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What’s the story on foundations? A simple question, with surprisingly many answers.
A story is the way we interpret the meaning of actions and events. We tell stories about actions to make sense of intentions. Inevitably, stories are subjective and rooted in context. So, depending on context, the story told about foundations can be benign (foundations exist to help those in need) or conspiratorial (foundations are anti-democratic vehicles for the wealthy), critical (foundations wrongly sequester urgently needed resources for today’s problems) or aspirational (foundations are the risk capital for much-needed social innovation).
Can there be a single story? Probably not. Philanthropic foundations are as diverse as the sources and uses of their capital. But the compelling question for philanthropy in the 21st century is, do foundations still matter? Is there a convincing story to tell about that?
Endowed foundations as institutions can be traced back over a thousand years in Western societies. Philanthropic capital endowed in Islamic waqfs or Christian monasteries and churches permitted continuous charity, with funds dedicated in perpetuity for a charitable purpose. This is well-documented in Paul Vallely’s comprehensive 2020 history “Philanthropy From Aristotle to Zuckerberg.” It’s a model that has been developed over centuries. What has changed, of course is the understanding of charitable purpose, and the role of independently funded philanthropic institutions in a modern society.
Charity itself has not changed in meaning. At its most basic, the foundation story is about charity, caring for others. Most endowed foundations would claim that story. They are using their endowed funds to provide a stream of grants to operating nonprofits for community good. But this story alone is not sufficient to explain or to legitimate the role of foundations in 2022. Community needs are greater than ever, and the importance of equity as well as compassion is changing philanthropic priorities. Is the story only about charity, or should it also be about change?
Over close to two decades as leader of a national network for philanthropic foundations in Canada, I got to know many grantmaking and endowed foundations and their work. One of my goals in that role was to tell a convincing story about the reasons that foundations matter. There are many audiences for this story: policy and lawmakers, opinion leaders and influencers, advisors, donors, and foundations themselves. The audience is also increasingly the community. Community leaders are asking for a compelling rationale for the perpetual or continuous charitable foundation, at a time when justice and inclusion are as important as charity. How must the story itself change in this context?
Reflecting on my experience in a new book “From Charity To Change,” I have written about how the story is evolving away from foundations as charitable givers. In the early 2000s, when I started in my post, the new story about foundations was that they were social “investors.” According to this story, foundations, with their unrestricted funds and higher risk tolerance, play an important role as the “angel investors” of the non-profit sector. Like early-stage business investors, they can take on risk and fund the development of good ideas and models for social change by supporting experimentation and demonstration pilots. But the angel investor model of philanthropy doesn’t capture how social change is made. Nor can it profit from the exit strategies available to private investors.
Read the full article about shifting toward change by Hilary Pearson at The Center for Effective Philanthropy.