By Floyd Keene, The Triple EEE Foundation
“Paradigm” is an overused word. However, there is no question that today a new paradigm is staring U.S. society squarely in the face. This new paradigm encompasses:
- Less government spending on social programs (no matter which party wins this fall’s and future elections)
- An ever-increasing need for social programs, caused by a slow-growth economy and aging population
- The need for American philanthropy to find new ways to address the above truisms.
Yes, over the next ten years American philanthropy must change. If it doesn’t, then it will be missing an amazing opportunity to serve the American people. Philanthropy should act as a wonderful orchestra, composed of talented and diverse individuals, providing needed sustenance to society.
However, all too often in the past, philanthropy has been reactive to specific social needs, satisfied with feeling good about itself. Instead, philanthropy must find innovative ways to utilize its existing resources more effectively, so as to significantly aid society, the economy, and most importantly, its own intrinsic and diverse social values.
The coming change in American philanthropy will likely involve the following:
NEW FORMS OF ORGANIZATION
1. Future philanthropy will involve an ever-increasing transformation towards organizational entities that are created both to make a reasonable return on investment and serve specific societal needs. In short, the line between for-profit and non-profit entities will be blurred.
This movement is currently in its infancy, involving scattered L3C corporations, B Corps, and social impact bonds. But the movement is growing every day of every year. It only makes sense. Why not be involved in a profit-making endeavor that also serves those social values closest to your heart? To do so serves one’s material and spiritual needs alike. I would be surprised if, ten years from now, there were not 1,000 times as many of these entities in existence, as well as new entities that NOBODY has even thought of yet.
2. Future philanthropists and others will increasingly use social values to guide their for-profit investments. The “mission investing” movement has been around for decades and today is more commonly referred to as impact investing. By using this strategy, a foundation can serve its mission with not only the 5% of assets it gives away, but also with all or part of the 95% of assets targeted to investments. Thus, a foundation can potentially increase its impact by 20 fold.
Impact investing, and the movement it represents, has really caught on. New products and opportunities are everywhere, and participation has exploded exponentially. Considering how to do impact investing is a standard practice for more and more foundations across the country.
I truly believe that the way to really change the world is to create a new asset class. And impact investing is looking more and more like such an asset class.
BYE BYE PERPETUITY PIE
3. In the future, in my opinion, perpetuity will be dead. It is a concept that has been valuable in the past, but no longer. This will occur because perpetuity is based on a blatantly false assumption that the current U.S. tax laws will exist forever. Therefore, a foundation assumes that it can operate, in its current form with its current spending policies, in perpetuity.
This assumption is absolutely untrue. There is no question that U.S. tax laws will change sometime in the future. Nobody knows how they will change or when, but it is an absolute certainty that they will. Thus, planning and creating a spending policy for “perpetuity” is based on a faulty assumption. More and more foundations are realizing that a 10-year or 20-year planning period makes much more sense than assuming a “perpetuity” that does not exist.
THE ROLE OF CORPORATIONS
4. Corporate involvement in philanthropy is about to explode. Almost every large corporation has a Corporate Social Responsibility Program (CSR), but this is only the beginning. The Council on Foundations has undertaken a Corporate Philanthropy 2012 program and I applaud them for it. The key to expanding corporate philanthropy programs is the realization that helping society is good for business. What a novel thought!
Giving to the needy by handing out quarters is a century old. The new model, which is being adopted, realizes that the needy and the middle class are customers. By using corporate philanthropy to raise them economically is not only compelled by social justice considerations, but also by the profit motive.
5. The philanthropic future will clearly have collaboration as a watchword. Joint efforts of non-profits, government, and the private sector are crucial to addressing societal needs. So are joint efforts of non-profits working amongst themselves—including foundations working together and foundations working hand in hand with their grantee partners. More and more collaborative efforts will occur, both in the near and distant future.
In sum, American society and the philanthropic community are faced with important issues and problems. However, these can be transformed into solutions through the methods described above. I only hope that the philanthropic community is nimble, innovative, and expansive enough to promptly realize and effectuate these solutions. This is my hope. Because our ever-changing world needs us more than ever.
Floyd Keene is president and founder of The Triple EEE Foundation in Deerfield, IL, and vice chair of ASF’s board of directors. He received his bachelor’s and law degrees from the University of Wisconsin and, before leaving the business world, was a senior executive at Ameritech, a Fortune 500 company. He is a strong advocate of mission investing, and his foundation’s assets are currently 100% mission invested.