It’s often frustratingly difficult to find basic information on foundation boards: their size, their structure, and their composition, for example.
At CEP, we’re frequently asked by foundation CEOs and board members for help finding this kind of benchmarking data. So my colleagues Ellie Buteau and Jennifer Glickman drafted, with help from our colleagues at BoardSource, some questions about governance to include as part of a larger benchmarking survey we fielded to leaders of large, private U.S.-based foundations earlier this year. (Support for that effort, which also included questions on investing practices and perpetuity, was provided by the S.D. Bechtel, Jr. Foundation.)
The report we are releasing today, Benchmarking Foundation Governance, is a straightforward reporting of the data — no analyses or interpretation. Unlike in our study on foundation governance a decade ago, we did not seek here to determine which practices were more or less effective. But we believe the data in this report can serve as a valuable resource to foundations as they consider their own board’s structures and practice.
The data points raised some questions for me as I examined the information that my colleagues collected, which is based on survey responses from CEOs of 64 U.S.-based private foundations making $10 million or more in grants annually.
First, I was interested to see that, in addition to the 53 percent of responding foundations that compensate some or all of their board members, 39 percent provide board members with discretionary funds from which they can make grants with little or no staff involvement. The median amount for these discretionary funds was $50,000 and a quarter receive $100,000 or more each. This is a serious perk for board members, especially when some are also compensated. Is this practice of providing board members discretionary funds really necessary to attract strong board members? What might be the pros and cons of doing this?
Second, I was interested to see that, while 59 percent of boards delegate approval authority to staff for grants below a certain dollar amount, the rest approve every grant. Moreover, even for those that do delegate approval authority to staff, the median threshold is just $125,000. I have argued before that foundation boards would be well-served to do less discussing of individual grants. Too often, grants get discussed in the absence of clarity on goals and strategies, and, ironically, more resources are wasted than if the board delegated more grantmaking authority to staff — but with greater clarity about the criteria and logic that should guide them. What’s stopping foundation boards from delegating more grantmaking authority to staff?
Third, a minority of foundation boards — 48 percent — report completing a self-assessment during the past three years. This strikes me as an important missed opportunity for boards to take stock of how they’re doing — and to prompt discussions about how they might get better. With a high-quality, relatively inexpensive instrument available from BoardSource, my hope is that this will change in the years ahead. Why aren’t more foundations taking stock of their own effectiveness through a self-assessment process?
Fourth, and finally, I was struck by how little time, at the median, foundation boards spend actually meeting. The median respondent reported four board meetings a year with a median length of four hours. But there are a significant number of boards that have chosen to have longer meetings — a quarter report their typical meeting is 10 hours or more. I wonder if they might be on to something. Obviously, meeting time does not count all the ways board members engage individually and through their committee service, but I wonder if four hours together four times a year is sufficient time for board members to meaningfully engage, as a full board, with the important strategic questions facing the foundations they govern? Is 16 hours a year in full board meetings enough?
These are just a few of the many questions raised by the data we are releasing today. I don’t purport to have the answers.
In addition, we at CEP would be the first to admit that there is much more data on foundation boards that could and should be collected. Questions about racial and other forms of diversity on boards, for example, are among the ones we’d be interested in exploring in the future. (We included questions on racial diversity in our survey, but there was too much missing data because some foundations chose not to complete them, and we were not comfortable reporting on the small sample size we did collect.)
If you believe, as I do, that foundations matter — that they can play a crucial role other actors in our society can’t or won’t — then surely foundation boards matter, as well. It is foundation boards that assess the performance of the institutions they govern — and of their CEOs. It is foundation boards that set or endorse goals and strategies. And it is foundation boards that ensure endowment assets are well-managed — and make crucial decisions about those assets, such as whether to exist in perpetuity or spend-down, or whether to consider programmatic goals when investing the endowment.
We hope the data we share today sparks discussion, debate, and reflection that leads to better foundation governance.
Download the report for free here.
Phil Buchanan is president of CEP. Follow him on Twitter at @PhilCEP.