December 2015
By Susan Wampler

What are the appropriate roles of philanthropy in society and how do they intersect? Should foundations be encouraged to sunset, or close their doors, after a certain period of time? The USC Center on Philanthropy and Public Policy (The Center) hosted William E. Simon President James Piereson on November 11 as part of its Conversations on Philanthropy series to discuss these and other compelling topics relating to maintaining donor intent and foundation independence.

Piereson cautioned that “if foundations begin to entangle themselves too deeply with government,” they risk losing their dynamism, independence, and creativity.  After all, the unparalleled financial capacity of the federal government compared to philanthropy creates an imbalance in power that is difficult to overcome.

Although he believes foundations “operate best if they maintain their independence from government,” Piereson emphasized that he is not reflexively against public-private partnerships. “Foundations have actually achieved a lot over the decades in working somewhat in cooperation with government,” he said, pointing to the Simon Foundation’s own efforts, as well as others in supporting charter schools as an example.

“Charter schools are public schools, but we maintain our independence,” he said of the foundation’s process in supporting them. “We go in on our own terms. We come out on our own terms.”

Piereson added that most successful foundations that interact with government tend to describe their missions more narrowly rather than using noble, but harder-to-define terms like “promoting social justice” or “ending inequality.” He cited examples of such effective public-private efforts as the anti-smoking and anti-littering campaigns of the 1960s and ’70s, which had more targeted, achievable goals.

However, he noted that the biggest challenge of tackling major societal issues through the public sector is that everything the government does is inherently controversial and increasingly polarized. “Government is driven by a whole set of factors that complicate the operations of foundations. It’s called politics,” said Piereson, who served on the political science faculty of several major universities before entering the field of philanthropy.

On an issue such as climate change, for example, he expressed skepticism that consensus can be reached on how to respond. “I don’t dispute the science, but … people who think that the U.S. Congress can set the global temperature 50 or 100 years from now don’t know the U.S. Congress,” he said. He believes technology is more likely to solve the problem — in the form of improved electric vehicles and cheap, commercially available wind or solar power.

In addition to maintaining a clear, focused mission, Piereson discussed sunsetting as another way to ensure a foundation doesn’t drift away from its founding donor’s intent, and he spoke from experience in addressing it.

As executive director and trustee of the John M. Olin Foundation from 1985 through 2005, he oversaw the foundation’s dissolution and disbursement of its remaining assets. “John Olin left that wish with his trustees,” explained Piereson. “Since we were term-limited, there was really never any temptation to depart from the mission he set forth.” The foundation remained focused on preserving the free enterprise system, with most grants being awarded to universities and private think tanks.

Piereson recalled that Olin wished to avoid a similar situation to that faced by the Ford Foundation in 1977, when Henry Ford II resigned from its board because he felt the foundation’s activities had drifted too far afield from his father’s intent in creating it. “When [Ford] resigned, he wrote an editorial in The Wall Street Journal in which he basically said that he could not find in the program of the foundation anything that paid any tribute to the capitalist system which created the wealth for the foundation in the first place.”

Sunsetting also allows foundations to have a more immediate impact through their philanthropy, as larger sums of money can be spent rather than protecting foundation assets in perpetuity.

Piereson added that the number of foundations deciding to sunset, though still small, is increasing. As examples, he cited The Atlantic Philanthropies, which by the end of 2016 will become the largest organization intentionally closing its doors, and the Searle Freedom Trust — on which he serves as a board member. The Simon Foundation will also cease operations, as stipulated in the will of founder William E. Simon. Piereson said he anticipates that happening in 2022 or 2023.

Longer dissolution periods are also an option, he noted, mentioning the Bill and Melinda Gates Foundation, which has a sunset clause of 50 years from whichever founder passes away first.

No matter what the political perspectives of a foundation’s founding donors are, Piereson believes they should consider sunsetting as an option. “I don’t think people should be forced to do much of anything by the government, but I think [sunsetting is] something foundations should consider.”

Now in its fifth year, the Conversations on Philanthropy series brings together experts with diverse points of view for intimate, in-depth discussions about issues facing both donors and foundations. After opening remarks by Professor James Ferris, director of The Center, and an introduction by Fred Ali — chair of The Center’s Board of Advisors and President and CEO of the Weingart Foundation— Simon Foundation Co-chair William E. Simon, Jr. moderated the lively discussion.