Philanthropy Without End

By Tony Proscio

The idea of limiting the lifetime of a foundation has become so popular (at least in the financial media, and evidently among many newer philanthropists) that the foundation trade group Philanthropy New York recently felt it worthwhile to hold a seminar for its members on why not to spend down. Titled “What Is the Case for Foundations Living in Perpetuity?” the session featured three prominent New York-based institutions that had, at some point, considered spending out their endowments but rejected the idea. The three were the Rockefeller, Altman, and Edward W. Hazen foundations, the first two of which have been around for a century, and the third for nearly 90 years.

For a contrasting perspective, David Morse, chief communications officer of the limited-life Atlantic Philanthropies (closing ca. 2017), discussed the virtues of sunsetting, as Atlantic views them. But he also brought the perspective of his previous employer, the Robert Wood Johnson Foundation, whose board has discussed the idea of a limited life but remains committed to perpetuity.

One intriguing revelation was that the Rockefeller Foundation actually opted for a limited life in 1946, before quickly changing its mind. Michael Myers, senior policy officer at Rockefeller and head of its centennial programming, reported that the foundation’s board, in surveying the heady post-World War II environment, decided it ought to make an all-out effort to accomplish as much as possible with the wealth at its disposal, allowing the endowment to shrink and eventually disappear.

Before long, however, the board became alarmed at what foundation president Chester Barnard described as “extravagance and carelessness” in the rush to spend the money. Rockefeller promptly reverted to a more limited annual payout, at a rate low enough to preserve the endowment. The foundation has operated on the presumption of permanence ever since, though the idea of limiting its life has still come up from time to time.

The proponents of time-limited philanthropy often argue that perpetuity encourages a certain institutional lethargy or smugness, which can dull an institution’s spirit of enterprise and ambition. A few also believe that more value can be produced with large grants awarded right away than with a stream of smaller grants extending over many years. As moderator of the panel, I outlined some of these views just to give the panelists something to rebut or critique.

And critique they did. Not surprisingly, for institutions proud of their many decades of work, they rejected the idea that lethargy or timidity were necessary side-effects of long lifetimes. Instead, all three pointed out that their staying power, and the influence and credibility they had amassed over years of accomplishment, had itself become a philanthropic asset, which would be lost if they went out of business. Viewed as authoritative in their fields of work, and often seen as trusted partners and deal-brokers precisely because of their long time horizons, these institutions believed that the very lack of a time limit — their ability to persevere despite periodic obstacles and momentary setbacks — was a critical part of what made them effective.

These perspectives hardly settle the matter. In fact, two of the institutions on the panel acknowledged that they will probably revisit the question of perpetuity at some time or other. But it struck me as significant, at a time when a small but increasing number of foundations are choosing a limited life and promoting its virtues, that the venerable notion of a perpetual endowment has begun to reassert itself. The debate will surely continue, as it should.