President’s Message 2000
President's comments from the Foundation's 2000 annual report.
Recent years of prosperity in the United States expanded foundations' assets along with those of so many others, bringing increased attention to the ways that philanthropists use their resources. This is all to the good, as it encourages broader reflection on philanthropy's social purposes and whether philanthropic individuals and institutions contribute to the common good. Moreover, many of the decisions foundation boards and staff make in periods of sustained growth reveal the expanse of their vision, their attitudes toward institutional longevity and their concept of philanthropy in the modern world.
The Ford Foundation's recent approach to these matters can be seen in a progression of three decisions beginning in 1996, when I became president. For several years, the board and staff took advantage of expanding resources both to fortify long-standing fields of work and to initiate exploration in new areas. We deepened our ongoing work on poverty, human rights, governmental reform, strengthening the civil sector, educational and cultural programs. At the same time, we decided to create new programs related to religion in society and to the media's role in education and civic life. As a result, our program officers often had more grantees in their portfolios and made larger than usual grants. In some cases they were able to provide organizations with endowment grants or long-term support, giving them a degree of financial independence. Among the endowment recip-ients were Africare, the Manpower Demonstration Research Corporation, the American Civil Liberties Union, the Center for Resource Economics, the India Foundation for the Arts, and the East-West Center.
After several years of continued portfolio growth, we made a second decision: to fund a series of large, one-time grants for new initiatives. With these grants, we put sizable sums behind promising projects without adding new foundation staff or creating long-term dependency on the foundation that could be risky for grantees when a market correction occurred. We asked foundation staff and people outside the organization to help us generate these initiatives.
Many of their first suggestions surprised us. People urged that we devote large sums to problems on which we had never worked—supporting medical research to cure dread diseases, reforming a foreign country's notoriously bad prison system or creating new information technologies to reach remote communities. Although each of these had appeal, they soon were overtaken by other promising ideas in areas where we felt we had a comparative advantage.
The first was a $52-million initiative with the Center for Community Self Help in North Carolina. With our funding, the center is working with the Federal National Mortgage Association and banks across the United States testing ways to increase homeownership among low-income and minority families. Ford's $50 million guarantees $2 billion of loans to new low-wealth homeowners. Since homeownership is a key way to accumulate assets in the United States, all the participants found this opportunity very intriguing. The initiative included $2 million for evaluation of the project over 10 years.
A second major investment of $26 million supports Project GRAD and its expansion in Houston and other sites around the United States. Project GRAD is an unusually successful systemic public-school-reform project with strong results in test scores, improved school atmosphere, high-school graduation rates, reduced teen pregnancy and higher college enrollment. Since most school-reform projects are "boutiques" with weak results, the idea of expanding Project GRAD to 100,000 students in six U.S. cities was very appealing. We are pleased to be partners with Lucent Technologies, Prudential, Verizon, The United Way, the Jane and Michael Eisner Foundation, the federal government and many others in this program and its evaluation.
A third investment involved endowment challenge grants totaling $40 mil-lion to 28 artistic and cultural groups across the United States. Most of the money went to groups that had not previously received Ford support. All had shown special creativity that was redefining excellence in theater, dance, poetry, museums and other fields, and each was poised to take on a capital drive to support this new work. The grantees will work together during the five-year program, exchanging experience and know-how. The importance of cultural institutions to intellectual life, freedom of expression and community vitality in the United States drew us to this initiative. Alison Bernstein's essay on page 60 discusses this new project, possible work of this kind outside the United States and a related program for individual artists in the United States that we are incubating with other donors.
A cluster of grants totaling $19 million made up another initiative that supports research and dialogue about the results of affirmative action and alternate strategies for dealing with underrepresentation. This, too, seemed a good investment, since much of U.S. residential and institutional life is still color-coded, some very "gendered," and there is a need for better research and analysis to deepen the debate about affirmative action. Bradford Smith's essay on page 44 outlines Ford's history of work in this area and its most recent support for a United Nations World Conference Against Racism, Racial Discrimination, Xenophobia and Related Intolerance planned for September 2001 in South Africa.
Having primed this pump of ideas, we now have a steady stream of large-scale initiatives and have reserved money for them as a regular part of our annual budgeting process. Melvin Oliver's essay on page 22 describes one we are helping to incubate: a system of matched savings accounts that could enable children from low-income families to accumulate a finan-cial asset for use when they become adults.
Ford's resources continued to grow at the end of the decade, and we began to explore a third option—an investment of several hundred million dollars in a single new initiative that might promote change over many decades. As we reviewed philanthropic history, we were reminded of the long-lasting positive impact of overseas fellowship programs that Ford funded in the 1960's and 1970's. Many of the recipients had become leaders of their countries' governments and nonprofit organizations and were now approaching retirement. We saw an opportunity to design an overseas fellowship program to help widen and deepen the talent pool for national and world leaders by supporting especially talented people in disadvantaged communities. We were drawn to the idea of devoting some of our newfound wealth to people in countries that had benefited less than the United States from new global markets and doing so in a way that took advantage of Ford's overseas office network and our 50-plus years working beyond our nation's borders.
The result is the Ford Foundation International Fellowships Program: fellowships and companion "pipeline-building" grants totaling $330 million, which exceed the foundation's normal payout level by roughly that amount. This 10-year program, funded by the largest grant in the foundation's history, provides three years of support for graduate-degree study anywhere in the world to individuals from disadvantaged groups who show leadership ability and academic promise. It includes a decentralized selection process that defines "disadvantage" locally, strong incentives for fellows to return to work in home countries and a range of activities to build a network among the fellowship recipients. The program begins in 2001 and will operate in the countries and regions in which the foundation has overseas offices. An additional set of grants totaling more than $50 million will fund undergraduate institutions for the next few years to increase the flow of disadvantaged college graduates eligible for the fellowships.
Over the program's 10-year life, we expect to help at least 3,500 students obtain graduate degrees. We are excited about this new program and look forward to completing the selection of the first cohort of Ford international fellows.
Beyond inspiring large new programs, increases in the foundation's assets also stimulated public interest in philanthropy and policies that influence it. Some people take this opportunity to reflect on the role of foundations and individual donors and others focus on public policies. Questions have been raised, for example, about the federal policy requir-ing private foundations to pay out 5 percent of their average asset values annually. Some have argued that foundations should be required to pay out more, suggesting that even when foundations have unexpected asset growth, they won't spend more than 5 percent unless forced to do so. But recent history, at Ford and other foundations, shows that many regard the 5 percent payout rate as a floor, not a ceiling. For example, in the last five years in which our assets have grown, Ford's payout level was typically at 5.5 percent, and the new fellowship program boosts it to over 7 percent.
There are good reasons for the payout floor to remain at 5 percent. Prudent asset managers agree that endowed foundations with no new donations coming in should spend about 5 percent annually if they want to maintain purchasing power through the ups and downs of economic cycles. Many donors want to create a foundation for the indefinite future and want it to maintain a reasonably steady level of grant making. The 5 percent payout policy makes that possible. The softening economy now makes it seem more prudent than ever.
A donor's inclination to create a foundation that lasts for generation after generation is valuable to society and worthy of public support. Philan-thropic institutions can protect and project values over the long term. We admire religious, educational and cultural institutions for this role. Why not foundations? Their constancy is a counterweight to today's throwaway culture and helps ensure support for the people who persist in working on problems that require long-term effort. This is especially important since the next generation's wealthy are very likely to have agendas that differ from those of their forebears.
In addition, institutions can build up knowledge and professionalism over time that increase their effectiveness. Obviously, when new players enter a field, they often bring in fresh blood and ideas, and philanthropy is no exception. But professionalism has an important place in our field. The longer a well-run foundation works in an area, the more likely it is to develop expertise and legitimacy that help it take the right kinds of risks for good returns. Not all problems will be solved by markets, government or individuals acting alone and without support. Experienced not-for-profit innovators and support for them are valuable in any society.
Equally important, donors ought to have the freedom to establish foundations that carry their names far into the future. Such a philanthropic impulse is evident across cultures, countries and centuries; note, for example, the J.N. Tata Endowment, established in India in 1892, or the Russell Sage Foundation, created in the United States in 1907. Even earlier, Roman law declared philanthropic organizations "immutable, undying persons," and Islamic tradition over centuries prompted the creation of charitable awqaf in perpetuity. The breadth of this experience suggests the wisdom of conserving the natural expression of generosity linked with institutional longevity.
Public policy should encourage a wide range of philanthropic institutions to match the tremendous diversity of donors in U.S. society. Some will focus on science, others on poverty, still others on the arts. Some will spend at the federally mandated payout level and others will go beyond it. Those spending more than the requirement will do so for different reasons—some because they like the idea of spending their foundations down in their lifetimes, others because they want to make a major investment in a particularly compelling idea. That is philanthropic freedom.
But those who favor longevity dare not ignore prudent advice. At Ford we remain mindful of the fact that it was only in 2000 that we gained back the purchasing power we had before the foundation's assets tumbled in the 1970's. The new, large-scale programs we have begun support talented and visionary people and build on know-how gained in leaner times. We are pleased that we now have the resources to do this, and the early results give us confidence that these were good risks to take.
The Ford Foundation continues to make grants of all sizes, including some very small ones that support remarkable change and change makers. The new wealth in the United States, whether spent in large or small sums, enables donors to fund more problem solvers concerned with poverty and injustice. It supports exploration of new ideas and artistic creativity and helps build new leadership generation after generation. The assistance provided by U.S. philanthropic organizations can help us leave this world a bit better than we found it—maybe a lot better.
Henry B. Schacht retired as trustee and board chair in September 2000 after 14 years of extraordinary service to the foundation. He brought to all of our work the commitment to positive social change that characterized his distinguished business career. As board chair, he provided both vision and stability. The foundation is a better and stronger place because of the wise and devoted attention that Hank has so generously lavished on it.
I am very pleased to report that the board elected Paul A. Allaire to succeed Hank Schacht as chair. Paul has been a wonderful colleague and an effective trustee since he joined the board in 1997. We enjoy working with him and look forward to the years ahead.
Susan V. Berresford
President