Philanthropy on Trial: Are We Living Up to Our Mission?

“Philanthropy on Trial” ended with a hung jury. The sector was charged with not living up to its mission to advance the common good, and, while ten jurors were ready to take away philanthropy’s tax-exempt status—the penalty if convicted—two jurors held out. It was marvelously entertaining: the Law and Order music, the extraordinarily witty and articulate prosecutor (Gara LaMarche of The Atlantic Philanthropies) and defense attorney (Ralph Smith of the The Annie E. Casey Foundation), the randomly selected conference attendees drafted for jury duty. Both philanthropic attorneys demonstrated an ability to deliver a speech. Serious issues were on the docket, and both LaMarche and Smith handled them with skill and knowledge.

• LaMarche attacked the rampant self-interest of foundations, which are willing to call for other sectors to report on the diversity of their staffs but not to report their own, and express concern about financing health care reform but publicly vow to fight President Obama’s suggested cap on charitable deductions on incomes over $250,000 (even though the impacts on philanthropy and on charitable giving overall would be minimal). Smith suggested that perhaps defending the unrestricted deduction was like defending the mortgage interest deduction, a statement of belief in philanthropy like a statement of belief in homeownership.
• LaMarche challenged the insufficient proportion of philanthropic grantmaking going to social change and advocacy, citing statistics from both NCRP and the Foundation Center to make his case. He said Smith’s cataloguing of “the greatest hits of foundations” beginning with the oft-cited foundation support for “Sesame Street” doesn’t absolve philanthropy of its social justice shortcomings.
• Smith was hard-pressed to make a compelling defense against the charge that philanthropy has yet to do much toward making itself more diverse and more reflective of the communities foundations serve. He suggested that philanthropy looks more diverse now than it did in years past. Foundations are trying to be better, he said, even though they, like all other sectors in our society, suffer from human frailties and flaws.

Even though the majority of the jury and probably the audience were more persuaded by LaMarche’s critique than Smith’s defense, it’s hard to imagine anyone who voted “guilty” volunteering to renounce his or her institution’s tax exemption because of individual or collective shortcomings. In response to the challenge of who has the right to question whether the content of philanthropy merits a tax exemption, LaMarche noted that philanthropy is a creation of the tax law. Society has a right to examine and recalibrate those decisions from time to time. Perhaps, as Smith and LaMarche demonstrated, individual foundations ought to take the time to ask themselves, Have we done enough to warrant our tax exemption?

Rick Cohen is a columnist for the NonProfit Quarterly