Inside Philanthropy

A blog on philanthropy and nonprofit news and issues. A publication of Philanthropy Journal.

October 29, 2007

Good governance requires investment

Self-regulation is the new religion for philanthropic power brokers.

Funded by big foundations and driven by Independent Sector, an aggressive campaign by the Panel on the Nonprofit Sector to fight moves in Congress to strengthen regulation and policing of nonprofits now has culminated in a new testament to the promise of an unbridled charitable marketplace.

Like the innate goodness of motherhood and apple pie, the panel’s newly-released “Principles for Good Governance and Ethical Practice” is filled with wholesome ideas and common sense: Nonprofits, of course, can and should govern themselves more effectively and ethically.

But there’s a rub: The minimal rules and policing that are the logical outcome of the panel’s push for self-regulation simply will create a regulatory vacuum in which the very nonprofit power brokers that are pushing for an unregulated charitable marketplace can expand their power and influence, both of which already are often unearned and out of whack.

What’s more, while they are quick to preach that nonprofits should and will regulate themselves, big foundations and the nonprofit trade groups that do their bidding are slow to invest the significant resources nonprofits need to operate and regulate themselves more effectively.

Nonprofits, expected to do far too much with far too little to fix what is wrong in our society, already must bow and scrape for mere scraps of support from big foundations.

Controlling wealth they typically did not create, and often acting as if the influence flowing from that wealth invests them with wisdom denied to mere mortals, the staffs of many big foundations exercise disproportionate control over nonprofit supplicants quick to defer to the foundation staffs’ inflated sense of their own smarts.

So the new religion of self-regulation preached by big foundations and nonprofit trade groups is little more than an exercise in hypocrisy and self-interest.

In the less-than-brave new world they seek, these power brokers will have even freer rein to amass even more power and influence without having to increase by so much as a dime the share of their assets they pay out in grants.

And despite their righteous words about the ability and willingness of nonprofits to regulate themselves, big foundations invest precious little in making themselves more accountable or in helping nonprofits simply cover their existing operating costs.

Helping nonprofits gear up so they can govern themselves more effectively and ethically will require a lot more operating and capacity-building support than foundations have given any indication they are willing to invest, or that trade groups like Independent Sector have had the courage to champion.

The charitable marketplace needs more effective regulation to help ensure that the exchange of philanthropic supply and nonprofit demand is fair and even-handed, providing equal treatment of nonprofits, foundations and individual givers.

Any nonprofit or foundation can and should improve itself by adopting the innately commendable self-regulation principles proposed by the Panel on the Nonprofit Sector.

Foundations and trade groups also should practice what they preach, and increase their commitment to investing more in building the operations and capacity of nonprofits.

But without tougher regulation to ensure fair play, the charitable marketplace will continue to be skewed in favor of the philanthropic power brokers, true believers in their own entitlement who are leading the charge for self-regulation.


  • At 11:47 AM, Anonymous Frank K. Simon, Jr. said…

    More governance is not the answer. Too often Congress creates a regulation which makes headlines but does little to solve real world issues. Regulations, which take on a life of their own, increase operating costs and cause compliance issues while failing to correct the problem for which they were targeted.

    Foundations and trade groups took a step in the right direction in setting their own standards. However, they have not gone far enough. The author is correct in noting that foundations need to invest more in the nonprofits they support. A lack of vision in this regard begs for congressional action.

    If the nonprofit’s mission is sufficient to garner foundation support, what has the nonprofit not done to cast a vision that garners financial stability? Too many nonprofits develop an entitlement mentality. They look to foundations and donors for that next welfare fix.

    Creating a long term strategy and sharing that vision can lead to long term fund development necessary for ongoing success. Foundations need to invest in that future. If they do not, foundations risk government action.

    Nonprofit boards which extend their focus beyond immediate budget demands have the option to build their own future. Casting their vision and building relationships with their donor base gives them the opportunity to structure donor gifts that keep on giving.

    The focus on the future may also be the key to improve ongoing foundation support beyond bare bones budget fixes.

  • At 4:39 PM, Anonymous John C McGee said…

    Would large grant making foundations/organizations not only be acting in their own self-interest by implementing proposed self-regulation guidelines as well as the interest of stewardship by expending resources on those who receive their funds to help them implement the same type of guidelines? What better way to lead than by example and then with resources.


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