Who Owns Philanthropy?

Peter Wood

This article was originally published on the Chronicle of Higher Education's Innovations blog in response to "The Greenlining Institute Responds to Peter Wood."

I welcome attention to my article of a few weeks ago by Mr. Aguilar, executive director of the Greenlining Institute, and Mr. Mirken, its media relations coordinator. Their response, however, seems to bypass my point. I wrote that the practice of “greenlining” threatens the voluntary character of philanthropic giving. And faced with that threat, many will give less or not at all, or take their giving someplace where they can choose their beneficiaries rather than have them chosen by someone else.

Greenlining in this context is the effort to force philanthropic foundations to have a certain percentage of minority members on their boards and staffs; to give a certain percentage of grants to minority-controlled organizations; and to ensure that a certain percentage of grants are directed to programs that serve minority communities. My commentary was based in large part on Claire Gaudiani’s new book, Generosity Unbound. Greenlining supervenes the principles of philanthropic giving that have been in place for some two hundred years in the U.S. It breaks the trust that donors have placed in foundations to carry out their lawful wishes. Under greenlining, their wealth is diverted for purposes they never intended, and future philanthropists would find their choices constrained.

Greenlining is a close parallel to what ACORN did in the 1980s when it exploited the Community Reinvestment Act to force banks to make more loans to low-income and otherwise unqualified borrowers. The banks, with the intervention of Fannie-Mae, eventually made peace with the practice of subprime mortgages. They were able to push the high-risk mortgages off on others as an “investment.” But that story didn’t come to a happy ending, and neither would the proposal put forward by the Greenlining Institute to shake down the philanthropic world. ACORN and the Greenlining Institute are both instances of public advocacy aimed basically at plundering institutions that the advocates think can afford it.

Greenlining might succeed—in the short run. It already succeeded in California to the extent that in 2008, nine separate philanthropic foundations calling themselves the Foundation Coalition “voluntarily” set aside an additional $30-million to assist minority-led organizations in the state. The price of such success, however, is certain to be negative in the longer term. Foundations ought to be free to “greenline” themselves if they want to but the aim of the greenlining movement has not been to persuade the philanthropic world; the aim has been coercion via law and regulation.

Mr. Aguilar and Mr. Mirken spend much of their essay defending the concept of “diversity” and praising those who agree with them that “diversity” should be considered a great boon to fund-raisers and others. This opens up a topic not even glanced at in my original article. I gather Mr. Aguilar and Mr. Mirken have spent some time doing opposition research and discovered that I published a book in 2003 titled Diversity: The Invention of a Concept, in which I offered an anthropological history of the idea of “diversity” and a critique of some of its contemporary uses. I’d be happy to say more about diversity as a general topic at an appropriate point, but I don’t want to concede to a tactic aimed at changing the subject.

Is coercive greenlining good for American philanthropy? Is it good for higher education? Is it good for America?

I don’t see anything in Mr. Aguilar’s and Mr. Mirken’s essay that defends this kind of greenlining. They point out that the president of Stanford University likes “diversity.” So? Do we therefore conclude that all philanthropic foundations in the U.S. should be forced to pay “diversity” dues according to the formula that the Greenlining Institute has devised?

As to Stanford’s commitment to “diversity” having strengthened its fundraising, perhaps. I wouldn’t stake very much on the protestations of any university president when it comes to this matter. Most of them owe their jobs in part to their success in persuading search committees that the pursuit of diversity is their fondest wish, and virtually every university in the country embraces diversity as a “positive value.” A look at The Chronicle’s 2010-2011 Almanac issue shows college and university endowments of $250-million or more with mostly double-digit losses for 2009. Stanford registered a 26.7-percent decline. Of course, the stock market and general decline in investment values were at work. The decline had nothing to do with Stanford’s embrace of “diversity.” But that’s my point. Factors much larger than the fashionable ideological posturing an institution adopts determine how well a university attracts funds. Embracing “diversity” might attract some donors and deter others. I would suppose the key reason why people give to Stanford is because they admire its academic excellence. It stands out as exceptional in that regard. It is indistinguishable from every other college and university when it comes to “diversity.”

If greenlining is such a good idea and so many organizations are willing to embrace it on its merits, why does the Greenlining Institute support coercive legislation to force it on philanthropic foundations?

Mr. Aguilar and Mr. Mirken do have an answer:  “[B]ecause [philanthropic foundations] are exempt from federal (and usually state) income taxes, charitable foundations receive a massive subsidy from taxpayers.” It is worth looking at that answer closely. It amounts to saying that philanthropic foundations don’t really own their own resources. Because they receive favorable tax treatment, their assets really belong to the public. The foundations have their wealth on sufferance from the federal and state governments that allow them to hold on to dollars that otherwise belong to the government. That’s not a novel argument, but it is one that the American people have long and emphatically rejected.

We don’t hold wealth at the sufferance of the government on the condition that we spend it as the state and federal bureaucracies stipulate. That’s one model of government, but so far, not ours. Private property is still private in the United States, even when it receives favorable tax treatment. Take the favorable tax treatment away and fairly quickly the private philanthropy will wither too.

We have made a choice as a nation that we like what private philanthropy can do. It has often out-performed government-sponsored research and public welfare programs. But it is a choice and not a fact of life and it cannot survive a great deal of state intervention. Those who doubt that can examine the record of philanthropic foundations in Europe and elsewhere. It won’t take long.

The diversity argument is truly a red herring. If it is right to coerce philanthropic foundations to support the Greenlining Institute’s agenda, it will be just as right to impose a tax on philanthropies for any number of other causes that politicians decide are public priorities. They can be tree-lined to support sustainability; vet-lined to support military veterans; road-lined to support highway construction; gun-lined to support Second Amendment rights, and so on without end. Except there will be an end. Men and women of wealth will just decide there are better ways to support the values they care most about.

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