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Why Transparency is Essential for Big Philanthropy

Over the past decade, the super wealthy have come under heavy fire for giving most of their money away.

On the face of it, this seems counterintuitive. Who can argue with the charity of generous philanthropists? 

Many can. Because the common denominator of much of Big Philanthropy is a lack of transparency. 

Wealthy philanthropists benefit greatly from the tax breaks of charity vehicles. They also receive public adulation for their grandiose gestures of giving, even when no details are offered.

Are they actually making a difference? Or just standing in the way? Hard to know. Sunlight is the best disinfectant, but much of Big Philanthropy operates in darkness.   

Climate change. Social unrest. Divided government. The relentless spread of income inequality. The “death by a thousand cuts” defunding of public programs. And, of course, a historic pandemic. All of this has placed ever more hope for billionaire philanthropists to solve the world’s problems. 

If the future of the world is really in the hands of the ultra-wealthy, doesn’t the public deserve to understand what they’re doing to save us?

We can’t assess or participate in the work of Big Philanthropy if it’s shrouded from view. And research shows that philanthropy can’t achieve true impact without collaboration and transparency. 

That’s why many believe that if the ultra-wealthy don’t feel accountable to be open and cooperative around their giving, they don’t deserve the benefit of the doubt. 

From these seeds of distrust and discontent, the movement around transparency in philanthropy has been growing stronger. This transparency movement has spawned organizations such as the Transparency, Accountability, and Participation Network, spurred efforts such as The Transparency and Accountability Initiative, and led to a fundamental change in the way that many foundations choose to operate and communicate.  

Where did Big Philanthropy go wrong?

When Bill Gates and Warren Buffett launched the Giving Pledge in 2010, the country was enthralled. A new breed of ultra-wealthy philanthropist would commit to give away the majority of their wealth while still living? Game-changing! 

Early Giving Pledgers like Bill Ackerman, Sue Ann Arnall, and Lyda Hill professed not only their enthusiasm but “relief” at the opportunity to dispense with all of their wealth. The future of philanthropy was bright. 

But enthusiasm for the Giving Pledge has curdled into disappointment and recrimination. 

Even before a pandemic and economic collapse threw the stakes into stark relief, the Philanthropist Saves the World superhero perception was being harshly reexamined. 

“We got this,” was the attitude of some lip-service Pledgers, who signed the Giving Pledge only to divert their wealth to private family foundations with, literally, hidden agendas. 

The disconnect between the public posturing and potential self-dealing of some Pledgers stained public opinion. Even one of the Giving Pledge’s own 204 signatories has admitted that the pledge “isn’t growing as rapidly as we had hoped.”

The Chan-Zuckerberg Initiative, which was formed as an LLC instead of a nonprofit, has also faced heavy criticism. Untethered to a nonprofit’s requirements for transparency, the initiative is free to make political donations and isn’t bound to give away five percent of its value every year. 

The argument for the LLC structure is that it allows the organization to take time to develop long-term solutions to problems. The objection is that this gives Chan Zuckerberg the halo effect of Big Philanthropy without opening itself up to scrutiny or the opportunity for real collaboration. 

The slogan ‘Every billionaire is a policy failure,’ created by the advisor to Rep. Alexandria Ocasio-Cortez, encapsulates the disenchantment with relying on the richest people to fix the world’s biggest problems. This camp believes that government can best address our problems and that billionaires should not be allowed to defray their tax obligations through their own charity vehicles. Greater transparency and collaboration amongst ultra-wealthy philanthropists would help counter this argument.  

As noted in a report by the Transparency and Accountability Initiative, there are several related problems that spring from a lack of transparency and accountability in giving:

1. The ‘efficiency problem’: when aid is opaque and unaccountable, funds are more likely to go astray (through corruption or inefficiency) between donors and the ultimate or intended beneficiaries. 

2. The ‘effectiveness problem’: when aid is opaque and unaccountable, it is harder for donors to coordinate their efforts, for recipients to plan ahead and for those affected by aid to suggest ways to improve outcomes. 

3. The ‘empowerment problem’: opaque and unaccountable aid reinforces relationships between donors and recipients that are disempowering, and prevents aid recipients from taking control of the development process. 

This doesn’t even account for the huge PR problems with a lack of transparency.

Secretive operations is why ­Big Philanthropy is often a Big Disappointment. The counterpoint to this disappointment is the transparency movement. 

Transparency strengthens trust and impact

The Transparency, Accountability, and Participation (TAP) Network is a center of the transparency movement. TAP is an international coalition of civil society organizations working towards SDG16+ (Sustainable Development Goals) and the 2030 Agenda of the United Nations. TAP Network “Partners” are organizations that take part in the substantive work of the TAP Network and make explicit commitments to implementing SDG16 or towards accountability for the 2030 Agenda.

The most important donor collaborative within the TAP space is the Transparency and Accountability Initiative (TAI). TAI represents the most active donors in the TAP space and have funded such important TAP organizations as Transparency International, the International Budget Partnership, the Natural Resource Governance Institute, the Open Contracting Partnership, and initiatives such as the Open Government Partnership and the Extractives Industry Transparency Initiative. 

Caption: Glasspockets is a strong advocate for greater transparency in philanthropy

Candid, the merger of The Foundation Center and Guidestar, runs an initiative called Glasspockets, which strongly advocates for increased transparency in philanthropy. Glasspockets articulates the benefits of transparency in giving this way: 

  • Strengthened foundation credibility
  • Increased public trust
  • Improved relationships with grantees and regions served
  • Reduced duplication of effort among foundations that care about the same issues
  • Facilitation of greater collaboration and collective problem solving
  • Cultivation of a community of shared learning among foundations

Recent research from GuideStar further demonstrates that transparent philanthropic organizations tend to be stronger organizations and that donors give more to transparent nonprofits.

Many foundations have recognized the need for greater transparency and have pulled back the curtains on their operations. Organizations such as the Center for Effective Philanthropy, Inside Philanthropy and NCRP’s Philamplify support this trend by encouraging greater analysis and cooperation around grantmaking so that a foundation’s efforts is better positioned to create impact.

Still, the majority of Big Philanthropy remains cloistered in its own world. Only a small percentage of the thousands of foundations in the U.S. have submitted profiles on the Glasspockets website. Only ten percent of foundations even have a website.

As an entrepreneur whose focus revolves around transparency in giving, I hope that more of Big Philanthropy joins the global movement towards transparency, accountability, and cooperation. Big Philanthropy can be a far more powerful force for good in the world, and we need everything we can get. The problems we face are too vast and complex to squander any potential for impact.  

Alex Huff is the CEO of Givvor, a collaborative giving platform that brings automation and sustainability to nonprofit fundraising.

By Alex Huff

Alex Huff is the CEO of Givvor, a collaborative giving platform that brings automation and sustainability to nonprofit fundraising.

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