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Archive for December, 2013

I really like the week between Christmas and New Year’s Day.  It is about as calm and quiet a week as exists anytime during the year and gives us a chance to both bask in the glow of the holiday season and contemplate the future.

During this week the, religiosity of the season begins to ebb as we look forward to the secular New Year, a time of hope and optimism.  For me, this week is, in large part, about decompressing before the silly season begins anew.  Although, we do have some last minute planning items to consider, basically our work is done and we wait for the clock to run out on 2013.  We want, no, we need to savor such quiet times because they are so rare. Colourful 2014 in fiery sparklers

The week between Christmas and New Year’s also goes by another name – Kwanzaa.  Kwanzaa is a uniquely American holiday, designed to help black Americans reconnect with their African cultural and historical heritage.  Unlike Christmas and Chanukah, however, which have been around for centuries, Kwanzaa was only created in 1966, so it is really young as far as holidays go.  Unfortunately, because of its relative youth, it is often overlooked in the mad rush of all the other holidays celebrated this time of year.  So, to all my friends who observe, Happy Kwanzaa!

That being said, at this point, I would like to declare the ongoing holiday greeting debate a draw (until next year, of course)  “Happy Holidays!”  “Season’s Greetings!”  “Merry Christmas!” “Happy Chanukah!” “Happy Kwanzaa!”  Should we care how we greet the season?   The universal message at this time of year is about peace and love and family and cultural identity and pride – what could be bad?  This year, my holiday card said to the world “Whatever Your Holiday – Enjoy!”  Isn’t that what it’s all about?

Soon enough comes January with its dreary dark days and, for those of us in the accounting profession, the stresses of tax and audit season.  But for now, let’s enjoy the remaining holiday season and look forward to 2014 – a year that will certainly have its challenges, of course, but also plenty of opportunity.

From my colleagues and family to you and yours, may 2014 be a wonderful, happy, peaceful, prosperous and above all, meaningful year for us all.  Happy 2014!

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The private foundation (PF) is an oversold commodity in this country.  There are far too many of them with critical mass too small to meaningfully engage in the highest and best use of a PF, namely, the business of philanthropy.  In my humble opinion, the business of philanthropy requires real money and because of this, foundations with less than a couple of million dollars in their coffers have limited usefulness.  Of course, it depends upon how we define the “business of philanthropy” but with PF’s required to pay out only 5% of assets in any given year, small PF’s that are not self-liquidating are truly constrained from acting as anything other than a charitable pocketbook.

Nevertheless, many successful people dream about establishing their own PF.  Some have true aspirations in the business of philanthropy while others are enamored with the idea of their family name adorning such a charitable vehicle.  The majority, however, probably have little idea about what it all means and how far they want to take it.  Might a different format for charitable giving make more sense?  Looking at it a different way, if you were starting a business, wouldn’t you first develop a business plan?  If you want to enter the business of philanthropy, shouldn’t the same assumption hold?

grassroots-coverIn his excellent little book, Grassroots Philanthropy, author Bill Somerville makes a number of common sense suggestions for funders to follow when undertaking and administering philanthropic endeavors.  If nothing else, the book makes you think about what it really means to be in the business of philanthropy and if it is something you should consider.  Somerville is the founder and president of Philanthropic Ventures Foundation, a public grantmaking foundation in the San Francisco Bay Area.  He feels that much of the field of philanthropy is unfortunately moribund, mired in paperwork, and far too risk-averse.  According to Somerville, most funders get into the business with little or no experience and few best practices at their fingertips – so they end up having to learn it all on the job and often fall into the bad habits of existing philanthropies.  Somerville feels we should strip away unnecessary paperwork and procedures and focus on five basic principles:

  1. Locating outstanding people doing important work.
  2. Moving quickly (and shedding paper).
  3. Embracing risk.
  4. Focusing on ideas instead of problems.
  5. Taking initiative.

Sounds like a variation of the plain, old blueprint for entrepreneurial success, doesn’t it?  And, if it were actually so easy, wouldn’t everyone do it?

In addition to all of this, Somerville feels that the average foundation executive should get out of his/her comfortable office (read:  comfort zone) and into the field far more often than s/he does.  (He suggests getting out and about a minimum of 30% of the time.) In this way the executive can see firsthand the good works that are being done (or not) by the organizations funded, and not merely rely on the mound of paperwork that accompanies grant solicitations and follow-up reports.  Somerville relayed a story about the time when his organization wanted to fund some programs benefiting the homeless in San Francisco.  Somerville arranged to spend a night on the streets with the folks running the programs so that he could actually meet the clients of the programs.  This event affected him deeply, putting a human face on the problem of homelessness that informs his approach to this issue to this very day.  Not many funders would go this far, but perhaps they should.

So, the lesson for those who want to move “from success to significance” by starting their own private foundations and engaging in the business of philanthropy is also simple to state but hard to implement – Are you truly willing to get your hands dirty within your chosen area of philanthropy?  Are you willing to act like the social entrepreneur you need to be if you want to make a difference in the world?  (Think Bill and Melinda Gates, but perhaps with a few less zeros at the end of your foundation’s value.) You have to get to know the true movers and shakers in the not-for-profit world who are doing the actual business of (fill-in the blank:  housing the homeless, feeding the hungry, rescuing dogs and cats, underwriting aspiring artists, etc.…).  You need to see what is actually going on out there and develop reasonable metrics tempered by the human element that is implicit in philanthropy.  You need to eschew paperwork and PowerPoint presentations for touting potential and measuring success and go out there and see for yourself.  You need to realize that the reward for good philanthropic work lies not in the celebratory black tie dinners but in seeing the results of on-the-ground agencies achieving success in their areas of expertise.

If such a scenario excites you, and you have the funds to make such a worthy investment, then you may be ready for that private foundation – and an “Act II” that will truly bring you from success to significance.

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Peter B. Lewis was not a household name, but Progressive Auto Insurance, the company he ran for 35 yeapeter-lewis-marijuana-died-progressive-insurance-300x300rs certainly is.  Peter died on November 23rd at the age of 80.  Beside his extreme success, what made Peter so special?

He was one of the 122 billionaires who signed the Giving Pledge promoted by Bill and Melinda Gates and Warren Buffett.

The Giving Pledge is an audacious and ambitious project on the part of the Gateses and Buffett to invite (cajole?) the world’s wealthiest individuals and families to commit to giving more than half their wealth to philanthropy or charitable causes either during their lifetime or at death.  It is not a pooled iGiving_pledge_logonvestment approach nor does it favor a particular charitable sector.  The idea is to steer the philanthropic discussion among people of means, thereby drawing more folks into philanthropy, and to lead by example.  Families and individuals who make the pledge do so publicly, issuing a statement explaining their decision.  It is a moral, not a legal mandate.  Basically, the Gateses and Buffett are trying to lead wealthy donors into the marketplace of philanthropic impulses, without putting any specific restrictions or conditions on those impulses.  It is a fascinating story about which I have blogged before.  The whole thing started in June 2010 with 40 signatories.   When I first blogged about it (4/26/2012) there were 81 participants.  This past February there were 105 and today there are 122.  Since inception, 6 of the signatories, including Peter Lewis, have passed on.   For more information, check out this recent story on 60 Minutes.

Getting back to Lewis – he was quite a character, and I don’t mean that necessarily in a good way!  Just yesterday, one of our clients told me that he knew Lewis personally and, although he was very smart he was also a real S-O-B.  From what I have read of him, I don’t doubt it.  Lewis’ approach as a philanthropist was apparently the same as his approach as CEO – tough, no-nonsense, take no prisoners.  He once told the New York Times that at Progressive he had “fired more Harvard Business School graduates than most other insurance companies have hired.”  (And you thought fellow billionaire Donald Trump (NOT a member of the Giving Pledge) was a tough guy….)  Similarly, when the charities Lewis supported did not do things the way he liked, he was not above taking his marbles and going home.  Ask the folks at the Guggenheim Museum, where he donated $77 million over 11 years before resigning as the board chairman in 2005 over the strategic direction of the museum.  Or the board at Case Western Reserve University in Cleveland, where Progressive is based.  He once staged a year-long boycott of cultural and charitable groups in Cleveland because of his discontent with the progress and rising cost of a Frank Gehry-designed building he was underwriting on campus.  Although he ended up contributing $36.9 million to complete the building, it was not without causing plenty of angst in town, even demanding the resignation of the entire board!

To which Lewis replied:
“I have no mandate to give a dime to anybody.”

According to the New York Times, Lewis has already given away about half of his $1 billion estate to various organizations such as the Center for American Progress and the ACLU.  Lewis’ alma mater, Princeton University, has received more than $220 million over his lifetime.

One of the fun things about the Giving Pledge website is that it publishes the members’ statements about philanthropy, giving the reader an opportunity to better understand the pledgers’ motivation.  To paraphrase Lewis’ thoughts on the subject:

“Taking the Giving Pledge comes naturally for me. I began giving with nickels to my Temple when my father explained to me that giving to help others is a Jewish tradition. Those nickels, contributed to nonprofits over the years, now total nearly $500 million. Having already given away nearly half my net worth, I plan to keep on going…The catch phrases that drive my life and philanthropy include: Enjoy every day; Think outside the lines; Risk, learn and grow; Ideas are easy, execution pays off; Constantly improve; Admit mistakes, fix them and move on; Problems are opportunities; Hard work makes winners.”

Lewis was obviously not a warm, fuzzy kind of guy.  Many of those who knew him couldn’t stand him.  Colleagues, employees, charitable organizations – all may have quaked in his presence.  But at least he gave back and for that we are grateful.  RIP, Peter Lewis.

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It’s December and there is not much time left to get those charitable contributions (read: tax deductions) completed before it’s too late (read: deductible in 2013 rather than 2014).  We all have our ways of determining which charities to support and our own philosophy of giving; this week, I thought I would share part of mine, using as illustrations some of those folksy expressions we often hear but to which we pay little heed:

“Charity begins at home.”  Generally this saying is used disparagingly against charitable giving.  Why give to charity when you can use the money to enrich your own life?  But, I like to think of this saying in a different way by favoring charities that impact close to home.  Therefore, my top picks in this category are (again, MY top picks, not necessarily yours):

  • The Withum Employee Hardship Fund, about which I blogged last week, exists to help employees in my firm who are facing extraordinary financial hardship. Over the past year, we have assisted a couple of Sandy victims as well as an employee facing large medical bills.
  • The Dreyfus Family Needs Charitable Trust, a similar fund at my wife’s place of employment (BNY Mellon, Dreyfus Service Corporation).  As Sandy victims ourselves, Dreyfus generously made a grant to us which left us speechless.  Pay it forward, baby!
  • Temple B’nai Torah, also discussed in a previous blog, is our local house of worship, and a true favorite in our charitable planning.  TBT provides a religious and social network for 490+ families on the South Shore of Long Island.

“Give a man a fish and he eats for a day…” Again, often used as an argument against making handouts to the poor (and the first half of the next saying).  But, because short-term hunger does exist, often through no fault of the hungry person, and will always exist at different times and places, isn’t the short term solution of “giving a fish” necessary?

  • Mazon – A Jewish Reponse to Hunger, is an organization that fights hunger here and abroad.  It seeks to provide those short term solutions for hungry people while at the same time advocating for ways to end hunger by attacking its root causes.

“…Teach a man to fish and he eats for a lifetime.”   The second half of the saying immediately above with which I agree wholeheartedly – education, education, education – long-term, it is always best to give a “hand up” instead of a “hand out.”

  • Binghamton University, the public university from which my wife and I graduated, provides world class educational opportunities for students of modest means, many of whom are first generation college attendees or children of immigrants.  We will be forever grateful for our start at Binghamton and, as long as it remains true to its mission, will support it both financially and as a volunteer.
  • New Ground, a Long Island based charity that educates and empowers families and veterans who are caught in the vicious cycle of homelessness.  By taking a “tough love” approach to this problem, New Ground hopes to break the cycle of homelessness and enable its clients to function independently for generations to come. 

“Save for a rainy day.”  If you follow this blog, you know that I love the donor advised fund.  These funds enable you to put aside some money today (or donate long term appreciated securities), and get a current tax deduction while leaving the determination of the ultimate beneficiaries to some point in the future.  In addition to my regular charitable contributions, I like to make sure that my donor advised fund is replenished for use down the line in supporting charities when our discretionary income may not be as plentiful.

Whether you have a formal, written mission/vision statement to define your philanthropic impulses or you follow your religious precepts, or you just want to give back to help others, I urge you to set aside some time now, during the holiday season, to make your charitable giving a reality.

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