News & Press: Member Insights

A Tale of Two Gifts: Extraordinary Philanthropic Reporting and Why It Should Be Required Reading

Monday, October 28, 2019  

By Stuart Sullivan
Senior Vice President
at Graham-Pelton.

The date of Friday, September 27, 2019, was extraordinary in the coverage of philanthropy in journalism. In the same edition of the Wall Street Journal on that day, there appeared an article and an opinion/editorial piece that should be required reading for all executives, board members, and professional fundraisers working on behalf of non-profit organizations.

Each piece involved multi-million-dollar gifts. And, taken together, they demonstrate the opportunity and the potential peril involved with philanthropic commitments of this nature. They also reinforce the fact that philanthropic activity in the new millennium is increasingly being driven by seven-, eight-, and even nine-figure commitments from individuals.

A bit of background:

The first article, “Caltech Gets $750 Million Pledge for Sustainability, Climate Research” by Melissa Korn, tells about the incredible commitment made by Stewart Resnick and Lynda Resnick, whose company produces Fiji Water among other products. This is the second largest gift ever made to an institution of higher learning in the United States. The purpose of the gift is to support research in environmental sustainability in a partnership between Caltech and the Jet Propulsion Laboratory. Mr. Resnick is a member of the Caltech Board of Trustees.

The editorial/opinion piece, "Colleges Go to Court Over a Donor’s Intent” by Nicole Ault, is the tale of how a generous gift with the best of intentions on the part of a sophisticated donor can have disastrous outcomes. It is the story of a bequest of $5 million from the estate of the late Sherlock Hibbs to the University of Missouri to endow three chairs and three professorships.

The University accepted the gift from Mr. Hibbs’ estate and installed faculty into those positions. Mr. Hibbs, however, included in his will an accountability clause regarding the gift, which now has resulted in Hillsdale College suing the University of Missouri. In his will, Mr. Hibbs required that every four years, Missouri must certify to Hillsdale that it has obeyed the intent of Mr. Hibbs’ will. If it does not, then Hillsdale is entitled to the funds accumulated in the endowment. Hillsdale is now suing Mizzou claiming that the University has violated the intent of Mr. Hibbs’ original gift.

What lessons can be learned from these two articles?

First, these articles dispel the continued notion that philanthropy is driven by gifts from corporations and foundations. While support from corporations and foundations is crucial, every year close to 90% of total philanthropy in the US is derived from the generosity of individuals through outright gifts, bequests, and private family foundations, as demonstrated in these two pieces in the WSJ.

Second, in the Caltech case, it is a clear and outstanding example of how two individuals are being driven by a passion to make real change in our world. And, not surprisingly, that change is related to how they made their fortune in the first place. These mega-gifts are becoming more common as individuals such as the Resnicks come to understand the true power of their philanthropy.

Third, the fact that Mr. Resnick serves on the Board of Caltech should not be overlooked or minimized. Modern philanthropists view their gifts as investments that involve decisions that are made carefully, over a period of time, and typically with institutions where they have had significant involvement. Far too much time and energy is wasted by non-profits chasing individuals and families with wealth who have no established relationship with those organizations.

Fourth, the truly unfortunate situation involving Mizzou and Hillsdale is a shining example of how philanthropists, even from beyond the grave, are increasingly insisting that their intentions and motivations be accommodated by the institutions in which they are investing. Modern gift agreements are legally binding contracts with specific requirements on the part of both parties along with accountability measures exemplified in this case. Executives and board members at non-profits need to take great care in negotiating these sorts of gifts and sometimes employ outside expertise in the process, lest they end up in court like Mizzou and Hillsdale.

Fifth, non-profits should look gift horses in the mouth and not let this year’s fundraising goal eclipse good judgment. In hindsight, Mizzou most likely would make a different decision in terms of accepting the bequest from Mr. Hibbs. This is one of many high-profile, very public examples of venerable institutions being engaged in an all-too-public fight with donors or their representatives. Institutions need to take the intentions of their donors literally and seriously. If there is any doubt about the ability of the institution to honor the donor’s intentions, the institution should walk away from what could be an extraordinary gift.

That two such articles should appear on the same day in the Wall Street Journal is a terrific acknowledgment of the transformational impact of philanthropy in our society. Taken together, they are also examples of a cause for celebration and a cautionary tale.

Stuart Sullivan is Senior Vice President at Graham-Pelton and can be reached at ssullivan@grahampelton.com.

 


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