Honoring the Donor: The Conrad N. Hilton Foundation

Note: This case study was written and released in 2001 as part of NCFP’s Living the Legacy guide; current circumstances at the foundation may be different than described here.

Conrad Hilton was an unusual family foundation founder. He set up a foundation in middle age and, although he lived for almost another half century, he never served on the board. He funded the foundation annually with a portion of his earnings and, while the foundation gave out small grants, he made large charitable gifts with his personal funds. Then, at the end of his life, he left most of his wealth to the foundation in which he had taken passing interest.

When he was in his seventies, he wrote an autobiography that was as much a summing up of personal beliefs as a recounting of his early years and business triumphs. He also spent the last years of his life rethinking how he wanted his vast fortune to be disbursed. His personal writings, business philosophy and record of charitable gifts served as a blueprint for his family in determining a direction for a foundation that would be true to Hilton’s values and wishes.

Hilton also offers a cautionary example. Despite the years he spent rethinking his will, the final version contained wording that resulted in lawsuits, family tensions, and distractions from the work of the foundation. It is a bitter irony that the will he labored over and which represented his best intentions mired the foundation in a decade of court battles.

 Conrad Hilton established the foundation bearing his name in 1944. At the time, he was 57 years old and engrossed in expanding his hotel enterprise. A religious man, he placed a high value on charity. Throughout his career, he responded to requests for financial help. But as his success grew, so did the appeals for donations from friends, strangers, and organizations as far away as South America and China. He established the foundation to provide an orderly way to process those requests, and he funded it by designating a portion of his annual profits from hotel operations to the foundation. Conrad lived to be 91 yet, curiously, in all those years he never sat on the board, served as an officer, or attended a board meeting of his own foundation.

His grandson, Steve Hilton, the current president of the foundation, could speculate only on the reasons his grandfather chose not to participate. Most likely, Conrad was too absorbed in business activities. Another possibility was that he wanted to see how the foundation he had set up to exist in perpetuity would function without him. Conrad appointed Hilton Hotel executives to the board and, when he came of age, his eldest son, Nick.

Delegating authority was typical of Conrad’s management style. In his hotel business, he hired good managers and gave them freedom to carry out their responsibilities. He followed the same approach in the foundation. Although he occasionally submitted a list of organizations he liked to the board, he let the directors decide how the money would be allocated. Conrad routinely reviewed the lists of grantees, but he never questioned the board’s choices. In truth, it could not have gone too far astray. At the time, the grants were small, most under $500. Operating under a general mandate to help those in need, the board distributed grants to religious organizations—Catholic nuns, in particular—hospitals, and local charities, much as Conrad did in his personal charity.

Reviewing the Donor’s Legacy

After Conrad’s death in 1979, the foundation entered a new league. Within two years, its assets skyrocketed from less than $10 million to $160 million. The directors recognized that the foundation had to revamp its practices to adapt to its new prosperity. The board was composed of Conrad’s two sons, Barron and Eric, as well as hotel executives and a bank president. Conrad’s son, Nick, had died in 1969.

Barron and Eric appointed Donald Hubbs, their father’s longtime attorney and trusted friend, as the foundation’s president. Hubbs had just retired from his law practice and although he knew little about running a foundation, he held one firm belief: directors had an obligation to be faithful to the founder’s values, beliefs, and wishes. Faith in God, country, and hard work were the cornerstones of Conrad’s life.

Through a blessed combination of drive, imagination, and business acumen, Conrad had amassed great wealth by doing work he loved. As his successes mounted, he also gave more thought to how to disperse his fortune. Over the years, he reportedly wrote 32 drafts of his will, each time increasing the amount he bequeathed to charity. Except for relatively small gifts to his children (Barron, Eric, and Francesca, his daughter by Zsa Gabor), he gave the lion’s share of his estate to his foundation. He did not, however, leave specific instructions as to how the foundation should distribute the funds. Instead, he bequeathed to future directors “some cherished conclusions formed during a lifetime of observation, study and contemplation” and entrusted them to use their best judgment in carrying out their responsibilities.

EXCERPT FROM CONRAD HILTON’S LAST WILL AND TESTAMENT

There is a natural law, a Divine law, that obliges you and me to relieve the suffering, the distressed and the destitute. Charity is a supreme virtue, and the great channel through which the mercy of God is passed on to mankind. It is the virtue that unites men and inspires their noblest efforts.

“Love one another, for that is the whole law,” so our fellow men deserve to be loved and encouraged—never to be abandoned to wander alone in poverty and darkness. The practice of charity will bind us—will bind all men in one great brotherhood.

As the funds you will expend have come from many places in the world, so let there be no territorial, religious, or color restrictions on your benefactions, but beware of organized, professional charities with high-salaried executives and a heavy ratio of expense.

Be ever watchful for the opportunity to shelter little children with the umbrella of your charity, be generous to their schools, their hospital and their places of worship. For, as they must bear the burdens of our mistakes, so are they in their innocence the repositories of our hopes for the upward progress of humanity. Give aid to their protectors and defenders, the Sisters, who devote their love and life’s work for the good of mankind, for they appeal especially to me as being deserving of help from the foundation.

This excerpt served as a beacon in guiding the board’s rethinking of the foundation’s mission and its organizational structure. In fact, the board regards this statement as so representative of Conrad Hilton’s philosophy and character that they had it engraved on a plaque that hangs next to the portrait of Conrad in the foundation’s office in Los Angeles. It is also reprinted in every annual report to underscore the connection between the foundation’s grants and the donor’s wishes.

Hilton’s Guide for Living Well

Contemplating the meaning of life was not an act Conrad reserved for old age. His philosophical bent was evident in his autobiography, Be My Guest, published in 1957. The book traced his life from his frontier childhood in the Territory of New Mexico to his position then as the head of the largest and most profitable hotel empire in the world. Conrad concluded the book with a chapter entitled, “There is an Art of Living,” in which he summed up of the wisdom he had acquired on reaching age 70. He listed 10 ingredients he believed were critical to living successfully: 1) find your particular talent; 2) think big, act big, dream big; 3) be honest; 4) live with enthusiasm; 5) don’t let your possessions possess you; 6) don’t worry about problems, take action; 7) don’t cling to the past; 8) look up to people when you can, look down on no one; 9) assume your share of responsibility for the world; and 10) pray consistently and confidently. Although Conrad did not have his foundation in mind when he wrote this list, it is as much a guide to giving away money as it is a guide for living.

Hilton’s Personal Charity

Conrad left more than words to guide the foundation’s trustees. He also left a record of his personal gifts. Conrad’s mother, a devout Catholic, instilled in her son a belief in the power of prayer and charity and, early on, he developed a concern for the suffering of others. Although he originally set up the foundation to handle the many appeals for donations he received, he continued to give away his own money throughout his life. His largest gift—$10 million to the Mayo Clinic—was drawn from his own funds, not from the foundation’s. Close to his heart were the Sisters of Loretto, the nuns who had given him his Catholic education. When the Sister who had taught him catechism sent him a letter asking for a small donation to the school’s campaign to build a gymnasium in a poor rural district in New Mexico, Conrad expressed his gratitude to her by writing a check to cover the entire cost. And as a memorial to his parents, he built the Hilton Mount Carmel School for the Sisters of Loretto in Socorro, New Mexico, the little town where he was raised.

Enacting the Donor’s Legacy

Using Conrad’s will, personal writings, and record of charity as guideposts, the board was able to construct a new model for grantmaking. The next step was to implement Conrad’s wishes. The directors asked Hubbs to research different approaches. Taking the best of what he had learned from studying the grantmaking practices of other foundations, Hubbs proposed a model that most closely reflected the donor’s philosophy and style. In business, Conrad thought big, acted big, and dreamed big. His strategy was to identify hotels that had potential and invest in them for the long term and to hire the most talented people to manage them efficiently and well. It seemed fitting that the foundation should employ similar principles in its grantmaking. Since 1981, it has made large, multi-year grants to a few projects and looked for the most qualified people to run them. Just as Conrad identified investment possibilities, so too does the foundation. Rather than solicit proposals, it prefers to select its own projects. “We think we can better carry out the donor’s philosophy of efficiency,” says Hubbs, “when the foundation determines what major long-term projects it wants to fund and how it can accomplish its objectives most effectively and efficiently.”

Conrad’s imprint on the grantmaking is evident in what the foundation funds, how it funds, and where it funds. Projects serving the blind is one example. As a young man, Conrad was awed by the accomplishments of Helen Keller who attended the Perkins School for the Blind. He generously contributed to programs for the blind and deaf, an area in which the foundation has invested heavily. It awarded $41 million in grants and program-related investments to the Perkins School for the Blind to provide educational training and support services to blind and multi-handicapped blind children in the United States and developing countries. It has also contributed $20 million toward a collaborative effort with other foundations and organizations to eradicate trachoma, the leading cause of preventable blindness in the world. These grants fulfill Conrad’s wish to fund programs for children and to fund internationally.

A BLUEPRINT FOR THE FUTURE: CONRAD HILTON’S EXAMPLE

1. As a public figure, Conrad Hilton thought in terms of posterity. He left behind a written record of his life and deepest beliefs—a precious gift for his descendants. Hilton published his autobiography, turned his Last Will and Testament into a sermon, and even wrote his own “Ten Commandments” for living a good life. Preserving one’s life and thoughts is not the province of celebrities alone. Anyone concerned with passing on their values and life experiences to future generations can follow Hilton’s example—whether in print or on audio or videotapes. These exercises provide a tangible legacy for generations to come. Equally important, they encourage donors and their families to do the important work of articulating their own philosophies and beliefs.
2. Conrad Hilton’s career provided a blueprint for running the foundation. His strategic approach to investing, his boldness, his management style of hiring the most talented professionals to carry out his projects, and the international scale on which he worked all provided a model for his board to set a mission and design a grantmaking strategy true to its founder.
3. In the 30 years since Conrad Hilton’s death, the family foundation world has changed dramatically. Today, the emphasis on family in foundation rivals that of grantmaking. Conrad’s grandchildren serving on the board today, all born during his lifetime, saw him infrequently when they were growing up. By current standards, Conrad’s decision not to participate in the foundation seems like a lost opportunity to share the pleasures that can come from families doing good works together and building close ties.
4. The prolonged legal battles that ensued from Conrad’s will remind all donors and their legal advisors that they need to consider carefully all the possible ramifications of the instructions they leave.

Legal Complications

It was prophetic that the board chose to invest in big projects because today the combined assets of the Conrad Hilton Foundation total $1.8 billion. The surge in assets proved to be a mixed blessing, however. The foundation became a major player in the field of philanthropy, but Conrad Hilton’s estate also became the target of lawsuits involving the foundation. As many times as Conrad rewrote his will, his estate did not manage to avoid messy legal entanglements.

Conrad owned 27.4 percent of shares in Hilton Hotels, which he willed to the foundation. Aware of the 1969 Tax Reform Act that forbade foundations from owning more than 20 percent of the shares in any one company, he added the provision that all his shares would be willed to the foundation except for those which, according to the reform act, constituted “excess business holdings.” He further stated that his son, Barron, had the option to buy excess shares at market price on the day of his father’s death. The foundation interpreted the phrase “excess business holdings” to refer to the 7.4 percent of the stock above 20 percent; Barron believed it meant that he was entitled to purchase all the shares.

The estate was the target of another suit. In the last paragraph of his instructions to foundation directors, he stated, “It is my wish, without excluding others, to have the largest part of your benefactions dedicated to the Sisters in all parts of the world.” The Sisters, represented by two religious orders in a class action lawsuit, argued that they were entitled to receive more than 50 percent of the foundation’s grants.

After a lengthy litigation involving appeals, the disputes were finally settled out-of-court in 1988. Conrad’s shares in Hilton Hotels were divided among the Conrad N. Hilton Foundation, Barron Hilton, and a charitable remainder trust. Income from the trust is divided between Barron and the foundation. The shares in the trust will be transferred to the foundation upon either Barron’s death or in the year 2008, whichever is later. The Sisters’ suit was also settled out of court. To satisfy their claims, the foundation established the Conrad N. Hilton Fund, a supporting organization, to provide grants to 12 named organizations. The Conrad N. Hilton Fund for Sisters is the principal beneficiary. Run under the auspices of the Archdiocese of Los Angeles, it gives grants averaging $15,000 to support projects throughout the world where Sisters serve the economically disadvantaged.

The Conrad N. Hilton Foundation Today

The Conrad N. Hilton Foundation is among the largest family foundations in the United States. With its tumultuous years behind them, the foundation directors are free to use its substantial financial resources to realize the wishes of its donor and make a powerful impact in its designated program areas. Over the past decade, the foundation has won recognition for its bold, large-scale funding of programs in the fields of health and drug abuse education. Its annual $1 million Conrad N. Hilton Humanitarian Prize honors individuals and organizations making extraordinary contributions toward alleviating human suffering. Conrad Hilton would surely be pleased by the work the foundation is carrying out in his name. Equally satisfying would be knowing that his two sons, Barron and Eric, and his three grandsons, Steve, Barry, and Conrad III, through their efforts on behalf of the foundation, are continuing the legacy of charity that Conrad inherited from his own mother.