By Todd Cohen
Whether working behind the scenes or performing at center stage, charitable foundations play a big role in America.
That’s good. Philanthropy is an independent force that is vital to American democracy.
In exchange for that independence, our free yet regulated marketplace expects foundations to be responsible corporate citizens and stewards of tax-exempt wealth.
We expect foundations to pay close attention to – and be held accountable for — the way they invest, contribute and spend their money.
Foundations are big business. More than 50,000 U.S. foundations controlled nearly $450 billion in assets in 1999 and handed out more than $23 billion, according to the Foundation Center.
That money packs a lot of muscle, and foundations know how to flex it.
Just ask Carly Fiorina, CEO of Hewlett-Packard Co. Her plan to merge the firm with Compaq Computer Corp. seems headed for defeat because of opposition from HP’s biggest shareholder, the David and Lucile Packard Foundation.
The Packard board’s exercise of its right as a shareholder is part of its job: To invest their assets wisely and earn a healthy return, foundations must be attentive and engaged investors.
Another part of a foundation’s job is the legal duty to contribute a share of its assets to charities.
In both roles, foundations exercise a lot of power.
They buy and sell stock and real estate. They hire and fire people. They purchase supplies and services. And in deciding how and where to spend their money, they help drive the marketplace.
And through the grants they make, foundations make a difference in society and in how charities operate.
Foundations cannot replace government in providing basic needs and services – even if many Americans would like to see government do less and charity do more to serve people living on the margins.
But foundations do make a mark on society. Their grant dollars pay to feed, clothe and house needy people, to fight disease and pollution and to promote thriving communities.
Foundations also influence the services that nonprofits provide and the way they work.
By tackling particular social issues such as racism or poverty, or even particular strategies to address those issues, and by supporting nonprofits focusing on those issues or strategies, foundations help shape the role that nonprofits play in our communities.
And by tying their grants to goals that nonprofits must meet for their operations and impact, foundations help define the way nonprofits work and deliver services.
The exercise of philanthropic power should get close scrutiny, yet foundations are largely unregulated and face limited oversight.
That leaves it to watchdog groups and to foundations themselves to track, police and share information about their work.
Fortunately, a growing number of watchdogs and foundations are using Web technology to make philanthropy more accountable.
America is stronger because charitable foundations are free to choose how to use their resources.
Sustaining philanthropy’s vitality and independence requires keeping the spotlight on foundations – whether performing at center stage or working quietly behind the scenes.