Inside Philanthropy

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

February 4, 2008

California philanthropy police are out of control

While government should tighten its regulation of philanthropy, a move by California lawmakers to police the diversity practices of foundations goes way too far.

As an opinion column in the Los Angeles Times reports, a bill approved by the California State Assembly would require every private, corporate or public operating foundation in the state with assets of more than $250 million to collect and publish date on the gender, race, ethnicity and sexual orientation of its members, board and staff.

Foundations also would have to disclose the race, ethnicity and sexual orientation of the owners of businesses they work with, and the diversity of the boards and staffs of groups to which they make grants.

What’s next? Should foundations be required to disclose the religious or political affiliation of their board members, staff, business partners and grantees?

The charitable marketplace works because philanthropy is both independent and regulated.

Americans see needs in their communities and address them by creating nonprofits and by giving, and that activity is voluntary, not required.

But in return for the tax-exempt benefits they enjoy, nonprofits and givers also must account for the way they oversee and invest their resources.

That is a reasonable tradeoff.

In recent years, government and watchdogs of philanthropy increasingly have called for greater policing of the charitable marketplace because some nonprofits, foundations and individual givers have abused their independence in the face of weak regulation and policing.

Foundations, for example, can do a lot more to address the needs of the communities they serve, to pay out more of their assets, and to give more to support the operating needs of nonprofits.

Yet while foundations argue they can and will police themselves, too few have been willing to do more than hoard their assets while ignoring the urgent needs of nonprofits.

What’s more, many of those same foundations, acting as self-appointed vigilantes, demand that nonprofits seeking support behave the way foundations demand.

Foundations have failed to police themselves, and lawmakers should pass laws that require foundations to pay out more of their assets, and to better disclose how they operate, including more information about their boards and staffs to help track potential insider dealing.

But the bill approved by the California State Assembly reeks of government intrusion and political correctness that eclipses the philanthropic correctness of many foundations.

The bill does offer a lesson, however: Instead of just talking about it, foundations actually need to make themselves more open and accountable.

By continuing to hide them in the sand, foundations are making their heads much easier targets for lawmakers.

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