Philanthropy's Unique Advantage

My good friend Dave Moore writes of a middle ground when it comes to leadership at philanthropic foundations:

[A]t times foundations need to act in a “top down” or “leadership” way to innovate and take on tough issues. The critique is that this behavior is undemocratic and at times even autocratic.

I think there is a middle ground. I am a firm believer that philanthropy can and should be innovators. They should take risk. They have the freedom to act with independence that others do not have. We need them to be willing to fail and to try to succeed wildly because they took on big things. When foundations are afraid of failure they become conservative, follow the leader and tend to reinforce the status quo or incremental change.

But foundations, if they want to act with the advantages granted them under the tax code, do need to exhibit a reasonable amount of transparency and openness in their work. They should be clear about funding priorities and actually reflect those priorities in the funding choices they make. They should be clear about successes and lessons learned when things don’t go well.

I could not agree more. The same day I read Dave’s piece, the Chronicle of Philanthropy also reported salutory news. Seems that, due to investment losses, the Knight Foundation is trimming back its administrative expenses while still honoring current commitments.

What a great piece of news. In my experience, foundations can do wonderful things, yet they are also prone to the sort of insularity that comes of an almost complete lack of accountability. The seemingly neverending tussle between regulators and foundations over how much of the endowment foundations must pay out each year (and how to calculate that) is a case in point. I wrote about that a a while ago.

In my view, because of the special position society has bestowed upon foundations, they hold a special responsibility. More than other institutions in the “independent sector,” they can take risks and weather storms. Rather than retrenching and escalating their demands for “impact” and “change theories,” they ought to ratchet up their risk-taking.

Some foundations (and quasi-foundations) are great examples of this — I am thinking of the Omidyar Network here, which invests for the long haul.