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Friday, October 1, 1999

The Great Philanthropists and the Problem of “Donor Intent”

Foundations Built with the Fortunes of Laissez-Faire Advocates Have Been Subverted

According to a book titled The Right Guide and its companion volume, The Left Guide, funding for the various organizations that promote the expansion of government is between three and four times as great as the funding for the organizations that seek to protect freedom, private property, and limited government. The principal reason for this lamentable situation is that several huge foundations that were built on the fortunes of men who were staunch laissez-faire advocates have been turned into cash cows for statist advocacy, among them the Ford, Rockefeller, and MacArthur foundations.

The Great Philanthropists examines the problem of the subversion of the wishes of individuals who create vast wealth and foundations to disburse that wealth after their deaths. The villains of the piece are the “professional” and almost invariably statist foundation managers who think that they know how to use the fortunes amassed by entrepreneurs to refashion society and have no qualms whatsoever about employing the funds in ways the donor would not have approved.

Wooster introduces us, for example, to William H. Allen, one of the earliest of these types, who denounced the “dead hand” of donor intentions and argued that trustees should be free to use foundation money for any purpose they thought worthy 20 years after the donor’s death. (In truth, many don’t see why they should have to wait 20 minutes.) The philosophy and objectives of “professionals” like Allen usually differ markedly from those of the wealth creators, yet in case after case, they succeeded in taking control of the foundations of the great capitalists. The book explains how it happened.

Consider John D. Rockefeller, creator of Standard Oil. During his lifetime, he made sure that his charitable giving did not promote dependency or waste. But people were constantly hounding him for money, and he was persuaded that he could insulate himself from that hounding by setting up a foundation and letting others handle the giving away of his money; this was “wholesale” rather than “retail” philanthropy. Within one year of the establishment of the Rockefeller Foundation in 1913, Wooster writes, “many foundation trustees and employees were looking for ways to exclude Rockefeller from the foundation’s affairs.” They would succeed.

Equally harmful was the fact that John D. Rockefeller, Jr., was philosophically much different from his father. Young Rockefeller surrounded himself with advisers who were hostile to capitalism and allowed them to quickly steer the foundation radically away from the desires of the senior Rockefeller. This was a heist worthy of the most audacious bank robbers, yet all done perfectly legally.

In 1919, Rockefeller, Sr., tried to reassert control. He wrote to his attorney explaining what he wished to do to put his foundation back on what he regarded as the right track. The lawyer, however, was aghast at the idea of Rockefeller’s controlling his own money and maneuvered to thwart his client’s intentions. The foundation continued on its merry statist way, as it does to this day.

The story of the Ford Foundation was similar to Rockefeller’s. Henry Ford was a staunch advocate of capitalism. He was virtually the only prominent industrialist who refused to cooperate with the National Recovery Act, thus making himself a target of FDR and his New Dealers.

Confronted with New Deal “share the wealth” legislation that threatened to cost the Ford family control over the business he had built, Ford established the Ford Foundation in 1936. The foundation remained relatively small and unobtrusive until after World War II, but a tremendous infusion of wealth came in following Ford’s death in 1947. Henry Ford II, a political moderate, allowed the foundation to fall into the hands of statist philanthropic professionals. Eventually, the younger Ford would resign from the board after being haughtily told by the foundation’s president, McGeorge Bundy, that he was just one vote out of 16 and his family lineage meant nothing. On resigning, Ford wrote that “the foundation is a creature of capitalism, a statement that, I’m sure, would be shocking to many professional staff people in the field of philanthropy. It is hard to discern recognition of this fact in anything the foundation does.”

Wooster recounts other such disasters, but he also points to several instances where the wishes of the donors have been honored by their foundations, showing that the problem is not insoluble. He identifies several means by which wealthy individuals can ensure that their money is not later turned to purposes of which they would disapprove.

The most important step is simply deciding to buck the trend of giving a free hand to “the professionals.” Wooster writes, “The fundamental problem of philanthropy today is not “dead hand” control. It is donors who meekly follow prevailing wisdom and leave their fortunes to professionals who spend the money on causes they like—which are usually not the causes preferred by the donors.”

A timely, much-needed book.

  • George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy.