Should Philanthropists have to say who they are and what they give to?

 An intriguing article on Bloomberg recently drew attention to the curious story of a couple of little-known private foundations in the US which – taken together, since they seem to be clearly linked – are in fact the fourth biggest foundation in the country. These foundations have combined assets of nearly $10 billion, making them bigger than the Rockefeller and Carnegie foundations put together. As vividly demonstrated by this amazing infographic, the three mysterious hedge fund donors behind the foundations have gone to extraordinary lengths to to maintain their anonymity, constructing a tangled web of interconnected companies, trust funds, public institutions and non-profit organisations.

 

 

This, as the article acknowledges, is an unusual case. The combination of the amounts of money involved and the efforts the donors have made to remain secret are almost unprecedented. And the use of a private foundation structure is peculiar, because this is usually a vehicle for making a wealthy donor’s giving more transparent rather than a means of hiding it.

 

However, the story does raise an interesting question that is relevant to philanthropy more generally: should donors be able to remain anonymous, or do the public have a right to know who they are and what they are giving to? It is this question that I want to consider here.

 

 

The tension between anonymity and visibility when it comes to philanthropy is nothing new. Many great philanthropists of the past and present are motivated at least in part by religious beliefs, and quite a few religions stipulate not just that you give, but that you do it as quietly as possible. The Jewish principle of Tzedakah, for instance, requires an individual to tithe (i.e. give 10% of their earnings to charity) but also specifies eight levels of giving, of ascending merit, of which the highest is giving where neither the donor nor the recipient is aware of the other’s identity. Being transparent about your giving in these circumstances actually decreases the moral worth of your actions.

 

 

Sticking to arguments in favour of anonymity for a moment, there are at least two others that can be made which carry some weight to my mind. The first is an argument from principle, on the grounds that giving to charity is a voluntary act, so people should be able to give to whatever they like (within the bounds of the law) and should be under no compunction to disclose this information. The complicating factor is that many people receive a tax break for their giving, so an argument can be made that there is a legitimate public interest in knowing where tax-effective donations are being made.

 

As the Bloomberg article argues:

“Because Congress offers tax deductions for philanthropy, this growing breed of donor is deciding the fate of billions of dollars that would otherwise flow to the government. Individual charitable deductions will cost the Department of the Treasury $43.6 billion in foregone revenue this year, a congressional panel estimates. Partly because of the tax subsidy for philanthropy, the IRS has long required private foundations to publicly state who controls and funds them.”

 

 

I think the public interest argument has some weight at the extreme end of the scale, where millions (or even billions) or pounds and dollars are being spent, because it is clear that this will have an influence on the direction of policy making. Not that this is necessarily a bad thing, but there is certainly a reasonable case that we should be allowed to know about it in order to protect against distortion of democracy and to be sure that our tax money is not paying for this to happen.

 

Of course, even this is not clear-cut: it seems simple if we have in mind the caricature of a shady billionaire using their money to fund lobbying on issues we don’t agree with, which is essentially the gist of the Bloomberg article, but what if someone is using their money to support a clear public good and also has legitimate cause to want to remain private? For instance, in countries where homosexuality is still criminal, would we want to discourage a wealthy individual from supporting gay rights causes by demanding that they tell everyone about it?

 

 

The argument is also less clear further down the spectrum of philanthropy. If someone is giving amounts of money that cannot be reasonably argued to have any material impact on the course of democracy, then should anyone else have the right to know about what it is they are giving to? You or I might not particularly like whatever it is that they choose to support, and take issue with the fact that they can get a tax break for doing so, but that is an argument about the definition of charitable cause or public benefit, not an argument for my right to query the details of their giving.

 

 

Related to this is the other main argument for anonymity, which is a pragmatic one: if people wish to remain private about their giving, to the extent that they would not give if forced to be open about it, then will calls for radical transparency simply lead to lower levels of giving? And, if as argued above, there isn’t really a public interest argument to be made about most of this giving, then would we be losing donations for no real gain?

 

 

One the other hand, there is a positive argument for transparency: namely that if people are open about their giving, they can then act as role models for others and help boost the overall culture of philanthropy. This is obviously the rationale behind the Giving Pledge and other initiatives that try to encourage philanthropists to talk about their work. And, at a lower level (for people like you and I), the role of things like social media in enabling people to talk about their giving and thereby establish new social norms is only just beginning to be explored.

 

 

This is a real challenge for those looking to promote charitable giving and philanthropy. As CAF often acts as an intermediary, allowing donors to give substantially and effectively, whilst still maintaining control over the level of visibility they have, it is something we have clearly been dealing with for a long time.

 

 

It is crucial that we continue to respect the rights and wishes of many donors to give privately, as there are legitimate reasons for doing so and these donors may otherwise be put off from philanthropy. However, we must also recognise that visibility and transparency are sometimes desirable and necessary, both in terms of harnessing the power of peer effects and in terms of ensuring that charitable giving does not find itself in opposition to the public interest.

 

It is a fine balance, but one we must all continue to try to maintain.

 

 

Rhodri Davies

 

 

 

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