At a time of year when people traditionally assess how they can help those in need, charitable foundations would also do well to ask themselves some searching questions: Are they still valuable institutions - or have they outlived their usefulness? Is the spirit of charitable foundations still willing, but the structure weak?
Over the next few years, foundations certainly will have the resources to make an impact. By the year 2010, the assets of American foundations are projected to grow to $800 billion, roughly a fourfold increase since 1994. This fall, the House of Representatives overwhelming passed the Charitable Giving Act, which will further provide charitable foundations with tax advantages.
But despite this progress, are charitable foundations really helping to improve society? Collecting and disbursing money is something that government, a United Fund, or an individual patron can do. But foundations fulfilling charitable goals should not just be a matter of showing generosity. At the very least, foundations should be leaders in innovation, experts in identifying challenges and opportunities, and willing servants in the catalyst for change.
The charitable foundation has entrepreneurship in its bloodlines. It was created at the turn of the 20th century by captains of industry who had devised or adopted new technologies and production methods to build railroads, manufacture goods, and marshal resources on an unprecedented scale.
The new capitalist class applied the same innovative mind-set to sharing their wealth that they had used in creating it - and broke taboos while doing so. Leland and Jane Stanford, for instance, applied the principles of seeding and leveraging when they founded Stanford University in the 1890s. From the start, the university admitted women - in contrast to most elite schools of that time. Other early philanthropists took risks, such as the Sarah Mellon Scaife Foundation when it backed Jonas Salk's use of a live virus to develop a polio vaccine.
Over the years, charitable foundations have also introduced management innovations. When Andrew Carnegie gave the money to build and stock 2,500 libraries around the world, in almost every case the municipalities had to bear operating and maintenance costs - entrenching the concept of free public libraries. The present day Silicon Valley practice of "renting" CEOs for start-ups was introduced over 30 years ago by the Robert Wood Johnson Foundation, when it needed proven administrators for short-term pilot programs in healthcare. …