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On the Issue of Trust (TPI, 2004)

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On the Issue of Trust (TPI, 2004) The Tuesdays @TPI May 2004 Volume 8 Number 2 Forums The T@TPI forum series The Philanthropic Initiative, Inc. provides a national audience the opportunity to partici- pate in a substantive discus- INITIATIVES sion around important issues A NEWSLETTER ON STRATEGIC PHILANTHROPY that profoundly affect philanthropy and society. The series' goals are to dig deep into the issues, to generate and disseminate “On the Issue of Trust” new approaches, and to provide a forum for the Philanthropy is private action in public space. In an increasingly exchange of ideas. Featuring political and media intensive world what governance, what account- a live audience and expert panel, the moderated discus- ability, what transparency and what attitude is appropriate, expected, sion is designed to allow the and right for charitable organizations and private foundations? participation of interested parties from across the Peter Karoff’s essay “On the Issue of Trust” explores the impact and potential consequences 1 country, utilizing a Web and for philanthropy of society’s diminishing trust in its institutions. It also provided the back- ground and context for a provocative Tuesdays@TPI forum, Trust and Transparency: teleconferencing format that Philanthropy as Private Action in Public Space, March 9, 2004. At a time when philanthropy includes polling,Web chat, is increasingly a subject of scrutiny and criticism by the media and the government, when call-in questions and a trust in its institutions is at its nadir,TPI concluded that this forum and a special issue of post-forum survey. WGBH, Initiatives were both important and timely.TPI is deeply grateful to Citigroup Private Bank Boston’s public television Philanthropic Advisers for its generous support for this event. station, films and makes available to viewers a video The panel of experts on March 9 included: John Abele, founder and chairman of Boston of the session, via the Scientific and donor to the Argosy Foundation; Peter Goldmark, past president of the WGBH Forum Web site. Go Rockefeller Foundation and a director at Environmental Defense; Scott Harshbarger, former MA Attorney General and Common Cause president;Alex Jones, Pulitzer Prize to http://forum.wgbh.org/ winning journalist and director of the Shorenstein Center at the Kennedy School at wgbh/ and under Browse Harvard;William Pounds, dean emeritus of the Sloan School at MIT; Dorothy Ridings, by Partners, click on president and CEO for the Council on Foundations; Marion Fremont-Smith, partner, Philanthropy. Choate Hall & Stewart; and moderator, Peter Karoff, founder of TPI. This panel of donors, lawyers, journalists, professional advisors, and leaders in state government and organized philanthropy came together in agreement with other forum participants that Continued on page 2 Selected Resources: “On the Issue of Trust” continued For more information on our day that trust in philanthropy and its institutions and actions is panelists’ work, the issue of trust, and how the sector is responding fundamental to its “franchise to operate.” It is a thesis that rein- visit these Web sites. forces the underlying message in the opening of Karoff’s essay: The Council on John Abele Foundations http://www.cof.org The field of philanthropy is overdue for a serious reassessment of its The Forum of the Regional mission and examination of many of its operating assumptions.A good Associations of Grantmakers http://www.givingforum.org defense is not the answer.While frustration within the field is palpable, The Independent Sector [there is also] a yearning to turn powerful visions of good works into http://www.independent practical strategies for transformation. sector.org Peter Goldmark Council of Michigan Foundations “The nonprofit sector has been a phenomenal source, historically, http://www.cmif.org of new ideas, of innovation, of leadership, of change, and some- Minnesota Council on times of very shrewd and disciplined planning and foresight,” Foundations http://www.mcf.org noted Peter Goldmark.“It is a sector, not always well-understood, Scott Harshbarger TPI Advisor Resources that other cultures and countries envy, and that remains a great http://www.tpi.org/promoting/ advisorresource.htm asset to the world. Common Cause http://www.commoncause.org “That sector, in some crude sense, now is on trial,” he added,“on Environmental Defense trial to define our standards, to justify our mission and to re-earn http://www.environmental Alex Jones defense.org trust. And that is OK, that is why we came today.” The Joan Shorenstein Center on the Press, Politics and Public Policy at “Society has given this sector a wide degree of freedom to Harvard University choose purposes, to carry out missions, and has also given it http://www.ksg.harvard.edu/ presspol/ very important tax incentives for support,” said Marion Fremont- Peter Karoff MIT Sloan School of Smith, lawyer and senior research fellow at the Hauser Center Management for nonprofit organizations at Harvard. “I look at trust not as http://www.mitsloan.mitedu. an issue, but as a relationship that demands the greatest, highest The Hauser Center for Nonprofit Organizations adherence to standards of fair dealing and prudence. If the http://www.ksg.harvard.edu/ hauser stewards of philanthropy do not adhere to these standards, society is not going to provide its support.The issue then is how do William Pounds we preserve these advantages and assure compliance with high standards in ways that do not impinge unnecessarily on the INITIATIVES A newsletter on issues of strategic philanthropy freedom we enjoy in carrying out our missions.” Editor Jane Maddox Contributing Writers These were among the important themes explored that day, a Dorothy Ridings Stephen Johnson Ellen Remmer portion of the proceedings of which are presented here. Cindy Hanshaw 1 “On the Issue of Trust,” is being published by the International Journal of Initiatives is published by Not-for-Profit Law and is available in draft form on www.TPI.org. The Karoff Center at TPI Reproduction and/or distribution of the essay is not permitted without 77 Franklin Street the consent of TPI. Boston, MA 02119 Marion Freemont-Smith 2 interest in the issue, spurred in large part originally by the Teapot tempest or debate over the pay-out rules. But clearly the numbers signal something to be aware of.” storm brewing? Still, in a sector that comprises more than 900,000 nonprofit organizations and 60,000 foundations one might ask, is the number of cases of outright abuse cause for widespread mistrust? “On the Issue of Trust” is based on the premise that trust in our society as a whole is The follow-up survey, to which nearly a third of the forum’s listeners responded, showed that 42 percent had in decline and philanthropic organizations been involved in an ethical dilemma.The examples are not immune. But is there really “a crisis included a foundation director with a conflict of interest, an agency that relied on government funding and had to in trust,” and what exactly does that mean? shut down, a decision to eliminate trustee compensation, advising a donor that his philanthropic plan was unethi- How encompassing is it? How resilient? On cal, and a question of whether an elderly donor under- what is the mistrust based? stood the consequences of an irrevocable gift of his estate to a community foundation. Among the many causes, media attention on philanthropy has increased.“While initially positive, the media’s infatuation Or is it a matter of accountability? in the late 90s with the givers and giving and what might be According to the panelists, a large measure of the public’s possible soon turned critical, much of it focused on actual or mistrust is based on the sector’s overall lack of accountability – presumed fraud and abuse within the philanthropic sector,” accountability for many things, including being true to mission. writes Peter Karoff. Might the erosion of public trust then be the product of little more than a media-driven, perhaps mis- “Execution is the problem,” John Abele, founder and chair- guided public perception? man of Boston Scientific says,“rather than dishonesty or unethical behavior.What about faith in the competence of the Dot Ridings, Council on Foundations president, says no.“We organization to achieve the intended goal? You have trust have always been aware that some members quietly leave the of the organization, trust of the individuals and trust of the organization because they are not living up to our expecta- program to consider.”As he points out, it is not a single, or a tions, even at a minimum level. But we really didn’t expect simple issue. the amount [of misconduct] that has been exposed, not just by newspapers, but by looking closely at the 990s [Form 990- Bill Pounds looks at the issue from a similar perspective. PF,the IRS’s annual reporting form for private foundations] “When I think about what is involved [in putting trust in filed in recent years.When I came to the Council eight years philanthropy], three things come to mind: first, do I trust in ago, I had no idea that there was the degree of either wrong the integrity of the donor’s intent; second, do I trust in the headed, deliberate or just ignorant error going on in philan- integrity and effectiveness of those employed to carry out that thropy that I am now convinced exists.” intent; and third, do I trust in the integrity and the willingness to act of those overseeing the program.” Some real abuses certainly do exist, according to author and researcher Marion Fremont-Smith.“In a survey [we pub- When moderator Peter Karoff asked the off-site audience lished] of press reports of wrong doing by charities from 1995 which factor has contributed most to the loss of trust, a signif- to 2002 we came up with 140 criminal cases and 54 cases of icant minority identified “inadequate governance, accountabil- breech of fiduciary duty.
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