Most family foundations in the U.S. are set up to exist in perpetuity, but the number of limited-life foundations is increasing. The decision to continue for generations or spend down is an individual one, and there are valid reasons for each approach, according to Susan Price, vice president of the National Center for Family Philanthropy, who moderated the Giving While Living teleconference on Wednesday, sponsored by her organization and The Chronicle of Philanthropy.
In opening the session, Price said that regardless of where a foundation is on the perpetuity versus spend-down decision, “we at the National Foundation believe it’s really important for boards to review the decision periodically as part of good governance.”
The teleconference brought together the leaders of two foundations that plan to go out of business in the next decade to discuss their decisions. Gara LaMarche (left) is president of The Atlantic Philanthropies, and Lenore Hanisch is co-executive director and board and family member of the Quixote Foundation. The Atlantic Philanthropies, which had given away some $5 billion through 2009, will spend down its remaining $3 billion in 2016 and close its doors in 2020. Quixote, with some $15 million in assets, will conclude its grant-making in 2016 as well and shut down the foundation the following year.
Hanisch said that taking up the question of how long Quixote should exist and for what purpose allowed the board to look strategically at how it wanted to respond to a deep sense of urgency among its grantees and its ability to do so. “During the past year, the board’s conversation has been about having impact and the most impact we can have. For the areas we’re investing in, we think putting it out there all on the table is the best investment we can make.”
The Atlantic Philanthropies’ decision to spend down had been in place for several years before LaMarche joined in 2007, and he said he had no interest in revisiting that decision. “It’s always possible to change your mind against perpetuity; it’s harder to reverse once you’ve decided to spend down your assets.” Now, he said, there is a sense of urgency about of the kinds of problems with which the foundation is concerned—health, human rights, aging, young people—“and we’re able to throw concentrated resources into it.”
Hanisch encouraged boards that have never discussed the spend-down issue to think of it as an exercise about what success would look like in five, seven or 10 years. “It’s a very powerful exercise when you do that and think about not being there after those five, seven or 10 years. What we’re hoping to build into the DNA of philanthropy is that in asking the question, you’re asking whether the timeline of institutional perpetuity is still the right strategy for what you want to accomplish in perpetuity.”
LaMarche acknowledged the concern of some observers about spending down that there needs to be a steady source of support for various field over a long period of time. “But that seems to be premised on the notion that there is a fixed body of philanthropic money that could be reduced by somebody spending down.” He dismissed this by noting that philanthropic resources are constantly being replenished by new donors coming into the arena. The Gates Foundation, for example, did not exist 15 years ago.
How has the question to spend down affected the two foundations’ grant-making? Hanisch (left) said that the decision has an emotional component (“We have formed some deep partnerships with our grantees, and it’s saying good-bye to relationships”) that is important to acknowledge. By announcing Quixote’s closure six years in advance, the foundation gave both itself and its grantees time to adjust and think together about what they want to see happen for their organizations, staff, planning and programs and how the foundation can support them, as well as about any contingencies that might arise in the interim.
She said Quixote has decided to go deeper with its current grantees and to take few new applications. At the same time, it wants to be flexible and nimble enough to jump in if an opportunity should present itself.