Foundations Must Change to Meet Future Needs

Leaders of America’s wealthiest foundations--including those doling out the residual largess of Fords, Rockefellers and Carnegies-- are worried enough about their futures to have bunkered down at the Getty Center to plan their place in the next century.

Those who run organizations that sprouted from industrial wealth and blossomed in an era of expanding federal government activism agree that they must reinvent themselves to serve and survive in a new America. At the four-day conference, they along with philanthropy experts and some of the nonprofit groups that seek and spend foundation money are trying to figure out how.

“This is an effort to talk about our future,” said Warren Ilchman, president of the Paul and Daisy Soros Foundation and one of the conference’s organizers.

Although they don’t expect to come up with specific answers, Ilchman and others said those at the conference must lead the debate on how much of a role they should play in providing services that were once the function of government agencies.

“People on the outside are describing what we should be doing, but we as people on the inside ought to say what we can and can’t do,” said Ilchman, whose New York-based foundation awards graduate fellowships to recent immigrants or their children.

Whatever new approaches the foundations choose to take, they will probably do so with more money. The bull market has made the foundations richer than ever, but that greater wealth could prompt new government regulations or taxes, officials of the groups fear.

They worry that conservative lawmakers are increasingly wary of foundations and nonprofit groups and may step up efforts to strip them of their tax-exempt status.

“We’re a sector increasingly under attack,” said Margaret C. Ayers, executive director of the New York-based Robert Sterling Clark Foundation, which supports groups that work on such things as abortion rights and family planning. As a result, Ayers said, foundations need to launch public education campaigns to highlight their good works.

One area of great interest to conference participants was how the wealth generated by high-tech entrepreneurs like those in the Silicon Valley might be mined for philanthropy.

Computer tycoon and art patron Peter Norton pointed to a gap between old and new money by chiding the group, saying that family foundation meetings “nauseate” him.

“My childhood ambition was to get into philanthropy,” said Norton, who started a family foundation. “My goal was not to do good work at all. My goal was to have people admire me,” he said. “If you believe you’re doing God’s work, you’re dangerous.”

Norton’s pointedly humorous remarks drew peals of laughter, but he said that when high-tech magnates decide how to give away some of their wealth, it won’t necessarily be to existing foundations and may take an entirely new course.

“The idea of the old establishment educating the new money is very much fading. The belief that new money ought to kowtow to and respect old money has been completely extinguished. People will be trying to break new ground,” he said.

Philanthropy from high-tech millionaires is probably a few years off, Norton said, because wealthy individuals tend to give money away later in life. “They’ll be doing wonderful things, we just can’t predict what. There will be philanthropy, just not real soon.”

The fact that the meeting was held in Los Angeles signaled a new era, organizers said. According to Ilchman, “the capital for philanthropy is moving westward. Six of the 15 largest foundations [in the United States] are in the West. In 1980 it was zero. The whole future of new money is in electronics and entertainment.”

Those foundations include the James Irvine Foundation, the David and Lucile Packard Foundation and the J. Paul Getty Trust.

Ilchman and others at the meeting said the world in which foundations and nonprofits exist has changed dramatically in the past decade.

The federal government’s gradual withdrawal from anti-poverty programs and the widening gap between the rich and poor present the foundations with new missions they aren’t sure they want to accept.

“The gap in wealth and income inequality are the two biggest forces” confronting foundations today, said Robert Bothwell, president of the National Committee for Responsive Philanthropy. Foundations can become more involved in programs for the working poor, an area that has not gotten much philanthropic attention thus far, Bothwell said.

Rather than picking up social service programs cut by the federal government, foundations might want to fund community groups that work on behalf of the poor or fund studies that “try to figure out whether to reverse policies [such as welfare reform],” Bothwell said.

William Drayton, president of the nonprofit group Ashoka: Innovators for the Public, said he would like to see foundations develop new ways to fund those who are starting nonprofit groups.

Unlike someone starting a business, someone hoping to start a community service organization or nonprofit doesn’t have an equivalent to the private financial services sector, he said. “There are investment banks, venture capital, leasing firms, an amazing array and an enormous amount of specialization [for businesses]. We don’t have that in the citizen sector,” he said.

Others at the conference said that foundations and nonprofits need to come up with their own measures of their effectiveness. Such measures are needed as private companies are increasingly moving into social service areas, from hospitals to schools to prisons, said Ed Sklott, executive director of the Surdna Foundation, which supports environmental and community revitalization projects.

Skloot said for-profit hospitals often provide as much charity care as nonprofits. “In the real world, people don’t know or care if they’re served by a for-profit or a nonprofit. It’s incumbent on us to demonstrate that we can provide the quality service at an affordable cost and not hide behind nonprofit status,” he said.

The conference’s more than 100 participants included some of the most prominent members of the public sector, such as Harold M. Williams, president emeritus of the J. Paul Getty Trust, and Hugh B. Price, president of the National Urban League.

But one of the younger participants pointed out that new philanthropic voices are making their own efforts to be heard.

Catherine Saalfield, a 32-year-old who has used her inheritance to start her own foundation, told the group she will be a senior member of a philanthropic conference next week.

It is a young donors retreat and will include two 14-year-olds.