Golden Donors

A New Anatomy of the Great Foundations

Waldemar A. Nielsen

• Publisher: Routledge
• Year: 2017
• eBook ISBN:
  9781351516938
• Topic: Scienze sociali
• Subtopic: Organizzazioni non profit e di beneficenza

The world of the golden donors - the rich and influential philanthropic foundations - is quite likely the least known and yet most pervasive of all the invisible money and power networks in America. Nielsen explores the 36 largest of the 22,000 currently active foundations. He takes the reader inside each of the giants to analyze its people, policies, and performance. From the most famous, Ford and MacArthur, to the most obscure, Mabee and Moody, the author lets in daylight and lets out the bats as well as the butterflies. Golden Donors is a journey through 36 flefdoms, each of which controls upwards of $250 million dollars, beyond the reach of the IRS, in order to encourage medical research, support cultural and artistic endeavors, and not least, to buttress immensely expensive educational institutions. Which of the great foundations in recent years have been spectacular successes and which are failures? Is today's leadership in the third-stream economy equal to the task? Are foundations, seedbeds or killing grounds of new social and political ideas? And what is the federal government, and a variety of administrations, doing to help or harm this new economy? Nielsen provides many surprising and some quite startling answers for the millions of Americans whose lives the golden donors directly or indirectly affect. When Golden Donors first appeared, A. Bartlett Giamatti praised it as an historical guide, a shrewd critique, and an impassioned warning. "This remarkable book on the nation's largest foundations must be ready by anyone concerned with America's unique not-for-profit sector and the quality of our national life." Kingman Brewster saw the book as "a revealing mirror held up to the faces of big philanthropy...a must book for foundation creators and leaders." Thornton F. Bradsahw said, "Golden Donors describes the large American foundations, what they are how they got that way, and wherein lies their strength and their potential. The book is wise, witty, and perceptive - indispensable reading."

PART I

The Backdrop

1

The Money and the Men

The industrialization and immense development of the American economy in the 120 years since the Civil War have produced a few million millionaires (as of 1980 it is estimated that some 700,000 were alive and prospering), several hundred centirnillionaires, and a dozen or two billionaires. Many of these fortunes subsequently evaporated in the vicissitudes of business cycles or business failure, and others, though they were preserved, disappeared from public view, having been divided among numerous heirs of the founders.

However, in a development of American capitalism not foreseen by Karl Marx, a significant fraction have been converted over the decades into private grant-making foundations. More than twenty-two thousand of varying size are now in operation, with total resources of $50 billion and annual grants of nearly $4 billion.

No other nation in the world has such an array of aggregations of private wealth devoted to public purposes; no other nation has been so encouraging to donors to create such philanthropic institutions; no other has given them, once created, such freedom of action; and in no other have foundations played such a significant role in the nation’s life.

Among these thousands of foundations are thirty-six, each of which has assets in excess of $250 million. This book is about this small and powerful group—about the men who created them and why they did it, and about the magnificent accomplishments of some, the mediocrity of others, and the miserable failure of a few—and about the changing social, economic, and political context in which they now operate.

Each has its own special story: its own origins, peculiarities, faults, and virtues. As a group, they are institutions like no others, operating in their own unique degree of abstraction from external pressures and controls, according to their own largely self-imposed rules. They are private, and yet their activities cut across a broad spectrum of public concerns and public issues. They are the only important power centers in American life not controlled by market forces, electoral constituencies, bodies of members, or even formally established canons of conduct, all of which give them their extraordinary flexibility and potential influence.

Yet they remain little known and even less understood, shrouded in mystery, inspiring in some the highest hopes and expectations and in others dark fears and resentments. By some they are seen as the Hope of the Future, our Secret Weapon for progress; by others as our Fifth Column; and by still others as our invisible Fourth Branch of Government. They are as distinctively American, for better or worse, as the flag or the eagle.

The Big Benefactories

The list of these foundations and their assets as of late 1984 follows:

(By mid-1985, as a result of a surge in the securities markets, these portfolio values had increased on average about 12 percent.)

These thirty-six comprise only an insignificant fraction of the total number of existing American foundations, but they represent a very high concentration of wealth, holding almost half of the assets of all of them. In addition, because of other special qualities, they have a significance even larger than their huge resources alone might suggest. Because they are closely associated with rich donor families and prominent corporate and other leaders, they lie at or near the center of gravity of the American establishment. Their position in the intricate web of personal and institutional influence gives them a power that less strategically located institutions do not have.

Their activities bring them into regular contact with leading individuals from academia, science, medicine, the arts, and charitable agencies of every kind. They are marketplaces and nodal points for the exchange of information about trends, problems, and emerging ideas in the vast nonprofit sector of society.

By the fact that they are grant-making foundations whose funds are not tied to the maintenance of a particular hospital, school, or laboratory, their resources are maneuverable. By their selective assistance they can affect the character of other institutions, whole fields of research, and the vigor of particular art forms or new social movements. They can therefore be instruments of innovation and social adaptation, as well as of general sustenance to established nonprofit institutions.

Most important of all, they can assemble the specialized competencies needed to deal with major and complex issues of public policy. The Flexner report on American medical schools, the Myrdal report on the predicament of American blacks, and the work of the Carnegie Council on Policy Studies in Higher Education, all financed by the Carnegie Foundation in its long career, are examples of the broad impact that such foundation initiatives can have.

In short, the largest foundations not only are larger than the others, but they are different in their possibilities. They have critical mass, and their funds have leverage. Their potential to shape and alter the course of affairs is thus enormous, which is not to suggest that all of them, or even most of them, are able to take advantage of it. But the possibilities are there. That this is sensed even if not clearly understood by politicians, the press, and the public is reflected in the extravagant expectations as well as the outbursts of fear, resentment, and denunciation periodically directed at them.

Mirrors and Windows

The establishment of the very large American foundations, which began in the late nineteenth century, represented the beginning of a whole new phase in the American tradition of charity and altruism. Up until roughly the time of the Civil War “benevolence” and “good works” were interpreted by the wealthy both in the East and the Middle West to involve an obligation of personal service and civic stewardship. The notion was that successful citizens owed a dual obligation of both time and money to the communities in which they had prospered. Many upper-crust New Yorkers, Phi-ladelphians, and Bostonians at the time spent a good part of their free time in charitable work. Kathleen McCarthy in her excellent study of the evolution of charity in Chicago, Noblesse Oblige, gives the example of William B. Ogden, a New Yorker who came to that city, amassed a fortune, and served as its first mayor. Despite his far-flung business activities Ogden “never forgot in his busiest days to visit the suffering,” and he spent not less than six hours a week in making personal visits to the poor.

But after the Civil War this idea of an obligation of personal involvement was transformed into monetized and eventually bureaucratized philanthropy. As McCarthy describes the process in Chicago, socially prominent men and women in the 1870s and 1880s moved further and further from the personal service ethic and became more involved in such activities as sponsoring operas or concerts in the name of charity. As one indignant cleric wrote at the time, “Jesus never instituted a charity ball where, amid the voluptuous swell of the dance, the rustle of silks, the sparkle of diamonds, and the stimulus of wine and women dressed decollete, he could dissipate his love for the lowly.”

Out of this changing concept of benevolence, from the giving of service to the giving of money, institutionalized philanthropy in the United States emerged. Altruism is now to a great extent organized, professionalized, programmed—perhaps even industrialized. As a result some would say the heart has gone out of it; others believe that the change has made possible some of the most important advances in education, science, health, and other fields in recent history and has produced human benefits infinitely beyond anything that old-style charity could ever have brought about. In any event the existing big foundations are the ultimate and most obvious manifestation of the transformation in the concept of the charitable obligation of the wealthy that has taken place over the past century.

Money and the Men

A closer look at the list of the largest foundations makes several points apparent: Some of the most formidable figures in American economic history are there: Rockefeller, Carnegie, Ford, and the Melons. But some others conspicuously are missing: Where are such names as J. P. Morgan; H. L. Hunt, the Texas oil billionaire; Thomas Watson, creator of IBM; and the du Ponts? And who are these unknowns such as Irvine, Mac Arthur, Bush, Mabee, and Buck?

The answers to some such questions are available: There are so many du Ponts now, and their massive fortune has been split so many ways and into so many foundations, that no single one any longer ranks among the topmost. Hunt managed to make at least four of the many children he sired billionaires, but he was too stingy to give much of his fortune to charity. (Hunt was married to three women, two of them apparently in parallel, and by the time of his death in 1974 he left seventy direct living descendants. According to his biographer, Harry Hurt, Hunt thought he “carried a genius gene. He believed that by fathering children he was doing the world a favor, providing the human race with its future leaders, even as he provided himself with an ever-increasing flock of self-images.”) Morgan may have been less wealthy at the end of his life than is generally supposed. And where the Watson money will eventually surface philanthropically is not yet known.

But the larger fact is that no one, not even the U.S. Treasury, knows just who the richest Americans are at any given date, where they may have sequestered their wealth, and where it goes when they die. (The extensive use of legal trusts of various kinds is one of the major obfuscatory factors. As the British writer Anthony Sampson said of these devices in his The New Anatomy of Britain, “The great family trusts are like underground rivers in a barren countryside, the only signs of whose existence are the green fields they make fertile in unexpected places.” In the United States, Forbes magazine now makes the most serious attempt to map the location of American wealth, to the great annoyance of the individuals listed, The. gaps and inaccuracies, however, are necessarily very large, given the inaccessibility of the basic information.) So it is not possible to make a precise evaluation with any confidence of just how kindly American capitalists are, and whether they are on the whole more charitably inclined than their wealthy counterparts in Western Europe, or the Middle East, or Asia.

But it does appear that Christian and Jewish religious precepts about charity and good works, a population with many immigrants from impoverished backgrounds, the immense opportunities for wealth accumulation provided by the expansion of the American economy in the past 150 years, and a political and tax system encouraging to such giving have all helped produce a wealthy class somewhat more inclined to philanthropy than is the case in many other societies. At least one conclusion can definitely be drawn, namely that at the present time the United States has far more private philanthropic foundations, and they dispose of far greater wealth, than any of the other developed, democratic countries, Not included in the foregoing list, it should be noted, are great foundations of the past that deliberately spent themselves out of existence, such as the Julius Rosenwald Fund. Nor are “operating foundations,” which use their funds for their own activities rather than making grants to others, such as the huge Hawaiian trust, Bishop’s Estate, founded by a native princess, which owns about 10 percent of the land of the islands but is classified now as an educational institution; and the Alfred I. du Pont-de Nemours Foundation, which has now removed its blemished record from public view by retreating into the status of a “hospital.” Neither are the names of a few generous and major donors like Walter Annenberg, the Philadelphia publisher and former ambassador to Great Britain, who makes most of his gifts on a personal basis without channeling them through a foundation, included.

Examination of the dates when the various foundations were established, the industries on which the donors’ fortunes were based, and the geographical location of their headquarters provides a recapitulation of American economic history. The earliest ones were based on Eastern fortunes gained from basic industries and natural resources: oil, steel, and coal In the first decades of the twentieth century, fortunes derived from mass production and mass merchandising (automobiles, cornflakes, tobacco, and chain stores) were put into philanthropy, most of them out of the Middle West. Somewhat later, pharmaceutical, construction, real estate, and mass-media fortunes gave birth to other large foundations. Still later, the Southwest and the West Coast, through fortunes based on real estate, oil, electronics, and hotels, became strongly represented. Great wealth gathering has thus migrated from the East to the Mid- and Southwest and then to the Far West over the decades, along with population.

These successive waves of industrial and economic development are reflected in the birthrate and distribution of big foundations, New England no longer has, and the Rocky Mountain region, the Northwest, and Alaska do not yet have, any of the very largest foundations, although all now have some foundations of size and substance. (The distribution of major foundations across the country on the whole, but not precisely, reflects the distribution of millionaires. According to the United States Trust Company, which studies this subject, New York led the list in 1980 with 56,000; it was followed by California with 38,000; Illinois with 35,000; Ohio with 31,000; Florida with 29,000; and New Jersey with 28,000. Somewhat surprisingly Minnesota ranked ninth, ahead of Texas, in tenth place. Even more surprisingly the state of Idaho ranked ahead of both, in eighth place, with 26,000. And in density of millionaires per thousand, Idaho was more than three times as rich in this respect as any other state.)

The Donors

Foundations, even the largest, are typically the lengthened shadows of a few individuals, and the study of them has to begin with a study of their creators. By definition the donors of the foundations included in this study have been the richest of the rich. Some were colorful figures, including the eccentric Andrew Carnegie, the flamboyant William Randolph Hearst, and the theatrical Conrad Hilton. Some were more remote, even aloof, including the elder John D. Rockefeller, Andrew W. Mellon, and Alfred Sloan of General Motors. Some were remarkably obscure, given their wealth, such as Ben Weingart, who probably died of syphilis, and shy, withdrawn Will Kellogg, who according to his doctor “was deeply unhappy and frustrated. In my long practice of psychiatry I don’t know of a more lonely, isolated individual.”

Some were simply colorless, like Bush, McKnight, and Gannett, A few were downright nasty: MacArthur, Moody, and Henry Ford.

But apart from the wide range of personalities among these giant acquisitors, what kind of people were they? As a group, what do they tell us about the structure and characteristics of American society?

First, without exception, all of the builders of the fortunes on which these huge foundations are based were men. In the several phases of American history in which these fortunes were amassed, and down to the present day, women have not been the tycoons and economic empire builders. (The great disparity in income between men and women is not just a historical fact. In 1981 the U.S. Census Bureau reported that 669,000 men, but only 22,000 women, earned seventy-five thousand dollars or more, a ratio of thirty to one.) Their role in philanthropy derives from their being the wives or in some instances the daughters of tycoons.

In several cases, however, through marriage or inheritance, the donors of these foundations have been women. Ailsa Mellon, daughter of Andrew W. Mellon, created her own foundation with her inheritance, which after her death was merged with that of her brother Paul to form the present A. W. Mellon Foundation. In some instances the designation of the wife as codonor of a foundation was simply an act of courtesy by her husband. But sometimes the wife or daughter of the donor has played a powerful role in the formation and activities of the foundation. Edna McConnell Clark was a strong personality with strong philanthropic interests, and the foundation that bears her name is in a real sense her creation. Mary Moody Northen, daughter of the donor of the Moody Foundation, has been the single most stable and constructive factor in the troubled career of that Texas foundation. Mrs. Helen A. Benedict, daughter of John Andras, donor of the Surdna Foundation (his name spelled backward), ran it single-handedly for thirty years after his death. Mrs. Virginia Binger, daughter of the donor of the McKnight Foundation, is the most active and influential heiress in any of the very large foundations today. Together with its executive director, whom she selected, she has provided that foundation with its guiding spirit and has been responsible for many of its best accomplishments. (Among smaller foundations outside the scope of this study there have been a number of brilliant examples of leadership by women: Mrs. Marshall Field has in large part been responsible for the remarkable achievements of the Field Foundation, and Mrs. Mary Lasker has personally led the influential work of the Albert and Mary Lasker Foundation. Mrs. Brooke Astor has given extraordinarily effective leadership to the work of the foundation established by her late husband, Vincent Astor.)

In few instances women have been prominent essentially as troublemakers and gadfly s. Mrs. Archibald Bush, Zsa Zsa Gabor, one-time wife of Conrad Hilton, and Laura Winston, common-law wife of the donor of the Weingart Foundation, through litigation tried to divert foundation assets to themselves, jane Irvine Smith and Willametta Keck laid heavy legal siege against the Irvine and Keck foundations to try to force the trustees to manage their assets in a more productive fashion.

On the whole, however, large-scale philanthropy is made up of male-dominated institutions. With few exceptions, men have been the decisive factors in creating the foundations; they have been responsible, as in the case of Rockefeller, Carnegie, and Robert Wood Johnson, for some of philanthropy’s greatest achievements; and in other instances—Irvine, Moody, Keck, and others—they have been responsible for some of its worst fiascoes. Males, white males, have likewise generally controlled the boards and have monopolized the senior executive and professional staff positions. This has now begun slowly to change as the legal, economic, professional, and social status of women in Americ...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Contents
• Introduction to the Transaction Edition
• Preface
• Part I The Backdrop
• Part II A Gallery of Portraits
• Part III Patterns and Prospects
• Notes
• The Challenge to Foundations
• Index