Stanley N. Katz: Beware Big Donors

Stanley N. Katz directs the Center for Arts and Cultural Policy Studies at Princeton University's Woodrow Wilson School.

In a January speech at the University of Michigan at Ann Arbor, laying out his policy for higher education, President Obama opened by noting his agenda: "How can we make sure that everybody is getting the kind of education they need to personally succeed but also to build up this nation—because in this economy, there is no greater predictor of individual success than a good education." Although the United States still has "the best network of colleges and universities in the world," he said, "the challenge is it's getting tougher and tougher to afford it." Thus his primary policy concerns were high tuition and student debt.

At Ann Arbor, President Obama captured the spirit of the megafoundation program for higher education. Should we be worried about that confluence?...

This is truly the era of the megafoundation....

They are new foundations, and they are behaving in novel ways, departing from the more reflective, more patient, and generally less aggressive behaviors of the classic 20th-century foundations.

In the past, our large philanthropic foundations, Rockefeller and Carnegie particularly, were what I have earlier characterized as "learned"—much of their grant-making was devoted to trying to understand the underlying causes of the problems that concerned their boards, and the means they used toward that end was investment in research. They had a long-term strategy, hoping to find deep solutions to big problems, and they tended to support investigators who had strong research programs of their own design. Think of the Rockefeller investments in public health, both abroad and in the American South, and the large and long-term Carnegie financing of Gunnar Myrdal's study An American Dilemma: The Negro Problem and American Democracy.

In the 1990s, however, a mood of impatience and frustration with that approach emerged. Strictly speaking, a private philanthropic foundation must donate at least 5 percent of its assets each year or pay an excise tax, and most foundations give at a rate higher than 5 percent. The larger the foundation, therefore, the greater its required annual payout. But it is not just a question of total giving. The larger the foundation's assets, the larger its average grants tend to be, partially because big foundations tend to think big. That has been notably true of the Gates foundation, which tends to make a relatively small number of very large grants. While the traditional foundations worried about what they termed "scatteration" (the multiplication of small grants), they always made a considerable range of grants. And they were seldom in the position to make the sort of overwhelming "bets" the Gates foundation can....

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