeps of support from his colleagues...
...In fact, it was such p hi1 an t hr o pic non-conformity as Ford’s decentralization experiments in New York and voter registration in the South which aroused Congress to demonstrate its preference for tranquility and to protect its monopoly over political controversy . “Regardless of the banners held aloft,” writes Joseph Goulden, “Congress’ primary concern was not tax reform...
...to question the inherited assumptions-then progress would be stultified by conformity to the design of some one man or one group or one generation...
...The grant may be designed to produce some benefit for these unfortunates, but in an indirect manner which is most readily perceived and communicated by the educated types who get the money...
...For one thing, the family in control of the company can pay out low dividends to the foundation because they know that the foundation’s stockholders (themselves) will not be displeased...
...But there are costs involved with this I-could-cause-change-with-a-grantlikethat desire to spare the philan thropist...
...Although foundations play no such role, they speak of the social waves and controversies in distinctly political tones which suggest active leadership, if not control...
...The Irony of Patman It is not even certain that the tax act will handle future cases like the Frederick W. Richmond episode of 1968...
...We have not broken through to the major foundations,” said Ted Jacobs, Nader’s principal cohort in financial matters...
...Such projects are the riskiest, most costly kind of philanthropic activity, and most people expect them to be drastically diminished from an already miniscule volume...
...Some of these subsidies will be pared down by a requirement that foundations pay out a minimum percentage of their assets to charity, but the families who control businesses through charity will still be able to select the most comfortable level of dividend payment...
...If they do cause trouble, you have no string of credentials to fall back on as an excuse for making the grant...
...The grant will be a departure from the nearly universal foundation practice of channeling money only through exempt organizations (with minor exceptions like a few grants to individuals, private corporations, and various agencies of government...
...Beyond the involvement and the overbearing vanguard relevance, these passages merely exaggerate a kernel of foundationland-its solemnity...
...Obviously, you get down to matters of judgment in these things ultimately...
...This arrangement not only means that charity gets less in dividends, but also that the company is allowed to retain more earnings for business purposes...
...Why should the citizens renew the charitable tax breaks each year and thus appropriate more than $1 billion of public funds to philanthropic boards that are gamely contending with country clubs for distinction as the most unrepresentative institutions of prestige in America...
...Finally, grants to non-exempt organizations are prohibited unless the foundation exercises “expenditure responsibility,” by making full and detailed reports to the IRS in order to show that the money is being spent for charitable or educational purposes...
...To be sure, there are strict rules against “self-dealing,” in which an astute donor used to make money by trading assets back and forth between his company and his foundationthrough a bundle of formulas described in Goulden’s Money Givers (and in articles like “How to Make Money by Giving it Away,” which appeared in the American Bar Association’s The Practical Lawyer, or “Have You Put a Price on Your Business...
...Although the law, even as amended in 1969, requires only that the money be given for exempt purposes, not necessarily through exempt organizations, foundations have relied on the Internal Revenue Service for an added measure of protection...
...Or that Alexander Heard, Chancellor of Vanderbilt, sits with him, while Ford is giving Vanderbilt $1,154,652...
...This was aimed at the extensive manipulation which often occurs when families control businesses through foundations, but the three per cent figure was revised upward to 35-50 per cent after extensive lobbying...
...The contribution to medicine is also relatively miniscule, and Dr...
...We are supporting work on nearly all the issues that provide perspectives for the seventiespoverty, manpower training, higher education, the environment, etc...
...This causes psychological tension and financial strain-since most soldiers of change require compensation roughly comparable in the long run to what their background, education, and skills would earn in all but the most cutthroat of profit-seeking organizations...
...There is something about the freedom of foundations which provokes a glimmer of yearning approval-even when Wright Patman squints over his glasses to issue his favorite denunciation of Paul Mellon’s Bollingen Foundation for expending tax-free dollar to study “the origin and significance of the decorative types of medieval tombstones in Bosnia and Herzegovina’’ and “the remains of rural chthonic traditions which existed in Europe during the Middle Ages...
...Even Ford sometimes opts for the greatest grant precaution of allabstention...
...Even without the new law, the donors and the staff people who screen the grants would keep things that way...
...It is an unpleasant choice...
...Of course, only about .5 per cent of all foundations (no more than 100 of 22,000) would consider anything like a controversial grant, even in the absence of a tax reform bill...
...revived some of the old Populist teachings against unaccountable pools of money in the form of tax dodges for the rich...
...It’s ironic and sad that the one non-rightist fellow who’s taken after foundations has had the unintentional effect of making foundations pull in their horns even more,” said Philip M. Stern, president of the Stern Fund...
...The commission recommended increased tax incentives for philanthropic giving by the wealthy...
...Foundations spend about 30 per cent of their revenue on education, as much as $500 million a year, but this seems paltry compared with federal spending for education...
...In fact, there is already some evidence that educational institutions will get some compensation for their losses from the four per cent tax...
...And as long as he wears the dollar sign, he probably won’t get any...
...Charles Goddard to begin rocketry research in the 1930s...
...At Ford, by far the most controversial foundation of the last five years, one can listen to discussions about welfare reform, public interest law, black elected officials, Chicano rights, and the alienation of the white working class...
...Old Man Buck Duke pretty well fixed where his money would go in the original charter, so the trustees have little to do in their periodic meetings...
...In the early part of this century, the Rockefeller and Carnegie funds were attacked by Populists as perpetuators of monopoly wealth...
...That’s not only a practical political judgment-making the grant more difficult to attack-but it also makes the foundation people and their trustees more comfortable...
...But the professor usually agrees, even if it means substantially shifting the focus of his work...
...The new law will no doubt eliminate some of Richmond’s charitable exploits-such as the mass flak sheets announcing each grant, and the well-organized “neighborhood study clubs”-but it will not silence the plucked heartstrings and sighs of gratitude which result from routine, tax-exempt good will by Richmonds, Annenbergs, and Mellons...
...For instance, the Stern Fund, a small activist foundation with $6-7 million in assets, is now making preparations for a grant to the Voting Rights Project of Common Cause...
...Several sources connected with the grant say Ford advised the supplicants that they would do well to guarantee balance with some Reagan supporters among the students...
...Continuation means further tolerance of a hypocritical, nonsensical system...
...If conflicts of interest were stretched to forbid old school ties, Ford would have to revamp its operations...
...but they are not directly for the hungry, unclad, and unhoused...
...They are simultaneously free, unlimited, and removed...
...Potential grantees have not been eligible for a charitable dollar until the IRS takes responsibility for their non-partisan status by certifying them as taxexempt...
...The ratio of overhead to substantive contribution is often outrageously high in the private foundations...
...This reality made the grant politically hot and plagued efforts to obtain additional funds from Ford Foundation...
...That is precisely the kind of money that Congress wants to keep out of politics, and the political preoccupation of Congress is further highlighted by the fact that the law takes less notice of many commoner abuses of foundation tax exemptions...
...there may be a redundance and surplus where social need is least urgent and a drying up of the wells in areas where survival of the society is at stake...
...You just have to lower your sights a lot when dealing with foundations...
...Don Ouixo te’s Limousine This close intermingling of academics and foundations helps explain why foundations have received so little serious criticism from non-right-wing circles...
...Only a handful-far fewer than 50-are involved in any kind of innovative social projects at all...
...They cannot make grants “to influence the outcome of any specific public election...
...You can feel it...
...The activist foundations are filled with staff members sifting through grant proposals which address the problems of the most impoverished and undistinguished souls around, scanning these proposals for familiar, respectable names...
...to encourage the heterodox...
...Harvard, which schooled five of the 17 trustees and also gave President Bundy a place to teach for 12 years, is getting $14,657,083 in Ford grants...
...In the summer of 1970, it was asked to help fund a political education project which had already received money from the Stern Fund and the JDR I11 Fund...
...They are the vanguard without forgetting that their salving task is to help the same ignorant poor catch up faster...
...Since many of the people surveyed still find public schools and the Supreme Court hard to swallow, impartial observers adjust these figures downward by 65 per cent for a more accurate picture of foundation dynamism...
...Gordon Sherman advises that, faced with a choice between slim hope and continued pain, take the hope...
...Yet Nader remains too far out to receive substantial foundation support...
...He was spurred on by the conviction of Alger Hiss, president of the Carnegie Endowment for International Peace...
...In 1970, Duke’s trustees paid themselves $47,461.70 apiece for what was generously described as part-time work...
...After World War I, a Carnegie fund sponsored Abraham Flexner’s comprehensive study that produced influential recommend a tions regarding how American health care should be delivered...
...No person in recent years has labored more successfully than Ralph Nader to build a reputation of respectability and meticulous propriety...
...It gives great weight to his most casual remarks, induces quick responses to his phone calls, sometimes allows him to toy with people, and generally helps him believe that he is living closer to his dreams than those who go without his mark...
...The University-Foundation Complex The conservatism of foundation grant-giving stems not only from politics but also from the eternal quest for dignity...
...What that means is funding something that the government might pick up in two or three years-the grey areas of public policy, we call it...
...When you are pondering the good works of foundations-and wavering between admiration for their works and a sour awareness of the hypocrisy -this fact pushes you to the far side...
...Abolition means cutting off grants to the few ripples in the sea, like Ralph Nader...
...They are compassion, or pity, without sacrifice or risk...
...In fact, who has a colder heart for people than a philanthropist-basking in the midst of the wet eyes that bespeak overflowing gratitude on the part of those who make his benevolence possible, savoring the full ownership for his deeds and obtaining a far better image than the ordinary bureaucratic public trustee, retaining freedom from regulations and controls that wouldn’t recognize the kinship he sees between charity and the life style of the rich, receiving a kind of atonement for any remembered blemishes on the way the money was originally acquired, and standing above the outstretched hands of those driven to sycophancy by a desire to administer the next philanthropic project...
...The maximum liability for any employee is $15,000...
...For example, the foundationsponsored Peterson Commission recently issued a report which argued that foundations’ contributions to society suffered from too niggardly a tax break from the government...
...The Carnegie Corporation (assets of about $350 million) is the only big one that has given us a study grant...
...Despite this-and the project’s promise to teach anybody on campus how to run a press room or raise a crowd-keen foundation minds discerned that the youth education project would probably have a net antiwar, pro-Democrat, anti-Administration impact at the polls...
...Risky at the Margins The Tax Reform Act unquestionably makes the legal position of an activist foundation more precarious...
...The war is a symbol of that...
...But the new law takes no notice of subtler traffic between those in and out of foundations, such as conflicts of interest...
...In short, they have all the pleasures of assured power and money, but are insulated from most of the sense of conquest and the guilt...
...Humanitarian loopholes were so attractive that private philanthropic assets swelled from $2.5 billion to more than $20 billion in the last two decades...
...And a small minority of foundation officials are pondering the irony of the Tax Reform Act, which prohibited or at least inhibited their undertaking the very kinds of fractious experiments that remain as the excuse for their unreachable tax subsidy...
...Consultations with the Center staff, primarily director Charles Halpern, resulted in a “litigation committee” of prestigious Washington lawyers to approve cases for the Center and to certify their respectability...
...Nowhere are these contradictions more apparent than at the Ford Foundation, whose land and offices are carried on the books at $23 million...
...The good foundations are spooked by the tax law,” said Richard Barrett of the JDR I11 Fund, an offspring of the Rockefeller fortune...
...Ford employees are good people who generally seem to enjoy their work and have some commitment to it...
...Even the most candid, self-critical foundation person cannot escape the invisible dollar sign on his forehead...
...Ford finally decided to stay away from the youth training program...
...They have all the feeling and vigilance of a movement, but are insulated from the pain...
...Honest in a professional way, they are the kind of people who speak constantly of flux and of their flexible quest for a changing relevance, yet who never admit mistakes or a loss of control...
...Howard R. Dressner, secretary and general counsel of the foundation, said that the idea was rejected on “program and policy grounds, not legal ones...
...Even in the activist foundations there is a schizophrenic indecision between the wish for excellence and the wish for solutions to backward problems like poverty and under-education...
...Flexner’s 50-year-old work on health services moved few congressmen-the majority agreed health services today are sorely lacking...
...He and his assistant, Tom Wright, observed that Ford receives 2,000 proposals for every one that gets funded, and that each one must be looked at according to the balance between “payoff and trouble...
...It was then that some of the more sen sit iv e philanthropists noticed logical weaknesses in their position, and began to develop nagging suspicions that many of the old justifications for their very existence, so long in storage, had gathered dust...
...All the organizations like ours go to the same, small handful...
...A concerned philanthropist sees a mixture of Henry Adams, John D. Rockefeller, St...
...Judgments about the activist foundations are difficult not only because of the ethical cleavages but also because information about their controversial projects is hard to obtain...
...You May Be Able to Double It-By Selling to Charity,” in Prentice-Hall’s Executive Tax Report), These loopholes are relatively clogged, although knowledgeable people hesitate to underestimate Prentice-Hall...
...A few hard-earned episodes, however, may illustrate how they often react to the controversial grants on which the rationale for their existence now depends...
...I’ve seen professors who have worked on a subject for years bring their proposal to a program officer who will make some inane suggestions...
...They are likeable, very capable, and fashionably confused...
...None was cancelled...
...It singles them out from all other charitable institutions, such as churches, publicly supported charities like the March of Dimes, and community funds...
...Those who conquer sympathy for the philanthropist’s programs feel attached to him for one final reasona desire to share his freedom...
...Congress jumped on foundations because of what anthropologist Robert Ardrey has called ‘the territorial imperative...
...The people aren’t behaving wickedly, but according to the grain of their peers...
...There must now be an extraordinary reason for allocating tax money to private philanthropists...
...Patman believes that all sorts of inequity result from charity-owned businesses...
...Caught between the evaporation of their old appreciated distinctions and the unpopularity of the “bolster the controversial” argument, the foundations offered some rather humorous testimony in 1969...
...Foundation managers have begun to understand that voters will, and probably should, demand something in return for surrendering control over about $1.7 billion of grants each year...
...But Congress never really intended the foundation tax plan to provide political or cultural gadflies, anyway...
...Foundation people still bridle at such a perspective, preferring to see charitable accounts as their money and thereby clinging to the property rights claimed by their ancestors or employers-who once promised Congress that they would cure sickness and ignorance if they could be spared the full brunt of progressive taxation...
...Performance in the charitable field depends on the almost fortuitous coincidence between the interests of donors, many long since deceased, and the social priorities of the moment...
...There is little reason to expect that Congress could support an alternative distribution system for social risk capital...
...There must be a better way...
...Everyone is trying to look like they have some control...
...Princeton, which claims only one (Benson Ford), is on the receiving end of outstanding grants worth $3,245,022...
...The project coordinators told Ford that they could not ask any of the students about their politics...
...and Senator Albert Gore (D-Tenn...
...Right-wing foundations are embarrassing on the innovative end, too, caught up with projects like Dr...
...Most of the others I talk with are very apologetic about their caution...
...There were unbelievable things coming out about that decision,” recalls one staff member...
...No, I wouldn’t cut them off, even now...
...Sexy, unliberated women are as plentiful as the chic recessed telephones, and they both take approved visitors to the professionals...
...At one point, the sources say, Ford told them that a project such as theirs would require White House clearance...
...Take Vice President Mitchell Sviridoff‘s message in a Ford annual report: The agenda for the seventies clearly will have to cover more territory...
...An American Legion Magazine task force examined American philanthropy and concluded, with some chastisement, that it was supporting “outright communists, fellow-travelers, socialists, do-gooders, oneworlders, wild-eyed Utopians, and well-meaning dupes...
...Chicanos and First Class Flights How far these horns were out before the Tax Reform Act-before the political landed gentry advised philanthropy that it preferred not to be disturbed-is a matter of some speculation...
...Jonas Salk’s early campaign against polio...
...It is much harder now to deal with groups that are not in established institutions,” agreed Eli Evans of the Carnegie Corporation, who was instrumental in Carnegie’s Nader grant...
...most significant people possible, which in turn means to be associated with people who represent excellence and high acceptability...
...First, unknowns are less predictable and therefore more prone to controversy...
...When the Duke Endowment required legal work, for example, the trustees had to look no further than the firm of two fellow trustees, Robert McCormack and Thomas L. Perkins, for counsel worth $46,800 in 1970...
...Less agreeable investors would not hold such unproductive assets...
...They are somewhat guarded, but less so than federal civil servants...
...Ford trustees get $5,000...
...People were saying that first class seats were needed for the extra working room and because the tickets were easier to get on short-notice trips-or because you might be traveling with someone who cared about stuff like that...
...In the midst of tax breaks, lofty visions, and the hungry poor, however, he comes on like Don Quixote in a limousine...
...They are power without more than an inner responsibility to anything...
...The foundations’ best protection against such abolitionist sentiment has always been an emotional one-the image of a little child, crippled, surrounded by attendants who provide tender care at a foundation-supported hospital...
...In 1969, the endowment paid out a total of $873,265.50 for 22 trustees and officers...
...At a time when voters are pushing for a voice in all the institutions that affect their lives-even private businesses which earn their keep-it seems strange to take money from the publicly controlled tax coffers and give it to the wealthy for disposal as they see fit...
...One might almost as well be in Bosnia with Paul Mellon...
...One inevitable result of the political restrictions is more protective bureaucracy to watch over grantees and make sure they keep their noses clean...
...YOU can search all the academic journals and the political sheets on the left and you won’t find anything that really gets at the problems of foundations,” said one former staff man, who relates academic ties to the general philanthropic difficulty hearing anything but roses...
...Would the child’s care vanish without the philanthropist...
...The Case Against Foundations by Taylor Branch One need not be a Marxist, or even a Democrat, to deduce that foundations are unlikely to be restless with the world...
...Flitting from program to program, they are concern without permanence...
...By 1969, one such special foundation role had a touch of staleness about it, namely the pioneering that philanthropy had once done in the fields of health, education, and welfare...
...For these reasons, and many others, the best accommodation of the conflicting pressures on an activist foundation is to give someone at Harvard a grant to study this or that social abomination...
...Ford’s precautions, however, indicate the mood in which most of the activist foundations sally forth into controversy...
...Even this mild adjustment was not required in the great bulk of foundations, where signs abound that people are as out of touch as ever...
...The inescapable conclusion is that foundations are by nature pretty tame social kittens...
...The Endowment got the message and recruited John Foster Dulles to head its board of trustees until the State Department beckoned him...
...But to create that ideal by appropriating public funds to the richest people in the country is nonsense...
...Although many of Patman’s provisions against financial abuse by foundations were watered down, he was in many ways fortunate to make the law as tough as it is...
...Such a standard of living hangs awkwardly on people who are liberated from the marketplace in order to help the less fortunate survive within it...
...There has to be a reason for such abandonment-a foundation service which government cannot or does not perform, a clear realm of excellence beyond the powers or capacities of public institutions...
...This may or may not be related to the fact that universities stood to lose money from the taxand gain it from the political restrictions, since former grants to individuals and oddball groups are now likely to be channelled through the safety of a college...
...The mixed desire to appear harmlessly tame and shockingly innovative at the same time accounts for a portion of the current nervousness in the halls of philanthropy...
...In effect, charity subsidizes the business...
...I gave him the grant because he is a Phi Beta Kappa, Eagle Scout, president of the Young Republicans, author of four monographs, and former summer intern for Bennett Cerf...
...They seemed to be refugees from an era of sodbusters, undereducated Southerners, anti-intellectual Know Nothings, and fundamentalistspeople too simple to understand the need for large institutions in modern society, people as primitively suspicious of bigness and complexity as Tarzan in New York...
...Brewster then assaulted the cherished notion that foundations are more responsive than government to changing times...
...These achievements were recited again in 1969, but they had lost much of their emotional impact...
...Foundations are wealth without greed, in fact, with countergreed, since most employees sincerely want to give more money away...
...Foundations think the payoff is worth trouble only in rare cases...
...Richmond was running for the Brooklyn congressional seat of Representative John Rooney, scourge of the State Department and protector of the FBI as chairman of an appropriations subcommittee...
...If all support for university teaching and research were to come from the government -if there were no sources of unprogrammed, non-political funds to bolster the controversial...
...It’s a cultural phenomenon, and you’ve got to think that a few changes will seep through here and there to some of the new generations of moneyed people...
...Instead of choosing between nature and the city, Ford bought both by erecting its modern glass home around an expensively manicured garden near the United Nations...
...It noted the unfortunate impact of such a step on the tax structure, but concluded that tax breaks for those of lesser means would be charitably unproductive...
...Really, that’s almost literally true...
...When pushed by a Populist like Senator Gore regarding the justification for their tax exemption, they would climb high into abstraction with a sanitized version of the Brewster speech...
...2) 85 per cent of the executives are male and 30 per cent have Ph.D.s (no figures on race are available...
...Radical Is Relative After the Tax Reform Act of 1969, the Ford Foundation sought to demonstrate that it was still in the business of social change by funding the Center for Law and Social Policy, a public interest law firm in Washington...
...Why not abolish foundations, then...
...Determined to get something through during the brief cry for tax reform, Patman had to soften those financial portions of the bill that were unpleasant for the average philanthropist/ campaign contributor-and throw in some political land mines for the few foundations who dared to venture on controversial ground...
...If not, a tax of 10 per cent of the forbidden grant is levied against the foundation, while a two-and-a-half per cent tax falls on each employee who “agreed” to the deed...
...It is difficult to make judgments about the activism of the venturesome foundations because each one presents such a poignant mixture of opposites that are rarely found together...
...Moreover, the critics seemed far removed from the kind of people who exercise power in modern America...
...They are missionaries without more than a vicarious involvement in anything...
...I mean it’s going to end, but nobody’s going to end it...
...The 1969 hearings were filled with representatives of small businesses complaining that church-owned clothing stores, university-owned laundries, or foundationowned manufacturers were killing them by riding the cushion of taxexempt ownership...
...His original bill had contained no political restrictions, whatever...
...There is no legal stain, for example, in the fact that President Kermit Gordon of the Brookings Institution sits on the Ford Foundation board, which has outstanding grants of $2,081,821 to Brookings...
...Then, if the foundation does not satisfy the IRS that the illegal grant is corrected within a specified time period, a supplementary 100 per cent tax falls on the foundation, with a new 50 per cent tax on any employee who refuses to agree to the redemptive measures...
...That would be all right except that he almost always lacks humor about it...
...The thought that most of the attention might flow from the money in, or believed to be in, his power is unpleasant...
...We were always within the provisions of the 1969 Act, but the foundation was worried about what the most vindictive congressmen would think, Ford saw to it that the Center insulated itself with as many layers of respectability as possible...
...In the period before the enormous growth of government, foundations were appreciated for venturing into areas that politicians avoided for lack of revenue or because the prevailing political philosophy was too hard-bitten for such tasks...
...Rockefeller paid a portion of Dr...
...If, on the other hand, the child would be publicly supported, is not the philanthropist superfluous- esp ecially since his program, even for the child in question, is made possible by tax exemptions from the public...
...So you have a choice between abolishing foundations or waiting for and encouraging things like the Stern Fund, the New World Foundation, the Held Foundation, and a rare dropping from Ford...
...But all the indications that we have so far point to regulations that we can live with...
...Regardless of the ultimate purpose of a project, the persons immediately on the other end of a philanthropic check are likely to be highly educated, with incomes between $9-25,000 a year...
...That’s what the better foundations do...
...Or do you give compensatory scholarships to the most needy and unproven because you cannot ignore their need, or because the proven probably shift for themselves...
...Look on our works, at that child’s face, they say, and tell us how you can be against our programs...
...And Rep...
...Whose Cold Heart...
...The conservatism of wealth is not the only limitation on the social mission of foundations, for the 1969 Tax Reform Act placed tight restrictions on political activity and controversial grants...
...Projects of the socially activist foundations also have these qualities, freeing people from the shackles of the marketplace to engage in movements for social change...
...The debate over the Tax Reform Act prompted much thinking about and searching for that unique service which makes philanthropy worthwhile for the citizenry...
...As David Hunter, executive director of the Stern Fund, said, “There is very little justification for foundations, period, They are basically undemocratic institutions...
...Although there were some new glories on the list-such as Rockefeller’s role in discovering the miracle grains of the Green Revolution, and foundation support of public television-the overall litany had an air of reminiscence about it...
...Each day, they sit in an opulent New York office and make grants with the dividends that Henry Ford’s exempt money has earned from the foundation’s investments in IBM ($30.5 million), AT&T ($10.8 million), Dow Chemical ($5.4 million), CBS ($2.2 million), Lockheed ($1.5 million), 3M ($5.4 million), American Express ($15.5 million), Litton Industries ($9 million), Boeing Company ($6.7 million), various oil companies ($1 18.4 million), Ford Motor Company ($ l .2 billion), and about 150 other holdings...
...If a dean calls up from the University of Kansas, he is lucky to get listened to at all...
...The vast majority would cling to the Boy Scouts, museums, and the Community Chest through thick and thin...
...They like to see people on the board that they might have had lunch with the week before -people they know are all right...
...The Rockefeller Foundation spurned Kenneth Kenniston as a young professor, but scrambled to sign him up as a writing fellow after he wrote The Uncommitted and was heralded in The New York Times...
...The active funds learned that publicly supported controversy and experimentation is an improbable venture because the taxpayer is a conformist and doesn’t like his money stirring hornets...
...The foundation may receive the death penalty by losing its exemption...
...Liberals, We everyone else, are trying to maneuver so that the war will end in such a way that things look like they ended it...
...The Charitable Crisis After the 1969 act went into effect, the Ford Foundation undertook a comprehensive review of its 2,000 active grants...
...Giving money to unknowns involves a double risk...
...Ford gave the Center $375,000 in the fall of 197,0, after it had been in operation a little more than a year...
...The unique contributions of foundations have been so eroded by the increased responsibilities of government, and their innovative freedom so circumscribed, that philanthropy seems too ordinary-and abuse too certain-for the voters to support them...
...Patman produced so many examples of luxurious frivolity that the foundations were unconvincing in their concern for the poor...
...Of course, the impact of the law on activist foundations depends largely on how they expect it to be enforced...
...It was too hot a potato, with us in a fishbowl after the 1969 act,” said one staff source...
...Meanwhile, Representative Wright Patman (D-Tex...
...President Vivian Henderson of Clark College, a relative newcomer to the allmale board, is its first and only black, and Clark College enjoys $60,000 in Ford IOUs...
...There is always going to be some interpretive leeway in phrases like ‘attempt to influence legislation.’ I mean, what is ‘influence,’ or ‘legislation...
...University teaching and administration emits the largest number of philanthropic professionals for the foundations, creating a standing wave on which the money can flow back into the universities, stimulating the production of more professionals...
...Furthermore, there is a natural human tendency for him to believe that the extraordinary compliments paid to his genius and social commitment are earned, personal, and justified...
...No Tinsel Hope The Brewster ideal-of a dispersed pool of risk capital for stimulating social change-is a noble, perhaps vital one for the country...
...A 1965 Treasury report disclosed a great many such cushions, including the arrangement between the Houston Endowment (assets of about $200 million) and the Houston Chronicle...
...The proposal has caused many a philanthropic eyebrow to quiver because Common Cause is an openly political organization with registered lobbyists and no pretense of tax-exempt, educational neutrality...
...For one thing, the new law establishes personal liability for officers who approve a grant that the Internal Revenue Service later finds a prohibited “taxable expenditure...
...The susceptibility of foundation people to delusions of activism is another reason why foundations cannot be expected to create many new things or be risky political catalysts...
...Is not philanthropy a throwback to less prosperous times, when the public cared about crippled children but could not afford to care about all of them and used the philanthropist to hide its selectivity...
...For this reason, great attention has been paid to the languid process by which the IRS has sputtered forth with its interpretive regulations, now in published, but not finalized, form...
...From this point of view emerges recent criticism of foundation boards of trustees, such as Joseph Goulden’s skillfully acrid discourse, The Money Givers...
...Every political brushfire thus created would produce a mismatch between Congress’ strongest instincts and its cerebral Brewsterism...
...In private dispensations...
...These people decide directly what is to be done with the money-or in the larger foundations, they do so through a bureaucracy of professionals, who strive not to offend the trustees...
...Grants to individuals consumed only three per cent of foundation budgets in 1968...
...It is a tribute to Ford employees that they manage to produce relatively imaginative poverty grants from such an environment...
...A number of colleges have benefited handsomely and some departments of Harvard are soon to receive important gifts from such sources...
...None of these criticisms was of great concern to foundations before 1969...
...Some were toned down, and new proposals began to be scrutinized far more closely...
...The sniping was disparate, extreme right and left, leaving philanthropy in the respectable center...
...One can also hear of internal debates over air travel policy...
...Venturesome philanthropists find these interpretations somewhat encouraging, but foggy-the kind of situation in which an adversely motivated IRS Commissioner could cause a great deal of trouble...
...Brewster’s remarks placed foundations in a difficult position...
...Rooney noticed both the connection and the favorable impressions generated, later warning his House colleagues that they might face the same obstacles unless foundations were driven from politics...
...During the McCarthy period, Representative Edward E. “Goober” Cox of Georgia investigated philanthropy in a search for communists and other collectivists...
...Those poor groups that are not used to dealing with restrictions, bureaucratic language, the paperwork required for monitoring, and so on, are tough to fund...
...In 1909, the Rockefeller Foundation journeyed to the swampy loam and red dust of the Deep South to cure hookworm in about two years...
...Also, the yearning to approve foundation freedom may seduce people into thinking that the poor are served by their consuming foundation money while the poor go hungry...
...I see it every day,” said one Ford staff man...
...The study’s questionnaire reveals other surprising things about foundation administrators: 1) there is an inverse correlation between compensation and the amount of time an administrator spends in charitable work each year...
...But more than most private institutions, a foundation needs constantly to reassess its priorities...
...Its sinews are as taut as those of Richard Nixon’s self-control...
...Isn’t the philanthropist asking a misbegotten question by assuming that genuine feeling for cripples requires support for him...
...Congress showed no great hesitation to reclaim a portion of the tax breaks given philanthropy, viewing the money as public property...
...Ford was more concerned about politics than with legal requirements,” said one person involved with the “consultations...
...The act is certainly no death warrant for foundations...
...These projects are attractive somehow, because of their oddity, their offbeat creativity, and their liberation from worries about whether enough people would buy reports on chthonic traditions...
...Some people have detected signs in the individual penalties that politicians expect an especially chaste moral standard of charity...
...Of course somebody must be causing all these changes...
...The normal desire of foundation masters is to be appreciated in the most significant way possible, which generally means by the Taylor Branch is a managing editor of The Washington Monthly...
...It blinds grantees, and those who hope to be grantees, to the limitations of foundation money-limitations which usually emasculate the social impact of grants designed to cause controversial change...
...It is not at all surprising that educational institutions, chiefly universities, provided the strongest, most consistent support for foundations during the 1969 debate...
...Yale, alma mater of five, is on the books for $6,827,237...
...Asked whether they would now consider making a grant to Common Cause, officers of several large New York foundations responded with a don’t-bet-on-it shrug and a chuckle for Stern’s impishness-neither for attribution, of course...
...Although foundations spend only eight per cent of the nation’s charitable funds each year, their money is highly mobile, with few fixed obligations, turning over rapidly to new and different projects-the kind of money that can be used very powerfully for political experimentation...
...Congress respects foundations only by tradition and political attachments to the donors, and its respect is hanging by a string...
...What they say is that you better go slow and be careful...
...They are status without forgetting their identification with the ignorant poor so unmistakably below...
...While the right-wing assault abated somewhat in the 196Os, it was always there-waiting to be activated by things like the Ford voter registration grant to Cleveland’s CORE before the election of Mayor Carl Stokes, and Ford’s travel grants to eight of Robert Kennedy’s staff members...
...What the law has done is to bring tax lawyers into the act in a major way,” said one grantmaker...
...This allows more than sufficient holdings for control...
...Negotiations with Ford officers dragged on for most of the summer...
...Their best playing card-the point about foundations as the last pluralistic hope-was precisely what Congress did not want to hear in 1969...
...The report concluded that the endowment’s forbearance in accepting low returns on Chronicle stock, of which it owned 100 per cent, gave the newspaper a significant competitive edge against the Houston Post...
...They are the principal recipients of the grants...
...The Guggenheim Foundation enabled Dr...
...Duke-the third largest foundation, with assets of nearly $700 millionexemplifies another oversight of the Tax Reform Act-exorbitant salaries...
...The boards of trustees represent an exceedingly thin and contented slice of the American social stratum...
...And nearly close your eyes...
...Most people’s hearts shrink from the coldness required to hold their opposition -until, perhaps, they ask some further questions...
...They cannot communicate with any government employee, other than by making available the results of “non-partisan analysis, study or research...
...Sending the Grants Home The Tax Reform Act makes several legislative detours to intimidate foundations from political meddling...
...Only the crusaders like the Ford Foundation-whose controversial grants brought on the wrath of Congress-are cowed and restrained by an uncomfortable feeling that any experimentation is being watched...
...Foundations are not new to criticism...
...Many of their pronouncements could be used by liberal candidates for any major public office...
...Conflicts of interest are not restricted to the activist foundations...
...During the campaign the Richmond Foundation began to scatter money around to diverse ethnic organizations like the Yeshiva Talmudical Academy, the Sacred Heart Day Care Child Center, the Puerto Rican Trade Committee, and the local Urban League...
...The commission, headed by Peter G. Peterson, assistant to President Nixon for international eco nomic affairs, warned that, “without important new sources of funds amounting to many billions of dollars, our society will feel the full force of what can be called the charitable crisis of the 1970s...
...But the extent to which the activist few are cramped by the new law, and by their very nature and origin, is a subject that bears investigation by anyone who feels at all charitable toward (or obligated to) private philanthropy...
...A soon-to-be-published foundation study by a group of New York foundations maps the personnel traffic running between charity and knowledge and finds that it moves in the same patterns and frequencies as that between the Pentagon and the defense industry...
...Therefore, foundations have a magnetic charm about them because of their potential utility for the growing dilemma of young people and others who want to be freed for such movements...
...If you say something stupid at a cocktail party, people aren’t going to say you’re wrong...
...You unconsciously respond more to the Harvard dean...
...They’ll bend with you...
...The new law therefore inhibits the growth of new institutions, which is tragic since that’s what foundations should really be building...
...Foundations are forbidden “to influence legislation through an attempt to affect the opinion of the general public or any segment thereof...
...The project, organized by some former aides of Eugene McCarthy and some Ripon Society Republicans, was adorned with many convincing chestnuts about providing young people with “meaningful ways to participate in political decision-making within the system...
...Although Brewster’s speech was entitled “In Defense of Private Charitable Enterprise,” it caused some squirming in foundationland because he attacked every philanthropic homily other than the anti-conformist line above...
...It was also old-fashioned-warmed-over Populism and leftover McCarthyism...
...Hookworm Remembered This left only one avenue of rationale for the existence of the charitable funds: that foundations should be supported as pluralistic sources of independent risk capital for social innovation, as experimenters and probers of the unorthodox and controversial...
...The Stern Fund is on the foundation fringes by abandoning the traditional IRS cushion, but even its continuing radicalism is blunted, by the fact that Common Cause sounds so much like a foundation and that few people can escape thinking of its mentor, John Gardner, as anything other than a charitable, non-partisan person...
...Since World War 11, however, the barbs have come primarily from the right...
...Hell,” observed one foundation president, “if we could hold individual corporate or government officials to the same standard of accountability, we would have a radically different society...
...and 3) in response to the Tax Reform Act, foundation administrators said they would place more emphasis on “protective” staff and “probably move to people who would be less likely to ruffle the waters...
...These blessings were presented in person by foundation president Frederick W. Richmond, who took no pains to discourage the notion that he, private citizen, was also running for Congress...
...The administrative costs will rise on all grants, but they will jump especially high on projects involving new organizations, non-exempt organizations, and individuals-anything for which the law requires “expenditure responsibility” from the foundations...
...Any philanthropist contemplating a grant in the controversial twilight zone will find ample food for thought in these sanctions...
...For example, his original bill prohibited foundations from owing more than a three-percent interest in any single company...
...Francis of Assisi, John Dewey, and Galileo in the mirror...
...The foundation assembled an advisory committee containing no less than four past presidents of the ABA to bless the grant...
...Universities are not the main foundation constituency for nothing...
...The Tax Reform Act does not even contain some of the provisions considered essential by Patman, sponsor of its foundation section...
...If you should know of any trustees or foundations who may be considering disposing of foundation assets, I hope you will suggest the Law School as a worthy beneficiary...
...The self-esteem of foundations is gravely fixed...
...But the public’s view of the charitable tax exemption has changed since the old days, when most voters considered it an equitable bargain to spare the rich from high taxes in return for their pledge to undertake noble, if soggy, endeavors beyond the purview of government...
...When pushed by a conservative congressman, on the other hand, about this or that scurrilously radical program, foundations recounted the hookworm campaign, the Salk vaccine, and perhaps the support of an educational institution in the congressman’s district...
...And what they say is that the law is vague and uncertain, risky at the margins...
...They concentrated on that, although some of them also mentioned the political restrictions...
...When the Peterson Commission on Foundations and Private Philanthropy sought to learn what people think of foundations, it conducted a “Survey of Distinguished Citizens” by sending questionnaires to a sampling from Who’s Who and other cream lists...
...They are crusaders without the stigma of otherworldliness...
...Fred Schwartz’s Christian AntiCommunist Crusade, financed by the Pew foundations...
...That’s why he doesn’t like to hear harsh criticism of foundations from close to home...
...This often looks like a game of anticipation, in which an active foundation detects a new social wavewomen’s liberation, consumerism, peace, pollution, Chicanos, corporate responsibility, etc.-and funds a portion of it, studies it, or otherwise rides...
...Gordon Sherman, former president of Midas Muffler and the Midas International Foundation, ousted from both by his father because he was too liberal, says: The whole problem of organization in the country now is to try to control the elements of change...
...In April, 197 1 , John R. Mahoney, chairman of the Harvard Law School Fund, wrote his fellow alumni: As you may know, a number of family and other private foundations are being terminated and their assets being transferred to charities such as educational institutions...
...I do it myself, even though I promise not to...
...After all, they are essentially aggregations of wealth, controlled by the aggregators and their chosen successors...
...In a nation beset by divisiveness, surely one criterion that ought to rank high in foundation decisions is the potential of any idea or program to reunify people in support of constructive change and social equity...
Vol. 3 • July 1971 • No. 5
