Opening Remarks for ‘A Dialogue on Philanthropy’
Ambassador Thomas C. Foley
February 21, 2008
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| Ambassador Foley Addressing the Symposium |
We are here to explore what we can take from the American experience with philanthropy as Ireland builds its own philanthropic model.
A good place for me to start is to take a stab at defining philanthropy. I am often asked what the difference is between philanthropy and charitable giving. I describe the difference as ad-hoc check writing versus sustained giving with a defined goal. If Trinity College needs a million euros for a new biology lab and finds a donor to fund it, that’s generous but it isn’t necessarily philanthropy. It would be philanthropy if the donor’s gift is part of a program to build more biology labs for the purpose of curing a disease, for example. This would be a sustained effort to solve a problem that serves the public interest. Within the arena of philanthropists, participants vary from people with vast resources looking for a public interest to serve, to people with a strong impulse to address a problem looking for vast resources, to, in the best case, a person with a strong impulse to address a problem and vast resources.
For philanthropy to thrive, five things must be present – a generous culture, financial capacity, philanthropic infrastructure, supportive public policy, and supportive public attitudes. That is why we are here today. Generosity and capacity are already very much present in Ireland. Philanthropic infrastructure is developing rapidly. The challenge we hope to address today is what initiatives can be undertaken to design policies and develop public opinion in ways that will best support growth of philanthropy in Ireland.
All of you have been carefully chosen as participants in this dialogue because every one of you has an important contribution to make. First, we have our guests from the U.S. who are here brimming with expertise and insights about how the system works in the U.S. They include representatives from foundations, hospitals, universities, law firms, wealth advisers, and the U.S. government. Let me introduce them to you:
1. Bob Edgar – New York Community Trust
2. Paul Schervish – Boston College Center for Wealth and Philanthropy
3. Emily Lam – U.S. Department of Treasury
4. Robin Ganzert – The Pew Charitable Trusts
5/6. Dick Naum and Anne McSweeney – Memorial Sloan-Kettering Cancer Center
7. Karey Dye – Goldman Sachs Wealth Advisory Group
8. Peter Kimball – Harvard University Development
9. Lois Lerner – United States Internal Revenue Service
10. Matt Quinn – The Jack Kent Cook Foundation
11. Richard Wild – Dechert, LLP.
From Ireland we have representatives from government, philanthropic institutions, philanthropists, the media, and academia. Those of you from Ireland are here because you are a giver, a philanthropic intermediary, a policy maker, or an influencer of public opinion – all important roles in determining whether philanthropy develops and thrives in Ireland.
I am not sure what the genesis was for this gathering – the idea may have come during a lunch with Kingsley Aikens, or a cup of coffee with Tim O’Connor, or while reading one of many articles on philanthropy in the local press – however it developed, it was a great idea. Nothing I have been involved in since I became Ambassador here has acquired as broad interest and enthusiasm as this symposium. At the time it was conceived, I didn’t appreciate either the interest in Ireland in philanthropy nor did I realize how unique the U.S. experience with philanthropy has been and the potential benefit of the U.S. sharing its experience here as Ireland designs and implements its own philanthropic model.
I realize holding an event like this exposes the host to some risks – and I am not just talking about the food and bar bill. There are many opinions in Ireland about the appropriate role of philanthropy. Several spirited letter writers to popular Irish publications have made it clear that not everyone agrees that philanthropy as practiced in the U.S. is the right model for Ireland. Some even question whether private philanthropy is a good thing at all, believing that support of charities should be solely in the government domain. This was a good thing for me to hear because it made me more aware of some of the challenges here. In the U.S., the notion of private philanthropy being a good thing is not questioned.
My goal for this symposium is to make available the U.S. experience as Ireland develops its own philanthropic model. I, and I think I can speak for my American colleagues, do not believe there is a right way and a wrong way to do this, nor is there a ‘one size fits all’ model for philanthropy. Rather we are here armed with a wealth of experience about how the system works in the U.S. and some sense of what policies and other aspects of its structure account for its remarkable success. Some of what works in the U.S. won’t work here and there are undoubtedly things that will work here that wouldn’t work in the U.S. If anything I or any of my American colleagues say during our time together sounds prescriptive or presumes that it’s our way of the highway, let me apologize in advance. That is not the spirit in which we are here. We are here to share and discuss our experience.
With that disclaimer out of the way, let me brag a little about philanthropy in the U.S. because it is a truly impressive story. Charitable giving in the U.S. exceeded $275 billion in 2006. This is an extraordinary amount of giving. It is over 2% of U.S. GDP. This giving is the primary source of funding for our best charitable organizations, universities, museums, hospitals, and research organizations. Private giving in the U.S. is everywhere addressing public problems and building public assets both domestically and abroad. There are over 60,000 foundations in the U.S., each with an articulated purpose ranging from curing diseases, to supporting artists, to improving our inner city schools. As an example of what this system produces, Harvard University, often rated as the top university in the world, has a $35 billion endowment in addition to its many billions of capital in land, buildings, systems, and curricula. Harvard never did and still doesn’t receive any significant government support. All Harvard’s wealth has been built on private giving, mostly from its alumni. Tuition at Harvard College costs about $40,000 a year, but only about 30% pay full tuition. 70% pay less, and over 20% pay nothing, under various financial aid plans paid for by Harvard. But Harvard spends $125,000 a year providing a college education to each of its students. The difference is covered by giving from alumni and income from Harvard’s endowment which was built up over many years from gifts by Harvard’s alumni.
Harvard is such an important and influential institution in the U.S. it is thought of as a public asset, which it is, but it isn’t publicly owned or publicly governed. This may partly account for its remarkable success. Harvard is owned by a special corporation authorized under the colonial laws of Massachusetts. These special corporations were precursors to later trust and foundation law. Harvard is governed by a board of directors which determines its own successors. Neither Massachusetts nor our federal government has anything to say about who serves on the Harvard Corporation Board or affects any decisions Harvard makes. And yet, Harvard takes very seriously its responsibility to serve the public interest.
As a result of this structure of many of our institutions, we get some benefits that countries with publicly owned institutions don’t. These benefits include diversity, incubation, and competition. When there is a single source of funding and governance for public institutions, an opportunity is missed for the creativity, concept testing, and effects of competition that occur when you have thousands of sources of funding supporting thousands of independently generated concepts and all separately governed. These are some of the same beneficial effects entrepreneurs and the market place have on economic growth in open, market based economies versus nationalized, centrally planned economies. A privately funded hospital in the U.S. that doesn’t provide competitive health care service will fail. A charitable concept in the U.S. that doesn’t produce results won’t be able to sustain private support. The diversity of these efforts and the competitive pressures on them produce a very different result from government funded and managed institutions. I believe it is the private structure of many U.S. public purpose institutions that accounts for the extraordinary level of support they receive, their excellence, and their unquestioned broad and positive impact.
The United States and Ireland share many cultural traditions and perspectives that represent a common foundation for building a philanthropic system. Some of these include our primarily Judeo-Christian religious traditions, our generous, community-oriented cultures, and our common legal systems.
Despite these similarities, there are important differences. For one, America’s historical experience is largely a ‘frontier’ experience. American culture, traditions, and institutions, were heavily influenced by the practices and needs of settlers. American notions of self-reliance, civic responsibility, and private initiative were born in the necessities of our earliest communities. When the Pilgrims arrived at Plymouth Rock there were no schools, churches, or hospitals, and no government to appeal to for building these institutions. So our early institutions arose from private initiative and collective civic efforts.
Alex de Tocqueville’s enthusiastic and elaborate description of the importance of civic involvement in America is well known. He was impressed with how different these traditions are from European traditions. European culture and experience are legacies from monarchies and the paternal administrations built up under them. Europeans are mostly trusting of their government. Europeans expect and rely on their governments to deliver a broad range of services. Europeans see government as a service provider and problem-solver of first resort. Americans look to government for things only government can provide. Americans believe the private sector is a quicker and better service provider and problem-solver. Government in the U.S. is seen as the service provider and problem-solver of last resort.
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| Ambassador Foley with Loretta Brennan-Glucksman, National President of the American Ireland Fund |
Another difference that may bear on what philanthropic model will work best in Ireland is our different attitude toward success. Success is celebrated in America. Each success story, whether in Hollywood, the sports world, or on Wall street, subliminally confirms that opportunities are there for all of us. Our first thought upon hearing of another’s success is ‘I wish that had happened to me’ which quickly turns to ‘hey, maybe my turn is next’. I am told that in Europe success is treated with more cynicism and resentment. I am told the first thought is ‘he stole it’ or she ‘cheated’. The second thought is about bringing that person back down to size. If this difference is real and cannot be changed, then the potential for private philanthropic in Ireland may be far less than in the U.S. An important part of the philanthropic impulse is confirmation by your community that giving is a good and admirable thing to do. If one must be shy about it, there will be much less giving, particularly large scale giving which is hard to keep secret.
Another important aspect of U.S. attitudes toward success is that those who have benefited from the system must give back into the system. There is an unwritten social contract in the U.S. that wealthy people are obligated to give back to their communities. Many wealthy entrepreneurs who may not have been told about this obligation learn about it the hard way. After they acquire their wealth they will be criticized if they aren’t soon seen as giving something back. If they don’t respond, they eventually will be shamed into doing so.
A third difference related to the first, and possibly a benefit here, is that most of the institutions that are supported by private philanthropy in the U.S. are supported by the government in Ireland – notably universities, health care institutions, and museums. As a result, private support of these institutions either directly or indirectly relieves a government burden, thus lowering the cost to government of tax incentives offered to donors. In many cases it is reasonable to conclude the revenue impact for the Irish government from charitable giving would be positive. If I give a hundred dollars to Harvard, the U.S. government loses about $40 of revenue. But if an Irish person gives 100 euros to UCD, the government could actually gain 60 euros in revenue, assuming the government can then reduce its support of UCD by 100 euros.
A fourth difference may just be semantics, but I think it’s more. In the U.S., when we talk about charitable institutions, it includes a lot of institutions that aren’t charities. For example, schools, museums, and religious organizations. Tax exempt institutions in America, more accurately referred to as not-for-profits, are broadly writ as any organization that serves a public purpose. In Ireland, charitable enterprises seem in the public mind to include a narrower range of organizations – only those that serve the poor, sick, or otherwise needy. Current legislation in Ireland affecting this arena is referred to as the Charities Bill. Perhaps different terminology would help broaden the scope of what should be included as legitimate philanthropic endeavors.
These are four examples of differences that may affect which policies and initiatives Ireland should pursue in developing its philanthropic model.
I would like to suggest that for today’s discussions we begin presuming two things. First, that more private philanthropy is better. I accept that at least one letter writer to a well-known Irish paper doesn’t believe that, but I hope that writer is part of a small minority. Second, is that the focus of our discussions be on what will generate the most giving and leave it to the politicians, policy makers, and public to determine issues of fairness and feasibility.
I hope we are able to achieve three things during today’s sessions. The first is that our U.S. participants inform our Irish participants as best they can how the system of giving in the U.S. works and why. Second, I hope to identify ten or more policy and other initiatives that this group can recommend for promoting philanthropy in Ireland. Third, I hope this symposium creates friendships and contacts – within Ireland and with our American guests – that result in a continuing dialogue and dependable resource, as well as a base from which cooperation and partnering on philanthropy will grow.
In the interest of meeting these objectives, I would like to go out on a limb and propose seven areas that based on polling of a number of our Irish participants may offer the most promise for expanding philanthropy here.
• The first area, and easiest to describe, but maybe not the easiest to implement, is tax policy. The most often cited changes that people believe would stimulate more giving include:
1. Excluding charitable donations from the 50% of income and €250,000 per year caps on tax relief.
2. Allowing tax deductions for gifts other than cash and marketable securities.
3. Eliminating the limitation on deductions to 10% of the income of an ‘associate’ of a charity. An ‘associate’ is a board member or someone who is involved in the charitable enterprise. As I hope our discussion will bear-out, one of the most effective tools in developing support is involvement by donors. Policy should encourage, not discourage, donor involvement, as involvement brings additional giving, particularly large scale, sustained giving.
4. Eliminating the rule that disqualifies tax deductibility for donations for which the donor receives a benefit. If a donor gives a million euros to DCU and a thank you dinner is given in appreciation, technically the gift would not qualify for a tax deduction because the donor received something in return. This shouldn’t be the case. In the U.S. any benefit a donor receives is valued and deducted from the amount of the gift for tax purposes.
5. Excluding not-for-profit organizations from having to pay taxes, including VAT. These taxes just introduce inefficiency into the charitable enterprise and reduce the amount of its good works.
6. Excluding charitable enterprises that aren’t seeking government funds from having to wait 2 years to qualify for charitable status.
• A second area for our attention is developing vehicles for supporting sustained and endowed giving. In the U.S., a variety of foundations, trusts, and corporations serve this purpose. Transfer of wealth to these entities is encouraged with liberal tax policies, reliable law, and rules of governance that fit the needs of donors. As more generous people move to a ‘giving while living’ approach, these structures for giving will become even more essential.
• A third area for our attention is how to develop an environment where leaders in giving are comfortable being public about their generosity. This is an essential element of encouraging and motivating others to do the same.
• A fourth area is changing public perceptions about philanthropy. I spoke earlier about different perceptions in the U.S. and Europe about success. I am told the same cynicism about success in Europe translates into cynicism by some about private giving. I am told that motives of givers are questioned, particularly in the media. Apparently it is a common perception here that donors get back more from tax breaks from giving than they are actually giving away. In the U.S. it is broadly accepted that people who give away money should receive a reduction in their taxes. An easy way to see the logic of the tax benefit received in the U.S. is that if someone gives away part of his or her income and, therefore, never receives the benefit of it, they shouldn’t have to pay tax on it. Another apparently common view in Europe is that wealthy individuals shouldn’t have a say in how their giving is directed. These attitudes may go back to the different perceptions I mentioned earlier about the roles of government and the private sector. But the fact is that if wealthy donors don’t have a say in how their giving is directed – they won’t give. So the choice of whether to have government or donors direct the giving is a false choice. If the government insists on directing it, there won’t be much to direct. To promote significant philanthropy, Ireland will need to allow very liberal direction of giving by donors – particularly in the area of endowed giving. Government leaders and the media can play an important role here changing public attitudes toward public generosity and helping the public see the benefit of adopting tax and donor involvement policies that encourage more giving.
• A fifth area for our attention is building philanthropic infrastructure. Philanthropic infrastructure includes a laundry list of capabilities and organizations that support and facilitate giving. A few examples include: building dedicated expertise at banks and law firms for advising wealthy clients on how to structure their philanthropic activity; training and other professional development for fundraisers; standardizing the formation of giving vehicles such as a foundation; supporting community trusts that provide the middle market with endowable, donor-directed giving capability; and having the government and other organizations make available guidance, resources, and other information for givers and charitable organizations alike.
• A sixth area for our attention is what policies government needs to develop and articulate regarding how private giving to public institutions will be handled. There are many precedents for this in the U.S. where many state universities, supported primarily with state funds, also attract and integrate significant private giving.
• A seventh and final focus for our attention is generally how to make it easier for donors to give. Philanthropy and entrepreneurship are more closely related than they at first appear. In fact, some of the same qualities that make a good entrepreneur – determination, being idea-driven, and being a problem-solver – also make for an effective philanthropist. The most effective philanthropists are those who are driven by a goal – curing a disease, for example – and are personally engaged in achieving that goal. Philanthropic endeavors are born as an idea or impulse in the mind of someone who is probably already very busy or not well-financed. A successful philanthropic system will make it easy, not hard, for these ideas to develop into resources and efforts that have an impact. Large scale giving and its impact are inversely related to the amount of regulation, red-tape, risk, and other costs and inconveniences that act as a drag on generous impulses and creative ideas. These are some of the same impediments to economic growth described by the insightful economist Hernando De Soto. De Soto’s findings apply equally as well to the growth of philanthropy.
Before we begin, let me say a little about the schedule today. I have asked our moderators to spend the first thirty minutes of each discussion session providing a summary of the state of affairs on their topic in the U.S. and Ireland. I have also asked them to provide some direction to the remaining hour of discussion so that at its end, there are at least several recommendations for action resulting from the dialogue. Lunch and breaks will be a time for chasing down people you want to talk to individually. At 5:00 we will have a wrap-up session to discuss and compile the recommendations from all the discussion groups. These recommendations will be written-up and delivered to those capable of doing something about them, which we hope they will.
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| American and Irish participants at Philanthropy Seminar hosted by U.S. Ambassador Thomas C. Foley |
I would like to thank all of you for participating today. I would particularly like to thank our U.S. participants who, in a giving spirit, have come here at their own expense, or at the expense of the institutions they work for. I would also like to thank all of our moderators who have taken considerable time preparing for leading their discussions.
Finally, I would like to give a special thanks to Dwight Nystrom, our senior economic officer at the Embassy and Melissa Danforth, my special assistant, both of whom have worked very hard over the last two months organizing this gathering.
Now, if you are ready, let’s have the Dialogue begin.
