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February 2013 (6 posts)

Version 2.0: The Giving Pledge Globalizes
February 20, 2013

(Bradford K. Smith is the president of the Foundation Center.)

Brad Smith

They said that the Giving Pledge was "made in America," they said that Bill and Melinda Gates and Warren Buffett didn't understand other cultures, and that their brand of philanthropy was inappropriate for (substitute the country of your choice). They were wrong: on Tuesday, February 19, the ranks of the 93 American billionaires who have already signed the Giving Pledge - a public commitment to dedicate more than half of their fortunes to philanthropy - were joined by a dozen more representing 8 countries. In one fell swoop, the Giving Pledge has gone global.

The Giving Pledge has gone global.

How could the skeptics have gotten it so wrong? Since the Giving Pledge launched in 2010, wherever my travels have taken me, I have heard Brazilians, Mexicans, Europeans, and Chinese go to great lengths to explain why it would never catch on in their countries. On the eve of the Gates/Buffett visit to China, I was interviewed on CCTV2 (the English language channel of China's state-controlled media conglomerate) by a reporter who bombarded me with question after leading question to prove that theirs was a fool's errand. It was all I could do, in vain I suppose, to tell her that as hyper-developed as philanthropy may be in the America, it is alive and well and growing in China.

Here's what the skeptics fail to understand about the Giving Pledge:

Bill Gates is not (only) American - While the world has struggled to come to agreement on standards for just about everything else that matters, Bill Gates created and proliferated a standard operating system - Windows - that came to be used in every corner of the globe where there was a desktop and a computer. He led a second revolution when he and his wife Melinda turned their personal wealth and vision to creating an internationally-minded philanthropic institution. For both of these enormous achievements, Bill Gates represents a unique example of private success and public altruism on a global scale that many seek to emulate.

Billionaires are a culture unto themselves - As much as they may be African, Asian, European, or Latin American, the wealthiest billionaires are also part of a growing, global culture of the ultra-rich. They are densely networked through business and investment ties and "hang" together in places like Davos, Aspen, and at the Clinton Global Initiative. In deciding to join something like the Giving Pledge they are more likely to look to the example of their fellow billionaires, wherever on the globe they may be from, than to pay credence to the skeptics in their own backyard.

As the ranks of the world's billionaires grow, we have the Giving Pledge to thank for elevating philanthropy to the level of a higher calling to which they can aspire.

Philanthropy is an aspiration - Whether the Giving Pledge billionaires started out poor or were born into wealth, they see their fortune as a form of immense privilege. And, as their public pledges reflect, they recognize that they are in a position to do something about things in the world they feel could be better. As the ranks of the world's billionaires grow, we have the Giving Pledge to thank for elevating philanthropy to the level of a higher calling to which they can aspire.

The Giving Pledge is a social movement - When the Giving Pledge was first announced, I blogged about it being akin to a billionaire social movement. Several years later it has become one. Its ranks have swollen to over 100, it has its own web site, an independent resource in the Foundation Center's "Eye on the Giving Pledge," and periodic gatherings where pledgers share their experiences in philanthropy. As a movement, the Giving Pledge provides identity, recognition, and - above all - a network through which philanthropists can learn from one another. When you think about it, as wealthy as they are, the only place Giving Pledge members can turn for advice without being sold a service or pitched a project is probably to each other.

The most surprising thing about the globalization of the Giving Pledge is that anyone should be surprised that it is happening. Information is global, technology is global, many of the world's most pressing challenges are global, and ultra-wealth is global. Welcome to Giving Pledge 2.0, to be followed by future upgrades. I for one am eager to see where it will take philanthropy.

-- Brad Smith

Glasspockets Find: The Giving Pledge Goes Global
February 19, 2013

The Giving Pledge Goes Global.

Explore the Eye on the
Giving Pledge»

A press release, announced on February 19, 2013, that 12 additional families have joined the Giving Pledge, the effort launched by Warren Buffett and Bill and Melinda Gates in 2010 to encourage the wealthiest Americans to commit the majority of their assets to philanthropic causes. The new pledgers are all from outside the United States, marking a global expansion of the Giving Pledge effort and bringing the total number of signatories to 105 individuals, spouses, and their families.

The new pledgers include:

Since August 2012, Glasspockets has been keeping an Eye on the Giving Pledge, providing an in-depth picture of the participants and their publicly known charitable activities. Profiles for the new signatories are now available.

Explore the Eye on the Giving Pledge»

-- Daniel Matz

Board Compensation in Grantmaking Foundations: Reasonable and Necessary?

Mark Hager is associate professor of nonprofit studies in the School of Community Resources and Development at Arizona State University. He teaches a graduate course in philanthropy each spring semester.

Hager_100Tradition dictates that board members work for free in most quarters of the nonprofit sector, but that isn’t necessarily true for grantmaking foundations, especially independent ones. In a new paper (open access available until late March) published in Public Integrity, the ethics journal sponsored by the American Society for Public Administration, Elizabeth Boris and I consider the question of what varieties of grantmaking foundations compensate their board members for governance duties. It reboots and reframes an earlier analysis conducted by the Urban Institute, the Foundation Center, and GuideStar.

In the paper, we point to several interesting examples, including a very large foundation’s generous policy of trustee compensation spelled out in its organizing documents, another with seven-figure annual compensation paid to a bank to act as a very part time “institutional trustee,” and another that underwent IRS investigation for eye-popping compensation that essentially amounted to trustees looting a charitable trust. These cases aren’t typical, but they are part of the big picture of how work gets done in grantmaking foundations and how much insiders gets paid to do it. In more typical cases, foundations might have justifiable reasons to compensate board members, including to ensure representation from beneficiary populations or to extend health insurance benefits to family founders. It’s the extreme cases, however, that threaten to color all of philanthropy.

Compensation for governance duties is perfectly legal, so long as it falls under the IRS’ broad standard of “reasonable and necessary.” The practice is pretty rare in community foundations, partly due to the fact that they rely so heavily on public contributions and are therefore subject to public scrutiny. It also appears to be fairly rare in corporate foundations, but that may largely be due to the fact that many corporate foundation trustees get paid as corporate executives, making their compensation invisible on the foundation side. About one in five independent foundations, however, appear to report compensation of their board members for governance duties, as reported on Form 990-PF. 

The practice is always concentrated in larger foundations. Of the 10,000 largest U.S. foundations that are the subject of the study, more than half compensate no one, including any staff. Most foundations are small and get their work done by family volunteers. Foundations that compensate staff members are more likely to compensate their board members. However, for the typical foundation, board compensation levels are imminently reasonable. The median individual board member compensation in independent foundations is only about $8,000. That’s not an indication of a rampant problem.

However, a few bad apples always threaten to spoil the bunch. The median may be $8,000, but the mean was $15,700 due to a number of well-compensated apples. When a board member’s one-year compensation reaches $200,000 (this happens), or a bank trustee is compensated $1,000,000 to spend a few hours a month managing investments (noted above), or aggregate board compensation in a given foundation exceeds its grants in a given year (this happens too), we might rightly ask whether compensation has exceeded what is “reasonable and necessary” for governing the foundation’s mission. Also, $1,000 here and $100,000 there adds up to real money, to the tune of more than $100,000,000 paid out to foundation board members in a given year. People hear that and start asking why that money isn’t being allocated to community nonprofits instead.

Who is going to check to see if board compensation is reasonable and necessary? For many organizations in the nonprofit sector, the general public is the first regulator. Service providers and advocates, especially those that rely on public contributions, reign in compensation and overhead costs due to public pressure. This is not the case with independent foundations, however, since they are not beholden to public contributions. Since the general public has no skin in the private foundation game, that public tends to ignore them.

A second regulator candidate, then, is government. Certainly, the IRS can prosecute private foundations that exceed the vague “reasonable and necessary” standard. Thing is, they don’t, at least not very often. For one thing, identification of board member compensation is very difficult on Form 990-PF.  For 2008, the IRS revamped Form 990 for public charities so that compensated individuals are identified as board members or employees. No similar revamp happened to Form 990-PF, where administrative and governance duties are conflated. Picking out board members working on governance duties is tricky; board compensation must be inferred from titles or numbers of hours worked, if reported. So, board compensation is not always obvious on the federal form. Even when unreasonable or unnecessary compensation appears evident, the IRS is often unwilling to take on community elites with deep pockets.

The third regulator, maybe, is private foundation executives and board members themselves. That’s one of the ideas underlying Glasspockets: private foundations will regulate themselves when practices are transparent. Private foundations certainly do not need to eradicate the practice of compensating board members for governance duties. However, when outliers cause observers (like me) to raise their eyebrows, the whole field can get painted as out-of-touch with community needs. Maybe Glasspockets can plant a stake in the ground on this issue to encourage foundation leaders themselves to openly disclose this information as a best practice. Voluntary and widespread disclosure of board member compensation, venues for discussion, and bright lights on questionable practices can help stem criticism of compensation that is “reasonable and necessary” for carrying out the exempt purposes of grantmaking foundations. 

Everyone benefits when somebody, somehow, enforces the “reasonable and necessary” standard. Grantmaking foundations will keep better faith with their local communities. Regulators will be able to concentrate on more worthy offenses. Nonprofits will benefit from resources that are otherwise diverted into trustee pockets. Win, win, win.

-Mark Hager

From the President: Transparency 2.0
February 13, 2013

Jim Canales is the President and CEO of the James Irvine Foundation. This post first appeared February, 13 on the foundation's Web site.

Canales-100Within the past few weeks, I have read with interest the observations of a number of active bloggers in the arts field whom I have come to respect and admire: Nina Simon, Diane Ragsdale, Clay Lord and Barry Hessenius. Each of them has blogged on aspects of the Irvine Foundation’s new arts strategy and, in doing so, has contributed to a robust dialogue that has played out on their respective blogs as well as on Twitter.

And that’s what prompts my contribution to this discussion: I will comment only lightly on the substantive issues they have raised related to our Arts strategy as my colleague, Josephine Ramirez, who directs our Arts program, plans to post a more substantive comment on those issues in the next week or so. There is another aspect of this discussion that I do want to comment upon and invite others to engage on with me and my colleagues in philanthropy.

Whether people agree or disagree with the choices we have made, we are now discussing it, publicly, intelligently and forthrightly.

From my early days as Irvine’s CEO, and with great support from our Board of Directors, I have placed a premium on transparency, both with regard to our work at Irvine and for the broader field of philanthropy. I have certainly not been alone in this quest (Brad Smith at the Foundation Center is probably our field’s leading champion), and I think it’s a fair observation to say that the field has come a long way in the past decade.

At the same time, I would characterize much of the progress under the headline of “Transparency 1.0”: creating useful and information-rich websites; describing in detail the strategic priorities of the foundation; sharing results of evaluations and learning; posting results of surveys that offer feedback, such as the Center for Effective Philanthropy’s Grantee Perception Report. All of these have been positive developments, aimed toward shedding more light on what is often an opaque and impenetrable field. At the same time, these efforts at transparency are primarily one-way, aimed at information transmission. In “Transparency 1.0,” we decide what to be transparent about and then put it out there for you to digest.

Today, the advent of social media, to which philanthropy is still a bit of a newcomer, combined with the recognition that foundations certainly do not have all of the answers, offers opportunities for the field to embrace and practice what I will call “Transparency 2.0,” oriented toward dialogue, debate and shared learning.

And that’s what has struck me about this recent dialogue related to Irvine’s Arts strategy. Whether people agree or disagree with the choices we have made, we are now discussing it, publicly, intelligently and forthrightly. I admire those who have stepped forward to criticize aspects of our strategy, whether they believe it is wrong on its merits or they view it as yet another example of “strategic philanthropy” gone awry, where we are dictating and imposing our solutions upon the field.

That is certainly not our intention. What is different for us in our new Arts strategy is that rather than continuing with a broad-based approach that funded projects across multiple objectives, we made the strategic decision to direct our finite resources in a way that, in our view, will best position the arts field for future viability and success. In doing so, we are openly expressing a point of view about how we think the field must evolve to ensure its dynamism and relevance. Yet, we are very clear about our willingness to learn with our partners in this effort, to refine our approach accordingly, and to help to advance the field’s understanding of the many ways to engage a broader cross-section of Californians (in our case) in the arts.

To draw from Diane Ragsdale’s very thoughtful analysis, I suppose one person’s coaxing might be another person’s coercion, but I hope what we will be able to do via this work is to co-create. In the end, we care about impact. And we believe that to maximize our ability to have impact requires a clear, focused and coherent strategic direction. That’s what we are aiming for in the Arts, similar to what we have already been committed to in our other core program areas of Youth and California Democracy.

Just as we lament the fact that the arts are too often (and wrongly) viewed by funders as discretionary or recreational, so must we demand that arts grantmaking be guided by the same level of rigor and strategic direction as other program areas. That’s what we are striving for at Irvine, and we know that we have much to learn along this journey. And that’s why I have been inspired and pleased by the active engagement from others, demonstrative of the evolution of transparency in philanthropy. So, please keep the ideas, observations and critiques coming. It’s the best way to ensure we can achieve the end we all agree upon: a vibrant, relevant and successful arts field. And in doing so, we might just model new ways for foundations and their partners to engage, debate, discuss and learn together.

-Jim Canales

Glasspockets Find: 2013 Annual Letter from Bill Gates
February 12, 2013

Gates Foundation Annual Letter

In previous annual letters, Bill Gates has highlighted the power of innovation to reduce global hunger, poverty and disease, and improved educational outcomes in the U.S.  In the fifth Annual Letter from Bill Gates, he notes that any innovation will fall short if it cannot reach the people who will benefit from it.  That’s why he shifts his attention this year to examine how innovations in measurement are essential to discover better ways to deliver the solutions that the Bill & Melinda Gates Foundation seeks to push forward.

“You can achieve amazing progress if you set a clear goal and find a measure that will drive progress toward that goal…”

Throughout the letter, Gates provides examples from the foundation’s experience that may inspire others to think critically and honestly about choosing the proper measurement to better gauge whether progress is happening—and, if not, what adjustments might make sense.  In northern Nigeria, he describes how digital technology has vastly improved the ability to map the distances between villages so that polio vaccine can more effectively be distributed to children at risk for the disease.

In Ethiopia, well-stocked health clinics have been set up in the vast rural stretches where most of the people live, enabling, among other successes, a significant reduction in the rate of child mortality and an increase in vaccination coverage.  Unlike ten years ago when it was unusual to document a child’s birth or death in rural Ethiopia, today there are much better official records that provide data to track progress and allow for adjustments to be made in order to address remaining—or new—needs.

In Colorado, the foundation initiated a project in 2009 to better understand how to build an evaluation and feedback mechanism to help teachers improve.  Final results of this project were announced last month, concluding that there are “observable, repeatable, and verifiable ways of measuring teacher effectiveness.”  The lessons learned may be used to improve teacher education which may open doors to re-creating a much more effective education system in this country.

Gates, in closing, expresses an overall sense of optimism, but shares two challenges that most concern him for accelerating progress over the next 15 years: the possibility that sufficient funds will not materialize for essential global health and development projects and that agreement will prove elusive in identifying clear goals to help the world’s poorest.

The 2013 Annual Letter from Bill Gates serves as a reminder to us all of both the importance of measurement and the challenge of determining the right things to measure to make transparent the difference we are making in the world.

To read or download the letter, click here.

 -- Mark Foley

The Journey from Practice to Theory: Developing a Foundation’s Theory of Change
February 7, 2013

Mary Gregory is the executive director of the Bella Vista Foundation, one of twenty-two foundations managed by Pacific Foundation Services (PFS). She has been with the company for fourteen years and enjoys the variety of philanthropic styles demonstrated by PFS’s clients.

Gregory-100I have the privilege of managing a number of grantmaking portfolios for PFS foundations, and each has taught me important lessons about the art and science of grantmaking. Most recently, as a result of many years of work with the Bella Vista Foundation (BVF), I had the opportunity to learn first-hand what it takes to develop a foundation’s theory of change. But first, let me give you some background. The Bella Vista Foundation (BVF) was started in 1999, and within a few years of making general grants to benefit children/youth, the board decided that one of its purposes should be to make a difference in the lives of children prenatal to three years old from low-income families in four Bay Area counties.

In 2007, after reviewing data, reading studies on infant development, and talking to experts in the field, BVF decided to fund programs that help parents and caregivers cope with stress and anxiety in order to prevent more serious mental health issues from arising which might negatively affect the health social and emotional development of their infants and toddlers. The foundation looks for high quality, culturally aware programs for parents and caregivers that may use any of a number of strategies to create well-being and community, including exercise, classes (such as parenting education), community activism, and peer counseling. These programs can be initiated by nonprofit organizations, county departments, or joint efforts between counties and independent organizations.

In 2012, with a grantmaking capability for this program area that currently amounts to about $1.2M per year, Bella Vista Foundation began to think about whether it could measure its impact. How could the foundation tell if parents and caregivers of very young children were actually better able to cope with anxiety and stress? BVF now encourages its grantees to set goals for their programs. Some programs already measure impact on their clients, using any of a variety of measurement tools that are easily available, to see if levels of stress and anxiety decrease in a meaningful way as a result of participation. Collection of this data also helps grantees to see if they need to revise their programs to get better results.

We realize impact measurement is tricky for foundations, as our investments are just part of a whole ecosystem of funding. BVF’s thinking is that if we aggregate the results of our grantees, we will at least know how many individuals were positively affected by these programs, and what percentage of the participants that represents. Through grantmaking, we are also getting a picture of how many agencies and/or nonprofits in each of our four counties are addressing parental stress and anxiety in families with young children. When Bella Vista Foundation is able to aggregate the programs’ results, we will have a sense of whether our grants are making a difference, and can also create a body of shared learning that will benefit our grantees beyond the grant investment.

Logic Model

View the logic model»

During the past year, in order to lead the way and to better understand the process, the foundation created and publicly shared its own Theory of Change (TOC). As board and staff crafted the TOC, we decided that this might also be a useful tool for our grantees, so we worked with a consultant to help us standardize our language, to review the foundation’s draft version, and to lead a workshop for grantees to get them started on creating their own TOCs. BVF then offered small technical assistance grants to six organizations that wanted to continue and refine their work, which is ongoing—the work will take place between now and early summer. We now know how difficult it is to create a Theory of Change! Foundation staff members are creating customized versions of our TOC for each of the four counties in which BVF makes grants because each county is different, so our activities and funding in each county will need to be customized. Bella Vista Foundation hopes that we can use this new set of tools to measure our progress towards our goals and our vision, and make our own course corrections when needed.

--Mary Gregory

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About Transparency Talk

  • Transparency Talk, the Glasspockets blog, is a platform for candid and constructive conversation about foundation transparency and accountability. In this space, Foundation Center highlights strategies, findings, and best practices on the web and in foundations–illuminating the importance of having "glass pockets."

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