Legitimacy of Philanthropic Foundations

Legitimacy of Philanthropic Foundations: United States and European Perspectives

Kenneth Prewitt
Mattei Dogan
Steven Heydemann
Stefan Toepler
Copyright Date: 2006
Published by: Russell Sage Foundation
Pages: 312
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  • Book Info
    Legitimacy of Philanthropic Foundations
    Book Description:

    Though privately controlled, foundations perform essential roles that serve society at large. They spearhead some of the world’s largest and most innovative initiatives in science, health, education, and the arts, fulfilling important needs that could not be addressed adequately in the marketplace or the public sector. Still, many people have little understanding of what foundations do and how they continue to earn public endorsement. The Legitimacy of Philanthropic Foundations provides a thorough examination of why foundations exist and the varied purposes they serve in contemporary democratic societies. The Legitimacy of Philanthropic Foundations looks at foundations in the United States and Europe to examine their relationship to the state, the market, and civil society. Peter Frumkin argues that unlike elected officials, who must often shy away from topics that could spark political opposition, and corporate officers, who must meet bottom-line priorities, foundations can independently tackle sensitive issues of public importance. Kenneth Prewitt argues that foundations embody elements of classical liberalism, such as individual autonomy and limited government interference in private matters and achieve legitimacy by putting private wealth to work for the public good. Others argue that foundations achieve legitimacy by redistributing wealth from the pockets of rich philanthropists to the poor. But Julian Wolpert finds that foundations do not redistribute money directly to the poor as much as many people believe. Instead, many foundations focus their efforts on education, health, and scientific research, making investments that benefit society in the long-term, and focusing on farsighted issues that a myopic electorate would not have patience to permit its government to address. Originating from private fortunes but working for the public good, independently managed but subject to legal prescriptions, philanthropic foundations occupy a unique space somewhere between the public and private sectors. The Legitimacy of Philanthropic Foundations places foundations in a broad social and historical context, improving our understanding of one of society’s most influential—and least understood—organizational forms.

    eISBN: 978-1-61044-461-3
    Subjects: Sociology, Business

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Contributors
    (pp. vii-viii)
  4. Foreword
    (pp. ix-x)
    Craig Calhoun and Mattei Dogan

    Privately established foundations were pioneered in medieval and early modern Europe. More recently, they have been distinctively prominent in the United States. Although there has been some learning from different experiences, there has been much less comparative research. This book seeks to encourage more mutual engagement between European and American researchers, and to make knowledge of the field of foundation philanthropy available to policy makers and a broader public.

    The papers published here originated as presentations to a conference held in Paris in May 2004, but have since been revised. The conference was organized by the Fondation Mattei Dogan and...

  5. Editors’ Note
    (pp. xi-xii)
  6. Acknowledgments
    (pp. xiii-xiv)
    • Chapter 1 Foundations and the Challenge of Legitimacy in Comparative Perspective
      (pp. 3-26)
      Steven Heydemann and Stefan Toepler

      Who do foundations think they are? Why do they even exist? Why do democratic societies accept, even foster, the presence of “aristocratic institutions” that control large amounts of capital, in perpetuity, with few constraints on how their assets may be used? On what grounds are institutions that control vast wealth able to secure the consent of society and government? To whom are private foundations accountable? What, in other words, gives private foundations their legitimacy?

      For foundations, the challenge of legitimacy is pervasive and enduring. It exists in every setting in which private assets receive privileged treatment by governments in exchange...

    • Chapter 2 American Foundations: What Justifies Their Unique Privileges and Powers
      (pp. 27-46)
      Kenneth Prewitt

      Should nations that do not have a modern philanthropic foundation sector bother to establish one? If so, on what grounds? What is it they do or represent that cannot be provided by the government, the market, or the nonprofit sector more generally? To address the principles of legitimacy and accountability that underlie these questions I draw on the U.S. case. This is not to suggest that American practices should be adopted elsewhere, but simply to pose a theoretical question: what is the source of foundation legitimacy, of the widespread acceptance and public endorsement of the privileged status of foundations as...

    • Chapter 3 American Debates on the Legitimacy of Foundations
      (pp. 49-98)
      David C. Hammack

      Defined as large stocks of wealth controlled by independent, self-perpetuating boards of trustees and devoted to the support through grants of charitable purposes—or to no specific purpose except “the general good”—philanthropic foundations first attracted notice in the United States only at the beginning of the twentieth century. By the time of World War I, such foundations had won attention as distinctively American phenomena. Since then, though they have often attracted critical scrutiny, their diversity and their close integration with the American nonprofit sector as a whole—together with the commitment of America’s political culture to the rights of...

    • Chapter 4 Accountability and Legitimacy in American Foundation Philanthropy
      (pp. 99-122)
      Peter Frumkin

      A central problem in American philanthropy is whether donors are ever held adequately accountable for their giving. This issue arises in part from the tax deduction that donors receive for their giving, but is also connected to the power donors have to use resources to enact their agendas. Interestingly, the issue is more pressing in some parts of the field of American philanthropy than others. For individual donors who operate quietly or who give only modest amounts of money, only rarely do groups complain about access, transparency, and fairness. For large institutional donors, including private, corporate, and community foundations, accountability...

    • Chapter 5 Redistributional Effects of America’s Private Foundations
      (pp. 123-149)
      Julian Wolpert

      Grants by America’s 62,000 private foundations, with assets of $477 billion, totaled $30.3 billion in the year 2002 (Foundation Center 2003). Those are substantial numbers, but of themselves do not indicate whether the grants are redistributive and how their distributive targeting compares to government transfers and assistance programs. These questions are the focus of analysis in this chapter. However, the issues are complex and some preliminary discussion is needed about the concept of redistribution when applied to foundations. Little would be learned, for example, from merely calculating short-term changes in the income or the wealth distribution of Americans that can...

    • Chapter 6 Foundation Legitimacy at the Community Level in the United States
      (pp. 150-174)
      Kirsten A. Grønbjerg

      Community Foundations occupy a strategic place among U.S. foundations. Although they make grants like other nonoperating foundations, they are classified as public charities rather than private foundations because they raise funds on an ongoing basis from many donors rather than just a few (such as a sponsoring corporation or founding family). Although most grant-making foundations have a regional focus, community foundations have so more explicitly. They pursue broader community issues, solicit donors with special connections to one community, pool funds for the benefit of that community, and include community representatives on their boards or fund distribution committees (not just donors...

    • Chapter 7 Historical Changes in Foundation Functions and Legitimacy in Europe
      (pp. 177-191)
      Giuliana Gemelli

      Historically, foundations are among the oldest of social institutions, having been with us for nearly 3,000 years. From the Greek and Roman period to the Middle Ages, in the Christian and the Islamic and Jewish traditions, their raison d’être has been to preserve memoria, both sacred and profane.

      This concept—perpetuating fame and glory after the founder’s death, establishing an afterlife, and maintaining the social relation between founder and beneficiaries—is implicit in the Arabic word waqf, which refers to philanthropic foundations in the Islamic world and is derived from the root verb waquafa, which means to “cause a thing...

    • Chapter 8 Roles of Foundations in Europe: A Comparison
      (pp. 192-216)
      Helmut K. Anheier and Siobhan Daly

      From a comparative, European perspective, few types of organizations have received less attention by researchers and policy analysts than foundations. Little is known in a systematic way about the current and future role and policy environment foundations are facing across Europe. Research on foundations has not been as forthcoming as that on other nonprofit organizations, where significant progress in data coverage and theoretical understanding has been achieved (for example, Salamon et al. 1999; Anheier and Ben-Ner 2003). Of course, countries such as the United Kingdom, Germany, Belgium, and Italy have been able to improve foundation statistics; yet most European Union...

    • Chapter 9 Supporting Culture and Higher Education: A German Perspective
      (pp. 217-235)
      Rupert Graf Strachwitz

      One of the most difficult tasks in analyzing the role of foundations in supporting culture and science in the European context is to describe adequately the nature of a foundation and define what is meant by support—not to mention the futile attempt to define culture (Luhmann 1997, 93). With the rise of the U.S. grant-making foundation in the twentieth century and, perhaps even more forcefully, the wealth of American academic research on foundations (Toepler 1996, 157), comparative research has largely accepted the way in which foundations are understood and defined in the United States as a benchmark (Toepler 1999)....

    • Chapter 10 Industrial Foundations: Foundation Ownership of Business Companies
      (pp. 236-251)
      Steen Thomsen

      In addition to serving as donors, foundations can own business companies. This was not uncommon in the United States until passage of the 1969 Tax Reform Act, which effectively prevented U.S. foundations from owning more than 20 percent of a corporate entity (Fleishman 2001). But in northern Europe, foundations continue to own and operate world-class companies such as Bertelsmann, Heineken, Robert Bosch, Carlsberg, and Ikea. In Denmark, particularly, foundations own and operate some 25 percent of the 100 largest Danish corporations and control close to 50 percent of the major Danish stock index (KFX).

      The question in this context is...

    • Chapter 11 Foundation Legitimacy at the Community Level in the United Kingdom
      (pp. 252-270)
      Diana Leat

      Community foundations claim to be the fastest-growing form of philanthropy (Walkenhorst 2001), yet in most countries they are also the newest. This raises a number of questions concerning the diffusion of philanthropic innovations, including how novel foundation forms carve out distinctive roles and build legitimacy and trust in their roles, capacity, and viability. The story of community foundation development in the United Kingdom also highlights issues about legitimacy and accountability in an era of third-party government (Salamon 2002).

      For the purposes of this discussion, a community foundation is defined as “an independent philanthropy organization working in a specific geographic area...

    • In Search of Legitimacy: Similarities and Differences Between the Continents
      (pp. 273-282)
      Mattei Dogan

      Legitimacy is a belief, not a legal prescription that can be implemented by a ruler’s decree. Foundations flourish only in democratic regimes, where they are expressions of the civil society. The legitimacy of philanthropic foundations involves the belief that they are the most appropriate institutions to fill certain social functions in the sense that they are considered more efficient and more sensitive to the needs of the society than the state bureaucracy or the liberal market.

      Comparing the functions of foundations on both sides of the Atlantic is not an easy task. The difficulties come from the fact that we...

    • Index
      (pp. 283-298)