University Place Building Civil Society Series Barry Gaberman, "Building Civil Society Through the Non-Profit Sector" 6/17/2010  UP 444   cc >> Good evening. I'm here to welcome you to the Building Civil Society Through the Nonprofit Sector colloquium. This is a Communiversity session that's offered through the UW Center for Nonprofits. It's based within the School of Human Ecology. And my name is Shep Zeldin, and I'm the faculty director for the center. Now, a lot of you have met Barry Gaberman, our speaker, in the last session, but because we're filming this for public TV, I'm going to repeat some of the information which you might have heard for the first time, but Barry is such a good record and it's so interesting so it's worth repeating. So I'm going to repeat that. But before I do that I wanted to give a real thanks to our sponsors and to our partners because we really do recognize and thank them for all that they've done for us. And these are the UW Division of Continuing Studies, the Oscar Rennebohm Foundation, the Alliant Energy Foundation, the Morgridge Center for Public Service Challenge Grant, and the Brittingham Fund. So we very much thank all of you for allowing us to bring in these great speakers and to offer these Communiversity sessions. 

And again, of course, we want to thank all of you out there in Wisconsin Public Radio for taping this. This is going to be shown regularly on various stations, and also we will have all these presentations on our website. So I want to introduce Barry Gaberman to you. He's our guest lecturer. The first thing I want to tell you about Barry is he was born in Shanghai, however, he spent his formative years here in Madison. He went to West High School, and I'll talk to you a bit about that later, he went to UW undergraduate and he went to UW graduate. So we like to call Barry one of our own for sure. Now after Barry left Wisconsin he went to a small organization called the Ford Foundation, and Barry started there as a program assistant and almost before taking that job, somebody left in the Ford Foundation so they gave Barry a promotion after the second day. And over time Barry did a lot of things and ended up as an executive vice president. And he had lots of responsibilities which included the management of a $50 million revolving capital investment fund. 

And Barry worked at the Ford Foundation up until 2006. And since then he's sort of been sort of a world traveler. He continues to be a great philanthropist, which is his skill in training, but as I think you'll find out, he's also a wonderful teacher, and he's been teaching in a lot of different places including the American University in Paris, he's teaching in University of Virginia, he serves on the Council on Foundations on the board there, the Board of the Independent Sector, the Trust for Civil Society in Central and Eastern Europe. So Barry really is a teacher in a lot of different forms and a lot of different ways. And I think, so what I want to say is that Barry is this teacher, and he's been teaching now for 50 years if we consider him finishing West High School and then sort of moving on, but I'm sure he was teaching at West High School too. And what Barry has is a great way to bring civil society alive. And, really, to sort of elevate and give prominence to the nonprofit sector, to the voluntary sector, to really show the critical element and the critical roles that it plays in society today. And this is something that we really need. So I'd like you to welcome Barry. (applause) >> It's interesting  for me to hear the Oscar Rennebohm Foundation is a partial supporter of this. 

In 1960 Oscar Rennebohm gave me a job as a cashier at Rennebohm's for $1.25 an hour. Big money for me in those days. Even though we're filming I'm going to take this jacket off. When we met on Tuesday, what we did was we concentrated on civil society. Civil society in sort of the broadest terms, if you will. We tried to define civil society. We traced the scope and the dimensions of civil society in the US and globally. We broke the activities of civil society into those that I called edgy and those that I called safe. And we noted that these were really the instrumental activities of civil society, and there was something else one could say about it, a generic activity in which civil society is a fifth estate, if you will, much like the independent press is a fourth estate, a layer of institutions that helps guard against the abuse of power in society. Today what we do is we move on to that slice of civil society called philanthropy. 

And we're going to first look at individual philanthropy, and then we're going to, and individual philanthropy among the rich and among the famous and among the poor, and then we're going to move to organized philanthropy. And there we'll talk both about independent organized philanthropy and corporate philanthropy for a bit. Why do people give money for charitable causes? I ask that question often when I start a course, and here are the kinds of answers that I get. Their religion tells them to do it. Well, in Christianity you should tithe, and generally 10% is what's considered the appropriate tithing. In Islam there are really two sorts of avenues. One is just the traditional charity that you give and giving your name or the name of your family. And the other or rather special type of charity that you give anonymously to show that you're not trying to curry favor. And in Judaism, traditionally you are to leave the corners of your fields unharvested so the poor could come and harvest those crops and not go hungry. On the other side of that, people will say, well, they give because they're trying to buy their way into heaven. 

Often people will tell you they give because they care about the issue. And that usually comes from personal experience, a family member that died of a particularly difficult disease or cancer and the commitment of the person and to work for that sort of a cause in the future. I suspect that it is true, that some give because they want to curry favor, often with important associates. I also guess that some people probably give out of a sense guilt. And I think a lot of people give for the very simple reason that they were asked to give by someone they knew and someone they trusted, and after all, that is the first cardinal principle of fundraising. Now what's interesting to me about all of this is it usually doesn't happen until towards the end or maybe not at all before someone says something like altruism. I guess we've become just a little bit jaded maybe over the years. But if those are the sort of reasons that people give, can we take those reasons and come up with a definition of philanthropy? And you by now know I love definitions. There are lots of them out there. They're religious, they're linguistic, they're historical. 

I don't really find most of those particularly useful, although interesting. The religious ones seem to be targeted mostly on charity and they don't tend to deal with strategic root causes. As for the linguistic ones, while it's said that the first use of the term philanthropy was in Prometheus Bound in the 5th century BC, and that's where Prometheus, who created mankind from clay, puts out a notion called philanthropos tropos, sounds like you're naming a dinosaur in all of that, but what it means is mankind loving. And he suggests, if you will, two gifts that he's going to give to mankind. The first is fire as a symbol of art and technology, and the second is blind hope so that humans will stop anticipating doom and be more optimistic, if you will. Just like civil society is not a perfect term to describe the overall sector, philanthropy is not really a perfect term to describe that slice of civil society. Many people would tell you that philanthropy just doesn't translate into their own language, and the term in their society is often linked with tax evasion and with corruption. Having said that, it's really the best term we have at the moment, and what I'd like to say is that we not get caught in the semantics of it all and we move on to a clear and simple definition of philanthropy. The religious and linguistic ones, while interesting, are very hard to operationalize and therefore have limited utility. And I prefer the following simple definition: philanthropy is the voluntary capture of private wealth for public benefit. 

Now I stress voluntary here because, after all, the state captures private wealth for public benefit, but the last time I looked about April 15th, that was not a voluntary activity. I like this definition because it can encompass both charity and more strategic philanthropy, and it can cover both individual philanthropy and organized philanthropy. But before talking about individual philanthropy, let's get a sense of scale in the United States and beyond. In the United States according to Giving USA, an annual publication that I think you mind find interesting, overall philanthropy in 2009 totaled $303.75 billion. These funds came from about 75 million households, about one million companies, some 120,000 estates, and 77,000 foundations. And what's interesting about this number is that in a very bad economic time the overall decline between 2009 and 2008 was only 3.6%. The total in 2008 was $315 billion. Individual philanthropy, which accounts for the lion's share of this, was $227 billion and declined only four tenths of one percent. And it's sort of interesting that even in bad times people still give. Foundations, on the other hand, at $38 billion were down about 8.9%. 

And that's because foundations generally use a three to five year rolling average of their assets to decide on what in fact they ought to be giving. So we have to factor in that bad year when your asset dropped, your giving goes down. Now here's an interesting and somewhat counterintuitive notion and that's that corporate giving was up 5.5% to about $14 billion. You'd expect that to have really gone down dramatically, but what happens in this particular case is that a lot of the corporate  giving is in the form of in-kind giving and that tends to be resistant to economic conditions. If that's overall where the money's coming from, where is this money going? 33% of it goes to religion. It would be erroneous to assume that that means it goes to maintaining the superstructure of the synagogue, the mosque, or the church because, in fact, a lot of it slides to the programs of those religious congregations and year in and year out if you're looking at who is going to be there working with the poorest of the poor people regardless of economic conditions, it's by and large those soup kitchens and other kinds of activities run by religious congregations. About 13% of the money goes to education. Fully 10% of the money actually goes to foundations. In other words, they're giving them to community foundations or they're setting up a new foundation. Some 9% of the money goes for human services. 

Some 7% for health and about 6% for international activities. Now in the late 19th and early 20th centuries in the US, there was a an explosion in the amount of wealth given by the super-rich. And this wealth was generally captured by independent foundations. For those of you who think this was essentially a tax dodge, I think you should note that Carnegie, Mellon and Rockefeller Foundations all were started before there was an income tax in the United States. That started in 1913. Now, if you fast forward about a hundred years to the late 20th century and the early 21st century, you have a similar phenomena occurring but with two important differences. The first is that this time the wealth is being given from all parts of the globe, not just in the United States. And the second is it takes on many more varieties or models of organized philanthropy than just independent foundations endowed in perpetuity. While there are some 80,000 or so foundations in the United States, the vast majority of them are very, very small. Only about 500 have assets of over $100 million, and only about 50 are the fat kids in the canoe and have assets of over a billion dollars. 

Less than 5,000 of those 80,000 even have staff. And here is an interesting little trick: if you're trying to figure out what the budget of a foundation is, unless it's subject to a sunset provision of some kind, what you need to do is you need to multiply the assets by 6% and that almost always tells you roughly what their budget is and that's because we have a 5% payout requirement in the United States. More on that later. So if you're a $100 million foundation, your budget is going to be somewhere in the neighborhood of $6 million a year. An interesting point is that the accumulated assets of those foundations, those 80,000 foundations or so now exceed a half a trillion dollars, and the estimates are that with the intergenerational transfer of wealth as the baby boomers retire, the next generation plus or so will see this number if historical earnings sort of prevail go to somewhere between $2 trillion and $3 trillion and then there will be a very interesting point of vulnerability because Congress will look out there and say, gee, I don't think we ever intended to see $2 billion or $3 billion totally outside of our control range. And my argument has been to those of us that we've got to deal with that problem now because if we don't, Congress will deal with it for us and what they do will be much more onerous than what we do ourselves. In Europe there are some 200,000 foundations now. The largest and the most being in the UK and in Germany. There is, however, an interesting new and vital group in Italy created from the conversion of savings banks into foundations. This happened in a two-step process, there were about 70 of them, and it initially encompassed some $33 billion. 

But one of the really very big differences between US foundations and European foundations is US foundations from the very beginning, at least the larger ones, almost always had some commitment to funding beyond our borders. And for the most part, European foundations fund within their localities, and only a few, growing now, fund across national borders. An interesting case in Europe is the IKEA Foundation. I suspect that most of you have never heard of the IKEA Foundation. But it may be the largest foundation in the world. Both the IKEA Foundation and the Gates Foundation have assets in excess of $30 billion. However, while the Gates Foundation pays out about one and a half billion dollars a year, and that's not counting the Buffett pass through, we'll come to that a little bit later, the IKEA Foundation pays out about $5 million a year, and he pays that out for interior design. One might argue the charitable purpose there. And the reason for that is that by and large the IKEA Foundation has been set up as a poison pill to make it very difficult to take over IKEA, not for charitable purpose. And there is no payout requirement. 

But interestingly enough, the notion that if you're over $30 billion in the tax exempt institution and you're only giving out some $5 million are you really contributing to the public benefit has caused a whole debate now in Europe about whether there ought to be a payout or not. Well, let's start talking a little bit about individual philanthropy. And I want to start with Andrew Carnegie. Andrew Carnegie wrote a pamphlet in 1899, looks like this one has been here since 1899, entitled The Gospel of Wealth. He's considered to be the person who started the modern foundation in the United States. And I'd just like to read a couple of pieces from Andrew Carnegie. Here is what Andrew Carnegie had to say about income and equality. He says that "we accept and welcome, therefore, as conditions to which we must accommodate ourselves, great inequality of environment. The concentration of business, industrial and commercial, in the hands of a few and the law of competition between these as being not only beneficial, but essential to the future progress of the race." Well, here is what he had to say with what do you do with excess wealth. He says, "There are but three modes in which surplus wealth can be disposed of. 

It can be left to the families of the descendents or it can be bequeathed for public purposes or, finally, it can be administered by the possessors during their lives." And of course, which one does he choose? He says, "Under its sway we shall an ideal state in which the surplus wealth of the few will become, in the best sense, the property of the many because administered for the common good, this wealth passing through the hands of the few, can be made much more potent a force for the elevation of our race than if distributed in small sums to the people themselves. Even the poorest can be made to see this." Good luck. "And to the citizens..." Well, you get the point. And I love this final quote by Andrew Carnegie. He says, "Yet the day is not far distant when the man who dies, leaving behind him millions of available wealth, which was free for him to administer during his life, will pass away unwept, unhonored, unsung, no matter to what use he leaves the dross which he cannot take with him. Of such as these the public verdict will then be the man who dies thus rich dies disgraced." Andrew Carnegie is not what you would have called a cuddly philanthropist. He believed in ruthless competition. He was patronizing and he felt the rich should control giving. And while the language he uses seems a bit quaint and outdated today, he talks about some modern concepts. He talks about the modern concept of moving beyond charity to strategic philanthropy and the recent phenomena of giving it away while you live. 

Incidentally, he failed at that. He had so much money he just couldn't give it away while he lived. And we still have the Carnegie Corporation and Foundation today and a whole set of other Carnegie institutions that are endowed. Now let's fast forward a hundred years from Andrew Carnegie and go to the super-rich of today. You all know about Ted Turner, the founder of CNN. In 1997, according to Ted Turner and the way he told it, he was on his way to the UN. He had noted that in January of that year he was worth $2.2 billion, and now in August of that year he was worth $3.2 billion, but he didn't particularly feel any richer. So he decided on the spur of the moment, I suspect he probably did a little bit of thinking about it, but as he says it, he decided on the spur of the moment to give a billion dollars to the UN. Now, we might argue about whether that was the right thing to do or the right place to put a billion dollars, but what was more interesting than the billion dollars he gave to the UN was the challenge he laid down at the same time. And his challenge was to his super-rich buddies to step up to the plate and start giving commensurate with your wealth. 

Did it work? Well, Gates says that it was that challenge by Ted Turner that led him to start giving away and capitalizing his foundation in his early years rather than waiting until he retired into his later years. And Buffett says that it was the Gates Foundation that made him think, well, why should I create a foundation of my own? When I see that foundation out there I'm just going to channel my wealth through the Gates Foundation. I like them, I like what they do, and the like the way they're run. In effect, what he said is I'm going to invest my philanthropic dollars the way I invest my other money. I'm going to pick a good company that's managed well and I'm not going to muck with it. And he went on there. But this is the phenomena now that goes beyond the United States. Carlos Slim in Mexico, the world's richest man now, is consolidating his foundations under one roof, and says he's going to add $10 billion to the foundations. And I find a most interesting person Moe Ibrahim from the Sudan. He set up a foundation that does two things. 

The first is it's created an African index of good governance. Which more and more is pointed to and referred to by African governments. But what he's also done is he's created an annual prize to go to the African leader that leaves office when they were supposed to leave office and, that while in office, really did something good. It's so interesting that we all know the names of tyrants like the head of Zimbabwe, but very few of us know who got the prize for being a good guy, and that was the head of Botswana a few years ago. Interestingly enough, he has now declined to make that award for the last two years. The award is not an insignificant award. It is $500,000 a year for 10 years to the person that wins it, plus $200,000 for that person to give to any charitable cause of his or her choice, and then another $200,000 a year after that for the rest of that person's life, and I really ought to probably say his cause because the fact is that with the exception of the woman that now runs Liberia, that is the first woman head of state in Africa since Cleopatra. Yesterday I heard on CNN, and I think some of you told me it was on Charlie Rose, a rather interesting development that could just below philanthropy wide open. And this was an initiative by Buffett and by Bill and Melinda Gates, and it was an initiative, a challenge thrown out to the 400 billionaires in the United States. And the challenge was step up and give away half of your assets for charitable purposes during your lifetime or on your death. 

Actually, they've been planning this for over a year in a set of secret meetings. And they just announced it. It's called the Giving Project. A number of people have signed on to it already. And if, in fact, they were to do this rough estimates are that those 400 people are worth about $1.2 trillion, it would mean some $600 billion coming in which would double the asset base of endowed philanthropy today. So much for the super-rich. How about the phenomena of celebrity philanthropy. It used to be that it was an athlete or an actor that would get up and endorse a particular cause, and often that actor or that athlete knew very little about that cause. That's really no longer true. Perhaps the queen of celebrity philanthropy is Oprah, but one of my favorites is really Bono of U2. 

His campaign to forgive the debt of impoverished nations and to double the foreign assistance to Africa was quite extraordinary. And now his ONE Campaign to see rich nations give 1% of their gross domestic product for foreign assistance is taking off. You should know that very, very few countries, just a few Scandinavian countries even approach 1% of GDP in terms of foreign assistance. Yet in the United States, if you ask people how much is given for foreign assistance you get wild, wild numbers. 10%, 15% of the budget, things like that. And it's extraordinary out of whack. But perhaps the biggest celebrity philanthropist of them all is Bill Clinton. It's the first time a former president has really devoted himself to charity and philanthropy. The Clinton Foundation, through its HIV/AIDS initiative and its work to reduce the cost of antiretroviral medicines, had assured by 2007 that 750,000 more people in the global south would be on medication than before. And that's about, at that time, one-third of the total number of people with HIV/AIDS in the south that were on medication. 

Through the Clinton Global Initiative each year about 1,000 leaders in business, in government, and in civil society are brought together to wrestle with a handful of pressing problems and to pledge specific amounts to work on that problem. The pledge is the initial price of admission, and the pledge plus a report on what was done is the price of readmission. In 2005 he got pledges of $2.5 billion, and in 2006 the number jumped to $7 billion. In effect, this global initiative, the Clinton Global Initiative, has become the philanthropic Oscars, if you will. And Bill Clinton is so powerful that he commands in excess of $250,000 a speaking engagement, which probably puts it out of the range of the center I would guess. But what about the poor? We've talked about the rich, we've talked about celebrities, here is really some interesting points about the poor. The first is that the probability of giving to charitable causes doesn't differ by income level. The percentage of poor people giving is just as high as the percentage of rich people giving. There is a difference. People in lower income brackets tend to give more for religious purposes; people in higher income brackets tend to give more to secular purposes. 

But here is the take away I want you to have and to remember. The poor give a greater percentage of their disposable income to charity than do the rich. And for those of you who are still maybe a little cynical about altruism in individual giving, let me tell you about the case of Osceola McCarthy. An African American woman, born in Mississippi in 1920. She had to drop out of school at the age of 12 and go to work. For the next 75 years she eked out a living by washing and ironing other people's clothes. She never owned a car. She lived in a modest home her uncle gave her. And she saved her money. Boy, did she save her money. 

At the age of 87 she gave 60% of her savings, $150,000, to the University of Southern Mississippi to endow a scholarship fund for African American students in financial need. She took the other 40%, $100,000, and she split it between her church and her relatives. And that, my friends, is the closest I've seen to altruism and a wonderful, wonderful story. Now we're going to make the shift from individual philanthropy to organized philanthropy, and when I do that I like to start with giving circles. Giving circles are a sort of halfway house between individual and organized philanthropy. They started gaining momentum in the 1990s, largely as a result of the increase of women's philanthropy. A report written in 2005 by New Ventures in Philanthropy identified then some 220 giving circles, and for the 77 for which they had full data, they saw that it engaged some 5,700 people and raised some $44 million. We now know today that that number is just the tip of the iceberg, and there are many hundreds more giving circles throughout the country. Giving circles are often informal. Sometimes they're housed within an existing entity like a community foundation. 

And sometimes they're even structured as a legal entity in their own right. But they seem to have a kind of resonance because they remind us of various traditional forms of self-help and communities like self-help loan funds, burial societies, and others. We've learned from them the simple fact that participation in a giving circle begets more giving in general. These are instruments that are highly participatory, flexible in substance and style, a place to learn about how to give, collaborative in their decision making, and they cut across wealth lines. In effect, they're a bit akin to that investment club many of you might remember you were a part of or your parents were a part of where you kind of got together and you threw in 50 bucks each and you invested and you kind of learned a little bit about the market that way. When you move now to the classic organized philanthropy, it is a fact that the independent foundation endowed in perpetuity, of which family foundations are in fact a part, is still the backbone of organized philanthropy. It probably accounts for some 70 of the 80,000 foundations in the country. Family foundations, people often still think of the money as their own money. But when you trade that in for the tax exemption, it's no longer your money. And I've always said to family foundation people if you think it's your money still, ask the IRS to give it back. 

And then you find out quickly whose money it really is. So far we've covered the fact that most of these foundations are quite small. But they also differ very much in their philosophy. Increasingly, they're subjecting themselves to sunset provisions. The Gates Foundation will go out of business so many years, I forget exactly the number, after Bill Gates passes away. They're also, a whole set of  them, they're now moving into a kind of give while you live phenomena. Atlantic Philanthropy, started by Charles Feeney, will give away all of its money over the next 10 years. And there is an interesting phenomena where many foundations are now moving to the point that they don't accept unsolicited proposals anymore. I've often kind of wondered about that. It just sort of makes a funny statement like all wisdom resides inside this building and nobody can tell me anything. 

And I guess my feeling would be that if you don't accept unsolicited proposals, I hope you set up another mechanism that informs you about what you're doing because chances are all the wisdom doesn't reside in your building. There's a kind of saying in our field that once you've seen one foundation, you've seen one foundation. (laughter) Many foundations are now turning themselves into operating foundations or starting that way. Instead of making grants, they run the programs themselves. The Hughes Medical Institute, for example, one of the largest foundations in the world, gives very few grants away but it really runs some 23 biomedical labs placed in universities around the country, and the people in those labs are employees of the foundation. It runs those programs. In a sense, an operating foundation is a little bit like a civil society organization except that it has an endowment. And one of the problems here is it means that they don't have to go out and meet the demand test of raising money like other operating foundations do. So once again, if you are an endowed operating foundation you've got to set up a mechanism that lets you know what you're doing, in fact, is on target. All foundations do a little bit of operating programs themselves. 

And some of them are genuine sort of hybrids in that they're part grant making, part operating. The Rockefeller Brothers Fund is that way. It makes grants and it also runs the Pocantico Center, a conference center in the old estate of the Rockefeller family. Quite a lovely place. But even purely grant-making foundations differ as to their governance and their capacity. The Gates Foundation has a board of only four people: Bill Gates, Melinda Gates, Bill's father, and now Warren Buffett. The Ford Foundation delegates two-thirds of its grant-making to program professionals below the president, a third to the president and none to the trustees. At one end of the continuum, there are institutions like Ford and Rockefeller that have overheads in excess of 20%. At the other end of the continuum, there are institutions like Mellon, who like to think of themselves as lean and mean, and have overheads of less than 10%. One style is not necessarily better than the others, but they do have consequences. 

For example, if you're the Mellon Foundation, you have to give fewer grants, you have to give bigger grants, and you have to give grants to institutions that have a track record because you do not have the staffed capacity to monitor what's going on. If you're the Rockefeller or the Ford Foundation, and you have that extra staff capacity, you can make more grants, you can make smaller grants, and can you make grants to organizations that, in fact, are startups and have less of a track record. Both are important. In one case, it gets 90% of the money out in the form of grants; in the others, it taps new potential grantees. In fact, we used to have a interesting phenomena at the Ford Foundation when I was there when periodically the Mellon Foundation was not able to pass out and pay out and meet its requirements, it would come and ask if there were any projects that we had in areas they were interested in that they could piggy back on. Of course we loved that. When I would be asked at the Ford Foundation what the overhead of the Ford Foundation was, I'd always say you tell me what you think it should be and I'll tell you why you're right. Because overhead numbers are numbers you really can fudge in lots of different ways. But generally what people mean when they talk about overhead is how much money do you spend on the grants you make versus how much money you spend on everything else. And our target at the Ford Foundation was always to do 80% in grants and 20% on everybody else, which meant our program officers, our general administrative cost, the excise tax we paid, the money we had to pay to invest or portfolio and all those sorts of things. 

Those are independent foundations. There is another category of foundations that I particularly have come to appreciate over the years and that's community foundations. And they're quite fast growing outside of the United States. There are now about 1500 community foundations worldwide. In the past few years we've crossed a watershed in that there are now more foundations outside, community foundations outside the United States than inside the United States. Having said that, it's still true that in US, in Canada, in the United Kingdom, and in Germany you probably have 1200 of the 1500 community foundations, with the growth in Germany being quite extraordinary. Germany started its first community foundation in the garden city of Gutersloh in 1995. Gutersloh is the hometown of the Bertelsmann Corporation. It's a real company town. I don't want to say that it's one of the most boring places on earth, but they don't roll the sidewalk up, they've never rolled them down in Gutersloh. 

But in 1995 the Bertelsmann Foundation started the Gutersloh Community Foundation there, and in the next 15 years 200 community foundations have sprung up all over Germany. There are about a hundred community foundations in the rest of western Europe, about a hundred in eastern and central Europe, and now about a hundred in the global south, and they're growing very rapidly in places like South Africa, in Mexico, in Thailand, in India, and some others places that you might not expect. Community foundations usually cover a defined geographic space, they're usually governed by citizens from that area, they seek to set up a permanent source of funds, and they garner funds from a wide array of places. But they also do more than grant-making. They play a very important convening function. You're going to hear from someone from the Madison Community Foundation. Oh, terrific. So you get a firsthand sense of a community foundation that's grown quite rapidly in the last few years. They play a very important convening function in the community. They're often a catalyst for community action. 

And they also do a very important job of servicing donors. There's a tendency of people who somewhat always think the next thing you ought to do is set up a foundation. But the fact is that unless you're over a certain threshold, it doesn't really make sense to set up a foundation, and then to have to buy all the sorts of responsibility for reporting and all those other thing that is go with it. And one of the things you can do instead is to set up a donor advise fund in a community foundation or in a commercial gift fund. And what it is is a fund that you set up and you advise how it's used, but all the reporting, the grant-making, the monitoring, and all of those sorts of things is taken over by the community foundation or the commercial gift fund for a rather modest fee. Now people will argue what that threshold is, and my own sense is if it's going to be less than $10 million you have to think pretty hard about whether you ought to set up a foundation or not. Interestingly enough, a lot of community foundations, while they're targeted on that specific community, usually a city or a town if you will, are now having to introduce into them international funds. It's a growing phenomena and it comes from the nature of our society and sort of a -- philanthropy because we now have people who want very much not just to give to the community that they've adopted and they're in, but they also want to give back to the place they came from. And community foundations have been quick to understand that if they say no, those folks are going somewhere else. And so you have this great phenomena now of international funds within community foundations, and I've always found it hard to understand why when you go to a meeting of development professionals there's never anyone from a community foundation there. 

And if you go to a meeting of community foundation types, there's never anyone from the development field there. And yet it seems to be a sort of a synergy between these two groups, and a community foundation is a natural sort of exit plan that doesn't build dependency and my suggestion is the development professionals and the community foundation professionals need to get together and go out on a hot date. Now, let's talk about the attributes of foundations, if you will. Those attributes that define their comparative, I'm going to talk a little bit more, I hope you don't mind today. I sort of been told 45 to 50 minutes but there's a few other things I'd like to finish and since I have to leave tonight I'm going to keep going. So bear with me. There are eight things that I see as attributes, if you will. I'll also mention a ninth later on of foundations. Because of their accountability structures, foundations can afford to fail in a way that's very difficult for institutions responsible to the public or for for-profit institutions that have to meet a bottom line test. They can afford to take risk and they can afford to fail. 

Foundations can take on sensitive issues the public institutions will often step away from. That's the story with contraceptive development in this country. When you had to move from the basic research to the applied research that would be necessary to bring the contraceptive pill and others to market, the corporations wouldn't touch it because of the vulnerability they felt and the government wouldn't touch it because of the political sensitivity, and it was foundations that funded that work that brought that to market. I suspect there are some people who might not have thought that was a benefit to society. Because foundations are not governed by the tyranny of the bottom line, as are corporations, they can take on activities that are not sustainable with only earned income and that require a form of subsidy. We have a very interesting hybrid in our field and that's not-for-profit organizations that garner a lot of their support through earned income. The Foundation Center, for example, today a $20 million plus organization that produces the data on foundations in this country, gets 60% of its money from earned income in terms of the research, teaching and education, and the publications it puts out. But it could never make it in terms of what it did if it had to live only on its earned income. And the 40% that it gets it gets from some 600 different foundations that contributed to it because they see it as a value and a public benefit. An important but often overlooked role of foundations is to help sustain a service desired by a particular segment of society but where there is neither the level of demand or the consensus necessary to make it a government priority. 

Incredibly important in really diverse societies. Foundations can afford to think on the long-term. Recognize that the solution to many problems that are complex, multifaceted, and take time. There are very few silver bullets. Foundations have the capacity to be flexible and to incorporate mid-course corrections to their programmatic efforts in ways that are difficult for the larger bureaucracies of the public sector. Related to this is the fact that foundations can act rapidly. And finally, foundations are a natural place for demonstration projects and pilot projects to be conducted. Unfortunately, foundations don't always live up to those attributes. They often tend to play it safe rather than take risks. They often stay away from sensitive issues. 

They can jump to follow a current fad, rather than sticking with the complex issues that demand long-term solutions. And as many of the grantees will tell us they become overly and unnecessarily bureaucratic, thereby reducing their flexibility. The final attribute that I would add, if you will, and one that I would suggest might be a primary objective or mission of foundations, is to support and nurture the institutions of civil society. And I say that because of the issues we talked about the last time. And that's why I like to always start with civil society rather than philanthropy. The general proposition is that the role of organized philanthropy is to support the status quo. But when you look at the attributes of organized philanthropy, a different picture actually begins to emerge. It's a picture of a sector that goes beyond the provision of services, as important as that is, to challenge the status quo in society. It does this by analyzing programs to see if they deliver on their promises. It does this by suggesting new and innovative ways to deal with complex issues. 

It constantly holds up the yardstick of fairness and a level playing field. And it gives voice to those who tend to go unheard in our society. One of the things we always fear when I worked in the field for the Ford Foundation on demonstration and pilot projects, and one of the reasons so many of these projects never get out of the demonstration and pilot phase, is that you are going to be discovered by the World Bank or AIG or something like that in the very early stage. And time and time again, you're working with a couple of small sites trying to understand what the nature of change is and what the factors are that help you to bring about change when you're discovered by the World Bank who said, God, that's an interesting project, here's $25 million, let's do it in 47 places and the whole thing just implodes. Because it's a case where both aren't working to compare the attributes that are the comparative advantage of each institution. Now, I'd be remiss if I didn't say just a little bit about corporate social responsibility and corporate philanthropy. So let me go through this somewhat quickly. I want to make a distinction between the two. To me corporate social responsibility is essentially doing what's right, but it's not corporate philanthropy. Milton Friedman would tell you that corporate philanthropy is bunk and detrimental. 

He says if you produce a product that people want and sell it at a fair price, if you treat your employees well, and if in the process of do as little damage as possible to the environment, what more could you want of us? Friedman would say it's folly to want more. But to me, that is basically adhering to the triple bottom line and doing what you should be doing, and that's what corporate social responsibility is. Now Price Waterhouse annually conducts a survey of nearly a thousand chief executives in Europe and Asia and Africa and America. They find a rather different corporate environment than the one Friedman would want. Over 70% of these CEOs say that they would sacrifice short-term profitability in exchange for long-term shareholder value. They adopt a concept of multiple obligations to a broad range of stakeholders in their enterprises. Stockholders, employees, host communities, government bodies, civil society groups, media, and even future generations. Now, I recognize that BP may be testing our patience with that particular notion at the moment, but that's the answer you get from those corporate leaders. And it's a very interesting sort of ethical issue here that an appropriately named organization in Brazil called Ethos has been floating which says that for multinational corporations, in particular, you ought to do your corporate philanthropy in proportion to where your corporate earnings come from. You earn 60% of your money in Brazil even though you're an American multinational, you do 60% of your corporate philanthropy in Brazil. 

It's a kind of interesting premise that's going on. Four models, four models of corporate philanthropy are out there. The first really is setting up an independent corporate foundation. Either endowed or a pass through. And there are about a thousand of these in the United States. The second and probably most prevalent form is to conduct a corporate giving program by agreeing each year on an amount to be given. That's something with a lot more volatility to it because it tends to fluctuate more with economic conditions on the one hand, and it tends to fluctuate a great deal with leadership transitions in the corporation. The third is to house your giving program in your public affairs department. And that raises the question, my friends, if cause related marketing is really corporate philanthropy or brand enhancement. And the fourth and interesting model is to put the employees at the center of the giving program. 

In other words, you usually do it through an employee matching program, you let them decide where they want to give the money and you match it on a one, two, or three time basis. Usually I end here by saying there are a set of issues very important to civil society and to philanthropy. What I'm going to do is just enumerate them because we could spend another hour really talking about what those issue are. There's the importance of the enabling environment. Freedom of association, the regulatory process, the tax incentives, if you will, and how they differ across countries and what they mean for your ability to operate. There's the need to build the infrastructure of philanthropy and civil society so it can support and professionalize and represent the work. It's important to put in place an accountability structure that builds trust and legitimacy. And my only feeling is that 85% of the abuse that occurs is because of the boards of directors of individual organizations are either asleep at the switch, don't know what their duties are, or have real conflict of interest issues. Very interesting is our need to take seriously assessment. Assessment or the lack of it is the Achilles' heel of this sector. 

We can no longer live on good anecdotes. Money is scarce and when you get a tax exemption to do something because you're going to contribute to the public benefit, it seems only fair to me the government ought to say what's the evidence that you've actually had impact. And we're going to get better at that, although some of our earlier attempts have been somewhat sophomoric. In that I always remind you of that great paraphrase from Einstein. Einstein said not everything that counts can be counted and not everything that you can count counts. And the point there is in the move to quantify and assess, we tend to move away often from some of the most difficult problems that are so hard to quantify. And we then quantify the lesser issues. We also demean qualitative data in the process. But we all know how important case studies and stories can be. The impact of technology is another extraordinarily important issue and it has two kinds of influences. 

One is it enhances the reach of traditional philanthropic vehicles. Giving circles, giving circles were face-to-face kind of things, but now with the technology, giving circles can have members from all over the country that are part of it. But the other thing are entirely new forms of giving. Some people would say that it's the democratization of philanthropy that's going on. I will probably never give over the internet. My daughter does, I suspect my grandchildren will only do it that way. And whether you're doing it something like Kiva.org, how many of you have heard of Kiva.org? Here's an organization, it came out of nowhere. It deals with microfinance. You essentially tune into it. You give $25 or more from a selected menu of people who are trying to build microenterprises and enhance their livelihoods. 

It's a loan. You get reporting on it. At the end of the time, it's a short-term loan, you can either take your money back or leave it there and rotate it for something else. It is now pulling in in excess of $2 million a month and may be the largest microfinance operation going on after just a couple of years. And not without some growing pain in all of that. We have a set of, I think, what are divisive debates going on in our field. Charity versus strategic philanthropy, perpetuity or not, is it good that business principles have come into philanthropy or not, and I would suggest to you that this divisive sort of discourse is really counterproductive. That, in fact, if you buy the definition I gave you of philanthropy, the voluntary capture of private wealth for public benefit, it only stands to reason that the broader the menu is of models that are out there that can attract someone to say yes I'm comfortable with that way of doing with it, the greater the likelihood that you'll channel money in. And the notion for me really is that diversity is our strength not our weakness when it comes to this. I'm always a little bit uneasy by someone who tells me that it needs to be channeled to something specifically because your passion and my passion may not necessarily match and you'd rather keep me in the tent, I think, than spending my wealth on other less productive things. 

Overhead, wonderful, the poetry and romance of overhead. Wonderful debate in our field. I boil this down to an ethical premise. You cannot let the capacity in an organization that led you to support the program in that organization be diminished by the fact that they took on that program. And we just nickel and dime not-for-profits all the time in terms of overhead or put just 10% flat numbers, and the point I want to make it there is no such thing as a free ride. You got to pay the freight. Now we can argue about what the right amount of the freight is, but let me tell you a gaffe at the Ford Foundation. In 9/11 we set up a fund to deal with the victims of 9/11. Money was coming in so fast, the fund was set up at the Community Trust in New York City, that they couldn't even open the mail. We sent over 10 interns to do nothing but open mail over there. 

And we then made a $2 million grant to the New York Community Trust, and that grant was for the administrative costs of running the fund. And what they did was they could say to everyone, look, every dollar you give goes directly for program, none of it for overhead. Sounds wonderful. It is a misguided notion, it's one of the many battles I've fought against and lost at Ford, because what it gives people is the erroneous notion you can get something for nothing, and you don't get something for nothing. People need to be educated to know that it costs money to run a program. But we can then argue about what the costs are as reasonable human beings. And I leave you with just one sort of tantalizing little question I hope, and that is to ask yourself where is philanthropy today in dealing with the great issues of our time? At a time not so long ago in the '50s and '60s when we thought that the world was not going to be able to produce enough food to feed the population, the population numbers were suggesting that we would have something like 40 billion people in the world, demographically, of course, we know that that's not true and is probably not even going to be a third of that by the time we level off, it was a small number of foundations led by Rockefeller that started the Green Revolution that really produced high-yielding varieties of rice, of corn, and of wheat. In the early '60s there was a book by -- who labeled it as the population bomb. Two brothers wrote a book in the next year called Famine-1975, how the United States should decide who will live and who will die. And in it they said the United States had to pick and choose the places that could survive, let's not brother even trying to save the places that are hopeless and they wrote off India. 

Don't try. Basket case. Can't help them. Well, within two years India went from food deficit to food surplus. Its biggest problem became it couldn't store the surplus and it was being eaten by rats. And that was a sense in which philanthropy pulled together and really challenged itself to deal with an issue of importance in the day and it would be interesting now to take climate change, to take the alleviation of extreme poverty, to take the eradication of debilitating diseases, to look at human rights and social justice, and to ask ourselves that very same question, are there are a cluster of foundations taking the lead in dealing with these crucial problems of the day. And let me stop there and let you ask whatever questions you would like. >> I will come around with a microphone and hand this off so that maybe you can introduce yourself. >> My name is Margaret McIntyre, and you might have covered this Tuesday, I couldn't stay for Q&A Tuesday night. You talked about the Netherlands having more not-for-profit organizations than any other country. 

And maybe that was per capita or something. I think that's what I heard you say. My question tonight is, if you know this, what countries around the world take the lead in terms of the greatest number of people in those countries per capita donating to not-for-profit endeavors? >> First of all, what I said actually was that the Netherlands had the highest percentage of paid employment in the field. It was about 15.5% where it's about 8% in the United States. So not number of the organizations, necessarily. There is absolutely no doubt that when it comes to individual giving there isn't any country in the world that's even close to the United States. In the United States it tends to come out at around 2% of earned income that's giving to charity. It is a fraction of 1% in Europe, the UK, and practically nonexistent in other places. But part of the reason, it's a complicated problem, and it wouldn't be appropriate to necessarily draw from that the conclusion that Germans or Brits are less generous because they have a social welfare system in which they consider the higher taxes they contribute for that to be in a sense a substitute, in a sense they feel they're giving it through that tax system as opposed to necessarily in a private way. But there's no comparison globally to what the United States does. 

>> Barry, I'm going to... (inaudible) >> My question has to do with the kind of references about charity. I think you mentioned about annual giving report, there's some kind of report about charity organization or civil society. So I wonder if you have other recommendations for publication like that? >> Let me strip off a few things, websites and others that you might find useful. As far as foundation statistics go, the Foundation Center in New York has got an extraordinarily rich website with so much material that you can get free, and as well lots of things you can order there. And that's one. Besides that, there is, in the Urban Institute, a center on philanthropy that produces a report on the dimensions of civil society in the United States and a very good source. There is then Giving USA, which annually gives the gross number of private giving in the United States. Aside from that, you can look at, the Ford Foundation's website has a special place for something called grant craft, and what it is is a set of publications which you can download free which teach you sort of the craft of grant-making. And it's on the premise that you come to the field with a substantive grounding and you got to learn a dual discipline, the craft of grant-making. 

And there are some two dozen very easy and user friendly guides that help on that. Aside from that, there have been, in recent years, a number of books that have come out. The best one on foundations is one by a man named Joel Fleishman, who's now at Duke, who's written a really terrific book on foundations. I talked about a book called Civil Society, written by Michael Edwards, the last time. And there's been a kind of interesting debate going on between Matthew Bishop, the American editor, the head of the American bureau of The Economist, who writes about a business, the rich and business principles coming into philanthropy and how that's going to save everything. And you can, I think, search The Economist database for his articles there. And he is countered by Michael Edwards himself who constantly, in fact they take their show on the road often and go at each other who is essentially is always saying that's just bologna, the emperor has no clothes, and the last thing that you're going to do is save the planet. So those are a few things out there. I'll also mention the European Foundation Center, which is now doing some interesting, on its website, that gives you a bit of flavor and insight into foundations outside of the United States. And lastly, I would mention WINGS, which is the Worldwide Network for Grantmaker Support, WINGS, because it's in the process of producing a status report on global philanthropy, not out just yet, and it produces annually a status report on community foundations globally. 

And of course, the granddaddy of all of this is Lester Salamon at Hopkins and the work he's done on the comparative not-for-profit project around the world. >> I was wondering if you could conclude by giving a couple of tips or free advice to us in the Madison community. So you seem sort of excited about this Gates/Buffett sort of challenge. Is there any way of sort of making this more local? Sort of thinking not necessarily about the super, super, super-rich? >> Wow. I guess in a sense I'm excited about it because I don't think Gates or Buffett are frivolous people, and I've liked their sort of commitment to what they do. So I don't think it's PR. After all, when the estate tax was going to be taken away, Gates and Buffett led a whole group of billionaires that said don't do that, which I thought was fascinating in all that. Could you do it locally? They've named their project I think the Giving Project is what it's called. Now, I don't know if any of the 400 billionaires in the United States live in Wisconsin. >> They do. 

John Menard. >> So we've got at least one. It would be interesting. There is a parallel in that corporations are allowed to deduct 5% of their pretax profits for charitable giving. In fact, the record in the United States is barely 1%, they don't even take advantage of the tax break. But there are communities in the United States in which the corporate sphere has, in fact, a 2% club and a 5% club, Minneapolis being the prime example. When locally they pride themselves on doing the full measure. So that there might be a way, we'd probably have to downscale our ambition in terms of the money a little bit, but there might be an interesting way. I was thinking of the great sort of loss to the city of Madison with the death of Irwin and Robert Goodman, who did so much, but we've got to find who are the ones like that. Those are the kind you could have gone to and who would have been willing to pull the cohort together. 

But you've got to have someone has that sort of legitimacy and cache, is willing to pull the group together, is willing to see this is not a one-off dinner event, and keep at it. And then somehow give it a kind of gloss that shows an appreciation of the community for it. >> Well, Barry Gaberman has taken us all the way around the world over the course of the last few nights and delivered us back to Madison quite handily. I know you all join Shep Zeldin and I and our UW Center for Nonprofits in thanking Barry for two great nights of lectures. (applause) >> Thank you, thank you.