SIZE COUNTS

Stephanie Strom, the New York Times' philanthropy reporter today quoted a study by the National Commission for Responsive Philanthropy the sum of which is that among a majority of foundations caught in the Madoff debacle those with smaller boards were more likely to lose money. Or put another way more of us are smarter than just a few of us.

In fact I read a study (which naturally I can't find right now) that concludes decisions made by a group may be more on target than decisions made by just one or a few people. (If you know the study I'm thinking of please let me know).

Board size and diversity matter for more than just making or losing money. The real challenge of governance is to strike a balance between the benefits conferred by a diverse board versus the risk of a board so large effective governance is impossible. Many charities develop big boards out of hope over caution - that the larger the board the more potential givers there are. This is almost never true in my experience. The results are first the gifts don't materialize and second a small executive committee winds up running the organization making for a two class board roster of greater and lesser beings. When that happens the diversity evaporates and the risk of dumbing down decision making is just as great as with the small board.

I haven't yet seen the NCRP study Strom quotes but I am more than familiar with a few of the foundations included in the study. The real problem is less size than cronyism. Small charity boards of every sort are more often stocked with intellectually arthritic founders, friends of the founders and family members or others who tend not to sass the alpha personality. In my view a board of five to seven people - provided they are truly independent - can govern effectively.

Size counts. But a willingness to break wind at the picnic counts for more.

Charity "Handle" $307.65 Billion in 2008

Donations to charitable causes
in the United States reach
$307.65 billion in 2008.

The sky is not falling. Henny Penny can go back to picking up corn."
Del Martin, Chair Giving USA Foundation

Though 2008's estimate of giving posted an inflation-adjusted 5.7% decline from 2007's $314 billion this is a very good number in the sense that the rope broke on the drop through the gallows. As I blogged last week " ... The free fall and economic collapse didn't hit big until the last quarter of 2008. So the data for 2008 will not reflect the full damage; 2009 will." 2008 is the first decline in giving in current dollars since 1987 and only the second since Giving USA began publishing annual reports in 1956. The full report on philanthropy was released today for the 54th year by Giving USA Foundation [TM] and can be purchased on-line at www.givingusa.org.

As always individuals gave the most money (75% from the living and 8% from the actuarially matured); foundations came in at 13% and corporations, 5%. Bequest giving may be higher than shown because it only includes estates large enough to exceed the estate tax exemption. Also I think corporate giving is under-reported because it has no way to measure cause related marketing or gifts-in-kind, both increasing sources of company donations.

On the where-it-goes side religion as always is a plurality - in 2008 35%; education 13%; gifts to grant-making foundations 11%. The remaining 41% of contributions - all in single digits - went to arts, environment, health, human services, social betterment and international affairs.

I'm just showing a little garter here. The full report is very much worth reading.





"Go back to basics. Tell your story honestly and positively."
Nancy Raybin, Chair Giving Institute

Rooney Appointed: White Smoke Rises

Patrick Rooney has been named head of the Center on Philanthropy at Indiana University. With colleague Melissa Brown and Center staff Giving USA - the most complete compendium on giving in the US - is coopered together each year and as everyone in the field knows it is the resource. Nothing else comes close.

Giving USA Foundation is the publisher and sales arm but the research and writing is done in Indianapolis. The announcement said after a "nationwide search" Patrick was named. I was not surprised but when Patrick and I had breakfast in New York a few months ago he assured me he was not a shoo-in. This I did not believe.

Patrick is of course an economist but he does not speak in tongues and he is definitely not morose - two hallmarks of the discipline. Not only does he explain abstract stuff in an interesting way he is cool to be with unlike say Ben Bernanke. Can you imagine?

Patrick's anointment and the attendant white smoke from Indiana comes just a few weeks before the 2009 edition of Giving USA will appear, no accident of timing I'm sure. As I'm no longer Foundation chair I don't get a sneak peak at the data and I haven't a clue. But that there will be a decline in absolute inflation-adjusted dollars in the total giving handle seems foregone. Duh. So Patrick will have plenty of media attention as he labors to turn crap into ice cream. That should keep him busy for awhile.

Next year's Giving USA might show even more horrendous data. The free fall and economic collapse didn't hit big until the last quarter of 2008. So the data for 2008 will not reflect the full damage; 2009's data will. But what might otherwise ameliorate that bad news is that since the end of March a powerful market rally and other budding signs of recovery - more new housing starts, stabilizing retail sales and a decreasing rate of increase in unemployment rates - are key markers. It does seem that the last quarter of 08 and the first quarter of 09 marked the slough of our despond. ("Powerful rally" means I am again opening my investment statements without a standby ventilator).

So Patrick:

Harper's Index for May reported almost $12 trillion of value has been lost so far by American individuals and families in this meltdown. Isn't that almost as much as the so-called intergenerational "wealth transfer"of which we heard so much during the bull markets? I always wondered if that was just lipstick on a pig because I never understood the assumptions. Is it time to re-calculate or just "fugeddaaboutit?" Okay the wealth was transferred. When I asked another social scientist about it a few months ago he said the model didn't consider the greed factor.

But fund raisers do.