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Shaking the Foundations

Opinion | November 20, 2017

How often do you hear Tufts students say the word “nonprofit?” As in: “Yeah I got fellowship through Tisch College at a nonprofit this summer,” or “did you see that nonprofit listing on the Women’s Center e-list?” Even more frequent was the post-election dialogue around donating to nonprofits, including the NAACP and Planned Parenthood. Nonprofit work is integral to Tufts’ branding as a university focused on “active citizenship,” and as students here, it too has become central to how many of us envision life after college.

The on-the-ground work that nonprofits carry out is funded by foundations. Foundations have endowments—huge sums of money that are kept in a variety of investments, of which a small percentage is donated to nonprofit organizations that fit a foundation’s mission statement.

An endowment, though, or really any large sum of investments, is not a stagnant or apolitical body; investors of endowments actively make choices between which business stocks, government bonds, or even impact organizations to invest in. It is critical, then, that students engaged with nonprofit work think deeply about how foundation endowments function, how they have been earned, and how they could depart from their complicated history.

A quick search of the largest philanthropic foundations in the US reveals ten names: Gates, Ford, Getty, Wood Johnson, Lilly, Hewlett, Kellogg, Packard, Moore, and Bloomberg. If these names ring familiar, it’s because they are tied to some of the largest businesses in the US today—Gates and Hewlett-Packard are computing/software giants (and often work in tandem); Bloomberg is the inventor of Wall Street’s software infrastructure.

These fortunes were amassed through exploitative labor practices, tax evasion, and the unsustainable extraction of resources across the world. The Guardian reports Kellogg’s subset, Unilever, uses palm oil that is harvested by child laborers under unsafe conditions in Indonesia. Getty’s main product—oil—continues to pollute the earth at alarming rates. Bloomberg built software that expedites investments and creates greater distance between the investor and the people on the other end of those stocks or products. The companies who share these foundations’ names continue to profit from trade laws that privilege national corporations at the expense of the Global South.

The reality is that much of the money nonprofits use come from these sources. So, the money accumulated through the exploitation of thousands is then dedicated to addressing the injustices it causes. The horrible irony of this reality raises the question—what really is the point of these foundations?

The IRS requires that a foundation spend a minimum of five percent of its endowment every year towards its mission. This means that the other 95 percent of that endowment continues to grow, tax free, forever. So, I see these massive endowments—the 10 foundations mentioned above collectively hold $127 billion dollars in assets—as vehicles through which powerful White families hoard wealth. A 2014 study revealed that in that year, 92 percent of foundation CEOs/presidents, 87 percent of foundation board members/trustees, and every founder of the 10 foundations named above were and are White. While family members can’t personally spend these funds, they have significant say in how the money is donated, and therefore over which nonprofits the foundation funds. In short, through accumulation of money over time, the families of old and new powerful businessmen continue to have influence over the lives of marginalized people.

This power too often comes with a lack of accountability—foundations have no donors, taxpayers, or even stockholders to report to. Tufts senior Emma Kahn is conducting a thesis on “Reimagining the Civic Commons,” a joint foundation initiative aimed at revitalizing public spaces in different cities across the US as places for “civic engagement,” “economic integration,” and “sustainability.” Kahn explained that when foundations take the place of municipal governments, there is a disconnect between the decisions made and the communities affected by those decisions. At times, she added, a foundation project can push a municipal government to remove barriers to building, zoning laws, and other community development projects, leaving the path to such projects clear for organizations less well-intentioned than foundations.

This project has potential to depart from a history of foundations gentrifying parks in communities of color in the name of philanthropy. However, the philanthropic sector needs to make radical shifts in its policies, processes, and practices to effect the social justice oriented change that many of its members preach without practicing.

The Ford Foundation is taking a step in this direction; it is the only one of the top 10 foundations listed above that names social justice in its mission statement. Ford has also integrated this mission throughout the organization, including only hiring interns who are on need-based financial aid at their respective universities and from the New York Tri-State Area. This suggests one—perhaps obvious—way foundations can counter a very White board and founding family: hire people grantmakers who know and represent constituent communities.

Another solution foundations are exploring is wholly integrating their missions into how endowments are invested. The foundation pioneering both divestment and reinvestment in impact investments is an heir to the world’ biggest oil fortune; the Rockefeller Brothers Fund (RBF) announced in 2014 that it would divest all of its over $800 million endowment from fossil fuels.

I spent time working independently for the RBF on revising the Fund’s proxy voting guidelines—a set of policies which guide how a foundation (or really any stockholding organization) will vote on company resolutions. Remembering that an endowment has this ability shifts how we can regard foundations; although they are philanthropic institutiaons, they exist in the role of investors in companies. The sustainability-focused non-profit Ceres advocates working with businesses and investors this way as a path towards rapid systemic change. Their theory is well-supported: earlier this summer, two historic shareholder votes at Exxon Mobil and Occidental Petroleum pushed these companies to address climate change within their business models.

Proxy voting offers one major opportunity to move the companies these major foundations are linked to away from exploitative or unsustainable practices. But I’m left wondering if more radical solutions exist—can we address the issues we care about without relying at all on these fortunes or their legacy? The John Merck Fund offers an alternative: they’ve adopted a “spendout” strategy, which means instead of holding onto an endowment for an indefinite period, they will spend all of their money towards their mission within the next ten years. They write in their statement that the issues they care about “should not have to wait for small incremental progress;” they are refusing to sit on their endowment for the purpose of “intergenerational growth.”

Community foundations are an example of philanthropy with accountability, since they consist of variety of contributors and donors from the community, and employees, and Board membership linked to the community. This movement is not small: the Silicon Valley Community Foundation is the second biggest donor in the US, giving around $956 million last year, according to Foundation Center. Importantly, this eclipses the giving to the other nine foundations in the top 10 list by endowment size—community foundations tend to give more of their funds away.

Knowing the potential for change among foundations, and not knowing what will be enough to break from their fortunes’ legacy—where do we go from here? As we Tufts students move into careers within or tangential to the nonprofit world, as well as moving through campus connected to Tufts’ own endowment, simply knowing the violent legacies and current realities of these endowments may not be enough. We can and should look for ways to push this money away from its legacy, to cut it from its history—to make the radical shifts necessary to center communities and marginalized people in philanthropic work.