Advocates keep scoring

Efforts to push companies to adopt more socially-responsible corporate strategies continue to bear fruit.

As The New York Times reports, Burger King this week announced it would start buying eggs and pork from suppliers that do not keep their animals in cages and crates.

Burger King made the changes after talks with the Humane Society of the United States and with People for the Ethical Treatment of Animals, or PETA, the Times says.

An official of Technomic, a food industry research and consulting firm, told the Times the growing importance to consumers of social responsibility and consciousness likely would prompt industry to see “an increasing imperative to get on that bandwagon.”

As the Times also reports, celebrity chef Wolfgang Puck said last week he will use meat and eggs only from animals raised under strict animal codes, while Smithfield Foods, the world’s biggest pork processor, said in January it was phasing out over 10 years the confinement of pigs in metal crates.

These developments follow an environmental deal announced by the Sierra Club and Kansas City Power & Light, and a separate deal between environmental groups and Texas utility TXU.

Yet while foundations preach about change, only a handful have had the courage and vision to use their clout as shareholders to push for corporate change.

And far too few nonprofits have proved willing to get involved in policy work that would advance their mission and benefit their constituents.

Even in China, no stronghold of democracy, 21 environmental groups recently called on the public to boycott products from companies that cause pollution, China’s news service Xinhua reports.

America’s civic sector is rooted in the idea of working for social change that makes our society a better place to live and work.

If foundations and nonprofits truly want to put their money and clout behind their words, they need to speak up more forcefully and work harder for policy change.

The only thing they have to lose is their hypocrisy.

Bush’s faith funding belies his talk

President Bush says he is making progress on getting more federal dollars into the hands of religious social-service charities.

But Bush’s actions have not kept faith with his words.

As Associated Baptist Press reports, Bush this month told a White House conference for leaders of religious groups and community charities that the federal government gave nearly $2.1 billion in grants to religious charities in fiscal 2005, up 7 percent from the previous year.

At the conference, Bush said he wants to ensure a “level playing field” for religious charities.

But some religious leaders Bush initially enlisted to push his faith-based spending plan have criticized him for not putting his money where his mouth is, Associated Baptist Press also reports.

While Bush says publicly he wants to fund social services delivered by religious groups, these leaders say, he actually has reduced overall funding available to charitable groups by cutting discretionary spending for social services.

And a new study by the Roundtable on Religion and Social Welfare Policy finds that, while the share of funds that 99 federal grant programs gave to faith-based providers between 2002 and 2004 was flat compared to the share given to secular providers, the total amount of funding actually fell to $626 million in fiscal 2004 from $670 million in fiscal 2002, Associated Baptist Press reports.

If Bush truly wants to ensure the effective delivery of social services supported by government funds in a even-handed charitable marketplace, he should not be cutting those funds or giving religious charities an uneven advantage.

Bad-behavior show at Smithsonian

The Smithsonian Institution has produced a compelling exhibit on the need for more effective regulation and policing of the charitable marketplace.

Under the gun for lavish perks and excessive spending, Smiithsonian CEO Lawrence Small has quit, The New York Times reports today.

But despite Small’s exit, the mess he created and the failure of the Smithsonian’s board of regents to ride herd on him underscore the broader need for stronger government oversight of nonprofits.

Nonprofits boards certainly need to do a better job keeping their own houses in order.

As Rick Cohen of The Nonprofit Quarterly told the Times, the Smithsonian board, apparently seduced by Small’s fundraising success, “was prepared to turn a blind eye to questionable expenditures.”

But even stronger board oversight is no substitute for tougher rules and cops to hold nonprofits accountable.

A Washington Post review of spending by Smithsonian Secretary Lawrence Small since he took office in 2000 found $90,000 in unauthorized expenses and approval by the institution’s board of regents for $2 million in expenses for his private home and offices.

The Smithsonian’s former inspector general also told the Post last week that Small, whose compensation this year was budgeted at $915,698, had asked her last year to halt an audit of the Smithsonian division that generates revenue for unrestricted use.

In the wake of the Post’s reporting, the Senate last week voted to freeze a $17 million increase in the Smithsonian’s proposed 2008 budget, capping salaries for any Smithsonian executive at $400,000 and keeping the freeze in effect until the Smithsonian fixes how the secretary’s shop does business.

Independent Sector and the big foundations that bankroll it continue to claim the charitable marketplace can police itself, but self-policing clearly has been missing in action as executive greed and board sloppiness continue to infect organizations like the Smithsonian.

And it is the news media, not the self-appointed champions of nonprofit self-regulation, that have helped lift yet another rock to expose still another slimy practitioner of nonprofit excess and arrogance.

Big foundations and the trade groups they fund can fight all they like against the need for better regulation and enforcement.

But without rules and cops that are effective and even-handed, the charitable marketplace will continue to be a breeding ground for bad behavior that only erodes the trust on which all nonprofits depend.

American Idol’s show-biz philanthropy

Aiming to do some good with the fortune it is raking in and focus the attention of its estimated 26 million to 28 million weekly viewers on the impact of extreme poverty on children and young people in Africa and America, TV juggernaut American Idol is turning to philanthropy.

The philanthropic initiative, “Idol Gives Back,” aims to raise funds and awareness peaking in broadcasts April 24 and 25 during which celebrity artists will appear and the top six finalists this season will sing songs about compassion and hope.

So far, reflecting its roots in the breakthrough marketing prowess of the Fox reality-TV phenomenon, Idol Gives Back has been big on show-biz.

But sadly, reflecting the arrogance of much of organized philanthropy, the effort has been short on details or respect for the individual donors it is counting on.

During the show’s March 8 broadcast, host Ryan Seacrest announced plans for Idol Gives Back, and American Idol that day published a news blog on the charitable effort.

The blog said sponsors Coca-Cola and AT&T and other partners would donate money for every vote cast for contestants on the April 24 show, that Ford Motor Company also would contribute, and that viewers during the April 25 show would be able to make donations using toll-free lines and the Internet.

The Philanthropy Journal phoned Scott Grogin, senior vice president for corporate communications at Fox Broadcasting, to find out exactly how much money American Idol and Fox planned to give to the philanthropic effort, how much money its sponsors and partners would give for every vote cast, how much Ford would give, and how much American Idol expected the entire effort to raise.

Grogin said he could not answer the questions but that someone would get back to PJ, and that any communication would have to be by email.

The response came this week – a week-and-a-half later – from Andrea Lewis, who says she works for Richard Curtis, a movie director and writer who Lewis says is one of the driving forces behind Idol Gives Back.

So how much will American Idol and/or Fox contribute? Will those contributions also involve matches? And if so, how will they work?

“We are aiming to maximize the funds raised,” Lewis says. “No specific numbers are available to you at this stage.”

What is the aggregate contribution that American Idol, Fox and corporate sponsors together are likely to make?

“We expect corporate contributions in the double-digit millions,” Lewis says. “We are working together to maximize the contributions for Idol Gives Back and the overall contributions amount will be announced once it has been totaled after the event.”

What is likely to be the total of all contributions from Idol, Fox, sponsors and viewers?

“We are working to maximize the contributions both from sponsors, philanthropists and the general public,” Lewis says. “Every dollar raised has the capacity to change someone’s life so we will be happy with the final outcome, whatever it may be — clearly the more donated, the more lives we can help change and save so we’d like the total be as big as possible. Raising awareness of the issues is equally important.”

There you have it: Maximizing hype, minimizing substance.

American Idol, which has made an art form of reality TV and product placement, and transformed wannabe amateurs into entertainment superstars, surely will generate huge bucks and a lot of attention for the cause of helping impoverished children.

As multi-media entertainment guru Martha Stewart would say, that’s a good thing.

But American Idol could do much more: Instead of simply touting its philanthropy in advance, and treating its viewers like automated teller machines, American Idol could be engaging them for the long-term in philanthropy and the cause of addressing poverty.

American Idol has a loyal and enormous audience with which it could be sharing the details of how it plans to practice its philanthropy.

Each week until its big two-day philanthropic extravaganza, American Idol could be educating over 25 million viewers about the impact of poverty and the difference that individuals and organization can make by getting involved.

And to accomplish its stated goal of “maximizing” its philanthropy, American Idol should spell out exactly how much it and its sponsors plan to give, including the formula they will use for providing matching funds.

In letting viewers know exactly how much their participation will generate in matching funds, American Idol might generate even more support.

By treating its viewers like donors, cultivating them and engaging them with substantive information instead of shallow hype, American Idol not only could increase the impact of its inaugural philanthropic undertaking, but it also could transform an unprecedented show-biz phenomenon into breakthrough mass philanthropy — and create a model for other mass media.

That would be something worth idolizing.

Foundations’ aggressiveness misplaced

Charitable foundations are aping the wrong role models and fighting the wrong fight.

Apparently coveting huge returns like those generated by the investment stars who manage the endowments at Harvard and Yale, foundations are allocating a bigger share of their assets to alternative investment strategies like those the Ivy League investors favor, such as hedge funds that offer high returns for taking high risks.

But spectacular as they have been, the returns at Harvard and Yale are not realistic barometers for most foundations.

The investment managers at Harvard and Yale, profiled recently in The New York Times, have the resources and expertise to forecast where the financial markets are going and to stay ahead of the curve.

That requires finely-tuned metrics, savvy financial know-how and the ability to anticipate the uncertain variables of inflation and projected costs and payouts.

Yet while they may lack their resources and expertise, foundations still try to mimic the big players.

In the process, foundations may fall short of the returns they need to meet the requirement that they pay out at least 5 percent of their assets each year in grants and overhead.

Lacking the clout and in-house expertise of Harvard and Yale, foundations pursuing alternative strategies depend on outside investment managers, and it can be tough for them to find hedge funds or other high-risk vehicles in which to invest the assets immediately, delaying the possible payoff and making it tougher to use investment income to meet the payout requirement.

And just as many foundations have tried to invest more aggressively than might be prudent, many also have been overly aggressive in fighting proposals to increase their required payout to 6 percent.

Instead of raising a stink to preserve the current payout rate and hoard their wealth, foundations should be looking for ways to invest their assets more prudently, address critical social needs and their underlying causes more strategically, meet nonprofits’ need for operating support more effectively, and work more actively to keep their investments and the companies they invest in more closely aligned with their philanthropic mission.

If they want to be aggressive, foundations should focus first on themselves by improving the way they invest their assets, make their grants and perform the policy role they can and should play in society and the marketplace.

The wolf at foundations’ door

Foundations claim they are at risk of going out of business, but they actually must be laughing all the way to the bank and the country club.

Screaming and kicking over proposals for a tiny increase – from 5 percent to 6 percent – in the share of their assets they must pay out in grants each year, foundations have misrepresented the proposed payout increase as one that will doom them.

Critics argue, rightly, that current law gives foundations an unfair edge in the charitable marketplace: Their donors get big tax breaks up front; the foundations have to spend only 5 percent of their assets each year, and can count overhead costs as part of their payout; and the assets they hoard give the donors and their successors unbridled power and influence.

What’s more, foundations typically count on an annual return of 5 percent on the investment of their assets to meet their payout requirement, keeping their assets safe and unspoiled.

And the grants that foundations do make do little to address nonprofits’ critical need for operating support.

Yet in fighting modest proposals for an increase in the payout rate, foundations argue that being forced to give away more money each year will put them out of business.

Foundations, in short, are reframing the issue, misrepresenting the modest proposal that they be required to be only slightly less greedy to an apocalyptic ultimatum that will force them to close their doors.

In his new book, The Foundation: A Great American Secret, Joel Fleishman of Duke University argues that “perpetual foundations” are critical to American democracy.

Fleishman says foundations constitute a “polyarchy,” a term he says refers to “the existence of many separate, independent power centers in society.”

In our civic sector, he argues, “it is the foundations that put the power of concentrated money behind individuals and the associations they form, thereby transforming American pluralism into a polyarchy with effective firepower.”

And it is perpetual foundations that “introduce a multigenerational polyarchy,” Fleishman says. “Without such perpetual foundations, America’s civic sector would be greatly impoverished.”

The “accumulated capital held by perpetual foundations plays a critical balancing role in another broader sense,” Fleishman writes. “Thanks to their power and the slow, steady pressure they exert on behalf of the causes they champion over time, the foundations serve as both a prod and a counterweight to the government. Perpetual foundations are much better able to criticize and stand up to politicians and administrations, if they exercise the courage to do so, than are life-limited foundations.”

Not only does Fleishman’s argument by implication discount the role that any individual or group without perpetual wealth can play in a democracy, but it overstates the role that “perpetual” foundations actually do play.

Donors who create foundations get tax breaks, and foundations’ charitable assets are tax-exempt, because our lawmakers concluded it is good public policy to encourage the operation of a charitable marketplace that will address critical social, economic, environmental and cultural issues.

The special tax treatment foundations enjoy is not a license to hoard money, and proposals to increase the payout rate and tighten the regulation of foundations are more than justified and long overdue in the face of foundation excess, wrongdoing, greed and arrogance that undermine the fair and efficient working of the charitable marketplace.

As for perpetual foundations acting as more muscular government watchdogs and gadflies, the reverse seems to be the rule.

Too many foundations are smug, fat and lazy, and their main interest in dealing with government these days seems to be to preserve and protect their assets and power, not to push government to fix flawed public policies that underlie our most urgent problems.

And precious few foundations are willing to use their role as shareholders to push corporations to adopt business strategies to better address those same critical problems.

Foundations also have been pushing nonprofits to be more effective and measure the impact of the grants they receive, but only a handful of foundations have been willing to invest in nonprofit operations.

Warren Buffett, who last year announced he was giving the bulk of his wealth, or $31 billion, to the $30 billion Bill & Melinda Gates Foundation, recently announced he had stipulated in his will that the proceeds from all the shares in Berkshire Hathaway he owns at his death must be used for “philanthropic purposes within 10 years after my estate is closed,” and he estimated his estate would be settled within three years of his death.

That is philanthropy.

Too many foundations, in stark contrast, spend their time crying wolf.