We hear a lot of noise in philanthropy right now. This is especially true In the United States. It’s the noise of calls for funders to step up, spend more, rescue programs, fill gaps, support legal action and advocacy, help a civil society under siege, “meet the moment”. The U.S. federal government is making noise about threatened investigations of large endowments, calls to dismantle diversity, equity and inclusion initiatives, threats against expression of opinion and the rights of refugees. Sorting through this noisy onslaught, the foundation sector in the U.S. is beginning to respond with commitments to increase funding, to commit to funding advocacy and multi-year grants and to speak out for the freedom to give.
In Canada too, the noise around the slipping economy is increasing. Inevitably, much of the noise focuses on financial fears, as charities in Canada report that donations are declining, costs are rising and reserves are exhausted. The threat to Canada’s economy from U.S. actions will only worsen these real concerns.
The noise around financial vulnerability will keep people focused on the amount and pace of foundation spending. There are calls now which will grow louder, for Canada’s 11,500 foundations to give more than the $16 billion they do spend (according to 2023 CRA). This raises a familiar debate about perpetuity versus spend down. Critics argue for an increase in the mandatory payout from 5% of assets to 7% or even 10%, and time limits on the existence of endowments. Others argue that foundations must maintain their capital to play their best role as needed social investors for the long term, however long that is.
But is there a signal being lost in all the noise about money and whether it is being spent fast enough and in sufficient quantity?
This signal is what foundations need to pay attention to. Underlying the argument about money is an argument about what foundations themselves are for. What is their role in a capitalist economy and liberal democracy? The underlying signal is the questioning of philanthropic legitimacy.
There is fragile public support for the foundation model. While direct attacks on foundations in Canada have been rare, the growing size of philanthropic endowments over the past few years is making them more visible. As stresses over inequality increase, so too will suspicion of wealth, even wealth held for charitable purpose and for public benefit. The lack of transparency by most private foundations in Canada leaves them open to this suspicion. In the U.S. opinion polls show support for regulating higher spend rates of endowments and possibly removing tax incentives provided to foundation donors if they don’t show themselves to be more accountable. While a US opinion poll does not predict or reflect Canadian views, this does not mean that Canadian philanthropy should not take advantage of this opportunity to react.
David Callahan, the editor of Inside Philanthropy in the US, has raised concerns about philanthropy’s vulnerability to public attack, pointing out that “public support for philanthropy’s current practices is weak”. He suggests that foundations pay more attention to the need to demonstrate their value to society. Callahan argues that “philanthropy needs to better understand how deep currents of isolation, loneliness, alienation and anxiety have greatly complicated the work of social change. It’s not enough for institutions to solve problems and demonstrate results. What’s also needed is the articulation of a broader vision of human flourishing and the good life that people can believe in.”
How can/should/must philanthropy respond to this signal? What can foundations do to demonstrate their contribution to a more flourishing society? Focusing on the money is not the only answer. Focusing on what the money is being spent on and how it is spent may be as important. Foundations can help create a more flourishing society by increasing people’s sense of belonging, empowering civic voice, reducing polarization and conflict by listening and by directing their help to those who are working to change systems of inequality. And, in Canada’s current situation, foundations can take the opportunity to demonstrate how their work contributes to a stronger country.
This will mean reviewing assumptions, practices and roles as well as adjusting or renewing strategies. Michele Fugiel Gartner of Philanthropic Foundations Canada offers some valuable suggestions for Canadian foundations that are pondering their internal and external actions in this moment. Based on her reflections and those of others, here is my list of ways in which foundations might respond to the legitimacy signal. These can be considered independently of each other but are also mutually reinforcing.