The newly rich are fueling a new era in philanthropy
In 1997, Michel Zaleski left the investment partnership he had helped found and put some of his profits into a family foundation.
In part, the foundation was a way to cut his taxes, but it also offered a way for him and his wife, Caroline Rob Zaleski, an architectural historian, to engage in philanthropic activities.
The foundation’s assets now stand at about $5 million, and Mr. Zaleski continues to add to them. He recently gave $1 million to his alma mater, Dartmouth College, and the foundation has made grants to the Council on Foreign Relations, the World Monuments Fund and the Trinity School in Manhattan, among others. Mr. Zaleski has also established a foundation in the Dominican Republic to build schools in and around Cabareti, where he has a home.
The Zaleski family and thousands of others with relatively new money are fueling a transfer of wealth unlike anything ever seen in this country. Models developed by Prof. Paul G. Schervish and John J. Havens at the Social Welfare Research Institute at Boston College predict that $40 trillion to $136 trillion will migrate between generations over the next 50 years, depending on economic growth rates.
A big chunk of that will end up in charitable endeavors: Professor Schervish estimates that $19.2 trillion to $50.2 trillion will be spent on philanthropy by 2052, again depending on the growth of the economy.
”Wealth has been spread across a much greater percentage of society,” Mr. Zaleski said, ”so there are a lot more people, like me and my family, who can afford to be generous.”
As much as $6.7 trillion will go to charity over the next 16 years, Professor Schervish said, which should come as a relief to a nonprofit sector currently worried about the impact of an uncertain economy on government subsidies, foundation assets and individual giving.
Professor Schervish, however, says he suspects that much of that money will find its way to new philanthropic ventures.
”There is no guarantee that any existing charity will get that money,” he said. ”New philanthropists are setting higher standards for charities and seeking to be more involved in the application of their money, so it would behoove foundations and other charities to begin finding a model for fund-raising that allows donors to engage in the mission of the organization.”
Some established foundations are moving to do that, and investment banks, consulting firms and university business schools are also moving to build expertise in advising clients on philanthropy. The Ford Foundation, for instance, has a new project called GrantCraft that offers advice to new foundations on how to make grants, fix mistakes in existing grants and build institutions.
Several large business schools have increased their course offerings and seminars in nonprofit management and strategic planning.
”The amount of resources that are emerging, despite the current blip in the economy, is sufficiently large that the way the money is ultimately allocated will have a significant effect on what our society will look like,” said Thomas B. Murphy, a philanthropist whose $1 million-plus foundation has backed Professor Schervish’s philanthropic research.
The activism seen among newer philanthropists is at least in part a reflection of the way their wealth has been created, and of the age at which they have come into it.
The Andrew W. Mellon Foundation was established by the generation that followed Mr. Mellon, and it is the heirs of John D. Rockefeller and Andrew Carnegie who have institutionalized their family names in the annals of philanthropy.
But many of today’s millionaires and billionaires have made their money suddenly and at a relatively young age.
”People are making money in large, lumpy amounts and early in their lives,” Mr. Zaleski, 55, said. ”It’s more tax-efficient to deal with those sudden increases in wealth by giving it away, although that’s not the only reason people give.”
Mr. Zaleski and those like him have also not become accustomed to living with wealth.
”A big part of my giving is about coming into it suddenly,” said Dawn Trudeau, a former Microsoft executive whose mother was a teacher and whose father drove a truck. ”Having a lot of money was never really part of our lifestyle.”
While Ms. Trudeau had long given money to the United Way and the United Negro College Fund, her giving changed when she retired in 1998 at 40. ”I now get personally involved,” she said, ”and I do think that changes the way you give.”
The more involved she gets, Ms. Trudeau said, the more she wants to give away. ”It becomes contagious,” she said. ”You start giving and you see how much just a little bit of money can do and you start having bigger ideas.”
Ms. Trudeau and her husband, Ron Beman, an electrical engineer who works at the Boeing Company, say they have been thrilled with the results of two $20,000 grants they made to Mr. Beman’s old school in Gold Hill, Ore. That philanthropy started when, on a lark, they made a brief stop in his hometown on a drive to California four years ago.
”Timber was the mainstay of the economy there, and you know what’s happened to the timber industry,” she said. ”The school had no technology, no access to the Internet, no computers, and the rest of the drive down, we kept talking about how great it would be if we could help them out.”
In 1999, their money wired the school, provided computers and started introducing teachers to computer-assisted teaching techniques. The second grant the next year provided for a technology makeover of the peripheral buildings.
Last year, after the school’s technology program became a model for other schools in southern Oregon, the town approved its first school bond issue in 20 years. The proceeds will go to building a much-needed cafeteria, among other things.
”It makes you realize that a little bit of help or a little jump-start can get other people involved and participating and start to change the world,” Ms. Trudeau said.
Like thousands of other newly wealthy individuals, she is establishing a family foundation. In 2000, the latest year for which figures are available, the Foundation Center counted 24,434 family foundations, up 19.2 percent from 1999. The figures do not include foundations that may be affiliates of a family business.
Family foundations control $197.7 billion, or almost half of all independent foundation assets, and they gave away $11.3 billion in 2000, accounting for more than half of all foundation grant-making. Autor: Stephanie Strom