Why Should Your Foundation Continue to Exist?

By Bruce S. Trachtenberg

The idea of time-limiting foundations seems to be gaining more traction. As counterpoint, a recent Philanthropy New York program asked: “What Is the Case for Foundations Living in Perpetuity?”

PNY gathered a group of three leaders of foundations whose boards had recently revisited the question of spending down or spending out at higher levels that would eventually lead to diminution — Lori Bezahler, President, Edward W. Hazen Foundation, Michael Myers, Senior Policy Officer and Director of Centennial Programming, The Rockefeller Foundation and Jane O’Connell, President, Altman Foundation – to better understand the rationale for existing in perpetuity. They were joined by moderator Tony Proscio and fellow panelist David Morse, Chief Communications Officer for The Atlantic Philanthropies.

The three who represented foundations living in perpetuity largely agreed that their organizations’ decisions were based on analysis that they can do more good over the long haul than in the immediate.

As the Altman Foundation’s McConnell said, “Spending down provides quick fix, but we’ve decided to stay at the table for hopefully the next 100 years.”

Just because a foundation chooses to keep on giving forever, however, doesn’t preclude the opportunity to occasionally ask whether that’s the wisest course. That’s something Rockefeller Foundation has done from time to time. Though as Michael Myers said, for a foundation “starting our second century, it so seems weird to say we’re still debating perpetuity.”

Nonetheless, he noted that after surveying the devastation and destruction to Europe in the wake of World War II, foundation trustees voted in 1946 to spend down the endowment. However, shortly after that decision, trustees reconsidered because of what they called too much “reckless” spending.

Myers also is firmly in the camp that equates foundation longevity with value, especially in helping influence the shape of giving decisions for others in the field of philanthropy.

“Our long history gives standing beyond the amount of grant money we give. We have credibility and influence, and both of those are multipliers.” He notes that the foundation’s “signature accomplishment” of helping bring about the green revolution in agriculture, an effort credited with saving one billion lives, also proved to be a motivator to other foundations, especially to the Bill & Melinda Gates Foundation, which is investing heavily in agricultural development in Africa.

“Our dollars got a few things rolling, then Gates came in with big money for expanding agricultural production in Africa. That’s an example of what how we can produce far greater change than with our money alone.”

He also maintains that some issues can only be tackled over long term, noting that Rockefeller has been working on public health related issues since 1913. “That kind of work can only be done over the course of a couple of generations. It can’t be done in lifetime of a single donor,” he added.

Despite the convincing arguments on both the spending down and the perpetuity sides, there really is no way of knowing which is the best option. It’s not as though we can run side-by-side experiments to see which decision will yield the greatest results over 100, 200 or even 500 years.

Nevertheless, there is a strong case to be made for encouraging foundations to commit to asking themselves with some regularity why they choose perpetuity.

As a guide for foundations open to that process, Proscio shared these questions that Alice Buhl, a senior fellow to the National Center for Family Philanthropy, has suggested trustees ask at least once a decade:

• What can we do in a limited lifetime that we could not do, or could not do as well, if we continued in perpetuity?
• What can we do with a perpetual endowment that we could not do, or could not do as well, if we put the full endowment to use in a limited time? And
• Which of these two alternatives produces the greatest value?

How would your foundation answer those questions? Have you ever asked them? And if you did and you opt for perpetuity, why not share your reasons, especially if it’s because you can or you think you’ll do the most good now and forever.

Bruce S. Trachtenberg serves as an advisor to the Communications Network