Giving sector making wrong turn in crisis

By Todd Cohen

To cope with the economic crisis, the giving sector is betraying its roots.

Instead of joining hands to better address social problems, many nonprofits are chasing handouts and looking out for themselves.

And instead of looking for ways to give more and pool resources with other funders to get more impact from their giving, many foundations are hunkering down and hoarding.

Tough times are a time when those in the giving sector should rise to the occasion by digging deeper and working together.

But in the worst economic collapse since the Great Depression, many nonprofits and foundations, despite all their talk about entrepreneurialism and collaboration, are sinking in the quicksand of entitlement and self-preservation and elbowing one another as they claw for solid ground.

Instead of rolling up their sleeves and figuring out how to strengthen, streamline and even merge their operations, big nonprofits and their trade groups are licking their chops over the prospect of federal bailout funds.

And instead of pitching in, as Pablo Eisenberg argues they should in an opinion column in the Philanthropy Journal, big foundations are doing little or nothing to offer a helping hand, let alone take a leadership role, in bailing out the sector.

What’s more, with a few honorable exceptions, foundations not only are failing to give more but are continuing to pitch a fit in the face of critics’ calls to increase the share of their assets they are required to pay out in grants.

Foundations now must pay out only five percent of their assets, and they have fought hard against an increase of even one percentage point in that requirement, arguing that any increase in the payout rate would force them eventually to spend all their assets and go out of business.

And for all the maneuvering in the giving sector for bailout funds, few if any giving-sector leaders have had the courage to push foundations to use more of their vast wealth to help nonprofits strengthen their operations and programs so they can serve more people more effectively at a time of rising social need.

Likewise, in its rush to hit up taxpayers for what easily will total over a trillion dollars to stimulate bank lending, business spending and new jobs, the Obama administration has been shamefully silent, and surprisingly blind, about the need to push foundations to shoulder their fair share of investment to stimulate the giving sector, which accounts for five percent of gross domestic product in the U.S. and 10 percent of jobs.

Banks got into deep trouble because lawmakers eased regulations and regulators fell asleep on their watch.

Foundations face far less and looser regulation and policing than banks, an inexcusable lack of oversight that must leave foundation executives and board members grinning all the way to their pricey conferences and retreats.

At those events, particularly in sessions that exclude the news media so they can talk more candidly, foundation leaders can wring their hands over the loss in the value of their endowments, congratulate one another over how effectively they govern themselves, and preach about the steps nonprofits should take to be more accountable and transparent.

In addition to letting foundations off the hook, President Obama also bears responsibility for perpetuating the idea that the giving sector is an underclass.

As Rick Cohen argues in an opinion column in the Philanthropy Journal, Obama’s promotion of public-service jobs for groups like AmeriCorps reinforces the mindset in society and the giving-sector alike that workers at community-based organizations are second-class citizens who should accept low pay for the hard work critical to addressing the symptoms and causes of urgent social problems.

The giving sector is in crisis and needs to get over its sense of entitlement and back to its roots in fixing social problems through voluntary enterprise in a competitive civic marketplace that operates with fair play and tough but even-handed rules.

Nonprofits need to figure out how to stand on their own feet and make their own luck, not beg for government handouts or grovel to foundations that talk one way, act another and cannot see beyond their own face in the mirror or the cherished cause of perpetuating their own wealth and power.

And while government can and should play a role in providing financial stimulus and incentives to the giving sector, which is critical to our economy and society but hurting badly from the economy’s meltdown, Obama should use his clout to push foundations to pay out more of their assets.

In return for the generous tax breaks they and their donors enjoy, using even a fraction more of their assets to help nonprofits do a better job is the least foundations can do to begin to shoulder their fair share of the huge job of addressing the economic crisis and social problems facing America.