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Foundations Need to Be More Transparent

January 29, 2010

(Bradford Smith is president of the Foundation Center. In his last post, he wrote about philanthropy, morality, and politics.)

"So far as there is a justification -- and I am sure there is -- for the existence of these institutions, it is that they serve the public good. If they are not willing to tell what they do to serve the public good, then as far as I am concerned, they ought to be closed down."

Philantopic-magnifying-glassThis statement -- the kind that would strike fear into the hearts of many foundation leaders -- did not come from Pablo Eisenberg, the National Committee for Responsive Philanthropy, or an overly zealous Hill staffer. Rather, those words were uttered in 1952 by a Republican banker, Russell Leffingwell, during his testimony before the Cox Commission, convened to investigate foundations for alleged support for "un-American activities." Leffingwell, who was also chair of the Carnegie Corporation board, had an acute sense of how philanthropy's preference for maintaining a low profile could work against it: "...the welfare of these great constructive foundations with which I am familiar, and their opportunity for usefulness, are constantly threatened by a confusion in the minds of the people about what is a foundation."

It was out of the Cox hearings and the Reece Commission that followed that the Foundation Center was born in 1956 as a "strategic gathering place for knowledge about foundations." The vision of our founders can be summed up in the simple words of Leffingwell, who told his Congressional skeptics: "We think that the foundation should have glass pockets."

With the launch of a new public Web portal, www.glasspockets.org, the Foundation Center reaches back to its founding values. We believe strongly in philanthropic freedom, the kind of independence that allows foundations to be innovative, take risks, and work on long-term solutions to some of the world’s most vexing problems. But the best way to preserve philanthropic freedom is not to hide behind it; rather, foundations increasingly need to tell the story of what they do, why they do it, and what difference it makes.

Why transparency? Foundations use private wealth to serve the public good for which they receive a tax exemption in return. While some have argued that the tax exemption does not legally compel foundations to behave in any particular way, foundations' challenges are more perceptual than legal. No sector -- government, church, business, or charitable -- gets a free pass in the world of 24/7 media, blogs, YouTube, Twitter, crowdsourcing, and digital everything. Why should foundations? Collectively, America's foundations control more than $500 billion in assets, spend some $46 billion a year in grants and on programs, and, in some localities and on some issues, are the major players. And as foundations strive to become more strategic and effective, their impact and influence will grow -- as will the curiosity, praise, criticism, and scrutiny they attract.

Glasspockets contains basic facts about the nearly 97,000 foundations in the United States, illustrations of philanthropy's impact on the issues that people care about, and information on the many ways in which foundations are striving to become more transparent. Sections like "What are foundations saying now" and "Foundation Transparency 2.0" show which foundations are using social media and how. "Who has Glasspockets?" features profiles of foundations' online transparency efforts according to the kinds of information about governance, finances, grantmaking processes, and performance metrics they post on their Web sites. Glasspockets is intended to recognize foundations who are taking the lead in becoming more transparent while encouraging others to do the same. Any foundation that is debating about whether to create a searchable grants database, initiate a grantee feedback mechanism, or get its feet wet with social media will, on Glasspockets, find plenty of peer foundations with whom they can consult about how to build greater transparency.

The Foundation Center has been working on Glasspockets for over a year and we have learned a number of valuable lessons.

We couldn't have done it without partners. Glasspockets was developed in partnership with the Center for Effective Philanthropy, Grantmakers for Effective Organizations, the Global Philanthropy Forum, the Communications Network, and the One World Trust in London. Each of these organizations shared their own experiences, suggestions, cautions, and content. As organizations that, to varying degrees, are dependent on foundation funding, the delicate task of positioning Glasspockets was first and foremost on everyone's mind. Their contributions have been invaluable and changed the direction of the site at various junctures.

When it comes to transparency, one size does not fit all. Many of the tools on Glasspockets measure online transparency, but according to one Foundation Center survey only 29 percent of foundations reported having a Web site or issuing publications or annual reports. Communicating what you do, extensively evaluating your projects and programs, using social media, or engaging in community outreach takes people, yet in the same survey 76 percent of U.S. foundations said they had four or fewer staff members. In cultural terms there is a long tradition in American philanthropy of not drawing attention to oneself and letting good works speak for themselves. There is also the very real concern of many living donors with protecting their own privacy and the safety of their children and grandchildren. A considerable number of foundations told us that their contribution to transparency was support for the Foundation Center, which takes data from their tax returns and other information, adds value, and makes it available to grantseekers. Transparency, it seems, is an ideal that each foundation has to approach according to its values and means. However, one thing seems certain: as the whole notion of privacy is being radically transformed by digital technology, choosing not to be transparent is an option whose days are numbered.

Transparency vs. Accountability. At the outset of developing Glasspockets, we used these terms almost interchangeably but soon found that while most everyone agreed on the definition of transparency there was considerably more concern about the notion of accountability. Many foundation professionals associate accountability with government control, particularly attempts that might go beyond the existing regulatory framework to dictate what issues should be addressed and which populations benefited from foundation dollars. We had been thinking of accountability more in terms of the relationship of philanthropy to its constituencies. For example, when a foundation decides to send out a Center for Effective Philanthropy grantee perception survey, that is an exercise in accountability, a strong signal that grantees are stakeholders whose opinions count. When the same foundation decides to display that report on its Web site for the world to see, that is an expression of transparency. The One World Trust was especially valuable in helping us sort through this issue. Their own Global Accountability Report ranks multinational corporations, multilateral government institutions, and international NGOs according to four dimensions of accountability -- transparency, participation, evaluation, and complaint and response mechanisms -- often with surprising results.

Why not rate foundations? Everything today is rated in one way or another, and most of us do not pick a restaurant, plan a vacation, or figure out which appliance to buy without consulting some kind of rating system, frequently of the online, consumer-based variety. So why not rate foundations? Foundations are increasingly funding organizations to analyze, evaluate, and, yes, rate nonprofits on the assumption that donors of all types have the right to know which are the highest-performing, most efficient, and best-managed organizations out there. Shouldn't that be a two-way street? Mario Morino and others have argued that it is only a matter of time before something like TripAdvisor comes to the foundation world. Indeed, when we were describing our plans for Glasspockets, one foundation encouraged us to jump into the deep end and devise an eBay-like user rating system for foundations.

In the end we decided that the best way to encourage greater transparency among foundations is not to rate them but to bring to light the wide degree of experimentation and innovation they already support. The "Who has Glasspockets" feature, a kind of transparency profile, allows readers to compare and contrast foundations on a range of criteria drawn from existing practice but does not issue scores or rankings. And we have already heard from foundations interested in suggesting new criteria and discussing how they might improve their own profiles based on the examples of others.

In the old days, the Foundation Center would release a print publication and then move on to the next project. With the launch of Glasspockets, we are just out of the starting blocks. How the site develops, in what ways, how it is used, and whether pieces of it spin off into other media are all open questions. We want it to serve as an important knowledge resource that can fuel the movement toward greater transparency in philanthropy. We have been joined in this effort by important partners and spokespersons such as Jim Canales, president of the James Irvine Foundation, and their ranks are growing.

Being transparent about what we do well, what we do poorly, where we exceed our expectations, and where we fall short cannot but increase the credibility of our institutions. Again, it was Leffingwell in 1952 who captured the essence of our profession:

"I think they [foundations] are entering into the most difficult of all fields. They have gotten their fingers burned, and they are going right straight ahead, knowing that their fingers will be burned again and again, because in these fields you cannot be sure of your results, and you cannot be sure that you will avoid risk; and you know that, if the boundaries of knowledge are pushed back and back and back so that our ignorance of ourselves and our fellow man and other nations is steadily reduced, there is hope for mankind...."

Greater transparency is the best means to protect the freedom that philanthropy needs to pursue this noble mission.

-- Brad Smith

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Posted by Bruce Trachtenberg  |   January 29, 2010 at 05:44 PM

Congratulations, Brad to you and your colleagues at the Foundation Center for the launch of Glasspockets.

I had a couple of reactions/thoughts to your post that I wanted to share.

From where I sit -- representing an organization of professional communicators in philanthropy, to many of us transparency serves a larger goal than just being open to public view. Transparency is at the base of effective communications, which when done well, can serve to advance the goals and mission of foundations by helping others gain understanding of what these organizations are accomplishing, problems they are addressing/tackling, as well as to communicate their willingness to partner with other groups and institutions that share similar interests or missions.

My other comment concerns the distinctions being expressed about how some foundations and others view accountability. I'm in the camp that thinks being accountable is a good foundation practice. It's not about government control but rather the willingness of foundations to be held account for whether or not they are achieving their publicly stated goals.

All that said, what you've produced provides excellent examples of the elements of transparency. Glasspockets can be a valuable tool for those who are looking for ways they too can make their organizations more transparent.

Posted by Michael Seltzer  |   January 31, 2010 at 11:09 AM

Brad, I add my own kudus to those expressed by Bruce. Glasspockets is an aptly named new resource to add to the emerging body of transparency practices among foundations today. I would add two more elements to the discussion on the rationale for more transparency among foundations of all sizes.

The more that is known about foundation's practices, including their chosen fields of endeavor, programmatic priorities, and grantmaking strategies, the more likely applicants can use their scarce grantsmanship hours well and submit more targeted quality proposals, saving time for both donors and applicants. Of equal importance, foundations are more likely to get valuable feedback. Such input can lead to lively discussion and greater likelihood of effecting positive social change.

Foundations that are interested in enhancing their impact should welcome more transparency to advance their respective missions, while also earning the public's trust.

Posted by Ani Hurwitz  |   February 01, 2010 at 03:17 PM

I'm not sure how you equate participation on facebook, twitter, etc. with transparency. Surely, a web site that lists every grant,offers results,and posts financials is transparent. and i'm not sure how any of this makes us accountable.

Posted by Bradford Smith  |   February 01, 2010 at 05:04 PM

Ani, we were very conscious of avoiding a standards based approach by drawing on the existing practice of foundations. We are seeing a growing trend in terms of more and more foundations using social media as a way to communicate more information, faster, to a wider public and to encourage a dialogue. We are not making any judgments about the content of their tweets, facebook pages, etc. rather we are making it all available in one place for people to view and come to their own conclusions. Perhaps we went too far in our efforts not to weigh the relative value of different transparency mechanisms?

Bruce makes an excellent point about how transparency can serve to advance the mission and goals of a foundation. Michael looks at it from the grantee perspective and how transparency increases the likelihood that potential applicants will understand the priorities and processes of foundations thereby better targeting their proposals.

Great comments, keep them coming!

Posted by Akwasi Aidoo  |   February 03, 2010 at 05:03 AM

Glasspockets is refreshingly unique in its subtlety and analytical clarity. I think it will help to encourage a more reflective approach to advancing philanthropic transparency and accountability. It would also be helpful, as this work develops, to go global with it.

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