The Link Between Transparency, Privilege, and Power in Family Philanthropy

What choices do family foundations and funds have when it comes to transparency? How open and accessible is your family’s philanthropy—to the extended family, to grant seekers and partners, and to the public you serve? What challenges and concerns do you face as you seek to be more open? And what approaches do other families take when it comes to managing transparency, communications, and privacy?

NCFP’s new guide, Transparency in Family Philanthropy: Opening to the Possibilities examines how family funders are thinking, acting—and, in some cases, not acting—when it comes to how open and accessible they are with others. The guide encourages donors, boards, and staff of family foundations (and other giving vehicles) to purposefully consider choices regarding transparency in grantmaking, governance, and everyday operations. It also offers a list of questions and conversation starters for families grappling with how to address this issue, and provides a variety of sample values and policies on transparency from other funders who have already considered these questions in their own work.

In addition, Opening to the Possibilities features a collection of five diverse funder stories exploring different takes on how families think about and act on transparency—and what they have learned as a result. Future issues of Family Giving News will spotlight these and other transparency stories, providing an ongoing reminder of the importance of considering the transparency lens in your work.

Barriers to Transparency

Despite the variety of benefits to openness in philanthropy (described further below), may families report  barriers to this approach, and not all family foundation leaders are comfortable with transparency as a default strategy. Others report that there may be important strategic reasons for not being fully transparent.

“Blanket transparency can have the effect of making private philanthropy look and behave more like the rest of philanthropy,” says Bob Reid, CEO of the JF Maddox Foundation in Hobbs, New Mexico. “I worry that acting like all other categories of charitable grantmakers might cause private philanthropy to lose its secret sauce—the special contribution of innovation and risk taking that can improve philanthropic practices across the sector.”

Additional reasons that families and donors might hesitate to open up include staffing capacity and privacy/security concerns. Other reasons include:

• Too small in size: “Of the 78,000 private foundations in the U.S., the majority of them are $1MM and smaller in assets. Many don’t have websites because they are concerned they would attract attention never intended for the scale and purpose of their foundation,” says Reid.
• Too much work: Transparency takes time, resources, and capacity. Some would rather dedicate those resources directly to funding, rather than talking and sharing about funding. Or they fear they will be overwhelmed by the funding inquiries that will ensue.
• Desire for privacy: Foundations don’t want to attract attention to themselves and their family members. This can be especially true in rural areas and for place-based funders who “don’t want their name all over town.” They may prefer to remain insular and within their own networks.
• Humility: No one wants to feel they are bragging about the money they give away. Funders want to be seen as the humble stewards they are. Some donors feel anonymous philanthropy is the highest form of personal giving.
• Don’t want to air family business: Some families aren’t transparent with each other, much less grantees or the public. If a family isn’t internally communicating well, how can they be expected to communicate well externally?
• Hush strategy: Staying quiet about the work is an actual strategy. It allows foundations to strategically fund controversial and/or human rights issues, and, in some cases, can build trust and credibility with grantees who want (or need) to stay out of the spotlight.
• Freedom to take risks: Foundations may be more willing to take risks outside of the public eye. Failures can be kept discreet, and foundations can experiment and innovate without scrutiny.
• No big push to change: There are no regulatory incentives to be more transparent outside of the 990-PFs, so why do it? Transparency is voluntary.

Why Transparency, Why Now?

Regardless of the challenges, transparency in philanthropy is a topic that seems to be on the minds of many, particularly in this age of growing government cuts and scrutiny. For the moment, beyond the basics of the Form 990, foundations have the freedom to choose for themselves how transparent they are.

Aside from the age-old and important argument that “foundations exist in the public trust, and the public has a right to know”—why the greater focus on transparency practices now? Here’s a summary of what your colleagues say when making the case for more transparency:

• Society is shifting: An overall culture and technology shift is demanding more openness and transparency in all fields/industries, philanthropy included.
• Next gen expects openness: Millennials expect more from their boards when it comes to transparency and want to engage with grantee partners in a more open, hands-on way.
• What’s good for the goose: If funders expect grantees to be transparent, they must be transparent with grantees. Mutual transparency builds authentic relationships and trust, and the shift from “transactional to relational” leads to bigger change.
• Move toward equity: As family foundations learn more about diversity, equity, and inclusion (DEI), they realize that transparency (or the lack thereof) is directly related to privilege and power—and that transparency within the wider community is a critical counter-action to inequity.
• Get other funders and support to the table: Being open about programs attracts co-funders, collaborators, and new ideas to the work. This means more impact is possible than can happen when funders go it alone.
• Voice the issues: Transparent funders can use their voice to lend weight publicly to issues they care about, and elevate the voices of others. This lifts the work of funders and their grantee partners.
• Do it for the field: Share learning—including and especially mistakes—for it strengthens the philanthropy field overall, and prevents funders from duplicating efforts.
• Time saver: When a foundation is transparent, people are clear on what you fund and don’t fund—helping you attract better-matched grant applicants, saving everyone time.
• Work better together: Internally within families and boards, honest, transparent communication “keeps it real” among members—helping to ensure everyone is on the same page, minimizing conflict and confusion, and serving as a self-reflective tool over time.
• Help a nonprofit out: As government funding wanes, nonprofits are calling for more foundation transparency around how funders make decisions and what they are learning, so they can continue to prospect and do their work more effectively.

The Link Between Transparency, Privilege, and Power

Proponents for openness argue that it is more critical than ever for today’s donors to be transparent. One of the most important reasons cited by many leaders is the role that transparency can play in advancing more just and equitable communities.

“As foundations learn more about diversity, equity, and inclusion (DEI), they are spending more time thinking about equity and inequity. The attention to transparency is increasing because grantmakers are examining their own internal biases,” says Suprotik Stotz-Ghosh, vice president of racial equity/ partnerships/talent at Grantmakers for Effective Organizations (GEO).

“Foundations come from structures and behaviors and cultures and patterns based on privilege, and secrecy is a huge part of that. Hoarding information is an instrument of power, and foundations—as well as most institutions—have evolved from this way of operating tightly and protecting power.”

Stotz-Ghosh and others call for foundations to be accountable, and transparency is an important first step. “People know a ton of money goes out from philanthropy, and they want to know: what does it all add up to? Foundations, corporations, and governments are getting more direct questions and expectations from their constituencies. With many communities in crises and addressing inequity, it’s prompting family foundations to ask: what’s our response?”

Another good question to ask is: to whom are we accountable, and why?

Pamela David, former executive director of the Walter & Elise Haas Fundin San Francisco, and currently the Senior Fellow at Northern California Grantmakers, says this:

“Information is power, and withholding it is a way to control outcomes. Certainly everyone does not need to know everything, and there are reasons why internal deliberations of trustees would remain private, or anything that might not respect individual privacy. Yet it’s not productive to withhold information about our mission, values, and strategies. We can’t hold ourselves publicly accountable and hide behind a private screen.”

Laura McCargar, president of the Perrin Family Foundation in Connecticut, agrees: “This is a predominantly white field, and we need to consider how a lack of transparency affects the beneficiaries of our work. Less transparency might make trustees feel more comfortable, but does it truly benefit the communities our foundation is set up to serve?”

Too often we see ourselves as responsible for serving communities, but not listening to communities, she says. “To be accountable, we need to invite in community voices to help guide us, and remember how difficult it is for folks to be transparent with us because of the power we hold. We need to ask them: how transparent do they expect us to be, and what do they need to know? Our role is then to negotiate what we hear from them,” she says.

Melinda Tuan at Fund for Shared Insight says transparency goes both ways: It’s about sharing, but it is also about listening. “It’s not about openness for the sake of being open, but being open to listening to the voices least heard in our society—responding, funding, changing how we operate based on the lived experience of those people at the heart of our work.”

Openness, she says, begins with a conversation. “Some foundations have never had a real conversation with grantees. They have transactions but not conversations; they are not meaningfully connected to the grantees or the people they seek to help. Staff and board need to know how to have these conversations in ways that don’t exacerbate the power dynamics.”

Transparency: Your Turn to Choose

When it comes to transparency, family foundations, by and large, choose the level of their liking—be it based on strategy, capacity, philosophy, or default. It’s up to your board, perhaps with your staff, to decide on the right level of transparency for your foundation, and why.

According to Bradford Smith, president of the Foundation Center. “Transparency is an ideal that each foundation has to pursue according to its values and means. It is something to aspire to, beyond compliance with existing regulation, and will be constantly redefined as foundations experiment, get feedback, and avail themselves of new technologies. However, one thing is certain: As the practice of philanthropy is being disrupted by the digital revolution, choosing not to be transparent is an option whose days are numbered.”