Stronger Foundations blog: A logic for openness

28 February 2019

ACF’s Stronger Foundations initiative aims to open challenging discussions about foundation practice and identify what it means to be a ‘stronger’ foundation. As part of the project, we will be publishing a series of provocations from members offering their personal views on the initiative’s themes.

This contribution comes from Paul Ramsbottom, chair of the working group looking at transparency and engagement. Share your thoughts on Twitter using #StrongerFoundations.

The storm clouds are gathering around foundations. Hyperbolic? Perhaps … but it is certainly true that philanthropy generally is under the spotlight as never before. Civic gratitude is increasingly giving way to civic scrutiny. Much could be said about the current trend to place areas of society once revered and seemingly beyond criticism under a searing spotlight (examples include the church or major international development charities). This spotlight is beginning to turn to philanthropy, as high profile media criticism last year of the Sackler foundations and the Presidents Club demonstrates. Increasingly foundations can expect greater interest in the source of their wealth, the nature of their investments and the level and type of expenditure.

Rooted in this context, many commentators — particularly those who would class themselves on the political left – are calling for greater transparency for foundations. The argument often invokes a looming threat and a sense of darkening clouds. The argument is also — and increasingly — linked to the concept that those who established foundations are enjoying generous tax breaks.

“We need global tax justice, not charitable scraps dictated by the fancies of the elite”, states Owen Jones in the Guardian. Commentators like Jake Hayman or Dan Corry are therefore specifically linking tax status to transparency.

I am privileged to have recently started chairing a working group looking at transparency and foundations as part of ACF’s Stronger Foundations initiative. Within the group — who are all drawn from the world of foundations — there is a genuine enthusiasm for transparency. There is an appreciation that greater openness can help foundations to achieve their charitable objectives. Among other benefits transparency can help encourage partnerships, foster learning from peer organisations and ensure higher quality applications. The great enemy of the effective foundation (particularly one with a predictable income stream) is a sense of complacency. Transparency helps to puncture that complacency.

And yet an irony emerges, at least in my mind.

Arguments for transparency that are rooted in negativity, that muse on future threats and which specifically link transparency to tax breaks and a foundation’s charitable status are entirely self-defeating.

This is for two reasons. First, the link between tax status and transparency is an intrinsically poor argument. It cannot be emphasised often enough that all forms of philanthropy in the UK receive a similar tax break. There is no economic advantage in giving through a foundation rather than, for example, as an individual or through a donor advised fund. And yet foundations remain the only part of the philanthropy ecosystem with some form of transparency inherently built in through mandatory, statutory reporting. Secondly, and most importantly, these arguments have the disastrous impact of sending philanthropy underground. Increasingly, high net worth individual are likely to give discreetly through donor advised funds or other forms of giving — out of the reach of scrutiny and far beyond calls for transparency.

Perversely then, the attempt to enforce foundation transparency on these negative grounds has the direct (if unintended) consequence of making philanthropy as a whole in the UK much less transparent.

Already there is a dearth of new foundations being established. For those of us who are passionate advocates of both transparency and foundations, it is important to create a logic for openness that is based on stronger and more positive practical arguments.

Paul Ramsbottom
chief executive, Wolfson Foundation
 

Views in this series are the personal views of the author, and do not necessarily reflect the views of the working group, ACF, or its wider membership. Find out more information about Stronger Foundations.