The Power and Influence of Grantors
Rob Reich rightly draws attention to the potential dark side of private philanthropic foundations. We should always be wary when institutions evade accountability, especially when they trade in important resources. At the same time, as Reich persuasively argues, private foundations’ independence from oversight can also enable exploration of paths not taken by their more accountable institutional counterparts.
Reich emphasizes that private foundations may promote pluralism by providing a protected outlet for minority perspectives. These foundations may concentrate upon needs neglected by large-scale majoritarian enterprises and engage in long-term experiments that impatient election and shareholder cycles may not tolerate. Moreover, from a democratic point of view, offering a protected avenue for minority positions (albeit primarily those of the wealthy) to be implemented, and not merely voiced, provides some salutary ballast to our non-proportionate, winner-take-all brand of democratic rule. Although private foundations’ tax-exempt status is not strictly necessary for their independence, it sends a concrete message that these contributions are socially valued as diverse forms of philanthropy.
Once minority perspectives are so empowered, private foundations may also play an important role in buttressing (valid) majority perspectives. For example, if the Gates Foundation pursues a critical alternative to the government position on teacher testing, but the government’s position turns out to be right, that fact may be more apparent when independent actors test and defend both sides. Thus, the autonomy of private foundations may have epistemic value not merely as a counterpoint to “government orthodoxy,” but also as a check on other private foundations and as a source of independent confirmation of the merits of the majority’s position.
Despite these virtues, Reich understandably worries that private foundations permit substantial resources to be saved and spent over generations without meaningful transparency or responsiveness, running counter to our democratic instincts. Although these features may contribute to private foundations’ independence, they may also cloak abuses and offer cover to indulgent projects. I might add the following variation on that concern.
When universities rely on foundations, they risk yielding to their funders’ judgments.
Most private foundations do not work in isolation and do not implement charitable projects directly. Most are “non-operating” foundations that give grants to other worthy institutions, including universities and governments. Sometimes their beneficence takes the form of a more involved partnership rather than a routine donation. These connections should spark caution, alongside gratitude, about whether these partnerships may compromise recipients’ independence and governance procedures.
Take universities, for example. The more universities must rely on private foundations for funding, the greater the hazard that the kind of judgment and accountability distinctive of the university will yield to the judgment and accountability practices of private foundations. Rather than making curriculum, hiring, and other programmatic decisions solely based on academic criteria and principles of faculty governance, universities may subtly or overtly defer to the preferences of private foundations and other donors. So the concern is not merely that private foundations have a non-transparent, non-accountable structure, but that these features may be contagious when private foundations interact with other sorts of institutions. Valuable forms of decision-making may be compromised to court the private foundation. These interactions may magnify the power of the foundation and diminish the vitality of other responsive forms of governance.
These hazards are not new or unique to private foundations. But their rise, the rise of public-private partnerships, and the greater neediness of public institutions for such partnerships make those hazards more urgent. In response, we might tinker with the structure of the private foundation, tying preferred tax treatment to modest measures of accountability and responsiveness. We could borrow from the model of public charities that must demonstrate significant public support to maintain their tax classification. Asking private foundations to garner just a small degree of public support and to introduce a minimal measure of diversity on their boards might introduce a sliver of accountability and transparency without jeopardizing their independence and long-term vision.
We should also work harder to protect recipient institutions from excessive donor influence. This aim figures among the myriad reasons why we should restore robust funding to state institutions. In addition, institutions that partner with private foundations should establish stronger firewalls between fundraising activities and institutional decisions by, for instance, barring donors from decision-making boards, explicitly discouraging donor expectations of direct or indirect forms of control, and demanding broad institutional support both for the project funded and for the relationship with the donors. All of these would reduce donor pressure on institutional leadership and decision-making. However valuable the independent perspectives of private foundations, they should not be allowed to infiltrate other institutions whose distinctive methods of governance provide epistemic and democratic virtues of their own.