Editors’ Note: The following is a modified excerpt from Joel Fleishman’s recently published book, Putting Wealth to Work: Philanthropy for Today or Investing for Tomorrow?
Henry Ford II resigned as a trustee of the Ford Foundation in 1976, 40 years after he assumed his first role at the organization. His decision to leave, and the way it was interpreted by the press and then popularized by ideological groups with an axe to grind, created a myth about wayward foundations and frustrated founders that continues to reverberate to this day. His celebrity as both CEO of the Ford Motor Company and the family trustee of the Ford Foundation ensured that his decision to depart the Foundation Board would acquire a mystique of its own irrespective of his true motivation and the actual facts surrounding it.
As described at much greater length in my recently published book, Putting Wealth to Work: Philanthropy for Today or Investing for Tomorrow?, I think that a number of persons in philanthropy, animated by conservative leanings, seized on Henry Ford II’s resignation from the Ford Foundation and succeeded in making it an emblematic example of a major foundation’s departure from donor intent. Their focus on this story and, I would argue, their distortion of it, have captured the attention of many prospective donors largely because of the prominence of the Ford Foundation. But the problem with this attempt to spin a morality tale out of a tangled bit of boardroom history is that the morale does not fit the tale, when accurately told. Put simply, it is logically impossible to have a departure from donor intent when, as in the case of the Ford Foundation, there was no concrete expression of donor intent in the first place.
THE MYTH AND ITS USES
“I thought the [Gaither] Report was good then. I still think the Report was good…. [M]y criticism is of myself for being so stupid as a young kid, not being…sensible enough to realize, if you let this thing go you’re going to lose control…. We lost control the minute we started to enlarge the Board after the Gaither Report came out.”
–Henry Ford II, in an oral history interview, 1973
Henry Ford II expressed the above sentiments 37 years after his father appointed him to the Ford Foundation Board of Trustees, 30 years after he assumed its presidency upon his father’s death, and 3 years before he resigned from that board. They are a classic example of what many call “donor remorse.” Such sentiments are often expressed by a donor when realizing that he or she made a serious error of judgment about a prior philanthropic gift—in this case, governance of an entire foundation—when little, if anything, can be done to rectify it. Ford clearly wished he had retained control of the foundation, whatever he meant by those words; even while recognizing that he had given up control by helping to recruit new board members, he nonetheless praised the major achievements of the foundation over the decades of his involvement, including the drafting by San Francisco attorney H. Rowan Gaither of what was intended to be, and actually became, the authoritative statement of the foundation’s mission.
Despite the shakiness of their case, those conservative-leaning individuals and groups proceed to use Ford as an example of what is bound to happen to any perpetual foundation whenever a donor/founder passes from the scene. In my discussion of this sequence of events, I point out that, alongside several efforts to pin the ‘departure from donor intent’ badge of shame on several perpetual foundations—attempts that, in my view, substantially failed in nearly every case—those individuals and groups have also continued vigorously recommending to potential donors that they always include a clause in their foundation governing documents that permits their foundation to end its existence if the trustees decide to do so.
Why, one will ask, do these conservative-leaning individuals and groups have so strong an antipathy to perpetual foundations? Because their ideological inclinations have persuaded them that, irrespective of a founder/donor’s meticulous efforts to ensure the foundation’s fidelity to donor intent, any perpetual foundation is vulnerable to departure from that intent and, moreover, that any drift away from donor intent will be politically leftward.
Henry Ford II’s resignation as a trustee of the Ford Foundation was widely reported in the press with a short, sensationalist explanation for his motives that was, at best, one-sided and, at worst, substantially misleading. (As late as 2003, a Detroit newspaper was still describing the episode, against volumes of evidence, as beginning when Henry Ford II “stormed out of a board meeting of the Ford Foundation”—something that manifestly never happened.) The headlines were seized upon by critics of foundations in general, as well as of the Ford Foundation in particular, and broadcast widely to make that foundation the poster child for the great risk that donors supposedly undertake when they consider creating perpetual foundations: at some point after their deaths, allegedly, their foundations would likely depart from donor intent. That myth continues to persist despite the paucity of evidence to support it. For example, Adam Meyerson, the highly respected president of the Philanthropy Roundtable, which is the leading association of mostly conservative philanthropists and foundations, wrote recently, “The Ford Foundation is one of the best examples of donor neglect.”
If, as Mr. Meyerson says, the founders of the Ford Foundation neglected to specify their intent as to the mission of their foundation and to establish boundaries to ensure future fidelity to their intent, how can Henry Ford II’s resignation from the foundation’s board of trustees be accurately described as a prime example of “departure from donor intent”? That, I assume, is the reason that Mr. Meyerson decided to refer to what happened not as a violation of donor intent but as an example of “donor neglect.” If that is indeed the proper interpretation of Henry Ford II’s role at the Ford Foundation and his decision to resign from its board of trustees, then it would seem hardly accurate for others to blame the Ford Foundation for any departure from donor intent since donor intent had never been firmly established.
The many examples of Henry Ford II’s primary role in molding and shepherding the foundation should convince any fair-minded reader of the contrary. After all, it was he who appointed the committee that drafted the mission of the Ford Foundation (the above-referenced Gaither Report), and it was he who played a dominant role in selecting the succession of senior officers who would go on to lead the Foundation. Similarly, any reader of his resignation letter is likely to conclude that even “donor neglect” is not an accurate description of Ford’s relationship with the foundation. Were there differences between Henry Ford II and the foundation’s senior staff with regard to particular policies? Of course there were. Such differences occur in all organizations and are, in healthy ones like the Ford foundation, signs of vigor and strength rather than of decline and weakness. The fact that Ford remained a trustee for so many years suggests that any difference he had with the foundation’s leadership and policy were less important to him than were the foundation’s many achievements.
Nonetheless, the myth took hold and sounded an alarm to countless wealthy individuals who were considering setting up foundations, including entrepreneur and industrialist John M. Olin.
According to James Piereson, whom Mr. Olin later chose as president of the foundation he created:
“Olin was also guided by another event that took place in 1977—Henry Ford II’s highly publicized resignation from the board of the Ford Foundation. [Ford’s resignation in late 1976 was not widely reported until early 1977, and many sources thus cite the later date.]… The lesson Olin took from this public flap was that his foundation would likely come under the sway of people who did not share his principles. If this could happen to the Ford Foundation while a member of the family still served on the board, it could certainly happen to the John M. Olin Foundation after he died.
His answer was to instruct his fellow trustees to liquidate the assets of the foundation over their working lifetimes.”
It is astonishing to me that many later potential foundation founders have bought into the myth that the Ford Foundation should be regarded as the poster child for departure from donor intent. Unquestionably, this is attributable to a significant degree to the extent to which the Philanthropy Roundtable has kept alive a questionable interpretation of Henry Ford II’s role in, as well as resignation from, the Ford Foundation. Moreover, other conservative foundations and think tanks have joined the chorus in imputing departure from donor intent specifically to liberal foundations.
It seemed clear that the Roundtable’s premise was, perhaps still is, this: because presumably perpetual foundations will inevitably outlive their founders, the Roundtable believes that such foundations are particularly vulnerable to drifting away from their founders’ intent when successor trustees take charge, whether they are donors’ descendants, relatives, or unrelated philanthropic professionals. Moreover, it is not just drift-away from donor intent in general but drift-away from donor intent toward left-leaning policies and programs that the Roundtable and many of its affiliated philanthropists fear.
The Roundtable’s assumption is that rich donors’ descendants are very likely, after the death of the donors, to be significantly influenced by the changing times and the socioeconomic and political attitudes of their peers. That’s possible but far from self-evident. So, in order to make its argument persuasive, the Roundtable has seemed to scour the landscape of philanthropy to showcase bogeymen to frighten donors away from the chance that their philanthropic heirs might become misguided, left-leaning distributors of the philanthropic wealth their right-leaning ancestor had amassed.
The fact that many of America’s largest, most successful, most-admired foundations are not characterized by any such departures from donor intent has not seemed to deter such opponents of perpetual foundations. Nor does the continuing record of important achievements by such American foundations over more than 100 years dissuade them from waging their war against philanthropic perpetuity.
To be sure, the creation of doubt about presumably perpetual vehicles for philanthropic giving, based on the claim that they are vulnerable to drift away from donor intent, is only part of the explanation for the growth in the number of donors who today are choosing to give all their wealth away while they are alive or soon after their death. Many donors who choose “philanthropy today” rather than “investing in philanthropy for tomorrow” are undoubtedly doing so out of an overwhelming conviction that the urgent problems of today merit as many of the philanthropic dollars available today as possible. I believe, however, that the successful effort to discredit perpetuity has led many donors to dismiss that model entirely and opt instead for a default position of “philanthropy today.”
If the arguments by those who hold anti-perpetuity positions continue to dissuade prospective foundation-founders from endowing new perpetual institutions, as they appear increasingly to be doing, America will be at risk of losing its capacity to continue facilitating the birth and nurturing of the kinds of high-quality civic-sector organizations that have helped make this country the dynamic society that it has long been. It will have lost the source of financing for America’s “passing gear,” as the Ford Foundation’s pioneering urban grantmaker Paul Ylvisaker called it. That would be a terrible loss indeed—for America and for the world!
-Joel L. Fleishman
Joel L. Fleishman is Professor of Law and Public Policy at Duke University and was founding director of what is now the Sanford School of Public Policy. He is the author of The Foundation: A Great American Secret–How Private Wealth is Changing the World (PublicAffairs 2007) and co-author, with Tom Tierney, chairman of The Bridgespan Group, of Give Smart: Philanthropy that Gets Results (PublicAffairs 2011). His latest book, Putting Wealth to Work: Philanthropy for Today or Investing for Tomorrow?, was released in September 2017 (PublicAffairs).