In the Money
The Big Foundations.
by Waldemar A. Nielsen.
Columbia University Press. 475 pp. $12.50.
How other people spend their money is a perennial American preoccupation, and when the people in question are multimillionaires enjoying special tax breaks, monitoring their disbursements becomes a positive duty. Thus the last few years have produced a number of studies and investigations of private foundations, most of them critical or even muckraking. The trend has now arrived at its logical conclusion. Waldemar Nielsen, a former Ford Foundation officer, has produced a study of the giant foundations that is itself financed by a foundation.
The Twentieth Century Fund, whose mission is to support research on matters of contemporary concern, has gotten good value for its money. The Big Foundations is well-researched, informative, and judicious. It is also highly readable. I would expect that fundraisers in their ceaseless search for inside information would rush to buy this book, but it should also make absorbing reading for anyone interested in American institutions, organizational behavior, or what the Establishment is up to. In its “Gallery of Portraits,” the book offers individual studies of the thirty-three American foundations (out of some 25,000 registered ones) with assets of over $100 million, their donors, programs, and business dealings. Here we find family feuds, financial scandals, and even a whiff of crime. We also get a good look at the values and social attitudes of the super-rich who left their money to benefit the rest of us. The activities that some tycoons have been able to regard as publicly useful add a rich scene to the human comedy.
As philanthropists, Nielsen notes, “the Rockefellers are in a class by themselves, comparable on a historical scale with the Florentine Medicis.” For four generations, the Rockefellers have made philanthropy a family calling, and the foundations bearing their name stand out for sustained productivity. Among the earliest activities of the Rockefeller Foundation were massive and successful campaigns against malaria, typhus, yellow fever, and hookworm all over the world. At the same time, the foundation contributed substantially to the establishment of permanent government machinery in public health, helped found the first schools of public health, and created a worldwide program of fellowships. It has also underwritten a whole array of scientific breakthroughs, including such research techniques as spectroscopy, chromatography, and the use of tracer elements; the development of the nuclear sciences (and weaponry); and the “green revolution.” The importance of Rockefeller activities can be deduced from the fact that such government organizations as the National Science Foundation and the National Institutes of Health were set up on foundation models.
“The du Ponts, at the other extreme, range from niggling to deplorable.” A large portion of du Pont charitable dollars go to keep up family houses, gardens, archives, and collections in Delaware as public exhibits. Unfortunately, since the “Historical Library” consists solely of company and family papers and most of the art collections are mediocre, the best that can be said for many of the family philanthropies is that “they make a contribution to the recreational life of one vicinity” by giving the proletariat a glimpse of aristocratic life-style. Less innocuous has been the largest single du Pont philanthropy, the Nemours Foundation chartered in Florida. Predictably, the main responsibility of the foundation is maintaining the palatial Nemours estate in Delaware as a perpetual memorial to the donor's forebears, with the leftover money going to a children's hospital. The foundation is fed by the Alfred I. du Pont Estate, whose activities have out-raged public officials for three decades. For most of its life, the Estate has been nothing less than a huge holding company, its assets including virtual control of thirty Florida banks, two railroads, a paper company, and a telephone company. However, it was specifically exempted from the Bank Holding Company Act of 1956 and from federal regulation by an amendment offered by then-Democratic Senator George S. Smathers of Florida. The “Empire,” as the Estate is called in Florida, enjoyed its special privileges and extraordinary growth until 1971, when Congress finally caught up with it and forced enough divestiture to render it no longer a bank holding company under the law.
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The character of a foundation is powerfully affected by the character and vision of its donor, and few donors have had the social imagination of the Rockefellers. Nor have many had the sense to leave their foundations alone. Typically, donors dominate foundation programs, mandating conventional and parochial activities, as long as they live—and they tend to be a very long-lived group. The grandfather of them all is Charles Stewart Mott, who amassed his fortune in General Motors and who is still ruling his foundation at the age of ninety-seven. The foundation is dedicated to making Flint, Michigan a living embodiment of the donor's social ideals, which mainly revolve around adult education: in effect, the foundation runs a privately-financed Model Cities program. A donor's dead hand can also weigh heavily on the tiller. James B. Duke of North Carolina specified in his will precisely how his foundation was to spend his tobacco fortune until Kingdom Come. Each year, 32 per cent of income goes to Duke University, 5 per cent to Davidson College, and so on, with 6 per cent designated in perpetuity for building rural Methodist churches in North Carolina, presumably until the state is paved over with them.
After a donor's death, control typically passes to members of his family and/or his business associates. Leaving a large block of voting stock in a business to a foundation whose board is composed of the donor's heirs is a good way to assure family control of the corporation while avoiding taxes. Only nine of the big thirty-three foundations are free of significant donor-family or corporation ties. Nonetheless, most foundations have not engaged in the kind of blatant self-dealing that populists darkly suspect them of. Families have not made grants to their friends and relatives, or taken bread from the mouths of the poor to pay themselves fat trustees' salaries. Companies have not even tried to take public-relations advantage of foundations bearing their names. (Ford Motor Company officials have more often felt they suffered from the activities of the highly visible and often controversial Ford Foundation.) The worst result of foundation-corporation marriages has been indifferent investment performance by some foundations. Several studies have indicated that returns on foundation portfolios are lower than they would be if assets were diversified. Safety is also a factor, but it appears that concentration of foundation assets in donor companies means that millions of dollars are lost to charity every year. The usefulness of a number of foundations has also been impaired by the limited vision of Old-Home-Week boards. The family-run Pew Memorial Trust of Philadelphia, for example, is notorious for its support of right-wing and fundamentalist causes such as the Christian Anti-Communist Crusade.
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Despite critics on both Right and Left, however, most foundations are respectably centrist institutions with benign if unexciting activities. Relatively few have well-defined, professionally-guided programs for social change. (Ford, Carnegie, Rockefeller and Rockefeller Brothers, Danforth, Kellogg, and Kettering stand out in their variously effective ways.) Most big foundations, like most medium-sized and small ones, function mainly as check-writers for a host of other non-profit agencies ranging from the United Negro College Fund to the local symphony orchestra. Probably the most activist of them all is the $3½ billion Ford Foundation, which drew a barrage of criticism for its backing of the ill-fated Ocean Hill-Brownsville school decentralization plan in New York and its small grant to the noisy Mexican-American Youth Organization of San Antonio. However, Nielsen reports, a careful study of even Ford's grants for 1969 reveals that only 8 per cent were related to controversial domestic issues and could be called activist or experimental. In 1968, 41 per cent of all American foundation grants, $308 million, went to education, commonly in the form of endowment and building grants, while health and science got 24 per cent, $183 million. The big foundations have more often been “on the trailing edge than the cutting edge of change.”
Nonetheless, the author's conclusion that private philanthropy is “a sick, malfunctioning institution” seems unduly strong on his own showing. The big spenders have generally lacked initiative and imagination on social issues, and most have moved with timidity (if at all) into new areas like race relations. However, if there have been only a few dynamic leaders, there have also been few actual delinquents. The programs of most have been decent, if not daring. Nielsen concludes somewhat ambivalently that foundations have been “useful,” but feels that they are now socially “unproductive.” Honorable men may, of course, differ as to what constitutes productivity.
More experimentation and less avuncular check-writing, the author believes, is necessary to fulfill the foundations' potential as seed-beds of social progress. The foundations should have another decade to turn themselves into enterprising social-change agents or face a merciful death. This is a debatable proposition. For private philanthropies to nominate themselves the sponsors of broad public change raises a question of accountability: foundations cannot be voted out of office (although they can of course lose their tax exemption). Further, it seems probable that the amount of meaningful innovation available to a society at any given time is limited not only by the amount of money spent, but also by the state of the social sciences and intellectual tools in general—and this is an area where a half-baked loaf may well be worse than none. The wreckage of the federal social programs of the 60's shows us that money and a will to progress are not enough.
The leverage foundations have on needy institutions like universities also makes trendiness in the foundations undesirable. Hungry applicants may be forced to shape their policies to the latest fashions in giving. Worthwhile experimentation seems most likely to come from institutions and individuals with solid experience and enough financial security to insure intellectual independence. In a time when the social sciences have become a thriving industry, foundations do well, I think, to earmark part of their income for the ongoing support of institutions found on careful inspection to be consistently productive. “Venture” capital should be spent separately, and always at the direction of a staff qualified to reject what is merely fashionable.
Foundations are contributing over a billion dollars a year to American life. This sum is dwarfed by the federal budget, but is of vital importance to a host of institutions that can't hope to attract government or popular support—conservatories of music, university presses, small colleges, arcane research projects. At their most routine, the foundations shore up the broad charitable structure; and at their most inspired, they tackle jobs government can't or won't do because they are too risky or small or controversial or imaginative for the official bureaucracy. The average performance of foundations as social servants is probably as good as that of government. In a society that values pluralism, we need the alternative offered by genuinely independent sources of money and ideas. Hoping to head off the Brave New World, humanitarians and reformers of every stripe, like Huxley's people, still call their deity by the name of Ford.
