Episode 1: The Evolution of Philanthropy
When the Greek titan Prometheus stole fire from the gods to give it to the struggling human race, Zeus accused him of being a “philanthropos tropos” – a being who loves humans.
Since ancient times, our understanding of why people give has changed considerably. From the Catholic Church to the IRS, the social and political structures that support giving have changed, too. So where are we now? And where are we headed, as a sector and as a philanthropic society? University of Notre Dame historian Dr. Marc Hardy and Ruth McCambridge, Editor-in-Chief of Nonprofit Quarterly, join us to discuss.
Field Notes in Philanthropy
PC: Welcome to Field Notes in Philanthropy. I am Patrick Center, News Director at WGVU Public Media.
TM: I'm Tory Martin. I'm the Director of Communications and Engagement at the Dorothy A. Johnson Center for Philanthropy at Grand Valley State University.
MD: And I am Matthew Downey, I'm Director of Nonprofit Services, also at the Johnson Center for Philanthropy.
TM: See, you got to say the short part.
MD: Mhhm, I did.
PC: Interesting times to say the least when it comes to the nonprofit sector. We're seeing changes in politics and policy with tax reform. You guys know this intimately. In your minds, what is happening on a daily basis as we charge forward into the great beyond?
TM: *laughter* Well, you know, I think we are, like you said, going through a lot of change as a sector, as a nation, and we're trying to figure it all out. And that's really what we're doing here in this podcast, is we wanted to build a space where we could host some of these conversations and bring in leaders in the field and practitioners on the ground and just try to figure out, “what does it mean to be in philanthropy in America today?”
MD: Yeah. I think reflecting on the last presidential campaign and really watching the media struggle, in many ways, to report on some spotlights that had been shown on our sector, I think in particular with the Clinton Foundation and the Trump foundation. There was confusion over how to report and how to tell that story and I think that allowed us the opportunity to say, hey, we can really have a conversation with the country and bring in some really important leaders who have interesting perspectives and sort of tell that story of politics policy and, current events, and how they interact with nonprofits and philanthropy.
PC: Just as an example, boil that down. What should the public have known? Can you do that in 30 seconds?
MD: I think there's structural things. For example, with the Trump Foundation, the Trump Foundation, um the big issue, they walked into was that they made a gift to the Attorney General's Office for her reelection campaign in Florida at the time in which she was considering whether or not she was going to bring about a lawsuit against Trump University. He made a gift to the campaign and miraculously she decided not to pursue the lawsuit. The challenge there is for a 501 (c) (3) PF – Private Foundation – they're not allowed to make gifts to anything but a 501 (c) (3) nonprofit. So that was a political activity that's preventable, but to further complicate it, they actually misreported on their 990, which is their information return to the IRS, which is publicly available, that they had made a gift to a different organization, they changed the name of the organization slightly.
PC: Alright, 30 seconds is up.
MD: This is the interesting part!
TM: We're getting to the meat!
MD: It was an organization in an Iowa actually.
TM: Well, see that raises an interesting question, too, because if memory serves, there was also some issue about where the foundations were registered, what states they were registered in, and that is bringing up a whole new question. In one interesting direction the sector is going in today is, of course, more online giving and many states obligate any charitable organization to register in their state before soliciting in their state. And if you are a foundation in New York and you want to solicit in Iowa, online, do you need to be registered in Iowa? That brings up all sorts of questions and it's about the evolution of the sector and how we kind of move from a sort of local experience to a national experience to an international experience. So it is, again, it's politics and it's, you know, interstate commerce.
PC: Okay, in 30 seconds who wants to inform everyone what the media did wrong when it comes to the Clinton Foundation. Matthew, can you do it in 30 seconds this time?
TM: And time!
MD: I think it was a false equivalency that was trying to be stretch their because they both had foundations. I think that it is questionable what kind of access people got who gave to the Clinton Foundation, you know, got out of Hillary when she was in the secretary of state's office. However, it's an interesting thing because I think that the public can easily get confused that because the last names are in the name of the foundation, that there's this perhaps perception that the family's benefiting financially from the activities of that entity. And that's not the case, that's private entities that are separate from the families and so, you know, the Clintons are not financially benefiting from it. And so I just think there’s a lot of confusion over what a family foundation is and how it exists and why it exists and what's the separation between family and the foundation.
TM: Which again, raises all sorts of questions about the professionalization of the sector and what that really means.
PC: But if you're politics are left or right, sometimes you don't care about the fact.
PC: Right? I mean it's all about your politics.
PC: And crickets in the room.
TM: No, you're absolutely right. And that is, again, another trend going on in the sector these days is what role should politics have in nonprofit work, in philanthropy with questions these days about the possible repeal of the Johnson Amendment, which is the element of the tax code that prohibits 501 (c) (3) ‘s from endorsing candidates or from political activities. While that was not ultimately included in the tax overhaul that was just signed into law, it was proposed as part of the tax law. And it's, you know, it hasn't quite gone away. The conversation is ongoing, so that's a huge and rising question. A lot of people want to be able to conduct political speech with their giving and there are mechanisms for doing that, but people are trying to figure out what it means and where it is and where the dollars are and how they can accomplish their goals.
MD: In reflecting on that whole tax reform issue, I was pulling out some research that had been done by the Philanthropy Round Table a couple of years ago, and they were really asking Democrats and Republicans their views on the charitable tax deduction. What was interesting is like 80 percent of all Americans, regardless of their political affiliation, said, actually, that the charitable tax deduction should be protected. And so a significant amount of republicans are very much in favor of charitable tax deduction. In fact, we find that that same study found that Republicans and Independents are more inclined to be supportive of private charitable organizations taking on social issues. To deliver social support systems through private organizations is very much in favor by Republicans. Democrats were the outliers that were really more in favor of seeing government handle some of these issues, and so it's just interesting to see how the sector played out in this most recent tax reform, from a political perspective.
TM: It absolutely is. I mean, we're facing a situation now in which the Tax Policy Institute has estimated that by raising the universal deduction, itemization is going to go down so much that we may be looking at a loss of $12-20 billion in giving over the course of the next year. That's billion with a “B”, and that is equivalent to – well, “equivalent’s” the wrong word – but it's estimated that that could translate into over a quarter-million jobs lost from nonprofit sector positions, which has a tremendous economic impact, of course. So, the question there though is “are people giving because of itemization, because they get a tax break on it, or are they giving out of the kindness of their hearts out of the feelings of, of wanting to share the good in their lives and to make lives better for others?”
MD: But you know what's interesting about this? We teach fundraising to emphasize the human nature of giving. Every faith on the earth talks about charitable participation as law and we know that it is an innate human activity is to be philanthropic and we talk about that. It's a relational activity among people and so we don't really talk about it. We acknowledge the charitable tax deduction, but when we teach fundraising, we talk about this human interaction that goes on. And then we have this challenge over tax reform and then we know that these are the potential, as you point out, the statistics of what could happen to giving. It's just going to be really curious to see how that plays out over time.
TM: You are listening to Field Notes in Philanthropy.
PC: Let’s bring in our first guest, Dr. Mark Hardy, you’re Director of Nonprofit Certificate Education in the Mendoza College of Business at the University of Notre Dame. You've written extensively on the history of U.S. philanthropy. Some terminology, right? There's philanthropy, there's charity. Give me a sense of the meaning of some of those words.
MH: Well, the concept of philanthropy really comes out of the Greek mythology of Prometheus, and this was not research I did, uh, it was research by one of my colleagues, Dr. Marty Sulek. He did the research into the myth of Prometheus and in that myth, the god Zeus takes fire away from the mortals because he thinks they’re silly creatures. He thinks they're imperfect and he wants to create a whole new race, so he wants to destroy them and start over. So when he takes the fire away, Prometheus, who was a Titan, loves the humans. So he takes the fire back from Zeus and shares it with the humans. And of course, the gods were furious, especially Zeus, and they made fun of him and they called him a philanthropos tropos, which was a being who loves human beings. And out of that they made fun of his act of philanthrópia which was a love of humans, love of humanity. It was a derogatory to –
TM: Well then don’t they chain him to a rock and eat his liver *laughter*
MH: *laughter* eventually, yes, until Hercules saves him. But the myth of Prometheus, he gets fire back to the mortals and he helps them not only survive but thrive, because now they can make weapons, they can make things to cook with, they can see, they have heat, so on and so forth. So, the origin of the concept of philanthropy, which was philanthrópia in the Greek times, actually has nothing to do with money. It has to do with giving people the tools to create a better life.
So that's where we started with this. But in Greek times and also in Roman times, philanthropy was kind of a social contract. The contract was, “we are wealthy, we will help you and we will give you entertainment, we’ll give you food as long as you allow us to remain wealthy.” So, there was a social contract: as long as the wealthy took care of people who were not as wealthy, then society worked well. And then when the Catholic religion came about, the concept of caritas, or charity, started rising and charity was [more like] we'll give to the deserving poor or to people that we feel it's in our best interest to give to, but in charity, as Jesus said, you know, you should give because you love, and there should be no conditions. You give because it's the right thing to do. And so in the Catholic Church, people gave because it was the right thing to do. It was a moral obligation, it wasn't so much a contract.
TM: The fascinating thing to me about that too, is that there's this angle of justice running through concepts of philanthropy. So of course within Judaism, and my understanding is also within Islam, the concept of philanthropy is very much about justice, not just about love or not just about a social contract that allows everyone to, you know, more or less stay in their lane. It's much more about you have the resources to share, therefore you are morally obligated out of a sense of justice to share, not necessarily to give to make yourself feel better or because you're, you know, you're doing so well so you can afford to be nice. It's really from the sense of justice, it is your responsibility as a human to help other humans out.
MH: Abolsutely, ya know a lot of that, especially the Jewish religion comes out of their history of being persecuted.
MH: And so their belief is that you help strangers because like them, or like us, they were strangers in a land. You know, one of the rules was that you left a couple rows of crops for people who were starving and didn’t have anything to eat. There was the seven-year jubilee, which was where you forgive debts every seven years. Which is what basically our bankruptcy laws are based on, because bankruptcy, you can only claim every seven years, that is based on jubilee.
TM: Wow, that’s fascinating.
MH: And so there are a lot of our U.S. laws on giving, on forgiving, those types of things that are based on religious understandings. Foundations, for instance, were really the creation of the Muslim faith and that has carried over into the U.S. Muslims were the first ones who really started creating foundations. The Greeks did it too, but of course that civilization kind of crumbled apart and was taken over by the Romans.
MD: I find this issue about sort of justice as motivations or ways of rationalizing sort of philanthropic behavior, but what we know now, which is a relatively recent finding, you know, at least within the last decade or so, is that the human brain gets this injection of dopamine every time we do an act of kindness or generosity for somebody else. And so I think it drills down to this notion that sort of, it's an innate human behavior, and we get pleasure out of being philanthropic. And I wonder if that changes how we think about why we have engaged in philanthropy throughout all of mankind. If we can explain it differently, or if that impacts our historical understanding of why we've done it.
MH: Well, I think absolutely, you know, it gives us purpose. It gives us a feeling that we are doing something larger than ourselves. And that in itself gives us a sense of fulfillment and that our life does matter. It's not just going to work, making a living, paying your bills, there’s something you're doing beyond yourself and beyond all that day-to-day stuff. There are emotional reasons we give, therer religious reasons, we give, there are certainly financial reasons we give.
MD: I'd like to touch on, too, before we have to end the call, just a couple of concepts. One is how do you reflect on what's been going on with tax reform today and this understanding of this historical roots of philanthropy, is one sort of question I'd love to hear you talk about that.
MH: I give to causes because I really do believe in them, but it is nice to get the tax write off. Now a lot of people are worried that they're not going to get the kind of donations from people who are, like, Annual Fund givers, that maybe people who give away, you know, a couple thousand dollars a year, that those donations are going to drop because people won't. I mean there's no reason to even donate because you can't write it off. But the fact is, I think that people that give away that money aren't thinking, oh, I can write this off on my taxes. I mean, let's face it. They could take that money and put it into an IRA and write it off on their taxes. I think the biggest impact is that we may not get all those letters at the end of the year saying, hey, you've got two more weeks to donate, to write it off, because that's probably won't be the case for most people.
TM: Yeah, it will really be fascinating to see how the giving cycle changes over the year or if it does.
TM: If everyone is just used to sitting down December 15th, with their families, making decisions about the causes they want to go give to, or whether it really becomes, you know, oh, it’s July 12th I don't have anything to do today…let's decide what we want to give to. Is that going to change our work so much or is it in fact going to stay the same because that's what people are traditionally used to.
MH: I think it's going to change the way money is raised. You know, right now there's a big push at the end of the year. Now, I think they're going to have to develop very close relationships even with the small donors to get them engaged. Where you're also going to see a big impact is on the higher end because they've raised the estate tax. And so now, you know, whereas people used to say, well, if I'm going to get taxed on it, I'm going to give it away to charity. That's not necessarily going to be the case depending on where they are in their wealth cycle.
MD: Another one I'd like to understand a little bit more about is the nonprofit organizations themselves. Just a little bit about the history of nonprofit organizations and their structures and how we haven't really done a lot of our revision of the laws that we've had in our country since pretty much the start of the country.
MH: Actually, up until 1954, there was no official thing as a nonprofit organization. The IRS did not codified nonprofits until 1954 when they put it in the 501 (c) (3) categories. And everybody talks about the 501 (c) (3)s, but actually there are, I think, 29 different categories—
MH: --of nonprofits. Oh yeah.
TM: I know about the (c)4 and (c)3 but none of the rest.
MH: Well, yeah, there’s (c)4 and (c)6.
TM: I gotta go back and read my tax code.
MD: We just added four in the last two years.
MH: Yeah, and for instance, you know, country clubs are nonprofit organizations with a different classification.
TM: And the NFL probably gets its own (c)12 or something.
MD: Well they were a (c)6 but they dropped theirs now.
TM: Oh well, never mind!
MH: Yeah, well, they make a lot of money, they were getting a lot of pressure.
TM: Yeah, I mean, I'm not going to say that that was a bad decision.
MD: Profit distribution is attractive.
TM: Yeah. Details.
MH: So, and the nonprofit sector’s become much more professional. It used to be mostly volunteer, but starting in the 1950s with the codification, and also [more] sophisticated fundraising, firms in the ‘30s and ‘40s started to arise that were fundraising firms, American City Bureau and places like this. They went in and they raised funds for nonprofit organizations. And then nonprofit organizations started hiring, you know, executive directors and fundraisers. And so over the last 50, 60 years, it's really come to this professional evolution of the nonprofit sector. Whereas before it was pretty much, it was a lot of high society people who were running the symphonies and the arts programs and, you know, the Red Cross was mostly volunteer, and so on and so forth.
MD: We did have organizations that were set up for social purposes, like voluntary associations—
MH: Yes, right.
MD: —and we’ve often talked about how the structure of those organizations, in colonial America even, was really the same structure that we have today, with a board of directors that's in charge. We sort of codified that into law in the 1800s even though we didn't really create the 501 (c) category until much later. There's truth behind that, is my understanding correct?
MH: There were a number of charitable organizations, but they weren't really formal as far as the IRS was concerned.
MD: What a fascinating conversation. And we really appreciate the opportunity to look backwards and kind of understand where the sector’s come from.
MH: Well, thank you anytime and good luck with your show.
MD: Hey, thank you so much.
TM: Thank you, have a good rest of your day.
MH: Alright, take care.
MD: Take care.
PC: That was Dr. Mark Hardy, Director of Nonprofit Certificate Education in the Mendoza College of Business at the University of Notre Dame.
MD: You're listening to Field Notes in Philanthropy.
SC: So Tory, at the end of that last segment, we were kind of talking about the dynamics, the meaning behind philanthropy and charity in the social contract. Our next guest might be able to clear some of that up.
TM: I think you're absolutely right. We have Ruth McCambridge joining us this afternoon. She is the Editor-in-Chief of Nonprofit Quarterly. Ruth, thank you so much for joining us today.
RM: Thank you for having me.
TM: So yeah, as Patrick was saying, we, we would love to hear your thoughts on where the nature of the sector is today. Do you feel that people are engaging in philanthropy from a charitable standpoint or from a social contract or justice standpoint, or do all of those things really mean the same thing?
RM: Well, if we're just talking about giving on the giving side of things, I mean, I think people give for a variety of reasons that have to do, very often, with their most deeply held values. That could be everything from giving back out of a sense of mutual responsibility, kind of in the classic common sense. I live here, therefore I must help make it good and help make it sustainable. But there's, you know, people that give out of religious obligation and out of family tradition and out of empathy or a feeling of immediate, kind of sadness or, or pity, or a need to reach out to someone that they see very clearly needs them.
But I think people also give, in some cases, out of a sense that they want to build something that is different, or that is, you know, will provide some difference or value to their community or the nation or the world. That it will just kind of lead to more kinds of shared wealth and happiness and sustainability. So I think people's reasons for giving our all over the place. I wouldn't say that I think there's been a major shift. I think, you know, among philanthropy, institutionalized philanthropy, those shifts do happen. So people in those realms tend to argue with each other about stuff like that. You know, should we be more strategic in our philanthropy? Should we address emerging needs? Should we be paying attention to the disruptive entrepreneur? I mean, those discussions go on all the time in institutionalized philanthropy, but I think that individual givers give out of much more personal rationales for the most part,
MD: So much embedded in that conversation on those topics. Something that, I think, particularly, institutional philanthropy is looking at, but also nonprofit organizations, is the role of equity in our sector and inclusion. And I know I was just recently watching a webinar that you hosted a with Jeane Bell [CEO, CompassPoint] and other colleagues, and you were talking about organizational structures and how they evolve and how we can shape a sector that is truly equitable. Things like shared power and co-leadership. I’m just wondering if you could talk at all about, sort of, your knowledge and experiences in that area, as sort of the evolution of the sector here.
RM: Yeah, well you know, it's an interesting area because I came into the sector just out of a personal reflection. I came into the sector during the ‘60s. That's how old I am—
RM: At that point there was actually a lot of experimentation with collectives and cooperatives and, you know, if you were doing feminist work at all, you were pretty familiar with some of those experiments. And they existed in other realms of work, as well. But I think that over the years what's happened is that people, in an effort to professionalize, in other people's turns began to set up these structures that were basically the default model of the industrial age. They were very hierarchical. The pay grades went from high to low. There were multiple levels between the person at the top, who was directing the whole thing, and then never mind the people who are being served. And it became the default model for nonprofits as it was for for-profits and I think, you know, ironically, we're revisiting this idea of shared leadership, and a more intelligent organization basically, and a more intelligent and engaged organization at the same time that a lot of for-profit organizations are doing the same thing at this point.
RM: So to some extent this is, you know, the shift that we're seeing from really, you know, defaulting to the hero leader as the savior of our organizations in our sector, and of a field like civil rights or, or immigrant's rights or anything like that. It's moving more to a collective image. And then along with it, moves our notions of leadership and size of organizations. And that's very exciting because organizations that really do encourage people to act intelligently get much more intelligence out of their workforce.
And right now, I mean if some of the other issues involved with that is that, you know, frankly we're in good economic times and people have jobs. And it's pretty well known that in bad economic times you just have to have money to get people to come into your workforce, but in good economic times you better have things that appeal to their sense of the value of work and their particular value to the work or you're not going to keep the best employees. And so there's any number of reasons why it's important for us to really – in this sector particularly where we are so much about collective actions, that's our roots, that's where we came from – for us to be able to really embody that within our organizations in terms of our leadership structure.
MD: I think that's so interesting. Talking about that as our roots because you know now when we have the conversation about sort of evolving organizational structures and perhaps going sort of back into this more collective action, collective structure, I see personally some generational differences in willingness and comfort level in doing that. I think millennials today are quite interested in exploring new organizational structures that are more equitable and sort of flatter in nature, and perhaps it's Boomers and even some Xers that are a little hesitant. So whereas Boomers were coming of age when that was maybe the roots of the sector, there's some hesitancy because that hierarchical structure, there's a lot of societal comfort in that structure.
RM: I think there's a lot of societal comfort in any familiar narrative. And a narrative that says you have to have one brilliant person at the top and a couple of people who are kind of semi-conscious and then—
RM: —Unconscious doers at the bottom, is not exactly appealing to a lot of people at this point. And so while it may be comfortable to other institutions or even to people who say, oh, you know, who feels like they’re not comfortable with ambiguity, even the ambiguity of the change between the hierarchical and a more shared structure, the comfort on the other side is really quite significantly as well. I think it's just whenever you go through a kind of an economic era change, you're going to see organizational forms change as well. And in this sector as in other sectors, the more you resist that, you know, the less facile you’re gonna be with it, or you know, the less able you are going to be with it. Because it does take some getting used to. People who are used to working in strict boundaries, hierarchical organizations, would have problems making that transition in some cases.
But more and more as you said, you know, generations coming up expect that not only will we be networked inside of our organizations, but we'll all be heavily networked outside of our organizations also, including at the governance level.
TM: So it strikes me as rather interesting that not only is there sort of this economic era change, as you say, going on across American society or the world at large, but that's also sort of going on within philanthropy itself. You're talking about professionalization, even the word feminism coming up here. That philanthropy, nonprofits, foundations, any organization in this sector is sort of trying to think now about what it means to be a professional structure. So we're kind of looking at, you know, business models, at governance models –
TM: and where we are already to say, is this working for us? What do we expect of ourselves and what is expected of us?
TM: And that's such an interesting, kind of, challenge to be facing of, what does a professional philanthropic sector look like?
RM: Right. And I think our notions of what a professional is has to change. I mean, I remember Jim Collins, who wrote one of the great management books ever, Good to Great. We asked him at one point to comment on this study that had been done by a group in New York, the Community Resource Exchange, that had done 360 Evaluations – which are these very inclusive evaluations – with organizational leaders both in the nonprofit and the for profit sector. And what they found was that the nonprofit sector leaders actually rated higher, but there were areas in which the for-profit sector leaders rated higher and those were the areas of kind of push leadership, of highly directive leadership. And what they found was that in fact nonprofit leaders have a lot more facility with legislative kinds of negotiating, negotiated leadership. And so that ability to address multiple stakeholders, to not be faced with a single bottom line but to have to balance between bottom lines…All of that that makes the work in the sector so complex, those were the things that nonprofit leaders were really good at. I think that in this very changed environment, what that says to me is, we've got a strategic advantage because we already know how to do that. We should be at the very lead of experimenting with shared leadership and networked models because, number one, it's kind of native to us, we already do a lot of what's required in addressing multiple interests at any one time. And number two, because it's the way of the future.
MD: It's time to evolve, right? As a sector, it's time to evolve.
PC: Time to evolve, and share some leadership here in the room. Ruth McCambridge, Editor-in-Chief of Nonprofit Quarterly. Extremely informative. We'll have you back. Thanks so much.
MD: Thank you.
TM: Thank you.
RD: Thank you.
TM: Well, that was a really phenomenal conversation. I'm so glad we had both of them on with us because I felt like I have a clear sense now of philanthropy as sort of an individual-to-individual or person-to-God, sort of question, person-to-Zeus. And now we're kind of looking at it as a full profession as it transitions through the twentieth century into the 21st. I mean, things are changing and as Ruth mentioned, it's a fairly young sector.
MD: Yeah, and yet it’s this complicated human construct, right? And I think that both interviews were evidence of that. When people join a board, they think it's a cute charity that feeds hungry kids, but they're really stepping into this rather complicated, ya know, social/human construct.
TM: With lots of stakeholders. One of our favorite words in this sector, stakeholders.
MD: *Laughter* That’s right.
TM: But it brought up a lot of great information that we're going to want to dig into in future episodes, so we really just appreciate everyone who joined us today and we look forward to having everyone back with us. It's going to be great.
MD: I think there is fodder for future episodes.
PC: I'm Patrick Center for Tory Martin and Matthew Downey. I'm looking forward to the next group of stakeholders joining us on Field Notes in Philanthropy.
Field Notes in Philanthropy is a partnership of WGVU Public Media, the Dorothy A. Johnson Center for Philanthropy, and Grand Valley State University. Our technical producer is Rick Mierling. Joe Moran composed our theme music. The views and opinions expressed on Field Notes in Philanthropy do not necessarily reflect those of WGVU, the Dorothy A. Johnson Center for Philanthropy, or Grand Valley State University.