Nonprofit Chronicles

Journalism about foundations, nonprofits and their impact

Wayne Pacelle

For more than a year, the Humane Society of the United States, the US’s most powerful animal-welfare group, has been trying to recover from charges of sexual harassment levied against Wayne Pacelle, its former chief executive.

The Humane Society’s board has apologized to women who lodged complaints against Pacelle, adopted new policies and practices, brought on new members, commissioned a pay-equity study and — after women at HSUS hired a lawyer to represent their interests — launched what it calls a reconciliation process to try to understand what went wrong and how best to prevent future problems.

On January 25, HSUS’s board appointed Kitty Block, a lawyer who has devoted more than a quarter of a century to animal welfare — and who is herself a survivor of sexual harassment at HSUS — as its new president and CEO. It also selected two new directors, Susan Atherton and Tom Sabatino, to co-chair the board.

Mission accomplished? Not yet.

In their first interviews since taking on their new roles, Block, Atherton and Sabatino all said they hope to put HSUS’s troubles behind them and build a stronger organization. But they brushed off questions about what went wrong last year, and declined to say whether they will make public the results of the reconciliation process.

“I joke with staff that the best thing about 2019 is that it’s not 2018 anymore,” Block says. “It’s been a tough year for all of us.” She adds: “We’re stronger and better now.”

Maybe. But if HSUS wants to regain the support and trust of donors, staff and allies, its board of directors will have to deal with some unfinished business. First, the directors will need to make public, in some form, the findings of the reconciliation process, if only so that Pacelle and, perhaps, others who behaved badly are held accountable. Second, some donors are calling on HSUS to remove from the board those directors who supported Pacelle — and discounted the allegations against him — when news of the scandal broke.

The stakes are high, for those who care about animal suffering or about women in the farmed animal movement, where they make up about 70 percent of the staff, a recent survey found.

With assets of more than $300m and a revenues of $209m in 2017 — the last year for which information is available — HSUS has been a powerful advocate for animals, particularly for the nine billion farm animals raised for food each year in the US. It played a key role, for example, in persuading California voters last year to pass Proposition 12, a ballot measure banning the sale of meat and eggs from animals kept in tightly-restricted cages.

But HSUS has been wounded by the sexual-harassment scandal. Last year, HSUS’s revenues fell, as donations grew to other animal welfare groups. (Block wouldn’t say by how much.) HSUS has also spent a small fortune to clean up the messes created by the scandal — on an initial investigation by the Washington office of a corporate law firm, Morgan Lewis; on the ongoing reconciliation process, led by a feminist lawyer named Kate Kimpel; and on consultants to deal with issues of pay equity and workplace culture. (An HSUS spokesman declined to estimate the cost of lawyers and consultants.) Those fixes are vital, but they require HSUS to spend donor money that could otherwise have been put to work on behalf of animals.

Harder to calculate, but obviously important, are the human costs borne by women who worked at HSUS. Several who publicly accused Pacelle of harassment left the organization. Others who complained about his conduct were asked to leave and given settlements. In a Facebook post last year, Melinda Fox, a former HSUS staff member, said she had received more than 100 “messages from women at HSUS, formerly with HSUS, in other animal protection orgs, or working in other fields now because of how they were mistreated in animal protection work. They all shared messages of similar experiences in orgs/in the movement, or have witnessed women being negated, harassed, abused.” Today’s HSUS surely would be stronger had women been treated better.

Making matters worse at HSUS was the board’s response to the charges against Pacelle. The directors hired Grace Speights, a partner at Morgan Lewis, to investigate after getting a complaint; she interviewed more than 30 people, but when news of the investigation leaked, the board abruptly ended her work and voted to retain Pacelle. Eric “Rick” Bernthal, the board chair, said then: “We did not find that many of these allegations were supported by credible evidence,” a comment that angered women. Only after seven board members quit and donors and staff members rebelled did Pacelle resign. He has maintained his innocence, telling The Washington Post: “I absolutely deny any suggestion that I did anything untoward.”

Block, Atherton and Sabatino decline to delve into that history, although Block did say that the complaints against Pacelle came as a surprise to her. She has worked at HSUS since 1992, most recently as president of its international affiliate.

“I didn’t know about the investigation,” Block says. “That was kept confidential until it wasn’t.”

Part of the problem, she says, was that HSUS’s focus on the plight of animals led to neglect of issues of workplace culture. “We all work really hard and we are incredibly mission driven,” Block says. Across the nonprofit sector, she says, workplace and equity issues got insufficient attention. That’s being remedied now, she says.

Atherton, a philanthropist and former technology executive, said the appointments of Block and the new co-chairs had been welcomed, inside and outside HSUS. “The staff was really thrilled,” she says. “We’ve had a lot of people contact us, and say the organization is moving in a new direction.”

Sabatino, a longtime animal advocate and corporate lawyer, says building a stronger board is a priority. Gibson Dunn, a global law firm that worked pro bono for HSUS, recommended governance reforms that are being put into place. More than half of the current board members are either new to the board or voted not to retain Pacelle, Sabatino noted.

On other questions, the co-chairs were vague.

They say they want to build a culture of transparency, but would not promise to release findings from the reconciliation process, which is in its final stages. “We cannot get out ahead of the board… in terms of what we are going to say,” Sabatino says.

Kimpel, the lawyer leading the reconciliation process, who is respected for her work on behalf of women, has talked to more than 100 people about a wide range of issues, not limited to Pacelle’s conduct or to sexual harassment, insiders say. Several who spoke to her say they want the results out. “ I think it is crucial that the Board make the findings public in some way,” says Alison Schiebelhut, a former attorney at HSUS. She is one of four women, including the daughter of a donor, who have said publicly that Pacelle grabbed or kissed them or pressured them for sex; how many others had similar experiences is unknown, but the number is not zero.

Several donors say they won’t give to HSUS until the board is more forthcoming about what went wrong and directors are held accountable for their actions.

Jim Greenbaum, an animal advocate whose foundation gave $100,000 to HSUS in 2017, told me via email:

While I applaud the amazing work that HSUS is doing in some sectors, and have several close friends on staff, we have not resumed our financial support. Due to the HSUS Board’s lack of transparency and accountability, we don’t have confidence in the oversight of HSUS. Until the findings of the outside report on the Board’s handling of the Wayne Pacelle matter is made public and a possible house cleaning of those board members who may have grossly mismanaged the situation takes place, we will continue to withhold any financial support to HSUS.

Rachel Perman, director of charitable giving at plant-based food company Tofurky, said:

Tofurky has not resumed direct financial support of HSUS although we did donate Tofurky roasts to retired laboratory chimpanzees at an HSUS affiliate this past Thanksgiving.

There are still people on the HSUS board who supported Wayne Pacelle and voted to keep him after the multiple credible allegations of sexual harassment. How can we trust an organization whose stewards don’t have a problem with behavior that we consider unethical and unacceptable? There may also be Board members who are themselves in violation of Tofurky’s sexual harassment policy.

Until HSUS really listens to the victims of sexual harassment perpetrated by multiple former employees and works to redress those wrongs — including but not limited to publicly sharing the results of the most recent investigation into the harassment — Tofurky will be looking to support other groups doing similar work.

HSUS also needs to win back institutional donors, notably the Open Philanthropy Project, the US’s biggest funder of the farm animal-welfare movement. Open Philanthropy gave $1m to the Humane Society in 2016, and several donations to its international affiliate in 2017, but it has not donated since.

Recently, Amanda Hungerford of Open Phil, who formerly worked at HSUS, published a research note on Gender Equity in the Farm Animal Movement in which she described 2018 as a “brutal year” for the farmed animal movement. She cited bad behavior by men at Mercy for Animals and FARM (Farm Animal Welfare Movement), as well as at HSUS, and wrote:

When a small number of famous charismatic figures dominate movements, it can begin to seem that the rock stars are the movement, and that disciplining them for inappropriate conduct would mean harming the movement itself. That’s an incredibly dangerous posture for a movement to be in, and makes abuses of power all-but inevitable.

Animal Charity Evaluators, a small nonprofit that evaluates animal charities, had identified HSUS’s farmed animal protection campaign as a standout charity between 2014 and February 2018. It rescinded the recommendation a year ago, as Alison Smith, its former director of research, explained at some length this post.

Pacelle, for his part, has returned to the animal welfare movement, as a volunteer for a political action committee called Animal Wellness Action. It’s unclear whether HSUS’s board compensated him on the way out. “Was Wayne given a severance package? The answer is no,” Sabatino told me. But Pacelle, who led HSUS through a period of dramatic growth, may have been rewarded in other ways. An HSUS spokesman said only: “Any payments to Mr. Pacelle will be disclosed in the organization’s next public tax filing.”

Pacelle is not the first HSUS executive to be accused of harassment. David Wills, who led animal-cruelty investigations at HSUS in the early 1990s, was sued sexual harassment by two women, including Block. It turned out that Wills had hidden a prior conviction for burglary on his resume, and he was then sued by HSUS for defrauding it of $93,000, according to a 1996 article in the Washington Post. More recently, Wills was indicted by a federal grand juryand charged with assaulting and sex-trafficking a nine-year-old girl.

One day after Block was named CEO of HSUS, a former HSUS executive named Scotlund Haisley was arrested by the Washington, DC, police department and charged with twice robbing a Subway fast food outlet in northwest Washington. Last fall, Haisley’s wife summoned police, telling them he had assaulted her; she subsequently obtained a protective order keeping him away from her and their children, according to Animals 24/7.

Whether any of this history is relevant to HSUS today is hard to know.

Says Kitty Block: “There are bad actors in every sector. My goal is to make sure that a bad actor is called out a lot sooner.”

“Accountable is key,” she added. “It starts at the top.”

This story was originally published on Medium.


Climate change is “the slow-motion equivalent of a large asteroid heading to earth,” writes Joshua S. Goldstein, in a new book about climate solutions. It’s potentially catastrophic, and requires a political solution, he argues.

But Goldstein says that if he were put in charge of environmental grant-making at a big US foundation, he would not fund the grassroots groups that have done more than any other to build a climate movement — not the Sierra Club, not Greenpeace, not

Why not? Because these green groups call for an energy sector powered entirely by renewable energy, predominantly wind and solar. (See the Sierra Club’s Ready for 100, Greenpeace’s 100% renewable energy for all and’s Build 100% Renewables.)

This is misguided. Someday, perhaps, an entire nation could be powered by renewable energy, but that day is too far off to deal with the climate threat, say Goldstein and Staffan A. Qvist in a new book called called A Bright Future: How Some Countries Have Solved Climate Change and the Rest Can Follow.

“There’s a lot of magical thinking going on,” Goldstein tells me, by phone. “Everybody loves renewables.”

Conversely, very few people love nuclear power. But Goldstein, a political scientist, and Qvist, an engineer, argue convincingly that the only way to rapidly decarbonize the world’s energy systems is with a rapid rollout of nuclear power and renewable energy.

“Up until now, only one carbon-free energy source has proven able to scale up very quickly and — in the right conditions — affordably. That source is nuclear power,” they write.

Meantime, they say, “100% renewables is a slogan that distracts us from the work at hand, which is the decarbonization of the world.”

Their arguments have big implications for foundations and nonprofits that are striving to curb climate change. If these NGOS are serious about reducing carbon emissions, they need, at the very least, to support existing low-carbon nuclear power plants. Ideally, they should push for many more plants.

A Bright Future begins by comparing Sweden, which embraced nuclear power as well as renewables, and Germany, which focused on renewables and is now phasing out its nuclear plants.

Sweden has thrived:

From 1970 to 1990, Sweden cut its total carbon emissions by half and its emissions per person by more than 60 percent. At the same time, Sweden’s economy expanded by 50 percent and its electricity generation more than doubled.

France also committed to nuclear. It has 70 percent lower carbon emission than the US and the cheapest electricity in Europe. The Canadian province of Ontario has flourished with a mix of nuclear energy and hydropower, reducing its CO2 emission by almost 90 percent. Those are all climate success stories.

Germany, by contrast, has pursued a much-touted green Energiewende (energy transition) that favors wind and solar. It doubled its production of renewable energy — an impressive feat. But the results have been anything but impressive, in part because wind and solar power are, by nature, unreliable.

Worse, Germany has also been shutting down nuclear plants. So it relies on coal for cheap, reliable, always-on electricity. It is failing to hit its climate goals and “continues to spew twice the CO2, relative to economic activity,” as Sweden does, write Goldstein and Qvist. Its electricity prices are among the highest in Europe.

Denmark, a world leader in renewables, also has higher carbon emissions per capita than either Sweden or France, according to the most recent World Bank data. What’s more, while the costs of producing wind and solar energy have dropped, Germany, Denmark and California — places that have scaled up renewables — have seen their costs of electricity increase.

That said, nuclear power has issues. The anti-nuclear arguments are by now familiar — that nuclear power is dangerous, that there’s no place to safely store waste, that the spread of nuclear plants could lead to the proliferation of weapons of mass destruction. These arguments are rebutted, persuasively, by A Bright Future.

That brings us to the biggest obstacle to new nuclear plants: They are ruinously expensive. For years, the nuclear industry has had an awful time building plants in the US and in Europe; they take forever and run billions of dollars over budget. South Korea has built nuclear power plants at a lower cost, but its buildout has run into political opposition. In France and Sweden, too, surprisingly, green groups are arguing against nuclear.

The question is, can changes in the political and regulatory climate — along with research into simpler, safer next-generation nuclear power plants — bring down costs and lead to a resurgence of nuclear energy?

Goldstein is hopeful. Government support for nuclear research would help. So, of course, would a price on carbon. States that have passed renewable portfolio standards to require that solar and wind be a bigger part of their electricity mix could expand those to become low-carbon energy standards, which would include nuclear. And, if the world ever gets to the point where it is building lots of nuclear plants, economies of scale will surely reduce costs.

“Somebody’s got to innovate,” Goldstein says. “The goal is to make these less like building a complicated bridge and more like stamping Boeing jetliners as they come off an assembly line.”

All of that will require turning around the politics of nuclear, which brings us back to the question of climate philanthropy. Bloomberg Philanthropies, and the ClimateWorks, Grantham, Hewlett, Packard, MacArthur and Sea Change foundations all back the Sierra Club, which remains unequivocally opposed to nuclear power. Greenpeace says that nuclear energy has no place in a safe, clean, sustainable future; its foundation supporters have included Grantham, Hewlett, and Packard (although almost entirely for Greenpeace’s work on sustainable seafood and deforestation), as well as the Rockefeller Brothers Fund. Foundations supporting include ClimateWorks, the Grantham and Oak foundations, and the Kendeda Fund and Wallace Global Fund.

Climate funders face a dilemma. The Sierra Club, Greenpeace and built today’s climate movement, such as it is, and for that they deserve great credit. Yet they stand in the way of the only proven climate solution.

“In a supreme irony,” Goldstein and Qvist write, “the very groups most actively opposing nuclear power are those most vocal about climate change.”

Happily, there’s a small but growing group of pro-nuclear environmentalists. Stewart Brand’s brilliant book, Whole Earth Discipline, is now nearly a decade old. Climate scientists James Hansen, Ken Caldeira and Kerry Emanuel have all called for a nuclear power comeback. Bill Gates has invested in next-gen nuclear. NGOs including the Clean Air Task Force and the Breakthrough Institute say nuclear energy will be needed to decarbonize the global economy, and the Union of Concerned Scientists recently argued for policies to prevent the shutdown of existing nuclear plants. This is real progress,

At the very least, philanthropists should provide more funding to the pro-nuclear green groups. The US badly needs a robust debate about nuclear energy and climate change.

reich-pacs-website-2016-1-300x225Most PTAs hold bake sales and car washes to help out their local schools. But in some well-to-do communities, PTAs have turned themselves  into “local education foundations,” the biggest of which raise millions of dollars a year.

Stanford professor Rob Reich learned about these super-sized PTAs when his son went off to kindergarten in Hillsborough, CA, a Silicon Valley community where the median income tops $250k. The local school foundation asked parents for an “expected but voluntary” contribution of $2,300.

As a political scientist, philosopher and scholar of education, Reich was troubled. This was tax-advantaged charity by and for the wealthy. “It’s rich people giving money to help rich children, with tax subsidies from everyone else, and then feeling noble about it,” he says.

Intrigued, Reich embarked on a systematic study of philanthropy and democracy that, eventually, led him to write Just Giving: Why Philanthropy is Failing Democracy and How It Can Do Better (Princeton University Press, 2018).  Reich, who is 49 and the co-director of the Stanford Center on Philanthropy and Civil Society, visited Washington last week to discuss the book at the Chronicle of Philanthropy and at the Politics and Prose bookstore.

Just Giving is the latest in a small flurry of books critical of philanthropy. It is neither a polemic (like Anand Giridharadas’s Winners Take All) nor a work of journalism (like David Callahan’s The Givers), but a sober attempt to explore the ways public policy and social norms shape charitable giving.

Reich challenges his readers to rethink policies and practices that are mostly taken for granted — the tax deduction for charitable giving, the desire of endowed foundations to live forever and the way in which the rich use philanthropy to expand their already outsized influence.

An exercise of power

Most importantly, Reich argues that we need to reconsider the way we think and talk  about philanthropy.

“Philanthropy, especially big philanthropy, is an exercise of power,” Reich says. “Any exercise of power deserves our scrutiny, not our gratitude. It deserves rigorous attention.”

This is especially so because foundations, for the most part, lack accountability. They have no customers to satisfy. They have no shareholders who insist on a return. They have no voters to whom they must explain themselves.

Yet the list of philanthropists who use their tax-subsidized giving to influence politics and policy is long. Bill Gates, Michael Bloomberg, the Buffett family, the Koch brothers, the Mercers, the Waltons, John and Laura Arnold, Mark Zuckerberg, Dustin Moskovitz and Cari Tuna, as well as endowed foundations like Ford and Hewlett, want to reshape governments around hot-button issues including climate change, abortion rights,  business regulation and public education,

By pouring billions of dollars into education reform, for example, The Gates Foundation exercises considerable influence over America’s schools. “There’s no mechanism to unelect Bill and Melinda Gates,” Reich writes. True enough, although it’s worth noting that influence isn’t power; school districts, whose leaders are elected, have no obligation to accept philanthropic dollars.

What’s to be done? Reich has ideas:

Replace the tax deduction for charitable giving with a tax credit. Tax subsidies for philanthropy cost the federal government roughly $50bn a year; most of the benefits flow to the rich, in part because they give more  but also because they take advantage of tax benefits that middle-class and poor people cannot. This bias will grow as fewer Americans itemize their tax deductions.

Here’s how it works: If, like most Americans, you don’t itemize, a $100 gift to your favorite charity costs you $100. If you do itemize, and you’re in a top tax bracket, it’ll cost you about $60.

“The wealthier you are,” Reich says, “the cheaper it is for you to be virtuous.”

Interestingly, rich donors as a group are less likely than most Americans to direct their giving to the poor; they give more to colleges and cultural institutions.

Reich writes:

The plutocratic bias in the subsidy and the lack of redistribution could be altered by by both changing the mechanism of the subsidy (change to a capped tax credit, for instance) and limiting the kinds of organizations that are permitted to receive tax deductible donations (eliminating churches and elite culture institutions, for instance).

A tax credit capped at, say, $1,000 a year would reward big and medium-sized donors alike. Hollywood mogul David Geffen would still be free to give $100m for the naming rights to a symphony hall at Lincoln Center, but he’d no longer be rewarded with a big tax deduction for doing so.

Don’t let foundations live forever. This isn’t a new idea, as Reich explains. When John D. Rockefeller sought a federal charter from Congress to establish what became the Rockefeller Foundation — permission that was denied — his attorneys promised that the foundation would spend down its principal in 50 years, unless Congress allowed it to live longer. The pledge was dropped when the foundation incorporated under New York state law.

Earlier, philosophers including Immanuel Kant and John Stuart Mill argued that there’s no good reason for foundations to be endowed forever. A permanent foundation transforms “a dead man’s intentions for a single day” into a “rule for subsequent centuries,” Mill wrote.

Yet most big American foundations (though not the Gates Foundation) are designed to last in perpetuity. This hamstrings their ability to provide for nonprofits, even when their donations are urgently needed, because they are saving for the future. It also affects the way they invest their endowments; most big endowments try to maximize their returns, at any cost, instead of aligning their investments with their mission.

Says Reich: “I would get rid of perpetuity if I were a philosopher-king asked to rewrite the policy structure.”

What are foundations for?

Near the end of Just Giving, Reich wonders:

With few or new formal accountability measures, practically no transparency obligations, a legal framework designed to honor donor intent in perpetuity and generous tax breaks to subsidize the creation of a foundation, what gives foundations their legitimacy in a democratic society? Why have this institution form?

He answers his own question by saying that foundations — precisely because they are free to experiment and can operate over long time horizons — can serve valuable roles in democracy, by, among other things, discovering and supporting new ideas and by providing a variety of public goods that may not be favored by the governing majority:

Powered by the idiosyncratic preferences of their donors and free from the accountability logic of the market and democratic state, foundations can help to provide, in the aggregate, a welcome pluralism of public goods that, over time, helps to create an ever evolving, contestatory and diverse arena of civil society. Such decentralization tempers government orthodoxy in a democracy.

How many foundations live up to that standard? Not many, I daresay. But that’s a question for another day, or another book.

1_mlfx5g9q6xq_eqlceqydqaJohn Bogle didn’t sign the Giving Pledge. He didn’t have the money. (You need $1bn.) But Bogle did more for the world than most of those who signed.

Bogle, the founder of the investment giant Vanguard, died last week. His story is a reminder that how you make your money matters more than how you give it away.

Bogle the donor was generous but otherwise unremarkable.

Bogle the capitalist was extraordinary. By popularizing low-cost index funds and setting up Vanguard so that it was owned by its mutual-fund investors, Bogle enriched millions of American investors. Bogle, arguably, did more good than all but a few of the very biggest, smartest American philanthropists.

On Twitter, Elizabeth Warren saluted Bogle:

A bit of background: Index funds do not try to outperform the market, which is all but impossible to do over the long run. Instead, they amass shares of all the companies in a given index — a group of big US companies, like the S&P500 Index, or broader collections of firms in indices that invest across the entire stock market, domestic or global. Because index funds aim merely to match the performance of markets as a whole, they don’t require high-paid fund managers. Their fees, as a result, are far lower than those of actively-managed investments. Fees matter a lot.

0470524235Instead of the Wall Street mantra that “greed is good,” Bogle’s watchword was “enough.” Getting your fair share of the market’s growth, he argued, should be enough. “Enough” also described his approach to executive compensation: People at Vanguard are well paid, but not by Wall Street standards. While Vanguard played no meaningful role in the socially-responsible investment movement, it is the epitome of a socially-responsible investment firm.

“John Bogle has changed a basic industry in the optimal direction,” Paul A. Samuelson, the Nobel laureate in economics, wrote in a foreword to Bogle on Mutual Funds, a 1973 classic. “Of very few this can be said.”

On MarketWatch, columnist Brett Arends estimated that Vanguard’s “low-cost index funds, and the imitators they have inspired, may have saved ordinary Main Street Americans a staggering $250 billion, or more, in mutual fund fees over the last forty years.” This estimate does not take account the billions more that were saved as expensive funds cut their fees to compete with Vanguard. Nor does it account for the multiplier effect of those savings: billions that were reinvested in the market (making people richer), spent on consumer goods (creating jobs and wealth) or given away.

Unlike the founders of Schwab or Fidelity, who amassed vast fortunes, Bogle never became a billionaire. His net worth has been estimated at about $80 million. He reportedly gave away half his income every year. In 2012, Bogle told Reuters:

I tend to give to those who have helped me along the road of life: Blair Academy, Princeton University, our church, and several hospitals that got me here in one piece. On the community side, I’ve always been a big supporter of the United Way. The best rule for philanthropy is to give until it hurts, as much as you can, because none of us can get through life all by ourselves.

A lovely sentiment, but he certainly could have been more thoughtful about his giving.

Or, as Dylan Matthews of Vox put it on Twitter:

But Bogle’s philanthropy is trivial when compared to his impact as a businessman. Hie death led to a Twitter discussion about how the social good created by Bogle stacks up against the philanthropy of Gates, Zuckerberg, et al.

Business writer Matthew Zeitlin (@MattZeitlin):

Another Bogle thought: Look at how much people admire and love him despite “only” being worth $80 million. Business titans are obsessed with legacy and yet few seem to realize that *actively amassing less* while still providing a good service is one of the best ways to do it.

Vox’s Matthew Yglesias (@mattyglesias) :

Yeah, “ethical business practices + bad charity >>> the fashionable Silicon Valley concept of destroying the world with your business and then trying to do smart donations to make up for it

Vox’s Dylan Matthews (@dylanmatt):

That seems wildly false! There’s no plausible view of the world in which Bogle’s net contribution was better than, say,  Gates

I’m pretty sure that I agree with Dylan, but Gates is the exception. He’s the world’s biggest philanthropist and among the smartest. The Gates Foundation has given away about $45bn, most of it to alleviate suffering among the world’s poorest people, and its endowment is worth more than $50bn. For its part, Microsoft has to be judged a net positive for the world, despite its monopolistic practices in the 1990s. Microsoft created three billionaires — Gates, the late Paul Allen and Steve Ballmer — and an estimated 10,000 millionaires, many of whom have become active, thoughtful philanthropists. (Jeff Raikes, for one.) Today, the company employs about 130,000 people. That’s quite a legacy.

But how does Bogle’s net contribution compare to other billionaire donors like Mark Zuckerberg, Michael Bloomberg, George Soros or the Waltons. Such comparisons are admittedly imperfect, as Alexander Berger of the Open Philanthropy Project noted on Twitter:

I never really know how to think about counterfactuals on this stuff — would indexing have happened w/o Bogle, windows/office software w/o Gates/Microsoft, whatever FB is without FB/Zuck. Hard for me to model clearly.

It’s especially hard to think about Facebook and Zuckerberg. It’s too soon to judge whether Facebook has been a net positive for the world, and Zuckerberg’s philanthropy is just getting going.

But what about Bogle vs. the Sackler family? That’s an easy call. The Sackler name is emblazoned on the walls of museums and universities, but it has become a stain. Read this eye-popping Twitter thread from Patrick Radden Keefe, or better, his New Yorker article, The Family That Built An Empire of Pain.

imagesAnd where on the continuum do we place folks like Herb Kelleher, the founder of low-fare Southwest Airlines, who died earlier this month? Like Bogle, Kelleher created and operated a revolutionary business, a low-cost air carrier that transformed an industry for the better. He saved his customers (as well as the customers of rival airlines) uncountable billions and, just as important, enabled them to go places they otherwise would not have gone. He built a remarkable corporate culture that put his workers first and created enormous value for shareholders as Southwest grew to become America’s biggest airline. Southwest employs 58,000 people, most of them unionized.

How many 21st-century philanthropists can top that?

Debates like these may appear silly but but they’re worth having for a couple of reasons. First, those of us who scrutinize philanthropy need to think about billionaire donors and their foundations in a holistic way. If, as it seems, the Sacklers built their wealth on the suffering of others, no amount of patronage can erase the harm they did. The Rockefeller Foundation can’t be held responsible for the ills of Standard Oil, but the foundation can be expected to do as much good as it can when investing its endowment. (It fails that test.) Indeed, most foundations have failed to learn the simple lesson that Bogle taught — that it’s folly try to beat the market with high-priced investments. Instead, they fritter away tax-advantaged money in pursuit of market-beating returns.

Second, we’re living at a moment when big philanthropy and big business are increasingly under attack — and yes, here I’m thinking of Anand Giradharadas’ Winners Take All, as well as Decolonizing Wealth by Edgar Villanueva. Their searing critiques gloss over the impact of smart philanthropists like Gates and, even more, the considerable good works of responsible capitalists like Bogle and Kelleher. Last year, Villanueva wrote in the Stanford Social Innovation Review:

Colonial dynamics are alive and kicking here in the 21st century, dividing the world into haves and have-nots…The system of capitalism, by its nature, uses wealth as a tool to divide, control, and exploit us.

Seriously? Tell that to the billions of people who have been lifted out of poverty in the last couple of decades by, er, the spread of capitalism. 2018, after all, was the best year in human history.

Yet the belief that capitalism is somehow a morally tainted enterprise seems to me to be widely if not universally shared in the social sector, particularly by younger people. This is lazy and misguided thinking. When it comes to philanthropy — defined, broadly, as the desire to promote the welfare of others — proud capitalists like John Bogle and Herb Kelleher have few peers.


Eighteen months ago, the people who manage the endowment at the John D. and Catherine T. MacArthur Foundation got some bad news: Investments they had made in funds managed by EnerVest, a Houston-based private equity firm that operates more than 33,000 oil and gas wells across the US, had plummeted in value to almost nothing.

The losses were small, relatively speaking — roughly $15 million, a fraction of the foundation’s $7 billion endowment — but they were unwelcome, if only because they called attention to the fact that MacArthur, whose mission is, famously, to build a “more just, verdant and peaceful world,” had taken a financial hit by investing in fossil fuels.

Lesson learned? No.

Despite its stature as a major funder of climate-change solutions, MacArthur continues to finance the fossil-fuel industry, a review of its most recent federal tax return shows. It does so deliberately–that is, by seeking out opportunities to invest in oil and gas, unlike investors who are inadvertently exposed to fossil-fuel companies because they own broad-based index funds that capture the entire stock market.

The MacArthur endowment holds investments valued at well over $200m in at least a dozen private equity firms,* including Enervest, that finance the exploration, production and distribution of fossil fuels, according to MacArthur’s 2017 Form 990-PF. (The full scope of its fossil fuel holdings can’t be determined because many private equity and hedge funds do not disclose what they own.) Some of MacArthur’s funds are invested in western Canada’s oil sands, which have been called the largest–and most destructive–industrial project in human history. The Chicago-based foundation also invests in mining companies, including those that mine coal in the western US and in South Africa; in Dynegy, a coal-burning utility; and in an energy-related hedge fund, the Cayman Islands-based ZP Offshore Energy Fund.

“Sacred cows”

The fossil fuel investments persist even as grant-makers at MacArthur sound alarms about climate change. Just last month, Jorgen Thomsen, director of climate solutions at MacArthur, wrote:

Humanity is in dark, uncharted territory…it is time to invest in bringing together leaders of the fossil fuel, energy, insurance, finance, credit ratings, and transportation industries with climate scientists, geoengineering specialists, and environmental advocates for no-holds-barred discussions about what strides and sacrifices must be made by 2030 to avert planetary catastrophe. All parties—including ourselves—must set aside “sacred cows” to come to terms with what is possible…

His blogpost was headlined It’s Time to Break with Convention.

This month, The Chronicle of Philanthropy published a package of cover stories, which I wrote, about foundations and impact investing. The cover story reports that very few of the US’s very biggest foundations have been willing to align their endowments with their grant-making.

In that regard, MacArthur is typical: The Hewlett, Packard, Bloomberg and Moore foundations, all of them major funders of environmental groups that work to curb climate change, also invest in the fossil fuel industry. Like most foundations, they remain unmoved by the GoFossil Free campaign launched by activist Bill McKibben,, the Sierra Club and Greenpeace in 2012 or by Divest-Invest: Philanthropy, a coalition of foundations that calls on other grant-makers to replace their investments in fossil fuels with investments in climate solutions.

Ellen Dorsey, a leader of Divest-Invest and the executive director of the Wallace Global Fund, is dismayed that major funders have declined to divest fossil fuels and reinvest in clean energy. By email, she told me:

Foundations should not be investing their endowments in industries driving the crises that they are asking their grantees to solve. Foundations are not just ‘any’ investor. They are driven by their mission. They receive charitable tax status to serve the public good. If their investments are harming the public good, they have mission level responsibility to act. If those same investments are financially poor, they are failing in their fiduciary duty, as well. If you are invested in fossil fuels, you own climate change.

She added:

Investing in fossil fuels is not only morally bankrupt, it’s financially bankrupt. The traditional energy sector has been one of the worst performers of the S&P500 for five years running, and in 2018 it was dead last. The shift is structural and one-way. Investors are on notice that the days when fossil fuels delivered strong, stable returns is over.

Dorsey is right that energy stocks have been terrible investments lately, badly lagging the broader markets. Whether that trend will continue is, of course, unknowable. So long us all of us continue to use fossil fuels, energy companies will profit by selling them.

MacArthur’s response

When I asked Andrew Solomon, managing director for communications at MacArthur, for comment, he replied:

We maintain a small allocation in our investment portfolio to a variety of private energy managers using different strategies, including those that invest in oil, gas, and wind. We believe this allocation is a prudent part of an overall diversified investment portfolio. Diversification helps to ensure that our portfolio returns can adequately support our grantmaking across different potential economic and market environments. Specifically, our allocation to private energy can help protect our overall portfolio against the risk of higher inflation.

We always invest with care and consider carefully a manager’s approach to environmental safety, as well as other factors.

Our investment allocation to private energy is independent of our significant commitment – more than $236 million since 2015– to address climate change through our Climate Solutions strategy and through clean energy impact investments.

In a 2015 statement explaining the foundations’s investment approach, Julia Stasch, MacArthur’s president, writes:

Divestment is never to be entertained to assert policy preferences, censure, or political leverage. The circumstances under which the Board might determine that it should divest from certain investments are where a company or government, in which an investment is made, is engaged in (or provides systematic support to regimes that engage in) morally abhorrent activity such as genocide, apartheid, slavery, or systematic cruelty to humans in helpless situations (many activities that may cause social harm do not descend to the level of being morally abhorrent).

In resisting divestment, MacArthur is typical of US foundations. Most manage their endowments the old-fashioned way — that is, to make money any way they can, without much regard for the consequences. MacArthur is is one of the few to have carved out a slice of its endowment — albeit just $19 million — for impact investments that align with its missions.

But, of course, all investments have impact — for better or worse.

By investing in fossil fuels, MacArthur supports the industry that has done more than any other to oppose the climate solutions put forth by the environmental groups that it funds. Its grantees include the Sierra Club, the Environmental Defense Fund, the Nature Conservancy, the Natural Resources Defense Council and the Carbon Disclosure Project.

MacArthur also made the first major grant to The World Resources Institute, a respected, non-partisan, business-friendly, science-based think tank in Washington, D.C. MacArthur has given more than $52m to WRI over the years. And what does WRI say about what it calls sustainable investing?


Institutional investors, banks, and other private sector financial institutions oversee trillions of dollars of investable capital. How they choose to deploy these resources will have a large impact on which companies, technologies, and projects succeed and flourish. In a world where the dynamic challenges of climate change, population growth, resource scarcity, and inequality are testing the earth’s limits and our standards for human well-being, it is crucial that these financial actors allocate their capital in a way that accounts for environmental and social risks and supports sustainable solutions.

WRI has spent five years very prudently working to align its own $40m endowment with its vision for a sustainable future. To inspire others to follow, and provide practical guidance, WRI published an excellent report called Learning by Doing: Lessons from from WRI’s Sustainable Investing Journey. One can only hope that WRI sent copies to all its funders, including MacArthur.

To be sure, managing the $7bn MacArthur endowment is more complex than managing the $40m WRI endowment. In a 2017 blogpost, WRI notes that “there are still not enough high-quality investment products to meet demand to fulfill a fully diversified, global, multi asset-class portfolio—the type most institutional asset owners demand.”

But, whatever obstacles remain, it seems past time for the big climate funders like MacArthur to at least begin the process of aligning their endowment with their missions and values, and to explain why they are doing so. They need not go all the way to divestment, but must they invest in some of the dirtiest fossil fuel projects on the planet? The question answers itself.

As for the argument that sustainable investing will damage returns, the evidence increasingly points the other way. In a 2016 blogpost, WRI says: “When evaluated across multiple funds and time periods, sustainable investing exhibits a largely neutral – and oftentimes positive – impact on financial performance.” Some of the world’s most successful investors, including Warren Buffett and David Swensen, say that institutions, including foundations, are making a mistake when they try to beat the markets with actively-managed investments. (See my 2017 blogpost, Warren Buffett has some excellent advice for foundations that they probably won’t take.)

Pay for performance?

MacArthur’s financial performance, it turns out, is decidedly average. Foundation Financial Research, a startup company that compiled the first comprehensive database of foundation endowment returns, estimates that the MacArthur endowment generated annualized returns of 8.4 percent for the five-year period ending in December 2017. That places the foundation in the 40th-60th percentile of all foundations. MacArthur did slightly better than the average for all foundations during that period and slightly better than a peer group of larger foundations that pursued a similar investment approach, according to Foundation Financial Research. Different time periods would, of course, produce different results.

Lately, MacArthur has performed well. “Our 2017 returns, posted to our website, were 16.7 percent, which puts us in the 94th percentile for that year compared to a broad universe of foundations maintained by Cambridge Associates,” McArthur’s Andrew Solomon wrote.**

True enough, but the Wallace Global Fund did better. Ellen Dorsey tells me: “Our foundation had returns of 21.6% in 2017, 100% divested, over 16% in climate solutions, and with an additional carve out for mission investments where we accept lower than market returns. We did so well that we put our year end earnings right back in to grants for 2018–doubling our grant budget for action on climate and democracy.”

One final point: MacArthur’s investment costs are not trivial. Private equity and hedge fund managers charge steep fees. Its investment managers are well paid, too.

On its IRS returns, MacArthur reports that total compensation for Susan Manske, the foundation’s chief investment officer, including performance bonuses, was set at $1.9m in 2017, $1.9m in 2016 and $1.6m in 2015–more than MacArthur’s president, Julia Stasch. Four managing directors in the investment office were paid between $900k and $1m, including performance bonuses. The compensation figures includes unvested incentive compensation, which may not be paid because it is subject to a substantial risk of forfeiture based on future returns, according to MacArthur.

To sum up: MacArthur pays its asset managers generously for generating average returns while investing in ways that make a planetary catastrophe more likely.

Note to self, MacArthur: It’s time to break with convention.

*Here is my incomplete list of private equity funds owned by MacArthur, with descriptions drawn from their websites:

ARC Energy Fund (Canadian oil and gas), Blue Water Energy Fund (oil and gas), Camcor Energy Fund (western Canada oil and gas) Encap Energy Capital funds (equity capital for US oil and gas), ENR Partners (upstream, oilfield service, energy, power, oil and gas sectors), Kerogen Energy Fund (international oil and gas), Natural Gas Partners, NGP Natural Resources (oil and gas), Quantum Energy Partners (North American oil and gas upstream, midstream, oil field service, and power generation sectors), Resource Capital Fund (mining, including coal), The Energy and Minerals Group Fund (oil and gas, possibly coal)

While much remains hidden — hedge funds based in the Cayman Islands make limited disclosure, to say the least — MacArthur is more transparent than most foundations about its portfolio. Try to figure out what Bloomberg owns–you can’t.

**The Cambridge benchmark is neither broad-based nor transparent. Foundation trustees who rely on benchmarks provided by the executives who are being benchmarked aren’t doing their job.

Reading is one of my life’s great pleasures. Here are the books that I read this year.

Consider the Lobster by David Foster Wallace. A mind-bending collection of journalism and essays about conservative talk radio, September 11, John McCain’s 2000 presidential campaign, Tracy Austin’s tennis career and the ethics of boiling large numbers of lobsters alive.

Evicted: Poverty and Profit in the American City by Matthew Desmond. A sociologist lives among the poorest of the poor in Milwaukee, compiles 5,000 single-spaced pages of notes and turns them into this powerful and depressing book. His sobering conclusion: “This degree of inequality, this withdrawal of opportunity, this cold denial of basic needs, this endorsement of pointless suffering–by no American value is this situation justified. No moral code or ethical principle, no piece of scripture or holy teaching, can be summoned to defend what we have allowed our country to become.” Solutions, though, are hard to come by.

The Gene: An Intimate History by Siddhartha Mukherjee. Very hard to follow, let alone understand and recall, perhaps because my grounding in biology and chemistry is poor. What stuck with me: More of us that we imagine, it seems, is scripted by our genes.

The Arm: Inside the Billion-Dollar Mystery of the Most Valuable Commodity in Sports, by Jeff Passan. Every winter, I read a baseball book. This was a good one. Somehow, Passan made me care about forgettable major leaders like Daniel Hudson and Todd Coffey.

The Wizard and the Prophet: Two Remarkable Scientists and Their Dueling Visions to Shape Tomorrow’s World, by Charles C. Mann. The lives of Norman Borlaug and William Vogt, who defined the terms of the debate about whether a finite planet creates limits to growth. My takeaway: Ingenuity and well-regulated markets can overcome so-called planetary limits, if we get the politics right. Right now, we’re failing.

The Flamethrowers by Rachel Kushner. A young woman known only as Reno—she’s from Nevada—sets a land-speed record at the Bonneville Salt Flats, explores the downtown art scene in New York in the 1970s and follows her lover to Italy where she falls in with revolutionaries who resemble the Red Brigade. Kushner’s prose and powers of observation carried me along.

Enlightenment Now: The Case for Reason, Science, Humanism and Progress by Steven Pinker. The world is getting better in so many ways, except where it isn’t. The threat of climate change casts a cloud over this otherwise sunny account of how how science and rationality have improved the lives of billions.

A Thousand Hills to Heaven: Love, Hope and a Restaurant in Rwanda by Josh Ruxin. See my blogpost, A little bit of heaven in Rwanda.

A Thousand Hills: Rwanda’s Rebirth and the Man Who Dreamed It by Steven Kinzer. Solid but unspectacular, this is the story of how today’s Rwanda emerged from the genocide of 1994. A bit dated.

Small Great Things by Jodi Picoult. A timely, fast-moving, well-plotted novel about race in America. It’s told through the eyes of an African-American nurse, the lawyer who defends her when she is accused of a crime and the white supremacist whose hatred sets the story in motion.

Killers of the Flower Moon: The Osage Murders and the Birth of the FBI by David Grann During the 1920s, Osage Indians living in Oklahoma become fabulously rich when oil was discovered on their land. Then they began dying mysterious deaths. A shocking and appalling saga, coming soon to the big screen.

How to Change Your Mind: What the New Science of Psychedelics Teaches Us About Consciousness, Dying, Addiction, Depression and Transcendence by Michael Pollan. The writer of The Omnivore’s Dilemma drops acids, chews mushrooms and even ingests the venom of a desert toad while researching the history, science, politics and potential of mind-altering drugs. Fascinating throughout, this is the best book I read in 2018.

Bad Blood: Secrets and Lies in Silicon Valley Startup by John Carreyrou. The Wall Street Journal reporter who exposed the fraud that was Theranos explains how the charismatic Elizabeth Holmes fooled a lot of supposedly smart people for a very long time, until she didn’t. A page-turner about gullibility, among other things.

Strength in What Remains: A Journey of Remembrance and Forgetting by Tracy Kidder. The harrowing journey of a young medical student named Deo from war-torn Burundi to the streets of New York and, eventually, back to Africa, all of it beautifully told.

The Beatles by Hunter Davies. The only authorized biography of the Beatles, published in 1968, with a new introduction. A entertaining trip down memory lane.

Shoe Dog by Phil Knight. A candid look at the early days of Nike. Better than you’d expect.

Less by Andrew Sean Greer. When a middle-aged gay writer learns that his lover is marrying someone else, he sets off on a round-the-world trip to avoid the wedding. Hilarity ensues during his journey of self-discovery. Winner of the Pulitzer Prize.

Fun Home: A Family Tragicomic by Alison Bechdel. The first and only graphic novel that I’ve read. Loved it.

Robin by Dave Itzkoff. A thoroughly-reported biography by a New York Times reporter brings back to life the manic brilliance of Robin Williams, as well as his struggles with addiction and depression. Engaging and intimate.

Winners Take All: The Elite Charade of Changing the World by Anand Giridharadas. This delectable skewering of philanthropic and corporate elites is never boring, and it makes an important but hardly surprising point–that rich and powerful people mostly want to preserve the status quo. Giridharadas argues that governments, not markets, will solve tough social problems, but his analysis doesn’t go deep.

Ten Restaurants That Changed America by Paul Freedman. How did today’s restaurant scene come to be? Freedman, a Yale prof and medieval historian–huh?–writes that much of our dining-out culture can be traced to a small group of influential establishments, from Schrafft’s and McDonald’s to the Four Seasons and Chez Panisse. (What, no McDonald’s?) Debate his choices if you like, but enjoy this cook’s tour of iconic American eateries.

Let Me Be Frank With You by Richard Ford. It’s Christmas season, and in the aftermath of Hurricane Sandy, hard times have befallen Frank Bascombe, the writer turned real estate agent who first appeared in a wonderful 1986 novel, The Sportswriter. Three books and decades later, Frank is older and wiser but not as endearing or amusing as he used to be, as he ruefully ponders the meaning of it all.

Just Giving: Why Philanthropy is Failing Democracy and How It Can Do Better by Rob Reich. A Stanford professor puts forth a political theory of philanthropy, and suggests ways in which it could become more democratic. He argues, rightly, that philanthropy is an exercise of power and thus needs more critical scrutiny.

On my list for 2019 are Asymetry by Lisa Halliday, the new biography of Frederick Douglas by David Blight and The Overstory by Richard Powers. Other recommendations are most welcome.

Happy new year, friends!

My wife Karen Schneider and I gave about eight percent of our pretax income to charity in 2018. The Life You Can Save, a nonprofit inspired by the moral philosopher Peter Singer, has a calculator that recommends the percentage of your income that you should give.

I’m writing about our giving because (1) I’m a believer in transparency, (2) I’d like to influence readers to be more thoughtful and intentional about their giving, and (3) I’d like to encourage others to talk about their charitable giving, both to promote more giving and so that we can learn from one another. I have friends who will talk for hours about politics or religion or family, but when I ask them about their charitable giving, they clam up. I’m not sure why. You don’t have to disclose dollar values. Just talk about why and where you give.

This year, our biggest single donation went to the Astraea Lesbian Foundation for Justice, which supports grassroots advocates for LGBTQI human rights around the world. Karen was the driver behind this gift, but we both know and like Astraea very much. We get an insider’s view because our daughter Sarah Gunther works as director of philanthropic partnerships at Astraea. It’s hard to measure advocacy, but easy to know that it matters: The US campaign to secure marriage equality for gay people has been cited as one of the great philanthropic victories of recent times, according to scholar Ben Soskis.

Our next biggest gift went to GiveDirectly, which makes unconditional cash grants to extremely poor people in Kenya, Uganda and Rwanda. Give Directly has become my favorite charity; last spring, during a trip to Rwanda, I had the opportunity to see how the organization operates in the field and talk to recipients. I could say a lot about GiveDirectly, but my biggest takeaway from the Rwanda trip was this: The money that middle-class or upper-class people in the US spend on a few restaurant meals, or for a single night in a nice hotel, is enough to make a meaningful difference to the life of a poor person in Africa. (Details, here.) I love the idea of simply giving money to people, and letting them decide what they need. GiveDirectly is more efficient than most charities (91 cents of every donated dollar ends up in the hands of the poor) and, importantly, cash transfers have the potential to influence global aid by providing a benchmark against which other programs can be measured. [See my story for The New York Times’ Fixes column, headlined Is Cash Better for Poor People Than Conventional Foreign Aid?] I’ve met Paul Niehaus and Michael Faye, two of the co-founders of GiveDirectly, and I have confidence that they will spend donor dollars wisely.

Next on my giving list is GiveWell. GiveWell, as you may know, is a donation platform that identifies and analyzes effective charities in great depth. It is a much-needed reminder that good intentions are not enough reason to support a charity. [See my blogpost about More Than Me for a horrifying story of what happens when good intentions go awry.] If you want to do the most good you can for each dollar that you spend on charity, GiveWell is essential. Shaped by the effective altruism movement, it drives many millions of dollars to its top charities.

Another significant donation of mine (though not Karen’s) went to Animal Charity Evaluators. Animals raised for food suffer terribly; Animal Charity Evaluators examines nonprofits that advocate on their behalf. Animal Charity Evaluators will deliver most of my donation to its top charities, which include Animal Equality, the Albert Schweitzer Foundation, the Good Food Institute and the Humane League. All do excellent work.

Another major donation went to Adat Shalom Reconstructionist Congregation. In this, we are like most Americans; religion was the biggest category of individual giving last year, reports Giving USA. My religious beliefs and synagogue community fuel much of my work and guide much of my life.

Karen chose the other groups to which we made significant donations. They include the Unitarian Universalist Service Committee, where she was a board member for six years and which supports grassroots human rights groups around the world, and the National Network of Abortion Funds, which provides access to abortions for low-income women.

In the aftermath of the Pittsburgh synagogue shootings, we made a donation to HIAS, a nonprofit that was founded in the 19th century to help Jews fleeing pogroms in Russia and Eastern Europe. HIAS now supports refugees and immigrants.

We made smaller donations to nonprofits where friends work or volunteer. They include the Torture Abolition and Survivors Support Coalition, Yachad, The Life You Can Save, the Center for Climate Change Communication, the International Rescue Committee and the Agahozo-Shalom Youth Village in Rwanda. I’m also a fan of Village Enterprise, Water for People and The Bail Project.

You may not share our desire to give most of our money globally or to support the animal welfare movement. (Most people don’t.) If, instead, you would like to support charities that work on health, poverty, education or disaster relief in the US, the Center for High Impact Philanthropy publishes an excellent guide. The Life You Can Save also has wide range of top charities that they have vetted, but most work outside the US. If you

Whatever you do, please give what you can and do so thoughtfully. You’ll feel good knowing that you are helping others in need.

*Our giving in 2018 was similar to our giving in 2017, so some of the language is this blogpost is adapted from last year’s post.