Not in the view of Scottish philanthropist Sir Tom Hunter. ‘He who has the pesos has the say-sos’ was how he put it, speaking at the Centre for Charitable Giving and Philanthropy (CGAP) conference on ‘Keeping philanthropy’s promises – today’s austerity, tomorrow’s riches?’ in London on 9-10 May. On the advice of his father, he chose a niche and an approach for his foundation just as he did with his successful sports shoe business.
Hunter sets a lot of store by sustainability and exit, and the need to recognize the moment when your work is done. He condemned the ‘western arrogance’ of trying to impose on developing countries what we think they need rather than being enablers of what they want to do. He described how he brought Paul Farmer of Partners in Health to Rwanda and asked him if he could develop a healthcare strategy for the country for the sum the government said it had to spend. The government is now rolling out the strategy Farmer came up with and the Hunter Foundation has exited. ‘We’re helping people help themselves,’ Hunter said. ‘We’re enabling Rwanda’s own vision.’
So what would it mean for philanthropy to be more democratic? CGAP’s Cathy Pharoah outlined two options. First, and less problematically, it could mean a wider population of givers. In the UK the abolition of thresholds for Gift Aid in 2000, which meant that tax relief was available to any giver who pays tax, however small the gift, created what then Chancellor of the Exchequer Gordon Brown called ‘a democracy of giving’. He assumed that this would result in more redistribution – the second way in which philanthropy could be more democratic. But this hasn’t happened, partly because increased uptake of Gift Aid has depended on promotion by existing charities, which tend to focus on larger donors rather than widening the base of givers.
But tax isn’t the only way to widen the base of givers. Angela Eikenberry of the University of Nebraska (US) talked about collaborative giving mechanisms such as giving circles, whereby donors pool resources and decide together where the money will go. There are over 600 in the US and around 50 in the UK. Although giving circles tend not to be diverse within groups – over half in the US are women only – very different types of people do form giving circles. This certainly means more different people participating actively in decision making, and giving circle members also tend to be more civically engaged than other donors, eg more likely to vote. Eugenie Harvey of the UK-based Funding Network endorsed the point about wider participation. TFN’s donors are ‘mass affluent not stupidly wealthy’, she said.
Do giving circles also expand who benefits from philanthropy? The picture is more mixed here. Giving circles and other donors give the same to basic needs but giving circle members are more likely to support smaller, grassroots, local organizations, women and racial and ethnic groups. But they are less likely to give to combined purpose funds like United Way, which gives a lot to the neediest.
Pluralism in philanthropy
What is the justification for tax breaks for philanthropy if it’s not to promote giving to the poor and marginalized? Diana Leat of Cass Business School pointed out that tax breaks are for public benefit, which covers more than the most disadvantaged. Tax breaks, Leat suggested, allow for democratic failure, for catering for minority interests that will never be catered for through a majoritarian democratic system. In fact they allow for pluralism in philanthropy.
According to Rob Reich of Stanford University, pluralism is the only halfway plausible rationale for tax breaks – the desirability of decentralizing the production of public benefits; of meeting the needs of minorities whose preferences will never be met in a democratic system; of redressing dysfunctions in the funding of public goods. This is a preference for a thousand flowers, for allowing as many people as possible to contribute their ideas about funding the public good. Admittedly, it is largely pluralism by the wealthy, plutocratic pluralism rather than democratic pluralism, but this is still better than no pluralism. If you introduced a flat-rate incentive, Bill Gates would still have a greater influence on public policy because he has so much more to give away, though he wouldn’t receive so much money back from the state.
What about redistribution?
But the pluralism rationale is indifferent to distribution, Reich emphasized. The idea of some causes having more merit than others is at odds with this rationale, which is all about pluralism among the givers.
Are there other ways of encouraging people to give more to the poor and marginalized? What about differential tax breaks, with bigger breaks for some causes than others? Interestingly, Cathy Pharoah admitted that her view on this had changed in her years at CGAP. A few years ago she would have favoured equal tax breaks for all causes, but in face of the continuing rise in inequality, her view has changed. Beth Breeze of the University of Kent suggested that government match funding schemes could be an administratively less complicated way to achieve the same end. Recently they have applied only to funding for higher education and the arts, but they could equally be applied to other areas. Mark Rosenman of Caring to Change mentioned that state governments in the US incentivize giving to priority areas through tax credits. A suggestion was also made that proportional representation would be a better way of meeting minority needs than greater diversity among donors.
The inescapable conclusion is that democratization is more evident among donors – albeit in a limited way, given the huge disparities in the amounts people have to give away – than among causes. There is no real reason to expect that more democratic decision making will necessarily lead to a fairer distribution of resources. There is nothing intrinsically progressive about democratic decision making, and donors tend to resist the idea of substituting for public spending. According to Beth Breeze, donors feel that charities should benefit the needy but their giving reflects their own interests and history. Finally, as Rob Reich pointed out, charitable support for basic needs will never amount to social justice.
Thank you, CGAP, for some thought-provoking discussion.
Caroline Hartnell is editor of Alliance magazine.
More articles from Caroline Hartnell can be found on the Alliance magazine website.
In a few weeks Alliance will be publishing the June 2013 issue of the magazine. Guest edited by Anthony Tomei, former director of the Nuffield Foundation, this includes a special feature on philanthropy in a changing world economy.
While the ‘financial crisis’ may have resulted in significant changes in North America and Europe, for the rest of the world, it can be taken as a symbolic date for a longer-term shifting of economic power. This is playing out differently in different parts of the world. What does this mean for philanthropy – foundations, individual philanthropists, impact investors? Are relations with government being renegotiated? Are foundations rethinking their role? Coming up with new ways of working? Is impact investing increasing? These are some of the questions this Alliance special feature will seek to answer.
This issue will include a number of global perspectives on this topic. Matthew Bishop takes on the immensely difficult task of predicting trends in philanthropy around the world. From Europe and North America, Foundation Center president Bradford Smith talks about how American foundations are responding to the twin catalysts of financial austerity and the information revolution, while Luciano Balbo and Massimo Lanza argue that impact investing may be the best way to address Italy’s growing social problems. Alison Bukhari of Dasra considers how philanthropy is changing in India, now the world’s third largest economy. Looking at developing countries, Tony Emulelu explains the concept of ‘Africapitalism’ and Jacana Partners founder Stephen Dawson outlines why he still thinks that venture capitalism can be more effective than impact investing or grantmaking in creating long-term change.
Other articles in this issue include an interview with the new president of the Council on Foundations, an article looking at venture philanthropy in Europe, and a look at maintaining the balance between the technocratic and the humanistic.
Alliance magazine is a quarterly publication available in both print and digital formats. For further information about the subscription options available and to read the June 2013 issue, please visit www.alliancemagazine.org/subscribe.
New plans for another global summit on the Syrian crisis represent modest progress, but the real question is whether the Kremlin is willing to withdraw support for the Assad regime, says CFR's Stephen Sestanovich.
At the AVPN’s 2013 conference, the moot question is Do markets provide a solution to alleviating poverty? The answer seems to be a qualified YES.
Harvey Koh of Monitor Deloitte talked of the stages of social entrepreneurship and how each stage requires a different set of gloves. Social interventions start with a blueprint that sets out the insight and the idea that claims to solve a particular problem. The model then continues to define the next step as Validation. The initial blueprint is explained and articulated while it is also piloted to substantiate its claims and establish its credibility.
Post the validation and pilot phase comes the preparation stage that then equips the social entrepreneur with the tools to get ready for take-off. This is when the strategy is made and the human resources readied for the final stage that scales up. The issue with funding players in the social sector is who would provide the early money. There is the pioneer stage that requires funding that is clearly fraught with risk. Is this where venture philanthropy should come in?
Annie Chen of the RS Group in Hong Kong, Kristin Lindsey of the Global Fund for Children, Wolfgang Hafenmayer of LGT in Liechtenstein and Michael Traill of Social Ventures Australia spoke of the various concerns that venture philanthropy faces. One major point made was that communities hold the key to success and must be the owners of any solution that is tried out. The questions that emerge bring up various aspects of philanthropy and its role in social entrepreneurship and the entire process of moving from blueprints to scaling up.
The conference then went into various breakout sessions. There was an entire section looking at regional insights from China, India, South Asia and South East Asia. Another section looked at the health, water, education and financial inclusion sectors. The conference then went on to investigate the roles that governments play and the different ways in which families enter venture philanthropy. The European and the US perspectives on venture philanthropy constitute a body of work that serves as useful background that Asia can take lessons from.
Amir Khan is President, Glocal University. Formerly Senior Policy Advisor, Bill & Melinda Gates Foundation.
This is AVPN’s inaugural conference where 30 countries are represented. In 2009, the AVPN idea in Singapore began. The concept emerged when Doug Miller started the EVPA in 2003. In the last 3 years, the increase in venture philanthropy and social entrepreneurship in this region has been substantial.
The conference started with Tan Chi Chui, Chairman of the LIEN Centre for Social Innovation, who warned against hype, sloppy thinking and monitoring in the social sector that will make investors give up. The danger looms large in reducing the movement to feel good rather than a do good experience. The LIEN Centre was established in 2006 as a partnership between the LIEN foundation and the Singapore Management University on fostering and sustaining social innovation.
Doug Miller talked about leadership that takes on a pioneering role, then focused on the fact that engagement is a key to success. The EVPA now has 160 members and the AVPN has 124 in 35 countries. AVPN is in the business of breaking the silos that private equity, wealth managers, professional service firms, universities, corporate CSR and foundations work in and allowing them to network. AVPN members work across sectors – health, environment, education, children, economic development and financial inclusion. Members support both non-profits and social enterprises.
Lawrence Lien, CEO, National Volunteer and Philanthropy Centre, lamented the fact that NGOs lack the hunger and the ability to articulate their requirements. Philanthropy plays a critical role in nation building and operates through a social contract with innovation and policy change, while it is the government that primarily must provide public goods and governance.
Philanthropists must take more risks, especially in Asia where we avoid risk and spend too little on upstream work and more on downstream activities. The rich actually give far less as a percentage of their income than the poor, something that is not unique to Singapore. Collaboration requires humility and systemic change requires a large diversity in partners. The failure to attract enough leaders to this sector is a serious problem; in a full employment situation it is so much more difficult to get people to think of careers in the social sector.
Former director of the US Social Innovation Fund and senior partner Bridgespan Group, Paul Carttar pointed out that venture philanthropy is not a 21st century phenomenon. The Red Cross, the Carnegie Foundation and others are 19th century ventures that had a profound impact on mankind. The three phases of modern venture philanthropy are the decade of the 1990s when we saw the creation of initial VP houses, the next decade when we saw the expansion of investor bases, and the evolution of powerful investors. The Social Innovation Fund in the US offers some lessons for Asia in how the partnership between government and philanthropy can leverage each other’s strengths. Aim high, seek models with realistic potential for large scale impact. Manage the risk of failure, and the only alternative is to do nothing. Trust your judgement.
Example: Youth Villages. For children from troubled homes. The insight driving this is that children are best served in their communities and homes and that good counselling can change families.
Never doubt that a small group of thoughtful committed citizens can change the world. In fact it is the only thing that has … Margaret Mead
Amir Ullah Khan is President, Glocal University. Formerly Senior Policy Advisor, Bill & Melinda Gates Foundation.
"Going forward, the United States has no choice but to embrace the sound underpinnings of leading from behind," writes Leslie H. Gelb.
South Korean President Park Geun-hye spoke at a joint session of Congress on May 8, 2013. She discussed U.S.-Korean collaboration regarding regional security and economic initiatives.
The latest offering from The Philanthropy Programme, a series of events for those who advise on philanthropic giving organized by Philanthropy Impact and the Society of Trust and Estate Practitioners (STEP), was held in London on 1 May. This event examined how to encourage greater giving from the ‘mass affluent’ sector, reflecting on both the UK tax incentives available and what the philanthropic goals are for donors at this level.
Opening the session, Gregory Wheatley of Buzzacott’s Chartered Accountants noted that philanthropy is often seen as the preserve of the fabulously wealthy. At the other end of the giving spectrum a large number of relatively small donations are made to charities and sponsored activities.
Between these exists a relatively untapped resource of wealthy individuals who give proportionally less than their better and worse off counterparts. Of the £75 million raised by Comic Relief in 2013, only 100,000 donations were of £50 or above. How can we encourage greater charitable giving from those in this middle ground – the mass affluent?
One way to do this is through tax incentives – though there seems to be a consensus that advisers do not do enough to make donors aware of them. In the UK successive governments have introduced tax reliefs to encourage giving. Perhaps the best known is Gift Aid, which allows charities to regain the basic rate of income tax the donor has paid on the gift.
However, as Owen Clutton of Macfarlanes points out, what many people do not realize is that donors who are higher or additional rate taxpayers, as the mass affluent set undoubtedly are, are also entitled to claim a refund of the difference between the basic rate and the rate they pay. This means that both the charity and the donor benefit from the Gift Aid donation. Organizations receiving donations should also be aware that with donations of over £2,500 charities can actually give up to 5 per cent of the Gift Aid to reward (and therefore encourage) their most valued donors.
Many donors, and indeed their advisers, may be similarly unaware that the value of charitable gifts of shares or land can be deducted from a donor’s income, thereby lowering their rate of income tax. Moreover, as Clutton was keen to impress, gifts of shares are not subject to capital gains tax, so giving in this way represents something of a double tax relief for the donor.
Likewise, while many will know that charitable donations in an individual’s will are exempt from inheritance tax, it is less well known that if they exceed 10% of the estate the inheritance tax on the remainder is reduced by 4%. More importantly, beneficiaries are entitled to ‘rewrite’ a will to include a higher level of donation and thus push the overall donation beyond the 10% threshold. In an estate worth £1 million this means a donor can make a £67,500 donation at the cost of just £16,200, with Her Majesty’s Revenue and Customs (HMRC) footing the rest of the bill. Despite this, while 75% of people in the UK donate throughout their life, only 7% leave donations in their will.
But tax reliefs are not the only way of encouraging more giving by the mass affluent. Describing himself as ‘the very definition of the mass affluent’, Simon Dodds of Deutsche Bank revealed his reasons for donating to the London Community Foundation. He noted that, in contrast to donating to larger charities where in some respects his donation feels ‘lost’, giving through the LCF is an immensely personal experience. Although wealthy, the mass affluent are not wealthy enough to set up and administer their own foundations or trusts. But it is still important to Dodds to retain a degree of control over how his donation is spent as well as to see first hand the impact being made.
The LCF provides a solution. It works as a neutral party that can introduce mass affluent donors to causes and projects they would otherwise have difficulty in accessing. It provides a platform through which donors can give with a similar level of involvement as with a personal foundation but in a way more suitable for their financial and time commitments. As Dodds put it, ‘The amount of time I want to spend on it works for me.’
LCF’s Lucinda Shaw elaborated: ‘People don’t necessarily know how to give though they want to.’ LCF provides both knowledge of the charities the mass affluent want to give to and the expertise to manage the process. Moreover, it allows donors to ‘retain their brand’ and attach their name to a project.
Much of the session focused on key differences between UK and US attitudes towards philanthropy. Members of the audience pointed out that in the US the culture around philanthropic giving is much more embedded in a holistic approach to financial planning. In the UK there tends to be a ‘reverse snobbery’ towards giving: being philanthropic isn’t something that is talked about. In some respects this culture extends to financial advisers, who often would not raise the subject of philanthropy with a client, instead waiting for the client to do so themselves. For Dodds, who has lived on both sides of the Atlantic, the lack of advice on offer in the UK is striking.
Nonetheless it was generally agreed that this culture is changing. Clutton noted that he and other advisers are beginning to see more mass affluent clients asking about philanthropy and more receptive to a broader conversation about how to give and where.
Tom Rennell is marketing and events officer at Alliance magazine.
Further events in London and around the globe can be found on Alliance‘s conference calendar.
Washington Post journalists interviewed South Korean President Park Geun-hye after her meeting with President Obama on May 7, 2013, and the newspaper published excerpts.
The heady days of the 2012 Olympic Games seems like an age ago. In recent weeks, though, as I’ve discussed citizen action and global justice around northern Europe, one story above all still lingers. For me, rather than any of the numerous and impressive individual feats, it’s the story of the British cycling team’s domination of their medals chart which might just help us understand our role in social change.
The coach of the British cycling team put the consistency of their success down largely to what they called ‘the aggregation of marginal gains’: rather than seeking any one secret weapon to deliver the knockout blow, this approach relied on gaining a series of 1% edges over the competition in every field – usually through superior equipment, stronger management and better training. They weren’t the only sporting team pursuing this incremental approach, but they were arguably unparalleled both in the range of advantages they found (including having the team sleep on special pillows) and in their clean sweep of the medals chart.
Why is this relevant for us as civil society? Well, increasingly, there are signs that greater numbers of us are moving from addressing the symptoms of social injustice to the root causes. Reminded by the social movements of 2011 that it’s the ultimate responsibility of civil society to talk about, understand and speak truth to power, more and more of us are starting to think seriously about strategic and long-term, rather than tactical, change. We’re starting to realise again that first and foremost it is citizens and their organisations, when free from vested interests, who are capable of envisaging and catalysing this bold, creative and courageous kind of system change.
I encountered this first hand in Brussels recently at a project initiation meeting for DEEEP4, a new development education project to engage Europeans on global justice issues (CIVICUS is an associate partner). I was surprised and delighted to find that from start to finish, participants universally saw the project neither as a service to deliver nor as a way of building a support base for high development budgets in cash-strapped Europe. Instead, they saw it as a vehicle for emancipating and empowering citizens – and in turn contributing to a new global justice movement. Some interesting work by the Smart CSOs Lab, one of many groups highlighting the possibility of a ‘Great Transition’ to a new sustainable paradigm (and how civil society might make it happen), seemed to strike a chord with the way participants understood their own modest role in the larger world. This was just one example. But the sense that the sector is starting to rediscover its ambition, its voice and an innate sense of optimism is palpable. Gradually, the world’s changemakers are starting to dream again, and daring to aspire to greatness.
But what kind of tactics, structures and organisations do we need to make these kind of ambitious goals a reality? Dan Pallotta, interestingly, makes the compelling case that in the current environment for non-profits, we just can’t hope to compete with those whose priorities are profit and who can do things we can’t to bring about success. Suggesting we need to re-level the playing field, Pallotta highlights that profit organisations have five critical things that non-profits currently don’t:
For many in civil society, the argument that we should encourage non-profits to access these five things causes some discomfort. With the private sector increasingly muscling in on the traditional service delivery territory of non-profits and claiming to be able to deliver social change more effectively, many of us understandably feel anxious about further blurring the lines between what we perceive as different sectors, or about further professionalising civil society and losing what we believe is our ‘essence’. But in terms of the mechanics – the ‘how’ – Pallotta makes a compelling case. Without a level playing field and an ability to exercise power in our own right, we can aspire to greatness all we want, but we’ll remain ultimately weak, unable to effectively meet the aspirations of the citizens that are the foundation for CSOs, and increasingly illegitimate as vehicles for popular claims to justice.
The broader point was perhaps made better (and certainly with less focus on the pure economics) by Avaaz’s Ricken Patel in his Commonwealth lecture (watch from 41 minutes) in early March. Patel argued that the public institutions in government and civil society, which we trust to push for aspirational and transformational global solutions, are themselves broken. But Patel suggested, in a refreshingly political analysis, that the key weakness lies not in their intentions, their mandate or their legitimacy, but in a deficit of good management. While few would probably admit it openly, I think many of us in these public institutions know this, experientially and intuitively, to be true. In unsupportive environments with poor management, as Patel puts it, ‘our inspiring purpose and charge gets lost’.
Good management in institutions need not be about organisational charts, the latest buzzwords, or the much-feared professionalisation or bureaucratisation of the sector. Good management can simply be about inspiring good people to work effectively for good causes. It can be about attracting the very best, and creating an environment where they’re not alone in their excellence, their ambition and their desire to work at translating our collective dreams into reality. Patel implied that if we’re to move on from our collective cynicism about big ideas, then we need the best public servants in each institution to step up and to work harder at believing they can change their institutions from the inside.
We might just be reaching a tipping point where we are starting to believe again in dreams and in change. But if we want to truly get to greatness – our own Olympic medals – then dreams and big ideas alone won’t be enough. We’ll need to work at it little by little. Our managers, our public servants – much more than our charismatic leaders – will need to step up and do little things. They’ll need to give that extra 10%. They’ll need to reject that job offer to work in a bank. And they’ll need to take that flak from that colleague they can’t stand, just to protect their brilliant, idealistic interns and make them see their future in public service. They’ll need to turn away from fear and cynicism.
If we’re serious about systemic change – about fixing the root causes rather than the symptoms – then, like the British cycling team, we must give ourselves both the tools to level the playing field and also powerful, effective, management. If we aggregate those marginal gains and competitive advantages, we might just get there.
Mark Nowottny is coordination and planning manager at CIVICUS. This article was first published on the CIVICUS blog