Emily Koons Jae:
So Joanne, welcome, and thank you so much for joining us today on Higher Ed Now. And thank you so much for writing this wonderful new book on donor intent, which is part of the Philanthropy Roundtable guidebook series and is called Protecting Your Legacy: A Wise Giver’s Guide to Honoring and Preserving
Donor Intent. And we wanted to have this conversation with you today because the issues you raised are so relevant to the alumni side of the ACTA equation. So many alums give back very generously to their alma mater. And through my work with ACTA’s Fund for Academic Renewal, I’ve seen just how challenging it can be for donors to give well and to translate their vision into a meaningful gift especially in higher education.
So as you pointed out in the forward, the importance of respecting donor intent is something that comes up in a lot of conversations about philanthropy, but there’s not much practical guidance available for donors in terms of what steps they can take to protect their legacy. And this book certainly remedies that and offers donors really tangible, actionable steps that they can take. So thinking about your readers, how do you hope that readers, particularly donors approach this book? Is there a particular stage in the giving process where you think that reading through this guide would be most helpful?
Joanne Florino:
Well, first let me thank you, Emily and ACTA and FAR for having me join this podcast today. We at the Roundtable, and I want to give a lot of credit to Adam Meyerson, for really encouraging me to work on this book. I think that for our purposes, the donor we had in mind was the donor who is just starting out and not has yet made a lot of decisions on the kind of philanthropic vehicle he or she might use, or the timetable on which they want to do their philanthropy. But in reality, I think the book is useful for donors and foundation boards wherever they are in the process. Because a lot of times I am hearing now from donors or members of foundation boards that are re-thinking their mission or they want to clarify their mission more than it was, they’re thinking about spending out when they had been initially committed to perpetuity. Or they’re thinking about adapting to a second vehicle or maybe even doing what John and Laura Arnold did and creating an LLC as an umbrella for all of their vehicles, or they’re going to board succession and they’re having a renewed conversation about what the donor intended and how that should be manifested in 2020. So I think that we created the book so that it could be picked up and used at any point in the philanthropic journey although initially we were focusing on those donors who had not yet made some of those key decisions.
Emily Koons Jae:
That’s wonderful. And one thing I found really encouraging in the book is that there were a couple of cases where the foundation had maybe gone off the rails and then people were able to do a course correction and really bring things back to what the donor intended in the first place. There’s some really wonderful examples of that in the book.
Joanne Florino:
it’s very easy to write a book about everything that has gone wrong with donor intent and we wanted to be sure that we weren’t just telling what we call the horror stories, that we were also showcasing examples of really good and effective philanthropy that honors donor intent so that it would spark some enthusiasm among donors or successor board members or successor family members to believe that it is possible to move forward in time and still honor the values of the donor.
Emily Koons Jae:
And your guide devotes a full chapter to higher education giving outlining the unique challenges that higher education donors face. Why did you decide to include this special area of focus within the book?
Joanne Florino:
Well, I think the flippant answer is because that’s where some of the great horror stories are. The second, not really important reason, is that often those are mega gifts. They’re typically not $5,000 gifts, they’re million dollar gifts, $10 million gifts, sometimes $100 million gifts. And it’s also the place where so much endowment giving takes place. But primarily it’s because this is where donors tend to focus on what their heart is telling them to do rather than what their head is telling them to do, and it’s understandable. Unless you had a truly awful college experience, most of us carry around very strong emotional ties, especially to our undergraduate alma mater. And in some cases, like I’m here, it’s my graduate alma mater which is Cornell, especially since I live right in this town.
Emily Koons Jae:
Yeah, you highlighted a few examples where donors do the work of visiting a nonprofit, getting to know the CEO, really diving into the depths of what a nonprofit does. I think sometimes in higher education giving, people skip that step because they think they know their alma mater so well from what they remember from their four years on campus, but that might’ve been decades ago and it could be a very different school today. So I think that donors need to take a really honest look at their alma mater and do that hard work that they would do with another nonprofit that sometimes gets skipped.
Joanne Florino:
I agree. And we do encourage donors to ask lots of questions, which I think they are definitely more inclined to do with nonprofit and other charities, and certainly not their own alma mater. And another factor too, I think, and I don’t think we talked about this in the book but I’ve been thinking about it. Often, especially with foundation gifts to smaller nonprofits, community nonprofits, the program staff is actually taking the lead on those gifts. When it’s the founder or the donor’s alma mater, the donor, man or woman, is front and center in those gifts. And therefore, there’s even more likelihood of there being an emotional entanglement because this is where I met my wife, my husband, this is where I met the man who’s now my best friend, this is where I made the contacts that led me to my first job and started me on the road to success. It’s hard to pull back from all of that.
Emily Koons Jae:
Yeah, absolutely. And kind of thinking about, this is skipping ahead a little bit, but thinking about the current climate in higher education and this unprecedented crisis that Higher Ed is facing, how are you seeing higher education donors shift in response?
Joanne Florino:
I think there is a growing wariness of endowment gifts. Although in the current crisis, I imagine that development offices are going to be even more determined to get those gifts. I think there is going to be more of a shift toward gifts that benefit students rather than the institution. Although there will always be donors who like capital gifts and donors sometimes like them because there’s a clear start and there’s a clear finish and you see the outcome, you can walk in the outcome, you can understand what kind of work is being done in the building.
And I also think it’s a little early at this point that even talk about what’s going to happen in terms of philanthropy in higher education. Because frankly I think the bigger question is what’s going to happen to higher education. Everything that’s happening in 2020, the move to online education, I think there has been an incredible reaction to Harvard’s announcement that it’s going totally online for the entire 2021 school year. And I don’t know how different institutions are going to respond to that. I can tell you here at Cornell, they have committed to bringing the students back in person, but they also understand that there’s an incredible amount of maneuvering that has to take place on it around campus for that to create a safe environment for students and for the community members who often come in close contact with the students. It’s a small town.
Emily Koons Jae:
Yeah. There’s so much uncertainty right now in the higher ed landscape, that makes it a really challenging place to give, especially when you’re thinking about those mega gifts that typically it takes several years at least to come together.
Joanne Florino:
I want to think that more donors are going to be more careful, exercising more due diligence, being more upfront about their values and their own goals. It’s interesting to me that Harvard, having been bombarded with a lot of concerns from what you might call passive donors, to complaints about their tuition, and complaints about hoarding an endowment, have actually just released a gift policy guide, I don’t know if you’ve seen it.
Emily Koons Jae:
No, I haven’t seen that.
Joanne Florino:
It’s quite interesting. It talks about what happens if we name a building for someone and then that person is accused of things or actually guilty of things that really we don’t want to be associated with. But it also includes a couple of things that Harvard won’t allow, which I find interesting. I saw one in particular that I want to mention—that the university cannot be required in gift agreements to grant the donor the right to enforce the terms and conditions of the gift. And I think that brings up a conversation around standing which we covered in the book because it is typically ignored, but I’m going to eventually write a little blog or something about the gift policy agreement that Harvard just issued, but there were a couple of things that stood out to me that donors need to be aware of.
Emily Koons Jae:
Yeah, that’s really troubling. And I think really few donors understand the nuances of donor standing. I think they approach it as they would a contract and unfortunately, a gift agreement legally is very different.
Joanne Florino:
So it’s an irrevocable gift then. I suspect that’s not made clear many times by development offices. This is Ithaca, it is a small town, some of my close friends are development officers. But the reality is that you’re charged with bringing in gifts to the university and you want to make it the least bumpy ride possible. I think the other issue that we’ve tried to highlight in the book that is coming up in the courts is the imposition of management fees on endowments for which donors have not been clearly notified. There may have been some mention of it but definitely appears to be a lack of transparency about management fees that were imposed after the fact, after the endowment gift was originally made. And so there were a couple of things that we tried to highlight in the book that we see as up and coming disputes that we hadn’t really paid much attention to before.
Emily Koons Jae:
So, clarity of purpose is a theme that’s revisited throughout the book and a well-defined mission statement can go a long way towards protecting donor intent, although certainly is not always sufficient. I love this quote that you’d included from the Bradley foundation CEO, Richard Graber, and he says, “In many ways, the easy part is putting these words on paper. That’s the first part. The second part, the harder part, is executing. Without that first part I’m not sure you can get to the second part.” And it seems that for higher education giving, getting that first part right is really critically important and getting that first part right in writing. How have you seen higher education donors do this well while at the same time respecting the bounds of academic freedom, which is so important to the Academy?
Joanne Florino:
Some of this has to do with relationships and some of it has to do with legal documentation. So I’m going to start with the legal documentation first. We advise donors not to simply take the gift agreement that was offered by the institution of higher education, or if you do take it, be prepared to modify it because there are clauses in there that you;re not going to be happy with. And typically, a university’s template is not going to include a revoking clause or a clause that says that in fact, if the purpose of the endowment becomes impossible in the future that you have to go back to the donor. I mean it’s clear that Harvard’s new gift policy is trying to avoid that. And I think you’ve got to be firm about what you absolutely want in that gift agreement.
I think it’s worth taking your time. I think it’s worth having someone else look at it even if that’s a consultant in higher education or an attorney. I’m aware of the fact that ACTA performs that service for donors, and I thank you for that. So I think that that’s the easy part. The other part, which is the executing but also has to do with that document, is making sure that everybody on the university side understands what it is–everybody is going to be involved with making this gift actually come to reality, understands what it is you want.
If a donor fails to express his or her end game clearly to the president of the university, to the faculty who are going to be in fact taking care of the program that you intend your money to go to, to the development officer with whom you’re working, perhaps to the Dean of the college in question. If those people don’t understand exactly what it is you want to accomplish with your gift, then it’s more likely that they are going to use your gift in the general area that you clearly were interested in, but not necessarily to accomplish a specific purpose for which you’tr making the gift. And donors often fail to carry through on that last part of the conversation.
And so, I think again, you have to ask a lot of questions about how exactly the gift’s going to be used, who’s going to be in charge of it. Make sure your relationships are in place around that entire gift and that it’s not simply between you and the development officer who’s been assigned to you. That takes a lot of time. It takes a lot of patience. And we do talk in the guidebook about Tom Lewis in particular who took years to finalize his git to the University of Kentucky, because he wanted to be absolutely certain that every person in that chain was going to understand what his end game was.
Emily Koons Jae:
And there’s a great example you have in the book about a donor who was an entrepreneur and he thought that just by the way that he had lived his life, it would be really clear to his family what his values were – that he valued the free market and free enterprise. But if you leave that to relationship only and it’s not clarified in writing in some way, you really run a danger that things can go off the rails at a later point.
Joanne Florino:
Yes.
Emily Koons Jae:
So thinking about the second part of the code, the execution, I was wondering if you talk a little bit about timeframe because that’s such an important piece to executing a gift well, and the guide does such a great job walking through the different options and laying out the pros and cons of each. So for donors who might want to give while living, following the giving pledge, this idea of sunsetting that’s become more popular. So where a foundation is established and then will spend all of its assets within 25 to 30 years, whatever timeframe the board sets, or donors who’ve made a gift in perpetuity. And you walk through examples of donors who have done each of those well. How do you recommend that higher education donors think specifically about the question about time?
Joanne Florino:
This is tough in higher education because endowment gifts are popular. You have much more certainty, especially with some institutions, that they’re going to be here 100 years from now, 200 years from now. So your comfort level in giving an endowment is greater in terms of the stability of the institutions which are getting the endowment. We generally recommend against endowments. But we understand that, especially for some large gifts in higher education, you want to create a center, you want to create an entirely new program, you want a faculty member to be on board as a chaired professor in this team, in a certain area for 20 to 30 years, that we are talking about long range gifts.
They don’t necessarily need to be endowments. And I think that the Koch Foundation and many others have done a great job in thinking about how to time gifts so that you give the institution the certainty it needs to hire staff, to hire faculty, to create a whole program with the infrastructure that it needs, but you also give yourself a safety net. So Tom Lewis talks about this and Jack Miller talks about this too, that you probably need to think about seeding the program with a significant amount of the overall gift up front. Any university or college is going to need that to create the program or start the building or whatever it is that you’re doing there.
And then you can time your payments after that. They can be once a year, they can be every six months. Depends on how much reporting you want to build into your grant agreement. And you leave yourself with the out, at the end of the possible first term. Say you make a seven year gift, you always have the ability to renew that for another seven years or another ten years, or maybe if you’re very confident after the first seven, that’s when you actually create the endowment. So maybe you don’t start with the endowment, you start with a genuine gift that’s long range enough for you to see how the university will handle your gifts over time.
Sunsetting is interesting. Some donors put the sunset clause in their foundations right at the beginning because they had that sense that they don’t want this to become bureaucratic or bloated or make jobs for younger members of the family 50 years down the road. A few donors do it because they have a sense that again, they want to see more impact in the long term even if they’re gone 10 years out or 20 years out, the foundation will be able to spend money at a much higher rate than it otherwise might have been doing. Some foundations choose to do it after the donor’s gone, after the original founder is gone, because they don’t want to deal with a board that didn’t know the founding person. And in those cases it usually is a very clear donor intent.
So I think we use Avi Chai in the book as an example of that, Earhart, and others that, if you go through the book, you’ll see that–Foellinger is another one—where the provisions around donor intent—Foellinger is not a sunsetting foundation—but the provisions around donor intent were created by a board. And that brings up, I think another real safe bond, your board. You have got to be so careful with the first round of board members and so careful with the succession planning after that, because the board is the first place things can go wrong. If your foundation is corporate form, the majority of the board can do many things unless you have prevented them from doing it in your articles of incorporation and your bylaws. So it’s always important I think for donors to remember that. Do that governance. Governance can be everything. I think it is Kim Dennis who’s quoted as saying, “You can have the best mission statement in the world, but if your board members choose to ignore it, there’s very little recourse once the donor was gone.”
Emily Koons Jae:
You talk a lot in the book as well about having staff as part of that foundation and how important they are to the equation. I love the story about Steve Moore at M.J. Murdock Charitable Trust and how after the donor had passed away, he really made an effort to meet all of the people who knew M.J. Murdock during his life. And to put that into writing, to get those people on video, I think to go that extra mile to really understand the donor and his intent, that ensures that you get such a better outcome.
Joanne Florino:
I think I talk about this when I talk about Atlantic Philanthropies, is that the core conflict at Atlantic wasn’t about helping underserved populations–there was complete agreement about that between the donor and the president of Atlantic. It was about strategy, how do we best accomplish this? And often mission statements don’t include strategy, they talk only about, here’s what I want to do, here are the areas in which I want to work. But the donor doesn’t spend enough time talking about how I want to work in museums, what kind of grant-making I like, what kind of grant-making I don’t like, what I won’t give to. It’s incredibly important to have the “what I won’t give to” in there. Because I’ve seen in family foundations the way children and grandchildren can stretch a donor’s legacy to include all kinds of things that people who know the donor will tell you, not in a million years, would he or she have given to that.
But because there was no explicit list of,” I won’t get to these things” or “I will give in this way, then I think you get into trouble. So when we talk about mission statements, we say to people, “Your values have to be upfront, your strategy has to be upfront.” Having a board work with the donor for some period of years enables a board to learn how a donor makes decisions, what he discounts, what he takes seriously, what she puts at the top of the list and what she puts at the bottom of the list. And so I think that all of those precautions, I realized that donor reading the book might just be exhausted by the time you get to the end of the book, but along the way you sort of figure out, “Okay, this isn’t going quite the way I intended it to so where do I have to make those adjustments?”
And again, that was part of the reason for writing the book the way we did. If you need to a governance adjustment, you can go to that chapter. If you need to make an adjustment in your mission statement, you can go to that chapter. If you feel like you want to add a donor advised fund to your philanthropy because you have children who are really off-mission or you want to give them an opportunity to be
philanthropic in their own right, then you have an opportunity to read about donor advised funds and the way they might play a role passionately to enhance your donor intent in the core foundation. So we wanted to make it a book that could be flexible and used for a long time. I can tell you I’m not writing the sequel to this book. We hope that it’s a good one for 10 or 20 years.
Emily Koons Jae:
Like you said at the beginning, I think there’s so much optimism in the book. It’s not like there’s one right way to do anything. It kind of comes down to what the donor wants, what your vision is, and there are many paths to pursue in all of them can have a really positive outcome. It’s just about choosing the right ones that worked for what you want to achieve.
Joanne Florino:
If you are forming a family foundation and your prime interest is in keeping your family together around the table and teaching your children and your grandchildren and your great grandchildren about how to make effective charitable gifts, then you need to be clear upfront that your donor intent may not outlive you, and you may want to give the family the freedom to do other things, things that are the higher priorities for them. If you are adamant that you are setting this money aside in a perpetual foundation to do X, Y, and Z and nothing else, then you need to have a different attitude about how you fill your board with family members, some family members, no family members and how you make those decisions, how you decide about eligibility because you’re talking about two very different family foundations.
Both can work very, very well, but the donor is responsible, or the donors, typically we’re talking about parents, are responsible for making that clear, having those hard conversations within the family that we often do everything possible to avoid. Because if we don’t have them at the beginning, they’re going to pop up somewhere along the way and it’s much harder to have them then.
Emily Koons Jae:
My last question is, how are you seeing philanthropists respond to the current crisis facing our nation? Are you seeing foundations as an individual shift, their usual giving strategy in order to respond to this extraordinary time or are you seeing people kind of sticking with their usual patterns of giving?
Joanne Florino:
And the answer to that–not surprisingly–is all of the above.
Emily Koons Jae:
Yeah.
Joanne Florino:
I know the fact that foundations have a wide variety of missions, a wide variety of timetables, a wide variety of operating procedures–. This drives some people crazy who would really prefer the foundation to agree on what the core problems of the nation are and put all their money in the same place. But the incredible value of private philanthropy is that it is diverse, that it is vibrant and that it is open to change usually within certain guideposts.
Our members have typically done a couple of things. They’ve focused in on those organizations that are their long term grantees, checked in with them personally asked about sustainability issues, tried to think about ways that they could give them a firmer foundation, understanding that some of their grantees, especially arts and culture grantees are not going to really be ones that maybe individual donors are flocking to right now at a time when human service needs are so great. So they may have taken multi-year grants and just given it all to them in 2020, or they’ve automatically given them their 2021 grant when they were getting them their 2020 grant. So they’ve been trying to really make sure that they can sustain those organizations which may intend to be working over the long haul. They’ve also asked questions about the communities that they serve because even if you’re not a geographic funder, you typically exist in a place whether it’s the Pacific Northwest or the city of Philadelphia or the city of Dallas.
And so they’ve been conscious about asking those community leaders, “What does our community need?” Because if you’re not a community, a place-based funder, you may not be in touch with the needs of your immediate community. And there I think a lot of people have been very collaborative. The easiest way to give to a community has been to make a significant grant to the COVID fund in that community, understanding that your foundation has very specific areas of mission. You don’t have necessarily the expertise in this particular community, and it’s actually a better way for you to give, to give to this fund and let community leaders then decide how it’s going to be spent. But a lot of the members have also been intrigued by the things they’re able to do that they, outside of an emergency, are not typically able to do. For example, a lot of funders have gotten involved with funds that are making direct cash transfers to individuals and private foundations are not allowed to do, or they’ve thought about ways that they can help small businesses in their communities.
Emily Koons Jae:
The creativity is really encouraging.
Joanne Florino:
Yeah. And I think the diversity of giving is what we’ve come to expect in civil society and what we think really makes civil society as wonderful as you can be. And that we’re not all marching down the same road. Because there are many needs that can’t be handled in the short term. We talk about perpetuity being potentially hazardous to donor intent, but not always. And we understand that for foundations that are in certain fields, that if you’re talking about eradicating global poverty, a 20 year timeframe is not realistic. And we’ve always said to donors, “These are decisions that are yours to make and the decisions that your board should be making. Your board has the fiduciary responsibility.”
Emily Koons Jae:
That’s the last question that I had. Is there anything that we didn’t cover that you think we should bring up from the book?
Joanne Florino:
No, but I’ll tell a funny story. Karl Zinmeister who is, I know, the best editor I ever will have, was so worried about the chapter on vehicles because it is very legalese, and I’ve assured him that people who don’t want to read that chapter won’t get bogged down in it, they’ll just skip it. So my last comment is simply to those who have a copy of the book in their hands, you don’t have to read it cover to cover, you don’t have to read it in the order in which the chapters were written. We’ve put those chapters in there thinking about somebody who is approaching giving for the first time and thinking of the chronology of how you have to make your decisions. Feel free to skip around. And if you want to just read the juicy stories, you can do that because those all tell some interesting tales of donor failure that you definitely want to be mindful of, but also please read the success stories too, don’t walk away, shaking your head. And most of all, don’t walk away from higher education. One of the things we didn’t want to do is to discourage donors, especially conservative donors, from giving to institutions of higher education. It would be the worst thing you could do. So continue to give, give with your eyes open, give carefully, give with an eye to the future and continue to give because your voices and your values are sorely needed.
Emily Koons Jae:
I couldn’t say it any better. I think it’s a beautifully written book. I think it’s very clear in its purpose. I think it’s fun to read. I loved all the quotes and the anecdotes, so thank you so much for writing it and thank you so much for talking with us today.
Joanne Florino:
Thank you for having me here.