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A Bubble Bursts – Alan Cantor Consulting

A scandal on the Silicon Valley Group Foundation (SVCF) has roiled the world of philanthropy. It’s a blockbuster story with dramatic parts worthy of an HBO mini-series: An imperious and (till now) impervious CEO, secretive billionaire donors, abusive remedy of staff, sexual harassment, operational dysfunction, intrepid investigative journalism, and, finally, rolling heads as the board of directors belatedly acknowledges the size of the issues and reasserts control.

As documented by journalists Marc Gunther within the Chronicle of Philanthropy and Kerry Dolan in Forbes, SVCF had a culture that valued progress over all the things else. (In a scene harking back to “Wolf of Wall Street,” Dolan relates how at the start of every monthly employees meeting the Foundation CEO, Emmett Carson, would chant, “We’re as small…” and the workers would reply, “…as we’re ever going to be!”) Carson – a guy with vital stature in the subject – seems to have been downright besotted with the growth of the inspiration. He was additionally largely absent, spending much of his time on the street, talking about philanthropy as an alternative of overseeing it.

Carson kind of left Mari Ellen Loijens, the inspiration’s chief business, improvement, and brand officer, in charge. Loijens by all accounts was a supervisor from hell, abusing and belittling the employees, and spewing forth inappropriate sexual comments to the point the place she and employees established a protected word – “muskrat” (you’ll be able to’t make this up) – when her lewd feedback made employees members uncomfortable. Tellingly, Loijens was the organizational rainmaker. She knew the right way to work with high-tech billionaires and translate their inventory holdings into monumental presents. Her expertise as a fundraiser made her untouchable, even after repeated employees complaints to HR – no less than, until final month.

Meanwhile, SVCF did not spend money on the human or technological infrastructure to keep up with its enormously rising volume of enterprise. Checks to grantees have been delayed or misdirected, and lower-level employees worked long hours at modest wages and beneath abusive circumstances to transact primary enterprise. Employees turnover ran at extremely high ranges, and on-line scores of the SVCF work experience have been atrocious. Now, because of Gunther and Dolan’s wonderful investigative journalism, we’ve a way of what’s been happening there, and so does the SVCF board. Prime executives (including Loijens) have since resigned or, in the case of the CEO, been placed on administrative depart.

Many elements of this story – with the weird twist of getting a lady, fairly than a person, within the position of the sexual harasser-in-chief – might have occurred almost anyplace within the enterprise or nonprofit world. But the problems at SVCF went nicely past on a regular basis poor administration. This was a corporation in dysfunction overdrive, thanks to 3 overriding characteristics: an obsession with pleasing wealthy donors, a putting lack of transparency, and an embrace of progress for progress’s sake. And I might argue that what amplified these characteristics into such a public meltdown was SVCF’s main position as a sponsor of donor-advised funds (DAFs).

Let me clarify.

Silicon Valley Group Foundation shouldn’t be alone in making an attempt arduous to please its largest donors. Each nonprofit value its tax exemption works to domesticate and provide stewardship to its main supporters. But here’s the distinction. Most charitable organizations have a compelling mission describing why they exist. They’re saving an endangered species, counseling veterans, curing illnesses, educating immigrants, providing housing, coaching nurses, feeding youngsters, preserving a historic house, or what have you ever. These organizations attempt to get donors to attach with the organizational mission and to see that work as very important. The contributions then comply with. This is the essential constructing block of charitable fundraising.

But what about a corporation whose mission, primarily, is whatever the donor says its mission is? At a primary degree that’s how a donor-advised fund sponsoring group operates. If the donor cares about saving elephants in Africa, that’s the mission or the organization. If the donor cares about educating orphans in New Brunswick, that’s the mission, too. The SVCF mission statement reads: “Silicon Valley Community Foundation is a comprehensive center of philanthropy. Through visionary leadership, strategic grantmaking and world-class experiences, we partner with donors to strengthen the common good locally and throughout the world.” I learn that to mean: “Our mission is whatever the donors think the mission is.”

For business present funds like Fidelity Charitable, the place the interaction between the group and the donor is only transactional, the mission is indeed regardless of the donor says it is. However historically, group foundations have been about far more than that. Group foundations have been about making their cities and states higher locations. They’ve been about providing group leadership. They’ve been about supporting and representing the nonprofit sector. They’ve been about focusing attention (and charitable and governmental assets) on important points. And, sure, group foundations have helped their donors be philanthropic in an knowledgeable, efficient, and effective method.

Most group foundations proceed to attempt to do exactly that. However the leaders of the Silicon Valley Group Basis found the notion of geographical group too limiting. As Emmett Carson himself wrote in The Stanford Social Innovation Evaluate in 2013, SVCF serves “a community whose geographic location, interests, and identity cannot be placed on any one map.” He went on to say that there are profound questions “about whether traditional definitions of place and community can or even should remain constant in a century when people are increasingly global citizens and issues come in and out of relevance.”

Emmett Carson and SVCF needed to draw donors with broader pursuits – they usually made it clear that, because the donors’ interests have been their pursuits, the inspiration’s focus was not restricted to a geographic region. Sure, SVCF distributed gobs of money around Northern California – it was so monumental, it might hardly assist however do this. However despite the fact that there were communities of nice need in and around Silicon Valley, SVCF made it clear that its interests – that’s to say, the interests of its donors – have been far broader. And SVCF not solely gave a lot of its grant cash hundreds of miles from Silicon Valley, however it sought donors from other areas, going so far as to open workplaces in San Francisco and New York City.

If a group foundation attracts from donors all over for causes all through the world, is it nonetheless a group foundation? Definitely not one with a spotlight beyond growing ever larger. It’s clear that for Emmett Carson, Mari Ellen Loijens, and the opposite prime execs, turning into as massive as attainable turned SVCF’s be all and finish all. (The salaries of Carson and Loijens rose accordingly – but you can have guessed that already.) And the best way to get greater was to make the organization as welcoming as potential for the high-tech billionaires of Silicon Valley. The donors’ pursuits have been the inspiration’s pursuits.

In the meantime, the inspiration was a black field. Individuals might speculate about what was happening behind the scenes, but no one knew. Transparency was simply not a worth at SVCF, notably if offering info conflicted with protecting the privateness of its donors. A few months ago stories surfaced that SVCF belongings had elevated by an astounding $5.three billion in 2017, and that the majority of that progress seemed to return because of funding returns, not donations. But the basis wouldn’t explain these extraordinary returns. Observers speculated that SVCF was holding a big amount of particular company stock – resembling Facebook, perhaps – presumably at the request of its donors, who embrace Mark Zuckerberg. But we couldn’t know for positive. In reality, we nonetheless don’t.

If SVCF have been a personal foundation, that funding info can be a part of its IRS Type 990-PF IRS. But SVCF is a public charity, and it doesn’t should reveal the small print of its funding info, and it definitely doesn’t describe its grantmaking or investing on a fund-by-fund foundation. Nor would the inspiration have been fascinated by sharing that info. That’s as a result of SVCF’s main customer just isn’t the general public, or the nonprofit organizations it supposedly supports, or the group through which it is based mostly. The primary – and, in fact, only – buyer who issues for a group foundation that has lost its means is the donor, and the best way SVCF has so rigorously stored its data personal has been a part of its massive attraction to the 16 billionaires and different donors who’ve opened funds there. If a donor stated, “I’ll give you $500 million in company stock, but you have to hold onto it for the next few years until I tell you to sell,” my sense is that that’s exactly what SVCF did.

So now we’ve the spectacle of the country’s largest group basis, and the third-largest charitable basis of any sort, dropping its government leadership – and, extra importantly, its credibility. The Forbes article speculates that lots of SVCF’s giant donors may be transferring their funds to DAFs at other organizations, akin to Constancy Charitable. (I wrote about these DAF-to-DAF transfers here and within the Chronicle of Philanthropy last yr. Now these transfers – formally thought-about grants – might improve dramatically.) We will shake our heads and dismiss what has occurred at SVCF as a one-of-a-kind story of failed leadership – and, definitely, there’s only one Silicon Valley, and consequently only one group foundation with this type of measurement, visibility, and potential for hubris. But I might argue that group foundations that lose their mission focus and overlook the which means of “community” – and, for that matter, nonprofits of every type that lose sight of who they are and why they exist – can find themselves following this similar sad and self-destructive path.

Copyright Alan Cantor 2018. All rights reserved.

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