Silicon Valley’s cautionary tale shows that when organizations dedicated to doing good make money their top priority, they get into trouble.
This is not the plot of one of those movies dramatizing Wall Street greed. It’s actually a sampling of the reported dysfunction at the Silicon Valley Community Foundation – one of the country’s largest charities – now coming to light.
As a researcher who studies the finances of charities and their funders, I consider the foundation’s culture extreme. But I also find it a cautionary tale for all charities.
A star is born
The Silicon Valley Community Foundation formed in 2007 when two smaller Northern California charities merged. As a community foundation, its role is to pool resources for the benefit of the surrounding area.
Immediately following its merger, the Silicon Valley Community Foundation held US$1.5 billion in assets. Within a decade, the organization had ballooned into America’s largest community foundation and one of the country’s largest charities. It held more than $13.5 billion by the end of 2017, a year in which it delivered $1.3 billion to nonprofits.
Massive donations from Facebook co-founder Mark Zuckerberg, WhatsApp co-founder Jan Koum, eBay pioneer Jeff Skoll and other titans of tech fueled this meteoric growth. More than 90 percent of the organization’s money was housed in the form of donor advised funds, which operate in practice as charitable savings accounts.
One reason why the Mountain View, California-based foundation got huge quickly was by catering to all of its donors’ charitable priorities, which basically required veering outside familiar territory.
Community foundations, as their name suggests, exist to serve the needs of their local community. But Silicon Valley Community Foundation’s founding CEO Emmett Carson believed that his outfit would grow more if it could emphasize both “local and global philanthropic interests.” So he went global.
To encourage Silicon Valley donors to funnel all their giving through its coffers, the foundation offers to help with the worldwide distribution of funds. It facilitates grants to everything from a South African food bank to an Irish creative writing initiative. Only one-third of the money the foundation gave nonprofits in 2017 supported local groups based in nine nearby counties.
And to expand its donor base, it maintains four offices in California and one in Manhattan.
On a growth mission
As Marc Gunther and Megan O’Neil first explained in The Chronicle of Philanthropy in April 2018, the Silicon Valley Community Foundation’s culture that valued growth above all else had destructive consequences. Carson, they alleged, ignored repeated instances of abusive behavior by Mari Ellen Loijens, the organization’s chief fundraiser who is credited with pulling in $8.3 billion.
Loijens resigned soon after the damning coverage was published. The foundation’s board put Carson on paid leave and hired the law firm Boies Schiller Flexner to look into the accusations. The report, released in late June, confirmed several of them, prompting Carson’s resignation.
The Boies Schiller Flexner report highlighted an institutional obsession with growth. Though abusive behavior can arise in any work environment, in this case the culture was normalizing it, according to former employees like Rebecca Dupras, who says that she “experienced inappropriate, hostile, and belittling behavior from my boss,” during the nearly three years she worked there.
Even Carson’s resignation statement emphasized growth under his watch more than his regrets about the personnel problems that led to his ouster. Though he stressed financial numbers, he made no mention of the number of people who were served due to donations that had coursed through the foundation he led since its founding.
When charities lose their way
The scale of the Silicon Valley Community Foundation’s woes is extreme, but I do not believe the mindset of growth that fed them is that far from the norm.
For one thing, donor-advised funds, including those held at the charities affiliated with investment companies like Fidelity and Schwab and those parked at community foundations, are the fastest-growing segment of the charitable world.
For another, many nonprofit leaders have bought into the notion that charities should behave more like businesses. In my view, the nonprofits-as-businesses mentality is exemplified by Dan Pallotta’s TED Talk – viewed nearly 4.5 million times – regarding the advantages he sees in freeing nonprofits from the shackles of frugality.
Other charities have gotten into trouble over their evidently uncharitable cultures. Take, for example, the Wounded Warrior Project.
Financial growth is only a means to a more lofty end for the charitable sector. But if the growth-above-all mentality continues to spread, it will surely erode the public’s confidence in foundations and nonprofits.
Brian Mittendorf, Fisher Designated Professor of Accounting and Chair, Department of Accounting & Management Information Systems (MIS), The Ohio State University