Is too much money tied up doing too little?

Recently Lankelly Chase, one of the country’s largest charitable foundations donating some £13 million a year took the decision to wind itself up and distribute its funds over the next 5 years.

The view taken by the charity’s trustees was that the traditional philanthropy model is so entangled with Colonial Capitalism that it inevitably continues the harms of the past into the present.

Personally I don’t understand the bit about colonial capitalism. Lankelly Chase was founded in the late 1960s on the back of fortunes made in the London property market. I fail to see where the colonialism part comes in and without capitalism generating wealth there wouldn’t be much philanthropy at all.

However I do have sympathy with view that the traditional philanthropy model based on endowment funded foundations may not always be that efficient.

Charities, including endowments should be agents for change with a clear vision of the better world they want to be a part of and a mission to get there. Some engage directly, providing services, running projects and engaging in advocacy whilst others engage indirectly funding others to effect the change they believe in.

The latter group includes endowments; charities with substantial invested capital which make grants annually representing a small portion of their value.

There are many good reasons why philanthropists set up endowments but there can also be good arguments for unwinding them. For example a wealthy parent may set up a family charitable trusts to be run by their descendants to inculcate in them a sense of social responsibility but what happens when the family is no longer interested? What about endowments set up to support organisations that themselves have ceased to exist? I once came across one established a long time ago to support indigent governesses. It couldn’t find any beneficiaries.

Far too many endowments are rather precious about themselves, seeing themselves as perpetual entities. Yes. well run ones will regularly review their mission focussing their giving on some particular problem. Frequently, in their literature you will read that “for the next 5 years we will fund charities focussing on ….”, but they will only be spending a small portion of their wealth every year. Do they really need to go on for ever? Wouldn’t they achieve far more spending down over a fixed term? They should all ask themselves form time to time what their charitable objective is (self perpetuation not being a charitable objective) and consider whether their spending commitment is appropriate to achieve that objective or whether by spending down they might improve their chances of actually achieving it.

There are also endowments, especially older small to mid-sized ones, which spend only their income, carefully preserving their capital for the future. By the time they’ve paid their auditors, investment managers and other governance costs there isn’t much left to do good. Often they seem more like memorials to their founder than vehicles for public benefit.

In the United States charities need to spend at least 5% of their funds on charitable activities each year to get tax relief. A rule like this would be viewed with horror by many smaller endowments here.

Imagine instead a world where endowments actually believed that they could succeed in making a real difference somewhere; a world where they believed in what they were doing and had faith that it could be achieved. A world where they have a clear theory of change for success to happen and, just an importantly, a clear timeframe in which to achieve it.

No Foundation, however large can sort all the worlds wrongs but the more focussed they are the bigger the difference that they can make becomes. They could be spending their money today dealing with todays problems. Allow tomorrows problems to be dealt with by future generations of wealth creators. Warren Buffet has left his fortune to charity stating that he wants his wealth spent within 8 years of his death. A good exemplar.

I’ll end with an old story familiar to many of you.

As a man was walking along a beach when he saw a young boy bending down, picking something up and throwing it into the water. As he approached closer, he saw that the boy was picking up starfish that had been washed up on the beach and, one at a time he was throwing them back into the water.

The man asked the boy what he was doing, the boy replied,"I am throwing these washed up starfish back into the ocean, or else they will die”. "But", said the man, "You can't possibly save them all, there are thousands on this beach, and this must be happening on hundreds of beaches along the coast. You can't possibly make a difference.”


The boy looked down, frowning for a moment; then bent down to pick up another starfish, smiling as he threw it back into the sea. He replied, "I made a huge difference to that one!"