During this week’s forum on donor intent, Scott Walter and Eduardo Andino have both pointed out the ways in which donor intent has been violated in perpetual foundations based on the historical accounts chronicled in my book, How Great Philanthropists Failed and How You Can Succeed in Protecting Your Legacy.
Based on these lessons of history, I believe the best way for donors to ensure that their intent is followed is to create foundations with a term limit, preferably no more than 25 years after the death of the founder.
Nonetheless, it is important to also mention the ways in which donor intent has been preserved in perpetual foundations. I have six case studies in my book, with the Daniels Fund and the Conrad N. Hilton Foundation being outstanding examples.
The two foundations have approached donor intent in different ways. The Daniels Fund, a regional charity based in Denver, derives its wealth from the fortune created by cable TV entrepreneur Robert William “Bill” Daniels (1920-2000). The Conrad N. Hilton Foundation is a family foundation founded by hotel magnate Conrad N. Hilton (1887-1979) that will also receive the fortune of Hilton’s son, Barron Hilton (born 1927) when the younger Hilton dies.
Both Conrad Hilton and Bill Daniels were conservatives who decided to primarily devote their foundations to causes other than politics. Conrad Hilton spent two terms in the New Mexico state legislature in 1912 and 1913 as a Republican, and gave $250 to Ronald Reagan in his failed effort to defeat Gerald Ford in the 1976 presidential contest. But Hilton is not known to have made any other political contributions or tried to change public policy in a partisan way.
Bill Daniels was an active Republican who ran, and lost, a race for governor of Colorado in 1974. He gave six-figure donations to at least two Republican presidential campaigns and sponsored a campaign event for George H.W. Bush in 1987 and a charitable event hosted by First Lady Barbara Bush in 1990. In addition, Daniels hired Neil Bush, son of George H.W. Bush and brother of George W. Bush, to head Daniels and Associates’ Houston office for two years.
In 2003, President George H.W. Bush wrote a preface to a biography of Daniels commissioned by his estate. “If one were to ask me to name someone who exemplified the dynamism of America in the twentieth century,” President Bush wrote, “I’d be hard-pressed to come up with a better example than my old friend, Bill Daniels.”
But the foundations Hilton and Daniels created have as their primary goals fighting poverty rather than advancing a partisan agenda.
In Hilton’s case, his views in giving were informed by his devout Catholic faith. Hilton wrote in his deed of trust to support Catholic Sisters, “who devote their love and life’s work for the good of mankind.” The Conrad N. Hilton Fund for Sisters, as of 2016, had an endowment of $170 million and makes grants of $7.5 million annually.
Bill Daniels declared in his deed that the Daniels Fund could not give money to cultural organizations. “Most of my giving does not match with symphonies, art, and opera,” he wrote in his deed of trust. “I am just not into that. I am helping people who need help, who are hungry, unclothed, in trouble.”
The Daniels Fund’s method of poverty fighting received an endorsement from the liberal National Committee for Responsive Philanthropy in 2014 for its programs that helped the poor, the old, the disabled, and drug addicts. “The foundation’s spread-betting (in poverty-fighting) represents a responsiveness rare among larger funders,” noted Kevin Laskowski, who added that the fund should also be commended for “the seriousness with which it approaches its connection with its founder.”
But shortly after Bill Daniels’s death in 2000, the foundation began to drift. Program officers were given unlimited authority to approve grants under $100,000 and did not have to reveal any rejections. This led to these officers routinely giving grants of just under $100,000 to organizations they favored and rejecting grants to organizations that Bill Daniels would have supported.
For example, these program officers routinely turned down grants from the Boy Scouts because of their stance at the time against homosexuality, even though Daniels was an enthusiastic supporter of the Scouts. They also, as Evan Sparks reported in Philanthropy magazine, rejected requests from the National Air and Space Museum to restore World War II airplanes, even though Bill Daniels was a World War II and Korean War veteran who downed 11 Japanese airplanes as a naval aviator, which earned him the Distinguished Flying Cross and the Navy Cross. Despite Daniels’s heroic record, the program officer said that it was Daniels Fund policy not to support programs that “kill people.” A second request from the museum to restore some of the airplanes that Daniels flew was rejected because the program officer said the fund did not support programs that preserved “instruments of war.”
In 2003 the Daniels Fund fired 21 employees and closed several regional offices. The board now approves all grants and sees all rejections. In 2005, the Daniels Fund gave a $3 million grant to the National Air and Space Museum, which has a section of its Sea-Air Operations Gallery describing Daniels’s career.
The fund now has all employees sign a document where they agree “to set aside personal views or preferences when acting on behalf of the Daniels Fund.” The contract concludes, “I am committed to Bill Daniels’ donor intent and I understand the seriousness of this endeavor.” In addition, the primary topic of one board meeting each year is about donor intent.
The Conrad N. Hilton Foundation has never had a crisis comparable to the Daniels Fund between 2000-2003, but they have acted to preserve donor intent in several ways. In 2005, the foundation’s bylaws were changed so that Conrad Hilton’s descendants would always be in the majority. Board members must sign a document saying, “The Board’s 1982 Statement of Purpose held that it considered the Will ‘a sacred trust to be honored to the extent possible.’ All directors formally commit in writing to honor the spirit and sentiment expressed in the Will.”
In 2014, a clause was added to the Hilton Foundation’s Articles of Incorporation, stating, “The corporation will make distributions and conduct activities in accordance with the philosophy of Conrad N. Hilton, which philosophy includes Conrad N. Hilton’s religious, ethical, business, and conservative beliefs.”
The cases of the Conrad N. Hilton Foundation and the Daniels Fund show that donor intent can be preserved, with strenuous effort on the part of the board members and program officers who act in their founder’s name.