“Spend down” isn’t even considered an option by most foundations since we often feel guided instead by that heavy word: perpetuity. Some want to offer grants well into the future while others believe they are legally bound to stay open forever. (Fake rule challenge #1: foundation founding documents can often be updated to bypass perpetuity.) I prefer the idea that foundations complete what they require of grantees: make an intelligent case for how their assets will be best used and over what period of time. Sitting here at my desk in the latest heatwave, this is indeed philanthropy’s moment to show whether it has the vision and will to address climate and justice issues or whether it will sit back in an old charity armchair refusing to look critically at itself.

Below we feature Glen Galaich of the Stupski Foundation, a spend down foundation. And don’t miss his preview vlog – also below – from their “Break Fake Rules” series. They are on it!

Stay cool,

–Elizabeth

Meet an Endowment Champion

At Work…

How did the Stupski Foundation decide to spend down its endowment? After her husband had passed, Joyce closed and restructured the Stupski Foundation. During that period, she decided to spend down all of the assets in the foundation and any assets that would transfer to the foundation from her estate before and after her passing. Joyce passed away in 2021, so we are spending down all of the Stupski family’s assets by 2027. Joyce wanted to make as much impact as possible and could not understand why she should pass wealth on or hold the assets in perpetuity in the foundation.

What are you learning on this journey? It all starts with Joyce. She was the one who broke the most incomprehensible fake rule in the foundation sector, in my opinion, perpetuity. In her, and my, view, there is no excuse, reason, or justification for holding onto charitable assets and/or disbursing only the minimum 5% annually. Donors and foundation staff tell themselves irrational stories about addressing future problems, being there for their grantees forever, and so on to justify their jobs, roles, and power. For me, and others at the Stupski Foundation, this realization was/is one of the greatest gifts that Joyce gave to us.  

From there, many fake rules start to surface. Perhaps the most damaging of them all is the need to invest in equities, hedge funds, real estate schemes, off shore banking, and more to ensure a 5% (and more) return on investment to live in perpetuity. Time and again, we see news of companies in which foundations are commonly invested engaging in toxic activity for society – totally undermining what they are doing with the 5% they give away annually. This truth is not discussed.

Next, you get to the irrational fake rules related to the grants themselves and the processes surrounding them. We challenge ourselves all the time to undo the restrictions, terms, decisions, and more that prevent change and deprive grantees of resources. We find them all the time inside our machine, and lament how much these fake rules and restrictions are so pervasive across the sector.

Have there been surprise benefits to spending down? As I mention above, I think if we had been a perpetual foundation we wouldn’t have seen all the waste, control, and abuse that dominates foundation practice. I am grateful to Joyce for creating the environment where we could see all of it.

Perhaps the one surprise that I see today is that most of the practices spend-downs discuss and use these days should really be a part of all forms of institutional philanthropy. Questions we have to answer about exiting gracefully, centering community and grantees, transparent discussions with staff about closing down, understanding the role of foundation staff beyond the money (if there is one), and the toxicity of our for profit investments, and so on. These realities for spend-downs are not unique to us. These are all dimensions of foundation life that perpetuals should also consider. We are forced to do it. Perpetuals have the luxury of ignoring it, unfortunately.

What have been the biggest obstacles? The biggest obstacle has been me. I arrived at the Stupski Foundation after leading The Philanthropy Workshop (now called Forward Global) and I was a true believer and champion for donor centered, strategic philanthropy.  Like many foundation practitioners during that time, roughly a decade ago, we embraced the notion that the donors knew best. We supported and held a mindset of donor control that centered their experiences, beliefs, interests, and practices in their giving. We erroneously thought that the funds stewarded in the foundations that held their names was theirs. And so on.

Thus, I launched into a process of intensive strategy and design when I arrived at Stupski in 2015. I worked with masters of strategy and they brought in consultants that shared the same mindset. It wasn’t long into that process that I started to learn from others about the damage and limitations of donor-centered giving. I wondered why charitable assets grew exponentially over the past two decades, yet the disparities did as well. So, just as we were launching our ten year spend down strategies in 2019, I was already leading an effort to de-emphasize the processes we were using to decide on strategies and grants. Several of the leaders at the foundation started to develop approaches for shifting power from the foundation to the community, and from the board to the program officers, internally.

All of this created a great deal of turmoil within about two years for us. Change can be extremely difficult, especially when it comes about rapidly, and I wasn’t experienced in managing it. The Foundation survived it and we have grown as a result, but there is a great deal of scar tissue for those of us that went through it. Since then, I have spent some time learning about, and practicing, change frameworks and management. And, I have engaged in deep reflection about my own leadership style and limitations.

My hope is that I have become less of a barrier to better philanthropy and more of a channel for change and growth in the sector.

What’s next? We project that the grantmaking assets in the foundation will expire (for the most part) by the end of 2026. The staff is incentivized to stay through December 2027, and then they have the option to stay or move on between from 2028 through December 2029.

Between now and then, we are focused on three tracks of work: 1) exiting grantee relationships gracefully, 2) influencing the philanthropic sector, and 3) closing down the foundation.

Closest to my heart is the influence work in which we have engaged for years. We are using multiple communications channels, partnerships, and other tactics to build awareness about the harmful practices and hoarding in the sector. I believe that the total lack of self-reflection in the sector needs examination, because we have a powerful opportunity to advance justice and equity, yet our current systems (in my opinion) perpetuate injustice and inequity.

Paradoxically, the largest foundations with the capacity to make real change seem to live in a total state of fantasy. They work the hardest to perpetuate the status quo through investments in organizations like the Council on Foundations and Philanthropy Roundtable that fight intensively to prevent policy reform. And, these large foundations often publish books and articles that glorify the banal of what they do. For example, Rockefeller published a book on big bets recently that was, frankly, uninteresting and uninspiring. Yet, the media jumps at this stuff because of the brands and wealth of these foundations. There are only a couple of journalists and commentators in the philanthropic media space that question current practices. We are grateful for them, but we feel a calling to push ourselves. We need to liberate more of the available $2T in philanthropic resources from hedge funds, equities, and real estate, and do so with community at the center.

How do you challenge the mindset that many foundations have in their allegiance to “perpetuity?” It starts with pointing out the facts. For example, perpetuity requires giving at the minimum. That means that the partners we all seek to advance are living in deprivation because foundations want to live forever. As a result, the very organizations on which we rely to make the change are suffering and struggling, which requires ongoing dependence on foundations to keep them afloat (nevermind actually winning). Thus, we justify our own existence by undermining our efforts today. This is a fact, rarely mentioned. And, this is just one fact. There are many more.

Second, we have to develop communication channels, brands, voices, influencers, and other persuaders to advance the alternatives. The donors, accountants, banks, estate planners, investment advisors, and large foundations that benefit the most from the status quo are the first to sponsor philanthropic media, conferences, academic centers, and more that perpetuate the myths of the foundation. This is not a conspiracy. They are all doing it for very rational and transparent reasons. They benefit financially and influentially from this system, so they have every incentive to shine a bright light on it. Thus, they create a great deal of shade on anything that would challenge it.

I am not unrealistic about what the Stupski team and our partners can achieve. The sector spits out a couple hundred billion in assets every year and sits on $2T in reserve, plus the trillions of dollars available to the financial sector. They like this system. They benefit, and they get to do it under the umbrella of “doing good.”  We are tiny, like so many reform efforts and voices.  BUT, despite the nascent state of our movement, you need to keep going. Opportunities open in crises and we need to be ready to jump through the window. The US is over 30T in debt, and if you take insurance, defense, and interest out of the equation, our national government invests at poverty levels in the society. Eventually, smart people are going to look at the favorable tax structure for the wealthy and the funds they are hoarding in tax shelters (foundations) and they will come knocking. We either fix this thing before then, or it will go away (as it should). I hope that we can be in position to push the Council and the Roundtable out of the way then, and put forward a systemic reform that saves the best of philanthropy and jettisons the hoarding, waste, and greed.

What’s the most convincing thing you’ve found to bring others on board to use their full endowments to work for their missions? Ironically, it is the myth of impact that opens the door. Let me explain. Since I have been working in philanthropy for nearly a quarter-century, I have watched foundations talk, debate, and waste resources (time, talent, and treasure) seeking to define and demonstrate impact. If we are being honest with ourselves, we will never get there. There is no way to demonstrate impact. Impact results from thousands, perhaps millions, of variables. How in the world can you identify how your $1M grant over five years participated in impact? Seriously, it’s a joke.

BUT, we can assume that the more resources you dedicate to a solution the more likely it is that you can change something. Put another way, the more you give, the more likely you are to have impact. I buy that, even though I can’t prove it. And, if donors and their staff are able to put aside all the self-interest, they buy it too.

If you actually act on it, the next question that comes up is “why is it more important for the foundation to hold onto these resources (or invest these resources in toxic stuff) than transfer it to the organizations that are making a change?” Again, if you aren’t flooding your brain with bullshit tropes by which the sector has lived for a century, this question guides you and your organization to productive and beneficial places.

After Work…

Guilty pleasure: I have been a listener to Howard Stern since 1991 and rely on him to take my mind off of the mess of American society (and Europe too). There are lots of moments when I have to turn him off, but when he is funny I am grateful.

Kickback film: I do like Rogue One: A Star Wars Story – I think A New Hope and Rogue One are the only Star Wars films worth watching.

Last series you binge-watched: I LOVED The Patriot, not the Mel Gibson movie, the two-season show on Amazon Prime. It’s excellent. And, I think the name stops people from watching it due to all the MAGA crap out there. They could have gone with hundreds of different names. This was a poor choice.

Favorite caffeine source: Guayaki Yerba Mate soft drinks, but they are so high in sugar that I have had to stop. So, I am back to coffee.

Sweet or salty: Salty for sure – roasted, salted almonds are the best.

Happy place: Music festivals, especially the Redwood Ramble in Navarro, CA

A favorite novel: Confederacy of Dunces by John Kennedy Toole

Animal friend: Penny, my little black pug. She is wonderful.

Childhood ambition: Wanted to be a lawyer – but, my grades prevented it.

Biggest challenge: Being an extrovert

Current pet peeve: Americans

Music that lifts your spirits: House

Last splurge: I bought a Japanese manufactured Fender Telecaster. LOVING IT!

Mission Aligned Investees