Introduction
The dust had just settled on year-end giving when the new decade opened with humanitarian catastrophe. Although the logistical challenges of aiding those in Haiti may be severe, philanthropy allows an important – albeit imperfect – way to respond to immense suffering, and a chance to feel as though we have some agency in trying to make the world better. Once we have given to the earthquake relief efforts, it is time to think more broadly about effective philanthropy in 2010 and beyond.
My posts address individual and institutional responses to giving in the downturn and include some philanthropic advice for Lloyd Blankfein, Chairman and CEO of Goldman Sachs, a giving guide for the rest of us, and thoughts on foundation investment strategy. The last post raises questions about the very purpose of charity– and the place of private philanthropy in the larger social contract.
Why Lloyd Blankfein Needs to Step Up
Much ink has been spilled over the bailout to bonus bonanza – how and whether Wall Street executives should be paid when the rest of the country still reels from the recession the bankers unleashed in the first place. The greatest ire has been directed at Goldman Sachs, a firm that benefitted handsomely from the socialized risk for private gain asymmetry.
According to the latest tally, it’s the U.S. 10 percent unemployment, Goldman Sachs, $16 billion in compensation. What follows is a prosperity prospectus: a giving guide for Goldman Chairman and CEO, Lloyd Blankfein, for top-down, standard-setting philanthropy.
First, let’s be clear: charitable giving is no substitute for sector reform. Here, popular fury is better directed at the Administration itself (and the Treasury and Fed) to ensure that the causes of the economic collapse and the flaws of the bailout are investigated and understood, and that appropriate measures are taken to mitigate future crises.
For now, however, the 2009 bonuses are here to stay. They will not be taxed U.K. style at 50 percent, and even places like AIG that have promised to return their non-performance awards have been slow on repayment. For 2010, a glass-is-half-full approach to the Wall Street windfalls could mean a significant cash infusion for hurting charities, and a huge opportunity for meaningful and effective philanthropy.
To be fair, the banks have an impressive philanthropic track record. History tells us that arts and culture have thrived in vibrant financial centers. In New York today, it is not only artistic institutions that benefit from Wall Street largess, but also the city’s state-of-the-art medical centers, public and private schools and libraries, environmental groups, and a large range of basic-needs service providers (whether this is the optimal model for social welfare will be discussed in a later post). Last year’s collapse, however, reveals the fragility of this charitable arrangement.
Take the case of Harlem Children’s Zone (HCZ). Founded in 1997 by Geoffrey Canada to nurture children’s development with programs from birth to college, HCZ grew into a 97-block, $70 million initiative serving 7,500 kids and 4,000 adults. It became one of the country’s highest profile and most widely studied poverty-fighting organizations, and the model for President Obama’s “Promise Neighborhoods.”
Canada’s success has come in part because of the relationships he forged with Wall Street; 20 to 30 percent of his organization’s support comes from financial service philanthropy.
Yet these ties have also rendered HCZ vulnerable. The economic collapse – and plummeting value of many of the firms (and their related foundations) that supported HCZ, including Lehman Brothers, Merrill Lynch, Citigroup, Morgan Stanley and AIG – has jeopardized a significant portion of HCZ’s revenue and threatened to stall its growth or worse still, shutter programs.
HCZ, of course, is not alone. Donations to nonprofits nationwide were down 6 percent in 2008, the steepest decline Giving USA has reported since it started tracking in 1956.
Social service groups were the hardest hit, suffering a decline of nearly 16 percent. Although Giving’s data for 2009 are not yet in, the estimates are grim. The Council of Nonprofits reports that, for most human service organizations, revenues from private and government sources are down severely, while demand for services has surged.
So what does this have to do with Lloyd Blankfein, a man whose personal and corporate philanthropy are among the best in breed? Indeed, no Wall Street institution prides itself more on its ‘citizenship’ than Goldman Sachs.
The firm has a much chronicled record of government service and boasts a strong commitment to local and global philanthropy: The Goldman Sachs Foundation, Goldman Sachs Gives, 10,000 Women, and generous employee volunteer and matching programs.
In 1999, the firm’s IPO created enormous wealth for its partners and spawned dozens of new family philanthropies. A 2007 count of the Goldman family foundations by Portfolio magazine put the list at 155: $1.3 billion in assets, $122 million in giving.
The recent uproar over taxpayer-supported bonuses has led to much hand wringing about the role and responsibilities of Goldman Sachs’ leadership – in the crisis and subsequent bailout, in setting a standard and culture within the firm and the industry for longer term profit horizons, and in stimulating economic recovery beyond the financial service sector.
While Blankfein concedes that his company “participated in things that were clearly wrong” he also contends that Goldman did not need public bailout monies to weather the collapse. Yet the record shows otherwise. Goldman has profited immensely from public subsidies far larger than TARP: guarantees on $30 billion of debt, the ability to borrow cheaply from the Fed, $12.9 billion in payments-in-full from AIG.
Goldman not only survived the crisis, it emerged as an even more dominant force in an industry where many former competitors have either vanished or are struggling to regain a foothold.
Calls for charitable recompense for Goldman’s publicly assisted abundance have taken numerous forms, from a proposed Goldman Sachs Virtue Fund – a kind of for-profit, social capital fund – to a charitable donation of $13 billion, roughly equivalent to its payments from AIG.
In November Blankfein announced Goldman’s 10,000 Small Businesses initiative, a pledge of $500 million dollars – $100 million a year – to provide access for small businesses to financial capital, mentors, networks and business education.
And yet this Small Business Initiative remains a charitable endeavor; nearly 70 percent of Goldman’s revenues and profits come from proprietary trading. This disconnect – not unlike the simultaneous acts of charity and vigorous lobbying to soften the blow of financial service reform – help explain the tepid and cynical responses to the 10,000 Small Business gesture.
So what is Blankfein to do? I’ll answer that question in my next post.
Georgia Levenson Keohane will be a CEP guest blogger from January 25 – February 5, 2010.
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Disclaimers and Disclosures: The views expressed in the CEP blog by guest bloggers are entirely their own and do not necessarily reflect the opinions of the Center for Effective Philanthropy.
