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Message from the President

by Council, posted November 19th, 2008 at 1:28 pm

Ever since becoming president and CEO at the Council, I’ve shared with anyone who would listen , how honored and excited I was to preside over this great organization during the greatest growth of philanthropy in world history.

Never did I realize that I’d also preside over its greatest evaporation of resources as a result of the economic crisis of 2008. Today, most foundations have witnessed a 30 to 45 percent loss in value—or an estimated $280 billion over the past year.

In surveying our own communities, we see the painful realities of a dramatic increase in need coupled with a dramatic decrease in resources.

Gara LaMarche, president and CEO of the Atlantic Philanthropies, succinctly captured the environment when he recently spoke to members of the Grantmakers for Children, Youth and Families:

Virtually every foundation endowment stands at considerably less value today than it did only a few weeks ago. And assuming our institutions meet the commitments they have previously made, which most will, there will be dramatically less new money to give out in the next few years, at least.

Corporate philanthropy will be dramatically reduced

Government revenues and social spending will continue to shrink … [and] this will have a sharp effect on the funding and programs of non-profit organizations.

And in what kind of social climate? One in which human needs—unemployment, greater health problems, even fewer covered by insurance, hunger, homelessness, crime, and violence—grow ever more acute.

What we are facing, then, is a kind of perfect storm.

How Should Philanthropy Respond?

This is a leadership moment for all of us who are part of this noble sector called philanthropy. Quite simply, as this sector has grown in size it must also grow in service.

Recently, my board chair, Ralph Smith, of the Annie E. Casey Foundation, and I issued an Open Letter to the Field. In it, we encouraged each philanthropic organization to carefully reflect how it could best play a constructive role in this economic crisis.

Specifically, our letter recommended that we:

  1. Reach out to the nonprofit sector, especially those we currently support – recognizing that the nonprofit sector will bear the brunt of shrinking resources and growing need.
  2. Play an active and visible role in helping communities and regions identify the scope and extent of the challenges they face – and in finding solutions that make sense.
  3. Pay special attention to those situations where the loss of philanthropic resources could be the unintended consequence of mergers, consolidations, or government intervention resulting from this economic crisis.

But we are not just asking the field to do more. The Council on Foundations is taking several major steps to ensure you have the information, tools, and resources you need to tackle the key issues that confront our sector.

We are beginning with the launch of this e-journal, Thought > Action > Impact. Through this journal, we will give voice to some of the most influential leaders from the public, private, and nonprofit sectors on topics that matter most to you. We aim to give you views from a variety of perspectives, as well as practical advice you can adapt to your own organization.

We are also introducing Economic Xchange, a central platform for sharing tools and resources to help colleagues weather the current economic crisis. The Council has reached out broadly throughout the sector, to colleague organizations, members and others to identify questions, information, events and resources that foundations may find useful. We will continue to add to this platform – but more importantly, invite you to contribute your comments, documents and ideas.

In the end, if we can draw on this economic crisis to fundamentally raise the vision of our work, we will create a more strategic and effective philanthropic sector.

This is a challenging moment in American and world history. This is not the ride we envisioned. But it is the journey we must take.

The question before us is whether we’ll use this time to just survive, or to commit to real progress in ways we never before imagined.

3 Responses to “Message from the President”

  1. Dexter Baker Says:

    Dose the 5% rule still apply when current value is 45% of last December 31st net asset values? Is there anyway to delay compliance without a big penalty? dexter Baker

  2. Dave Welbourn Says:

    Perhaps the answer is a giving policy based not on current value but on a three- or five-year trailing average. Endowments use total return and trailing averages to smooth out the vicissitudes of life and markets. That means that this downturn remains in your calculations longer but is never as influential as when it stands alone as a single year of measure: markets were up before this plunge, and will be up after it too. When values rise in coming years, a trailing-average spending policy will assure we don’t overreact and return to high spending before we have a chance to recover the value of our principal. Our job is to moderate/mitigate this crisis. A thoughtful long-term policy helps.

  3. R. Pfordresher Says:

    I am interested in learning what percentage of foundations operate according to a three-or five-year trailing average and what percentage of foundations base their giving on that year’s current value. Are you able to provide that kind of breakdown? And, of course, I would be interested to know if there are other methods in use that do not fall into either of these two categories. Thank you.

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