P O S T E D B Y A L B E R T
Joseph C. K. Breiteneicher, one the Great Souls of philanthropy, died on June 22nd after a long battle with cancer. He was a mentor to many in the field—myself included—and one of the pioneers of promoting philanthropy. He brought incredible intellect, passion, and moral authority to his work, serving most recently as president and CEO of The Philanthropic Initiative. I republish below a guest post that Joe wrote two years ago for the blog Hail, Sons and Daughters of Carnegie, the predecessor to White Courtesy Telephone.
Restoring the Trust in Trusteeship
Trusteeship is a sacred calling—as should be all work in the philanthropic sector. Compensating trustees diminishes the stewardship values and moral force of the sector.
Below, I offer several perhaps not-so-obvious arguments why all foundation trustees ought to serve pro bono.
First, I find it a moral disconnect that foundations pay trustees for service while they allow salaries in many grantee nonprofits to hover near subsistence levels. Because most folks who work in nonprofits (real ones, not tax-exempt businesses like most hospitals and large private colleges) are underpaid, and because foundations have contributed to this “underpayment” by not fighting for better conditions of employment for the nonprofit workforce, foundation trustees should feel obliged to forswear all compensation. It is the moral thing to do since foundations have helped keep most nonprofit workers economically barefoot and pregnant. And, thanks to Senator Grassley, it may also be the politically wise thing to do.
If the sector cannot get its act together, then Congress ought to adopt Canada’s laws regarding trustee compensation. Perhaps that could help build momentum toward other things Canadian—universal health care, gay marriage, diversity, police in great uniforms.
The rules of Revenue Canada (IRS nord) proscribe trustee compensation for all types of NGOs/foundations. The penalty is simple: foundations lose their nonprofit philanthropic charter. Last I looked, Canada had some very effective, progressive philanthropies with quite active trusteeship. No U.S. community foundation that I know pays its trustees. In both cases I can cite great foundations that have participation from less affluent folks who are passionate about their communities and who see philanthropy as real service. All this without the need to compensate.
Second, I can understand the argument that even Pablo Eisenberg makes for compensating some who are in need, but we must remember that the lack of compensation doesn’t get in the way of great folks serving as stewards for any number of philanthropies. I also keep constantly in mind the fact that trustee compensation creates a countervailing philosophy regarding stewardship (why do you have to buy service?) that is corrosive in the sector. It represents opportunities for mischief that the good folks at Kellogg or the Duke Endowment don’t see—not that trustees at those institutions aren’t great people of good will and above-board behavior. It’s that others, unscrupulous predators who see the donor/funder sector as yet another chance to score financially, cite Kellogg or Duke or any number of others that pay trustees as evidence of highly acceptable behavior.
For example, firms trying to convince hospital trustees to engage them to find a for-profit buyer for their nonprofit healthcare system have told trustees that the sale represents a truly great trifecta: Get rid of the constant burden of trying to keep a hospital afloat; get to play Lady Bountiful, giving away money to your friends’ nonprofits; and pay yourselves lots of money just like the Duke Endowment.* I have first-hand knowledge of that sales pitch from deal guys around the U.S. Or I can cite the sad examples of advisors who suggested that trustee fees could be the way for the directors of a company being sold to continue on with their past compensation as corporate directors.
Because the philanthropic industry’s trade associations haven’t taken the high road on this issue and because they haven’t communicated effectively (and consistently) about the basics of philanthropic stewardship, most folks new to organized philanthropy do not know what is acceptable behavior for a super majority of foundations or what are commonly held standards that reflect the highest and best practice. Most don’t need the money, but if everyone else is cashing in …
I have a sad example, quite fresh in my small mind: a dead donor’s former accountant places himself on the new foundation’s board, convincing the widow that that’s what “he” would have wanted. The accountant then tells all the other new trustees—old business friends of the founder who may have nonprofit board service but no links to foundations—that they should emulate foundations like Kellogg and pay themselves because that is what all serious foundations are expected to do. The greed is palpable: in a foundation with a corpus of $70 million, trustees were to get no less than $60,000 for general board service and up to an additional $180,000 annually for participation on board committees.
All this isn’t the fault of reputable foundations that compensate trustees, but I’m now convinced that they abet such acts because they should be sophisticated enough (and committed enough to the sector) to recognize the sad realities of human behavior when giving an opening and indirect encouragement to others.
This is never, ever about staff compensation—except for hospitals, etc., that should be required to pay an excise tax on salaries above a certain ceiling (pay at your own risk). Nor is it about compensating directors who also function as staff; whatever pay they receive should be as staff, not as trustees.
* Joe is referring here to the practice of hospital conversion. When a for-profit entity buys a nonprofit hospital’s assets, the community has a right to the proceeds of the sale because the hospital’s assets have been transferred to the for-profit’s owners or shareholders and no longer exist to benefit the community. Sometimes the proceeds are used to establish a health foundation that benefits the community previously served by the nonprofit hospital.