Making Big Donations to Change the World
By PAUL SULLIVAN MAY 13, 2016
Paul Salem, left, a private equity investor, made two big bets with his philanthropic dollars: one in Year Up, a nonprofit group that teaches urban teenagers the skills needed for a career. Mr. Salem has worked closely with Year Up’s chief, Gerald Chertavian, right. Credit Rachel Hulin for The New York Times
Philanthropists may proclaim their desire for social change, but few, it turns out, follow through.
Instead, according to research by the Bridgespan Group, a philanthropic consultant, they tend to fall back on proven recipients like universities, hospitals and museums for their biggest bets. Those may be worthy recipients but, in the eyes of some in the philanthropic community, they are not at the forefront of social change.
That is why someone like Paul Salem, a private equity investor in Rhode Island, is rare. He has made two big bets with his philanthropic dollars: one in a company that makes Plumpy’Nut, a peanut paste to feed malnourished children, and another in Year Up, a nonprofit group started in Boston that teaches young urban adults the skills needed for a professional career.
Mr. Salem, senior managing director at Providence Equity Partners, said he decided to make the big bets — defined as donations greater than $10 million — only after growing tired of being asked for donations and not knowing what impact his money was having.
“You get bombarded by amazing opportunities to invest in charities that come in over the transom,” he said. “You can give $5,000 here or $2,000 there. I still do that, but I consider it being nice. My wife and I decided we wanted to focus our giving on something that matters. It’s a way I like to invest money.”
William Foster, the head of Bridgespan’s consulting practice and the author of the study “Big Bets for Social Change,” said, “The desire to give to social change is genuine,” but that the study found that only 20 percent of big donors followed through. The wealthiest people want their money to make an impact on the biggest problems, he said. “But there are two reasons reality doesn’t match the aspiration.”
The first is it’s hard and takes a lot of time. Big institutions have plenty of projects that a donor can finance and have confidence that they will be completed and their name will be put on the door.
More complex problems, not surprisingly, are more challenging to finance. “It’s not clear that if you wake up one morning and want to write a check to save the fish stocks of the ocean, where to write that check,” Mr. Foster said.
The second reason is more nuanced. After decades of the type of success that gives someone the means to make a gift of more than $10 million, many philanthropists do not want to look foolish with their donations.
“Being an expert in a particular industry or field does not make you an expert in anything else,” said Steve Prostano, head of family wealth advisers at Bank of the West Wealth Management. “The very successful person would like to be successful in everything they do.”
That takes time and requires advice, he said.
“The rewards of giving to a larger, established institution are readily apparent — the admiration and respect of your peer group, and the certainty that it’s a professional and well-run institution that will use the money well,” Mr. Foster said. “When someone makes a gift to their 25th anniversary fund at Princeton, they’re saying, ‘It’s Princeton. It’s great.’ They don’t think it’s going to change the trajectory of education at Princeton in the next 25 years.”
But such giving isn’t rewarding enough for some philanthropists. Emily Nielsen Jones and her husband, Ross Jones, a private equity executive, began giving in ways that would seem big by most standards. They helped finance the creation of a preschool in Boston that has grown into the Park Street School.
Still, as their wealth increased, she wanted to do more on a big issue: stopping the trafficking of women and girls and, more broadly, changing gender norms around the world.
“It came from a deep feeling that we needed to ramp up ethically,” Ms. Jones said. “But then it was, how do you do that?”
Ms. Jones, who started the Imago Dei Fund, wanted to look broadly for groups to finance, from the innovative projects at larger nonprofit groups to working directly with religious leaders.
“That changed the direction of our philanthropy overall to make sure we were not guilty of a blind spot of just funding the rock star social innovators who went to the Kennedy School but also change agents working around the world,” she said.
One of these is Tostan, an organization in Senegal that aims to end female genital cutting and forced marriage. Her big bet on that group was particularly rewarding, she said. “I’ve worked with these imams who led the anti-genital cutting practice,” she said. “They described that they had been resistant because this was how it was for centuries but they said when you get new information, you need to move on.”
Mr. Foster said he advised philanthropists to give to several organizations in the area where they want to bring about change but also not to micromanage the institutions.
“If you say, ‘I care deeply about the ocean and I’m going to try the three best organizations and give them some money and trust them and not hold their feet to the fire for every T that is crossed and I that is dotted,’ that would probably work out pretty well,” he said.
Of course, not everyone agrees with the idea that philanthropists talk about social change in theory but shy away from it in practice — or that big donations are even a good thing.
Paul Connolly, director of philanthropic advisory services at Bessemer Trust, said many philanthropists can finance social change through institutions. Ms. Jones, for example, said she still gave to Dartmouth College, which she and her husband attended, but she focuses on scholarships and entrepreneurial programs.
The riskier issue, though, is when philanthropists donate too heartily to a social change organization without thinking through how that donation could affect that group.
“There’s a limited number of nonprofits that can absorb a very large gift,” Mr. Connolly said. “There are 1.4 million nonprofits, but two-thirds have less than a $500,000 annual budget and only 5 percent have a budget of $10 million or more. If you’re going to make a $10 million gift, you can do harm.”
And even if a single big donation doesn’t overwhelm a small organization, it could wipe out its base of smaller donors, who feel the group no longer needs their money. Mr. Connolly said he was working with a client who wants to give $350 million to 20 organizations. He said his team’s goal is to make sure those donations are not split equally among the groups but scaled to each organization’s size.
With Year Up, Mr. Salem said his involvement has grown over many years. And he has worked closely with its founder and chief executive, Gerald Chertavian, to expand the program beyond Boston to 16 other locations.
For his part, Mr. Chertavian, who started and sold a technology consulting company before founding Year Up in 2000, said he had begun raising “funds” similar to those in the private equity world to bring in donations that will be spent over five years. The first raised $18 million, the second, in 2011, brought in $55 million. “You can’t grow quickly if you don’t have patient capital,” he said.
Those funds have the added benefit of keeping donors involved for at least five years.
Mr. Salem, who has given more than $10 million to Year Up over 13 years, said that while he believed in making big bets, he tried to look at his contributions like his private equity investments.
“When I die, I’ll say I did my part to close the opportunity divide, but I’ll also say the money I put in, I got a return on my investment,” he said. “Not all bets work out.” he added. “But if I looked at Year Up like an investment in some of my portfolio companies, this was a home run.”