Southern California GrantmakersSignature Publication

looking ahead:

the changing landscape of philanthropy

page1

by

Sushma RamanPresident, Southern California Grantmakers

A symbol of this westward shift, The

Annenberg Foundation recently launched

two dynamic and inclusive public spaces

to bring together diverse communities in

a geographically dispersed region: the

Annenberg Space for Photography and the

Annenberg Community Beach House. The

rise of individual donors working collectively

to advance the public good is evidenced by

the success of the EveryChild Foundation,

which includes 200 women donors

contributing $5,000 each to award an

annual $1 million prize to one outstanding

nonprofit organization in Los Angeles.

Foundations and corporations ranging

from The California Endowment to the

California Community Foundation to Sony

Pictures Entertainment, Inc. are increasingly

looking to place-based giving as a strategy

to enhance community building and

leadership development in communities

across Southern California, from El Monte

to Culver City to Long Beach. Orange

County-based Fluor commits 36,000

volunteer hours a year to improving schools

and building houses as part of its three

decades of volunteerism around the world.

Ventura County Community Foundation’s

Destino Legacy Fund and the United Latino

Fund focus on the changing demographics

of the region by providing grants to meet

the needs of California’s majority minority.

Philanthropy is at a unique inflection point in

California. In the past decade there has been

a significant tilt westward in terms of growth of

assets, number of foundations, and level of giving.

In the period just prior to the economic downturn,

California surpassed all other states in actual

asset dollar gain. This growth has been paralleled

by an increase in diversity in institutional forms of

giving as well as the types of issues supported.

It has been characterized by greater innovation

in many organizations ranging from small, local

foundations to large, global institutions.

1 looking ahead: the changing landscape of philanthropySushma RamanPresident, Southern California Grantmakers

4philanthropy in southern californiaJames M. FerrisFounding Director, The Center on Philanthropy and Public Policy, University of Southern California

6strategic vs. responsive grantmakingA Conversation with Fred AliPresident and CEO, Weingart Foundation

8the growth of family foundationsSusan Crites PriceVice President, National Center for Family Philanthropy

10philanthropic and nonprofit trends

12corporate philanthropy and the changing economyMargaret CoadyDirector, Committee Encouraging Corporate Philanthropy

14capitalizing on crisis and opportunityRobert K. Ross, M.D.President and CEO, The California Endowment

16a view from los angeles:generating creative public-private partnerships in an era of changeTorie OsbornChief Civic Engagement Officer, United Way of Greater Los Angeles

18looking ahead: the future roles of california foundationsHelmut K. AnheierUCLA Center for Civil Society

looking ahead:

the changing landscape of philanthropy

While local perspectives are the priorities

of many, there are also global leaders

such as the Conrad N. Hilton Foundation

which launched the West African Water

Initiative, now a $52 million public

private partnership. The Initiative aims to

contribute to the United Nations Millennium

Development Goal of “halving, by 2015, the

proportion of people without sustainable

access to clean drinking water.” A laudable

and critical goal, given that over one in

six people in the world lack access to

clean water, over two in six lack access to

sanitation and 90 percent of diseases in

the developing world are caused by lack of

access to clean water and sanitation.

Given the diversity and range of forms

of giving, types of issues supported,

strategies for pursuing social change,

and the flexibility and collective power

of the sector, it is no wonder that this

inflection point in philanthropy’s trajectory

in California is not without contestation.

The shifting perceptions about the role of

foundations and government in the state,

rapid racial diversification (with which much

of philanthropy has not kept pace), and the

implications of the fiscal and governance

crisis all contribute to the tensions and

trends in this unique time in California’s

philanthropic history. continued...

Looking Ahead: the Changing Landscape of Philanthropy, is the first in a series of signature publications

which will be published periodically by SCG, focusing on areas of critical interest to grantmakers.

page2 page3

Democratization of PhilanthropyThe notion of “democratizing philanthropy”

has emerged in recent debates about

philanthropy’s role, impact, and effectiveness,

both in California and around the nation.

While the term yields more than 1,000 search

results on Google with topics ranging from

diversifying online giving options for donors

to building affinity groups and giving circles, it

has largely been utilized by watchdog groups

to articulate a vision of philanthropy that is

more accountable, transparent and diverse.

Is this concept one that should be of

increasing concern to philanthropists and

those who work for foundations? Or is it

irrelevant and at best a distraction to a

field that is already diverse in its missions,

strategies and viewpoints?

Literature on the nonprofit sector can yield

some insights into the answers. While pure

public goods are those provided by the state

and pure private goods are those provided

by the market, the philanthropic sector

supports “quasi public goods” —goods that

provide public benefit in a range of ways,

while marshalling private resources to do so.

This occurs for a range of reasons, including

market or state failure, asymmetries in

access to pure public or private goods, and

cost efficiencies. Situated at the intersection

between public and private, at a time when

public resources are in decline and private

needs are on the ascent, philanthropy is a

site for contestation and for demands from

multiple, competing publics, all of whom have

divergent views of the public good.

How philanthropy responds will affect how

the sector is perceived and regulated. And

in turn, over-regulation of philanthropy

could stifle its growth at a time when

philanthropy is increasingly being seen as a

critical financial and convening resource to

the nonprofit sector. While there is no one

answer, given the diversity in the philanthropic

sector, institutional grantmakers will need to

voluntarily embrace a greater commitment to

transparency and responsiveness, through

mechanisms such as self-evaluation,

enhanced clarity in communications, and

diversity in governance and leadership.

And philanthropy must remain collectively

organized to safeguard its interests and

ensure its unique attributes can function freely,

without impediment, in the years ahead.

Looking Back to Look AheadFour decades ago, the 1969 Tax Reform

Act and its aftermath dramatically affected

the philanthropic sector through introduction

of regulation targeting private foundations.

Similar debates and dialogues in the ‘60s and

‘70s related to greater equity in philanthropy

led to the foundation of the National

Committee for Responsive Philanthropy, a

philanthropy watchdog group. The greater

legislative scrutiny of the field led concerned

foundation leaders in Southern California to

establish the Los Angeles Inter-Foundation

Center (now known as Southern California

Grantmakers). Currently, at a time of national

economic uncertainty and escalation of

poverty, the philanthropic community must

look back in order to move forward, and it

must proactively embrace what makes it

unique while addressing the competing and

sometimes conflicting demands placed upon

it by a range of interested stakeholders.

Sushma Raman is president of Southern California Grantmakers. Raman

previously served with the Ford Foundation as program manager of the

International Initiative to Strengthen Philanthropy, a $100 million project that

increases the impact, effectiveness and scale of key foundations worldwide.

Given the diversity and range

of forms of giving, types of

issues supported, strategies for

pursuing social change, and

the flexibility and collective

power of the sector, it is no

wonder that this inflection

point in philanthropy’s

trajectory in California is not

without contestation.

Role of Foundations in CaliforniaThe atrophy of state institutions and public

services for low-income communities,

heralded first by Proposition 13, and then

furthered by welfare reform and anti-immigrant

legislation, has resulted in increased pressures

on the nonprofit and private philanthropic

sectors to “fill the gaps.” Yet, the role of

foundations —shrouded in privacy for the

better part of the last century and now being

unveiled through occasional media and

legislative spotlights —has never been to

replace that of the state. Instead, the multiple

roles of philanthropy (depending upon the

values of the founders and the mission of the

institution) are to innovate, seed promising

projects, invest in community leadership, and

promote policies that hold state institutions

and private actors accountable.

The growing influence of philanthropy—

disproportionate to its relative scale, often

behind the scenes or beneath the radar, and

catalytic in a range of areas—has resulted

in increased scrutiny of the field by elected

officials, the media, nonprofit activists, and

the public. Concomitant to this trend is a lack

of awareness of philanthropy’s role, the ways

in which it is regulated, and how it operates.

All this occurs against a backdrop of

increasing poverty and inequity, deterioration

of public systems and institutions, an

explosive growth of the nonprofit sector,

a growing economic crisis and a rapid

diversification of society and communities.

According to a survey by the Philanthropy

Awareness Initiative (PAI), 85 percent of

influential Americans were unable to give

an example of a foundation that benefited

their community, while 99 percent of media

coverage of foundations focused on a grant

as opposed to philanthropic impact. Clearly,

philanthropy must shape more powerful,

relevant messages about its role and impact

and develop deeper, long-term relationships

with key influentials.

looking ahead:

the changing landscape of philanthropy

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looking ahead:

the changing landscape of philanthropy

philanthropy in southern california

by

James M. FerrisFounding Director, The Center on Philanthropy and Public Policy, University of Southern California

dynamic to philanthropy in the region and

the potential to shape the philanthropic

sector to serve the community even better

in the future.

Structure and ScopePhilanthropy in the region is characterized

by a high degree of concentration, both

in giving and receiving.2 A great majority

of foundation giving is done by a few

relatively large foundations. There were 13

foundations in Los Angeles with assets of

over $250 million in 2004; they accounted

for 40 percent of the giving of all Los

Angeles foundations. At the same time,

grants made by foundations are also highly

concentrated. Based on a sample of slightly

more than 4800 grants, there were 102

grants of $1 million or more that accounted

for 42 percent of the grant dollars in the

sample. The average grant size was

$128,281 and the median grant size was

$25,100. Not surprisingly, large nonprofits

are the recipient of many of these larger

grants. These nonprofits mount major

capital campaigns and have the capacity

to make good use of grants of such size.

Of course, the great majority of grants are

rather small and go to many mid and small

size organizations.

Further analysis of Los Angeles foundations

and foundation philanthropy in the region

underscores that philanthropy in Los

Angeles is not solely LA-focused. The

Philanthropy in Southern California is robust. It is at

a scale that makes it one of the two concentrations

of philanthropy in the state, and one of the most

significant nationally; it has been growing at a

brisk pace with double digit rates in most years

since 1990; and it has become more diverse and

complex as new players, strategies, and institutions

increasingly characterize the changing landscape.

Scale and PaceAs of 2007, there were 2,930 active private

and community grantmaking foundations

in the Los Angeles area. They held assets

of close to $42.7 billion, made grants of

$2.1 billion, and received gifts of $1.8

billion.1 From 1997-2007, the number

of foundations has more than doubled,

foundation assets have increased by

almost 50 percent net of inflation reflecting

increases in the value of endowments

as well as new gifts received, and

grantmaking has increased 85 percent

net of inflation. This continual creation of

new foundations results in a foundation

community that is trending younger as a

whole. There are a number of established,

larger foundations – many of which were

created in the 1950s. But there are a

number of newer, substantial foundations

that have been created since 1990, many

of which are likely to come of age in the

next 10 to 20 years. This provides a

page5

region’s largest foundations include The J.

Paul Getty Trust and The Conrad N. Hilton

Foundation, both with an international scope;

several foundations that play important

national roles such as the Annenberg

Foundation, the Broad Foundations and the

W. M. Keck Foundation; and two state-

focused health foundations, The California

Endowment and The California Wellness

Foundation. While these foundations contribute

to the local community, their missions extend

well beyond Southern California.

Distinctive Features of Philanthropy in Southern California Of course, foundation philanthropy is but a

slice of philanthropy overall. While it is the

most visible, and the one in which we have

the best data, foundation giving only accounts

for 13 percent of private giving from all

sources in the U.S. If one takes the national

breakdown and uses that to impute the level

of overall giving in the region based on the

known level of foundation giving, private giving

in Los Angeles would amount to roughly

$11.77 billion. Individual giving, both from

those living and individual bequests, would

approximate $9.65 billion, and corporate

giving would approximate $588.46 million.

One of the perennial and most intriguing

questions asked is: how different is

philanthropy in Southern California than

elsewhere? In many ways, philanthropy

in the region reflects much of what we

know characterizes the region’s economy,

governments, and communities. Philanthropy

is fragmented, decentralized, and dispersed.

At the same time, it tends to be dynamic,

adaptive, and innovative. While individuals

will vary in their assessments, philanthropy

in the region has been shaped by those

entrepreneurs who have created wealth

and chosen to use a portion of it for the

betterment of the community.

Along the way, the region’s philanthropic

legacy is punctuated by some important

and distinctive features. The California

Community Foundation (1915) was one of

the earliest community foundations in the

country. The John Randolph and Dora Haynes

Foundation, founded in 1926, was one of

the early foundations, like the Russell Sage

Foundation, that focused on social science

research. Los Angeles has a large share of the

nation’s foundations that were created in the

1950s and that have been a significant force

in the nonprofit sector and for civic life in the

community for over fifty years. These include

the Ahmanson Foundation, The J. Paul Getty

Trust, the W. M. Keck Foundation, and the

Weingart Foundation. The Entertainment

Industry Foundation (1942) was an early

effort to combine the philanthropy of the

entertainment studios and industry to have a

greater impact on the community, and three

decades later the Liberty Hill Foundation

(1976) was created to bring together donors

around issues of social justice – two early

models of industry and issue-based public

grantmaking charities. In more recent

years, the region has spawned a number of

innovative philanthropic efforts: Los Angeles

Urban Funders (1994) —a place-based funder

collaborative for which Southern California

Grantmakers served as the incubator and the

Los Angeles Arts Funders (1998)—an affinity

group of private and public arts funders in

the region.

Challenges for Philanthropy in the RegionDespite the scale and pace that has

characterized philanthropy over the last few

years, the fact is that community needs

and the nonprofits that address them have

grown even faster. And the past year is a

stark reminder that trends can be seductive.

Although it is too early to tell precisely how

long it will take to rebound, the philanthropic

sector is better positioned to respond to the

recent decline in economic fortunes than it

was before. Over the last decade, there has

been much work focused on how to leverage

philanthropic resources to achieve greater

impact. The challenge for philanthropy in

the region and beyond, is to be continually

mindful of the importance of innovation and

adaptability in strengthening philanthropy for

the long term.

James M. Ferris, PhD, is the founding director of the Center on

Philanthropy and Public Policy at the University of Southern

California. He is a professor in the School of Public Policy,

Planning and Development and holds the Emery Evans Olsen

Chair in Nonprofit Entrepreneurship and Public Policy.

Philanthropy is fragmented,

decentralized, and dispersed.

At the same time, it tends to

be dynamic, adaptive, and

innovative. While individuals

will vary in their assessments,

philanthropy in the region

has been shaped by those

entrepreneurs who have created

wealth and chosen to use a

portion of it for the betterment

of the community.

1 FC Stats, The Foundation Center, 2009.2 Ferris, J., E. Graddy, and A. Ferree, California Foundations, 2004: Trends and Patterns. The Center on Philanthropy and Public Policy. University of Southern California, 2006.

looking ahead:

the changing landscape of philanthropy

strategic vs. responsive grantmaking

A Conversation with

Fred AliPresident and CEO, Weingart Foundation

Q: How would you characterize the Weingart Foundation’s grantmaking?

A: We believe it is the role of the nonprofit

organizations we support to design

programs and develop strategies that will

allow them to reach their goals and fulfill

their missions. The nonprofits we support

are in the best position to know what is

needed in the communities they serve. It

would be inappropriate to tell a credible,

well managed nonprofit what their strategy

should be or how to design their programs.

At the same time, we are strategic in the

sense that we define the areas of our

grantmaking where we want to concentrate

our resources.

There are also times when we want to have

specific impact, which is why we have

our own special initiatives. Even then, we

rely on the nonprofits that have hands-on

expertise. For example, we spent a lot of

time focusing on the health care needs of

Skid Row and determined that there was

little or no coordination in its health care

delivery system. We then went back to the

nonprofits working on Skid Row, presented

our findings and asked them how they

would address the needs we identified.

A group comprised of private and public

agencies was formed under the auspices

of the Community Clinic Association of

Los Angeles County. The group was

subsequently charged with developing

plans, projects and policy actions that

would result in the integration of services

and expanded capacity. Ultimately, the

design and strategy came from them—

producing a number of jointly coordinated

projects designed to improve service

delivery, outreach and access.

Q: From your perspective, define strategic grantmaking. How does it differ from responsive grantmaking?

A: People often assume that there are “strategic

grantmakers” and “responsive grantmakers.” But

these labels are typically not very helpful because

people have different definitions. For example,

a so-called strategic grantmaker might design a

strategy and then seek out nonprofits for program

implementation, whereas a responsive grantmaker

provides support to nonprofits that present their own

strategy. However, the majority of foundations with

whom I am familiar, whether they call themselves

responsive or strategic, do take into consideration

the plans and aspirations of the nonprofits with

which they work. And, in many cases when a

foundation announces a strategic initiative, the

strategy was actually designed by the foundation

and its grantees.

I think the deeper issue in

philanthropy is who owns

the strategy, who designs the

program and who develops the

plan—rather than labeling

foundations as either

“strategic” or “responsive.”

page7

Q: What are the advantages and limitations of each type of grantmaking? For funders? For the nonprofits they serve?

A: While I think this is rare, there are funders

who believe that nonprofits generally don’t

have the expertise to develop strategy. The

danger of this approach is that the people

who know what’s best for their communities

are often left out of the equation. Yet,

because there is so much competition for

resources, these grantseekers feel they have

no choice but to accept the money. From our

perspective—and my own experience in the

field— nonprofits with solid management are

in the best position to know about the issues

they are working on, and tend to be closer to

the clients that they are trying to impact.

We also hear from grantees that it creates

resentment when a funder tells them how to

operate their programs. This doesn’t foster

a good relationship between the funder and

the grantee. At the same time, it places the

organization that has developed a strategy

that works for them and their community in a

difficult situation. A strong nonprofit may feel

they can decline the funding, but others may

give in to the temptation to chase the money.

Q: What role does strategic grantmaking play in a challenging economic environment?

A: Some funders are specifically addressing

the economic crisis, while others are

maintaining their existing grantmaking

approach. Many argue that in the grand

scheme of things, foundation dollars represent

a small amount of support, that the markets

will recover and foundations should stick to

their long-term goals. I respect this thinking,

particularly with funders who are involved in

complex, time-consuming issues where a

long-term investment is warranted, such as

medical research or global warming.

However, in areas such as health and

human services, the needs of most nonprofit

organizations are absolutely critical. Every

recent survey undertaken on the impact of

the recession on the nonprofit sector paints a

frightening picture. Good, strong organizations

are reporting the loss of government and

private funding. They’re digging into their

reserves, while also reducing core staff

positions. Significantly, those organizations

involved in the delivery of critical services are

also reporting a demand for more services,

which is putting them in a terrible bind. The

sector is in trouble. In California, we see

organizations that have been severely hurt and

don’t have the financial reserves to survive.

Funders need to take a hard look and focus

on core operating support, which is more

critical than ever, even if it means temporarily

abandoning other funding strategies. It’s just

common sense. Right now the nonprofits

we serve are having trouble keeping the

lights on and maintaining their core staff. The

good news is that most funders in Southern

California are either providing general

operating support or are open to doing so.

And it’s important for funders to be

transparent about their strategy during this

financial crisis. A lot of our grant applicants

are expressing frustration about being unclear

as to how other funders are approaching the

current economic situation. Funders need to

communicate their approach directly to their

grantees. It’s also extremely important for

funders to make a special effort to “listen” to

their grantees right now—to convene, learn

from and continue to respond to their needs

the best they can. This is a time unlike any

other. The economic meltdown has been

much deeper than anyone predicted and

a lot of organizations are facing a very

difficult situation.

Q: Going forward, how is the philanthropic landscape changing to create new models for strategic grantmaking? What trends do you see in the future?

A: I have heard from a number of people

recently who have said: “This is a time for

funders and grantseekers to be very candid.

We have organizations that are not financially

viable and to continue to make emergency

grants to keep them alive may not be the best

approach.” The truth is there are plenty of

well-established organizations that need funds

and—with the right support—will weather the

current crisis.

This is a time for leadership and for some

difficult decisions. The competition for dollars

is greater than ever before—and those dollars

are limited. Funders need to be smart in using

resources where they will have the greatest

impact, and to be very careful in regard to

supporting those organizations that are not

financially viable. And that’s true even if it

means not making a grant to an organization

with a great mission that did great work in

the past, but doesn’t have a strategy for

getting beyond this crisis. We need to provide

unrestricted operating support grants to

organizations that are viable and understand

how to support the needs of the communities

they serve. It’s time for smart grantmaking

that will assist our best and most effective

nonprofit organizations not only weather the

immediate crisis, but also meet the challenges

and opportunities that lie ahead.

Fred Ali is president and chief executive officer of the Weingart Foundation.

He previously served as the executive director of Covenant House in Los Angeles,

where he developed a multi-service program for homeless youth. Ali has also served

as vice chancellor of the University of Alaska, Anchorage.

page8

looking ahead:

the changing landscape of philanthropy

the growth of family foundations

by

Susan Crites PriceVice President,National Center for Family Philanthropy

Why a Foundation?Most donors who create family foundations

do so with two primary goals: to help

society and to engage their families in a

joint endeavor built on shared values and

a desire to leave a legacy. Foundations are

often the choice for donor families who

want more control over their grantmaking

than other vehicles such as donor advised

funds allow.

Most families plan to exist in perpetuity.

In order to do that, they must continually

engage the next generations of the family.

Engaging younger family members in a

foundation’s work at early ages is a priority

for many of today’s family foundations.

For young people, growing up with a

tradition of giving becomes part of their

identity and their desire to contribute to

the common good.

A Relatively New FieldThe foundation as an institution dates to

the beginning of the 1900s with a small

number of individuals and families who

had generated enormous wealth during

the industrial revolution. But the growth

surge really began in the 1990s, especially

due to the new wealth created by the

technology sector. Until recent years,

family philanthropy was not recognized

as a distinct field of philanthropy. In fact

the phrase “family foundation” wasn’t

even coined until around 1985. Before

that, family foundations—loosely defined

It appears as if the news and entertainment

media and the Internet have suddenly discovered

philanthropy, but they are on the trailing end of a

trend. Private giving, in particular through family

foundations, has burgeoned in recent years. Family

foundations are the fastest growing segment of the

foundation field, and one third of them have been

established since 2000.

The Foundation Center’s most recent data show

that in 2007 there were 37,500 family foundations

with total giving of $18.5 billion. The biggest one,

the Bill & Melinda Gates Foundation, is almost a

household name now. But the majority of them are

small and unstaffed. In 2007, roughly 60 percent

had less than $1 million in assets. Many of these

are poised for their own growth spurt; their assets

are expected to balloon upon the sale of a family

business or the death of the donor.

Left out of these numbers is the surge in families

taking advantage of the many new choices in

philanthropic vehicles available to them instead of,

or in addition to, a foundation. The growing variety

of charitable estate planning tools and new giving

vehicles such as donor advised funds means more

families are making philanthropy part of their lives.

page9

as those in which family members play a

significant role in governance—had been

lumped together with all private foundations.

This was in part due to the tax code which

does not make a distinction and has no legal

definition for this type of foundation.

A decade ago, few thought that family

foundations merited specific research.

Today, thanks to the National Center

for Family Philanthropy’s work with, and

funding of, the Foundation Center to identify

family foundations from among all private

foundations, this segment of philanthropy

is now extensively researched, analyzed

and reported. There was no body of

literature on family foundations as exists

today. Nor were donor families included as

an area of academic study. Today, there

are professorships in family philanthropy.

Much has happened in a few short years to

understand this growing field.

Current TrendsOne field-wide trend is “giving while living.”

Philanthropy used to be something that

one got involved in after retirement. Now

Americans are giving at much younger ages,

thanks in part to high profile philanthropists

such as Bill Gates. A related trend is having

multi-generations at the board table.

Rather than figuring out their foundation’s

grantmaking after the estate of the donor has

been settled, the second or third generations,

for example, are working together with the

patriarch or matriarch. Additionally, given the

changing demographics of today’s families,

donors might be involving their parents,

siblings, spouses (or even ex-spouses),

domestic partners, stepchildren and

adopted children.

Another trend, partly brought on by the

economic crisis that began with the stock

market slide in 2008, is that perpetuity is

no longer a given. Some foundations have

decided to maintain or even increase their

grantmaking in response to urgent needs,

both domestically and globally, even if it

means spending down their endowments.

Others find that it’s hard to keep a family

involved over many years. For example, the

third generation from the donors may live all

over the world and have little connection to

each other or to the foundation’s mission.

Some donors have put limits on their

foundations’ lives at the outset, because

they would rather the grantmaking be done

by a generation with personal knowledge

of the donor and his or her wishes. A 2009

Foundation Center study found that 12

percent plan to limit their lifespan or are

spending down. For example, the Gates

Foundation plans to sunset 50 years after

the death of the last of the current board

members. But another 25 percent are

undecided, either because they have not yet

discussed the issue or because of uncertainty

about the family’s future involvement.

What the Future HoldsGeographic focus is changing. It used to

be that entrepreneurs built businesses in a

community and also focused their charity

there. Now entrepreneurs make money in

the global market. We are still learning what

the focus of their giving will be, but this

trend, along with the fact of families being

increasingly dispersed geographically, has

distinct implications. On a 2008 random

survey of family foundation practices

conducted by the National Center for Family

Philanthropy, 21 percent of respondents

said they give internationally, a growing trend

that is expected to continue as more of the

younger generations, who have been raised in

the Internet age and traveled widely, take their

places at the family foundation table.

As for funding strategies, there are early

signs that family foundations will operate

more collaboratively and more publicly. Many

seem to be seeking new options in grantee

partnerships, assessing effectiveness and use

of their investments to further their mission.

As the field has grown, so has the scrutiny.

It’s safe to assume that government, the

media, nonprofit sector commentators, and

the public will seek more accountability and

transparency from family foundations. How

well the field will be prepared to respond is still

to be determined.

Susan Crites Price joined the National Center for Family

Philanthropy as vice president in 2007. She oversees several

programs and is a frequent speaker on such subjects as

passing on values to the next generation and planning

for succession. Susan is the author of The Giving Family:

Raising Our Children to Help Others.

Most donors who create

family foundations do so

with two primary goals:

to help society and to

engage their families in

a joint endeavor built on

shared values and a desire

to leave a legacy.

page11page10

California

n Foundation giving per capita $164, ranking 13th

n Foundation giving is 0.33 percent of gross state product, ranking 15th

Los Angeles County

n Nearly 4,000 foundations

n More than half the foundations were created in the last two decades

n More than 40,000 nonprofits, the highest number among U.S. counties

n Nonprofit sector employs 6% of the workforce

looking ahead:

the changing landscape of philanthropy

philanthropic and nonprofit trends

data on foundations and nonprofits in Los Angeles, 2007

regional trends

Nonprofit Organizations per 10,000 population, 2007

United States 34

California 32

Los Angeles County 33

Ventura County 29

Orange County 30

Santa Barbara County 22

Riverside County 20

0 10 20 30

top 20 u.s. foundations awarding grants in the los angeles metropolitan area, 2007

Foundation Name State Awarded Grants

1. The Annenberg Foundation PA 61,691,496 210

2. The Ahmanson Foundation CA 51,421,720 328

3. Weingart Foundation CA 49,994,367 252

4. Gordon and Betty Moore Foundation CA 39,362,820 24

5. Bill & Melinda Gates Foundation WA 37,266,772 9

6. W. M. Keck Foundation CA 31,745,000 17

7. The Lincy Foundation CA 30,550,962 78

8. Skirball Foundation NY 30,428,482 53

9. The California Endowment CA 25,420,452 107

10. The Ralph M. Parsons Foundation CA 22,503,867 192

11. The California Wellness Foundation CA 19,313,500 86

12. Chartwell Charitable Foundation CA 19,191,840 142

13. The James Irvine Foundation CA 15,674,500 96

14. The Andrew W. Mellon Foundation NY 14,935,400 23

15. UniHealth Foundation CA 13,993,464 93

16. The Robert Wood Johnson Foundation NJ 12,927,895 35

17. The Ford Foundation NY 12,905,963 32

18. Eli & Edythe Broad Foundation CA 11,402,008 15

19. The William and Flora Hewlett Foundation CA 11,227,000 37

20. Arnold and Mabel Beckman Foundation CA 9,502,396 30

Number ofTotal $

Nonprofit Expenditure per 10,000 population, 2007

United States $42,824,477

California $39,151,245

Los Angeles $34,888,642

Ventura County $12,483,105

Orange County $19,877,928

Santa Barbara County $17,634,751

Riverside County $7,825,530

0 10 20 30 40

Data provided by Foundation

Center 2009 and UCLA

School of Public Affairs.

Corporate 70 2.4%

aggregate financial information for foundations in Los Angeles, 2007* (foundation type, number of foundations and % of total )

Independent** 2,606 88.9%

Total number of foundations: 2,930

Operating 2478.4%

Community 7 0.2%

* Figures include only Los Angeles area foundations that awarded grants in the 2007 fiscal year

**1,769 of the independent foundations are family foundations

looking ahead:

the changing landscape of philanthropy

corporate philanthropy and the changing economy

by

Margaret CoadyDirector, Committee Encouraging Corporate Philanthropy

Sharp Declines in ProfitabilityThe economic downturn that began for

some industries in the summer of 2007

did not discriminate in 2008, with 68%

of companies that responded to CECP’s

annual philanthropy survey showing a

decline in corporate profits year-over-year.

In fact, the decline in profits was acute for

many respondents, with 29% of companies

seeing pre-tax profits drop by a quarter

or more, and 16% of companies suffering

outright financial losses for the year (not just

profit declines).

The Majority Gave MoreAgainst this challenging economic

backdrop, 53% of surveyed companies

increased their giving from 2007 to 2008,

which is off only slightly from the 56% of

companies that increased giving from 2006

to 2007. An impressive 27% of companies

increased their 2007 to 2008 giving by 10%

or more, demonstrating that supporting

community partners was a top priority

despite the hurdles imposed by tight credit

markets, a paucity of consumer spending,

and widespread economic uncertainty.

Is Giving Linked to Financial Performance?A commonly-held assumption in the field

of corporate giving is that there is a link

between a company’s pre-tax profit and its

philanthropic contributions; in other words,

that giving increases or decreases based

on a company’s profitability swings. To test

this hypothesis, CECP conducted multiple

regressions on its data from 2006 to 2008.

Interestingly, the results did not uphold

a linear relationship between profit and

giving levels, even when a one-year time

lag between pre-tax profits and giving was

taken into consideration.

The weakening global economy has brought

heightened visibility to the fragile state of funding

at many nonprofit organizations, as well as to the

vital role that corporate philanthropy plays in helping

communities thrive. Resources are always precious,

but now companies and recipient organizations

must use them especially judiciously. Like all

stakeholders in the philanthropy community, the

Committee Encouraging Corporate Philanthropy

(CECP) seeks to understand the effect that an

economic downturn has on the level and timing of

corporate giving. In this article, CECP shares the

latest findings from its Corporate Giving Standard

(CGS) philanthropy measurement initiative.

Margaret Coady is director of the Committee Encouraging Corporate

Philanthropy, where she consults with companies seeking to contextualize

their philanthropic giving and authors publications based on her analysis.

page13

The absence of a link between giving and

profits is supported by the finding that 51%

of the companies that saw pre-tax profit fall

from 2007 to 2008 increased their giving

in the same time period. On the flip side,

45% of companies with increased profit

decreased giving. While CECP believes that

a company’s financial performance does play

a role in shaping corporate giving budgets,

it appears to be just one of many factors—a

finding corroborated by the diverse reasons

cited below by survey respondents for

fluctuations in giving.

Why Some Companies Increased Giving

n Strong Profits through Third Quarter. While the downturn was felt by many financial institutions in 2007, companies in other sectors did not experience its effects until the third and fourth quarters of 2008. Consequently, companies had largely disbursed expanded giving budgets before their business was affected.

n Increased International Giving. Rather than trim domestic giving budgets to fund new international initiatives, companies typically allocate new funds for grant-making programs abroad. The data show international giving rising roughly one percentage point per year over the last several years to 13% in 2008.

n Improved Contributions Tracking. Typically companies struggle most in the tracking of: international giving, non-cash giving, and donations made by regional business lines. Improved communication with subsidiaries or other departments, and implementing new company-wide grant-tracking software enabled companies to account for giving that may have previously taken place but was not included in their CECP survey in the past, increasing the year-over-year tally.

n Merged Giving Programs. Several companies underwent mergers or acquisitions in 2008, leading to combined giving programs. In this sense, the underlying company has fundamentally changed in its scale and resources, making its year-over-year total giving appear to surge.

n Beyond-Budget Disaster-Relief Gifts. When disaster strikes, companies often authorize assistance funds beyond their allotted giving budget. In 2008, companies supported relief efforts for the Sichuan earthquake in China and the California wildfires.

Why Some Companies Decreased Giving

n Weakening Economy and Uncertainty. As some companies began to forecast weakened performance, they cut back spending firm-wide, including corporate philanthropy budgets.

n Corporate Spin-Offs and Department Closures. Just as mergers and acquisitions can cause a company’s contributions to surge, total giving can decline when a business spins off or terminates part of its operations. This was true for several firms in the CECP sample in 2008.

n Completion of Multi-Year Commitments. Several companies experienced a period of decreased giving as new programs or re-commitments to previous programs are evaluated at the conclusion of multi-year grant commitments.

n Currency Exchange Fluctuations. 2008 was characterized by drastically widened average trading ranges for currency pairings such as EUR/GBP, GBP/USD, and EUR/USD. The last half of the year in particular saw large daily and weekly fluctuations. For companies with large international grant-making programs or those headquartered outside the United States, volatility in conversion rates caused total giving levels to appear to fall.

Leveraging Non-Cash ResourcesNon-cash contributions are one of the salient

ways in which corporate philanthropy is

distinct from individual giving and government

aid. While cash grants are most versatile, non-

cash donations—such as product donations,

pro bono service, use of company facilities,

and equipment donations—can connect

nonprofits with highly-valued assets that they

might otherwise be unable to afford, especially

in a declining economy.

In the CGS Survey, corporate giving is

defined as the sum of corporate cash grants,

corporate foundation cash grants, and non-

cash giving. To understand how the financial

crisis impacted each giving type, CECP

separated the companies that increased

giving from 2007 to 2008 from those that

decreased it, and then looked at the median

percentage change in each type of giving.

Among the 53% of companies that gave

more in 2008, non-cash giving increased the

most—surging by nearly 29%. Companies

whose giving declined dropped most in

cash grants from the corporate side. In both

company groupings, corporate foundation

giving levels changed less significantly year-

over-year.

Adjusting Course in the Current ClimateCECP polled leading CEOs and giving

officers to understand how they are focusing

their efforts in light of the changing economic

landscape. The data show that CEOs and

corporate giving officers seek to fulfill pre-

existing commitments to grantees while

working to more fully integrate philanthropy

strategy with company-wide business

objectives (see graph).

These results synch with the conclusions

reached by the CEOs in attendance at CECP’s

2009 global leadership conference. At this

meeting, CEOs emphasized the need to foster

an intellectual climate that allows fresh ideas

on social investment to flourish. They viewed

changes in the global economy as a chance

to commence strategic course-corrections

that will strengthen their ability to thrive when

conditions improve.

In their view, corporations have an obligation

—now more than ever—to restore public trust

by investing in projects designed to create

a positive ripple effect within and across

communities. Executing on this intention

requires: dispatching previously untapped

non-cash corporate resources; seizing

opportunities for increased efficiency; and

inviting employees, customers, public sector

advocates, government representatives, and

critics into a collaborative dialogue.

Corporate grantmaking

priorities in the current

economic climate

44%

19%

38%

56%

17%

21%

Fulfill existingphilanthropiccommitments

Refocuscontributions

to causescentral

to businessstrategy

Refocuscontributions

to areas of greatest

need

1%4%

Inceaseoverall

philanthrophy

Giving Officers

CEOs Sample size: 119 Giving Officers, 47 CEOs

looking ahead:

the changing landscape of philanthropy

capitalizing on crisis and opportunity

by

Robert K. Ross, M.D.President and CEO,The California Endowment

‘We’re in This Together’We believe in grantmakers as change-

makers, and that means that we attach

ourselves to a cause, to a movement around

that cause, and to others in the movement

who are also seeking to create change.

When foundations operate as

changemakers, they must embrace

interdependence among all those working

for social change, a culture of knowledge-

sharing, and a more long-term approach

to building the capacity of our grantees to

become effective advocates.

We see government as a key partner in

social change because it is through policy

and systems-level work that change will

be made real. We believe that innovation

begins in communities, but we need to

have the research that definitively proves

the effectiveness of local programs, along

with the public and political communication

channels that shine a spotlight on this work.

Finally, the “lifting up” of social solutions

requires strategic advocacy. That advocacy

involves media communications and

public storytelling and it also requires

sophisticated policy advocates who can

adjust to changing environmental conditions

to be most effective in their work.

All of this is a long way of saying, “We’re in

this together.”

The LandscapeWith this philosophical backdrop, let’s

look now at the political landscape and its

implications for funders. The promise of the

new administration in Washington indicates

an estimated $31 billion in new federal

funds will be available to California. At the

same moment, the state budget crisis is

unprecedented, has been only temporarily

resolved, and is already causing untold

harm to communities.

Today we find ourselves at the crossroads of crisis

and opportunity. We’re in the midst of the worst

budgetary disaster that California has faced in

generations, and at the same moment, the White

House is providing exciting new leadership on the

role of government in social change, particularly in

the areas of social innovation and national service.

As community-focused grantmakers, we see the

pain caused by the terrible cuts to California’s health

and human services programs and are working

hard to help preserve the state’s social safety net.

However, we believe that we cannot allow this

crisis to distract us from our core mission, which

is fundamentally about social change. We make

grants not just to do good in a particular community,

but with an eye toward how successful local

innovations can support meaningful change in the

misaligned policies and broken systems that got us

into this mess in the first place. Let me explain why

and how we put that philosophy to work at

The California Endowment.

page15

The current environment underscores the

need for grantmakers to commit themselves

fully to social change. We must realign our

tactics, grants, and expectations. To this

end, we look to these five principles to

guide our work:

1. maximize opportunities and minimize damageThe federal American Recovery and

Reinvestment Act (ARRA) presents immediate,

new opportunities to leverage literally billions

in federal funding. The Endowment believes

foundations can help California organizations

and communities make the most of ARRA

dollars and build capacity to leverage federal

dollars in the future.

Another pivotal and timely federal opportunity

that California’s foundations cannot afford

to miss is support for the Census 2010

outreach effort. The state has eliminated

virtually all census outreach funding, at a

time when California can least afford to lose

federal funds, political power in the nation’s

capital, and private investment opportunities.

According to a PricewaterhouseCoopers

report, in 2000 more than 500,000

Californians were not counted resulting in

a $1.5 billion loss in federal funding. The

adverse consequences of a poor count

cannot be overstated. This requires all of our

action and The Endowment asks all funders

to join the statewide coalition to secure

California’s future.

At the same time that we look to maximize

opportunities, we must also minimize the

damage to California’s social safety net. The

ongoing state budget crisis requires defensive

and long-term advocacy strategies. It will

require new conversations and a willingness

to put everything on the table. Let us be

ready for new alliances and difficult trade-

offs in order to preserve the most essential

government services.

2. find the “game-changers” in state governance It is abundantly clear that structural factors,

such as the two-thirds vote requirement

for approval of budgets and tax increases,

are contributing to the ongoing budget and

governance crisis. We believe philanthropy

can play a role in supporting groups working

on governance and fiscal reform so that the

state political structure can be corrected and

we can stop the cycle of continual crises that

we are in today.

3. build the political willChanging the current gridlock in state

government will require more than good ideas

backed by credible research and data. It will

require a change in political will, requiring

savvy messaging and communications,

as well as the community-based work of

building new leadership with a higher degree

of civic engagement. Communities must be

connected to each other, and to local and

statewide policymakers and media. This is a

good opportunity to leverage new technology

such as social networking, as President

Obama did so effectively in his campaign.

4. take the moral high groundThe biggest crises bring out either the best

or the worst in a society. In the case of

California’s state budget crisis, perhaps the

most troubling cut of all is the emerging trend

of singling out undocumented Californians

for disparate treatment. We must not only

redouble our efforts to improve the conditions

for these populations, but also remind

others of the contributions that immigrants

make to California’s economy and tax base.

Underserved people are not the problem. The

problems facing our state are the economic

downturn, budget crisis and structural

impediments, which threaten our health and

well-being. It is more imperative than ever for

our strategies to effectively make that case.

Foundations have a unique vantage point and

platform from which to identify and elevate a

conversation of a just and equitable society

and we must serve this role.

5. avail ourselves of white house leadership on social innovation and civic engagement Underserved communities have a great ally

in the Obama White House. We urge funders

to capitalize on the new focus on social

innovation and service, which have been key

features of our society at its finest moments.

Let us walk together as leaders, with the

President and First Lady, to sound the call

for the best and brightest ideas for social

improvement.

It All Starts With the GrassrootsLastly, we must never forget that local com-

munities are at the heart of social change.

Especially in the midst of scarcity and

hardship, it is always from local sources that

greatest innovations arise. The Endowment

so firmly believes this that we’ve gambled our

new ten-year strategic plan, Building Healthy

Communities, on that premise. Of course we

did not anticipate the times we find ourselves

in, but we know more than ever that we’re in

exactly the right place.

While much about this period is daunting,

we also see great opportunity. We must

capitalize on the sense of urgency we are

all experiencing by working together toward

the social change that is essential for

California’s future.

Robert K. Ross, M.D., is president and Chief Executive Officer of The California

Endowment, a private, statewide health foundation established in 1996 to address the

health needs of Californians. Prior to his appointment in September 2000, Dr. Ross served

as director of the Health and Human Services Agency for the County of San Diego.

Foundations have a unique

vantage point and platform

from which to identify and

elevate a conversation of a

just and equitable society and

we must serve this role.

looking ahead:

the changing landscape of philanthropy

a view from los angeles:

generating creative public-private partnerships in an era of change

by

Torie OsbornChief Civic Engagement Officer,United Way of Greater Los Angeles

Looking Back to See ForwardIn 2006, I headed for City Hall and a

newly created cabinet position as Mayor

Villaraigosa’s liaison to philanthropy. A

Durfee Foundation fellowship funded

research, which included visiting other

cities and interviewing local foundation

trustees and executives. I encountered

a number of models: New York’s purely

fundraising office directly supplemented

the city’s annual budgeting process with

$75 million in corporate and private gifts. In

Denver, the Mayor’s office coordinated with

local foundations on long-term initiatives

for at-risk youth and homelessness. San

Francisco’s local community foundations

served as a convening and funding hub for

Mayor Newsome’s anti-poverty initiatives

and later played a leading role in galvanizing

support for universal healthcare.

Significantly, in Los Angeles, I discovered

a hidden history of isolated acts of public-

private innovation, but little in the way of a

common, cross-sector culture of trust or

even ongoing communication. Individual

heroic philanthropies kept plugging away,

most notably the Annenberg Foundation,

which spent many lonely years braving

the buzz saw of bureaucracy in order

to fund the likes of public parks, pools,

community centers, and emergency

medical equipment.

Over time, Annenberg did not stand alone.

The slow, but steady work of foundation

leaders, newly collaborating with each other

and then with government, transformed

the culture. Porous boundaries of the new

economy joined in, as more philanthropic

and nonprofit leaders entered government

and former government leaders moved

into philanthropy. In recent years, new

spaces were created. Liberty Hill’s “Green

LA” coalition provided knowledge capital

This new Obama era of mutual responsibility for

social-problem-solving may finally mean we can

replace old walls with newly constructed bridges

between the public and philanthropic sectors.

Historically, innovative solutions—from public

libraries to Head Start to the Earned Income

Tax Credit (EITC)—have been funded by private

philanthropy, piloted by nonprofits, and then

replicated at scale by government. That traditional

model relies on expanding government, and is now

again being championed at the federal level, albeit

updated to a time of smaller domestic spending

and greater private philanthropy. For example,

the Obama administration’s plans for 20 “promise

neighborhoods” around the country, based on the

successful Harlem Children’s Zone, will be co-

funded equally by federal and private dollars. At the

same time, the new White House Office of Social

Innovation and Civic Participation is institutionalizing

the President’s all-hands-on-deck commitment to

collaborative social impact.

Here in Los Angeles, public-private partnership

is certainly not a new idea. But a widely engaged

philanthropic culture of true collaboration and

genuine partnership with government seems to

finally be generating real energy for change.

Torie Osborn is chief civic engagement officer for the United Way of Greater Los Angeles.

Formerly senior advisor to Mayor Antonio R. Villaraigosa and executive director of the Liberty

Hill Foundation, she recently completed a Durfee Foundation Stanton Fellowship to think and

write about collaboration between local government and philanthropy.

page17

to the Mayor’s environment staff, while

Southern California Grantmakers (SCG) was

funded by the Nathan Cummings Foundation

for convenings that focused on advancing

“a culture of civic philanthropy.” The James

Irvine Foundation funded a historic strategic

planning process during the Mayor’s first year,

2005-6, which laid tracks for his bold reform

agenda. The Weingart Foundation’s multi-

year Skid Row health collaborative included

county departments, and The Conrad N.

Hilton Foundation made a successful long-

term investment in the supportive housing

model for the chronically homeless, ultimately

championed across the country by President

Bush’s homelessness czar. Using their

considerable influence, those LA foundations,

joined by The California Endowment, followed

up their patient-capital investment with tough

love: behind-the-scenes meetings among

political leaders to push hard for integrating

city housing dollars and county health services

to help the homeless.

Millimeter by millimeter, the fruits of

partnership ripened. The United Way now

collaborates with LAUSD on reform, and helps

link workforce funders to a city-led labor/

business/community college partnership

to create living-wage jobs in growth and

green sectors. The Mayor’s first philanthropy

breakfast in early 2008 helped mobilize

support for the heralded Summer Night Lights

Program, reducing violence at 16 city parks

in areas historically plagued by gangs. It

could not have happened without the active

involvement of Weingart and Ahmanson

Foundation leaders, whose personal passion

attracted a host of other foundations into first-

time partnerships with government.

Lessons LearnedIf I had to condense lessons from my crash

course in breaking down walls between

government and philanthropy, I would suggest

two. First, trust is the currency of social

change. Building relationships and leveraging

them is how change happens. Yes, it takes

years, but people are hungry to be part of

solutions, and quiet leaders dedicated to

connecting the dots between people and

policies and institutions do move the needle

over time. Secondly, in an era of term limits

and no major corporate headquarters, the

philanthropic community in LA—along with

its nonprofit partners—carries the long-term

vision of civic progress. I see a growing sense

of mission and social responsibility that results

in more boldness and collaborative action.

Making Partnerships a Way of LifeCase in point: just as the Obama era ushers

in change across the nation, the city of Los

Angeles and three foundations—Weingart,

Ahmanson and Annenberg—have launched

a co-created, co-funded and well-staffed

Mayor’s Office of Strategic Partnerships. In

addition to serving as a fiscal sponsor, SCG

is supporting and facilitating this new public/

private entity by organizing focus groups

with select foundation and corporate CEOs

to help provide input on priorities and new

opportunities. Headed by a distinguished civic

leader, Deputy Mayor Aileen Adams—a former

state cabinet officer, Justice Department

Presidential appointee, city prosecutor and

fire commissioner—says her aim is “to make

partnerships a way of life” for LA. She has the

experience to back it up— from her early days

revolutionizing child treatment in sexual abuse

cases linking the Stuart Foundation and local

rape-crisis centers, to facilitating the massive

state-wide Flex Your Power campaign to save

energy during the Davis administration.

Today, Deputy Mayor Adams has big plans.

These include leveraging transportation,

housing, job training and other city dollars

in South and East LA neighborhoods, in

collaboration with place-based efforts by The

California Endowment and other foundations

committed to investing in long-term

community change.

Whether philanthropy can help restore trust in

government at a time of unprecedented social

inequality—and when scale is desperately

needed—remains to be seen. Ten years ago,

the United Way issued its powerful report on

poverty in Los Angeles, “A Tale of Two Cities.”

Today the statistics are no better, but the

alignment of powerful forces, including civic

and political will for change, is far greater.

Ultimately, the test of this new era’s creative

surge in public-private partnerships will be not

only the transformation of local communities,

but solid systemic fiscal and governance

reform at a statewide level as well.

A few years ago, several foundations quietly

got together and funded the bipartisan,

centrist California Forward, now gaining

attention in the wake of the state’s calamitous

budget mess. When a mere 51 percent

majority of Californians can take away legal

marriage from gay couples but a supermajority

of 66 2/3 percent is required to raise dollars

to save lives and educate people, common

sense says something is very wrong. Can

the forces of creative change ignite some

reformist heat at the state level? That seems

to be the next frontier.

Ultimately, the test of this new

era’s creative surge in public-

private partnerships will be not

only the transformation of local

communities, but solid systemic

fiscal and governance reform

at a statewide level as well.

looking ahead: the future roles of california foundations

by

Helmut K. AnheierUCLA Center for Civil Society

longer in a position to act as pioneers and

bring about basic policy intervention. Yet

unless foundation leaders can manage such

expectations and communicate their own

vision, the danger is that foundations are

judged by the records of a distant past to solve

current problems, rather than by their present

day capacities.

What are the capacities foundations can

offer in the face of the dual economic and

government crises that are threatening the

current and future welfare of California?

Foundations have significant comparative

advantages over other institutions. The

signature characteristic of the modern

foundation is its independence both from

market considerations and election politics,

making it among the most autonomous

institutions of modern societies. Foundations

can take the long-term view and are less

beholden to short-term economic and

political expectations. As a result, foundations

might be better positioned than other

institutions to contribute to society by adopting

four distinct roles:

Social Entrepreneurs — identifying and

responding to needs or problems that are

beyond the reach or interest of market firms,

government agencies, and existing nonprofits;

Institution Builders — identifying coalitions

of individuals and organizations capable of

implementing a program or course of action

across sectors, regions, and borders;

Risk-Absorbers — investing where there

is great uncertainty that an investment will

yield a return and that actions will bring about

intended benefits;

Value-Conservers — supporting practices,

virtues and cultural patterns that cannot easily

be supported via markets or win funding from

governments that must answer to majorities.

Financial means are only one of the resources

employed by foundations in playing out these

advantages. Knowledge, legitimacy and

autonomy are others. These qualities and

resources are well suited to help nonprofits

and the constituencies and interests they

serve. They are also well suited to deal with

the central element of the current crisis and the

governance problems at the core of it.

continued...

Among the many factors that shape the future

roles of California foundations in a period of

crisis and change, three in particular offer a

useful starting point for the visioning exercise

presented here. The first is that demand for

philanthropic dollars will vastly outpace available

resources. While this gap is nothing new, it

is the growing size of the difference between

needs and available funds that matters. Second,

over the last few decades, the nonprofit

sector in Southern California has experienced

significant growth, at rates higher than the

expansion of philanthropic assets. More

nonprofits are competing for relatively fewer

philanthropic dollars. Third, unlike in the past,

a severely cash-starved system of local and

state government will be unable to take on any

new programs that may have been pioneered

by foundations. To the contrary, governments

may increasingly expect philanthropy to absorb

some of the growing costs of social services,

education and health care.

These three trends will put significant political

and social pressure on foundations. Therefore,

it is important to have a good understanding

of what foundations can do, as well as their

distinct strengths and weaknesses. A historical

perspective is useful to help frame current

positions and options.

Lessons from the Past for Today’s ChallengesFoundations initially emerged in the last

century as private institutions serving public

benefit at a time when the capacity, if not

legitimacy, of government in a broad range

of fields was underdeveloped if not absent:

health care, social welfare and higher

education are cases in point. In these fields,

there were few other institutional actors with

comparable resources and visions, and

foundations operated in a relatively open

environment. Foundations were in a position,

given their relative size and the absence of

other legitimate actors, to engage in basic

policy intervention, become institution builders,

and assume a pioneering role.

This changed dramatically in the 1930s with

the rise of the modern state in fields that

until then were more within the institutional

responsibility of foundations and other

private nonprofit institutions. Education,

health care and social welfare changed in

terms of prime funders and policymakers.

Between 1950 and 1980, outspent by

government—and with capacities declining

in both absolute and relative terms to those

of the state —foundations shifted their role to

focus on incremental innovations and policy

improvements. The basic model became that

of leveraging limited philanthropic resources to

achieve disproportionate impact.

...mastering a crisis requires a

proactive stance on behalf of

foundation leadership —

by embracing what philanthropy

stands for: creating

opportunities for creativity

and innovation and preserving

past achievements for the

benefit of all.

With the reorganization of welfare and the

quasi-marketization of many government

services, foundations’ role changed again. By

the 1990s, foundations, experiencing renewed

growth in numbers and resources, found

themselves in more diversified institutional

environments, populated largely by other

institutions that had grown even more in

their capacity. In response, searching for

a new role, foundations today serve often-

specialized demands and a greater diversity of

purposes than in the past. At the same time,

a proliferation of new and different forms of

philanthropy has occurred since the 1980s:

the model of the grantmaking foundation is

becoming one of a range of private institutions

seeking to contribute to diverse and contested

notions of public benefit.

Given the dismal state of public finances

and a dysfunctional political system, popular

sentiments—fueled by political opportunism

—might well demand that foundations play

roles similar to those they performed prior to

the 1950s: as alternative providers of social,

education, and health services to relatively

large segments of the population, and in

areas where government has withdrawn or is

withdrawing. Of course, given the resources

required, foundations are unable to serve as

general welfare providers, and are also no

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looking ahead:

the changing landscape of philanthropy

page18

The Precautionary PrincipleClimate change, the 2008 financial meltdown,

the 2009 economic downturn, terrorist

threats or fluctuating food or oil prices have in

common that they involve unknown risks and

latent risk communities that can neither easily

be calculated nor managed. Examples of

conventional risk communities are members

of a health insurance plan, home-owners in

fire prone areas, investors in hedge funds,

or those covered by Medicare or Medi-Cal.

Indeed, the calculation and management

of risk was part of the ‘master narrative’ of

post Depression America: government was

to protect and insure citizens against natural

and man-made risk. That concept of risk

has become known as the precautionary

principle of policymaking: threats of serious

or irreversible damage and lack of full

understanding are no reason for abandoning

or postponing preventive measures.

However, whereas the principle sought to

establish an explicit link between cause and

effect, the risks of today’s globalized world are

of a qualitatively different nature. Risks cross

borders, often in unpredictable ways; they

may be far into the future, and with uncertain

timelines; and they are increasingly the

cumulative outcome of the actions of many

individuals and organizations. Sometimes,

these risk communities are latent and defined

by the possibility of some highly unlikely event.

California homeowners, citizens of Iceland,

bank managers of Lehman Brothers, laborers

in Shanghai and house servants in Dubai

find themselves connected by a common

exposure to risk. Such latent risk communities

are becoming increasingly linked, and in

ways that are frequently unknown and ill-

understood. In other words, risk communities

and the global governance problem are

closely linked. Risks have become unbound.

Which institutions can help rebound risks in a

globalized world? Foundations can. Endowed

with their four comparative advantages,

foundations can step forward and help face

these challenges. They can make sure that

risks are better understood and attributable

in terms of benefits and costs, even across

boundaries, time, ethnic background and

social class; that the regulatory framework

for policy action has capacity regulating and

effective enforcement mechanisms ready

for action. Foundations can create arenas

where risks are enunciated, exaggerated,

discounted, debunked, assessed and

debated. They can build arenas that

encompass information, expert knowledge

and reasoned deduction as well as fears

and prejudice. Above all, foundations can

help provide forums for expressing and

communicating differential knowledge about

risk, be it in the field of finance, health care,

the environment, communication or housing.

Due to the current crisis, broad ranges of

fields and institutions suffer from a lack of

trust and increased uncertainty. Foundations

could help identify latent communities of

risk (and benefit!), and encourage adequate

monitoring and enforcement mechanisms in

fields where governments cannot implement

the precautionary principle. In other words,

the current crisis has opened up a new role

for foundations: identifying, managing risk and

building appropriate institutions and coalitions

for and among risk communities.

ConclusionSociologists and economists have long

argued that crises are the necessary

correctives of capitalism, part of an ongoing

process of the ‘creative destruction’ that

has shaped much of the modern world,

with globalization as the latest, current

development. If this is the case, the

crisis offers perhaps as much in terms of

opportunities as it contains challenges. Some

California foundations will rise to become

icons of 21st century philanthropy; others

will struggle to meet increased demand for

grant support and become defensive and

reluctant donor institutions. New philanthropic

leadership will emerge, as will new ways of

achieving leverage.

Responding to a crisis means both reducing

uncertainties and capitalizing on opportunities.

Yet above all, mastering a crisis requires a

proactive stance on behalf of philanthropic

leadership—by embracing what philanthropy

stands for: creating opportunities for

creativity and innovation and preserving past

achievements for the benefit of all.

Helmut K. Anheier, PhD, is dean of the Hertie School of Governance in Berlin. He holds a chair of Sociology at

Heidelberg University and serves as Academic Director of the Center for Social Investment. He was the Centennial

Professor at the London School of Economics and a professor of Public Policy and Social Welfare at UCLA’s

School of Public Affairs, where he served as director of the Center for Civil Society from 2001 to 2009.

Sushma RamanEditor

Susan DunnCommunications Consultant

Vrontikis Design OfficeGraphic Design

Susan BurksPhotography

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