What makes a private foundation ‘legitimate’? And what role does public scrutiny play in answering this question? My reflection was piqued by two recent thought pieces on private philanthropy and public legitimacy. The first, from Rockefeller Philanthropy Advisors (RPA), discusses the idea of a ‘social compact’ for foundations’. The second, by Krystian Seibert, an advisor to Philanthropy Australia, discusses how foundations can acquire a ‘social license to operate’. In both cases, it is suggested that private foundations need to think carefully and speak publicly about their legitimacy if they are going to withstand public scrutiny and surmount increasingly frequent public critiques.

The idea of applying ‘legitimacy’ to private philanthropy is not new. People have been talking about the motives of philanthropists since the early days of ‘big’ philanthropy in the United States (the era of Rockefeller, Carnegie and Ford). Wealth draws envy and philanthropy draws suspicion. The two are connected. Anonymous or completely altruistic giving may not attract much public attention. But the giving of large donors and large foundations is frequently publicly known, because there is value in recognizing it (for both recipient and donor) and/or because it must be made public by regulation. And these gifts may be perceived as having strings attached. Or, if the gifts have an impact on communities or public policies, they may be perceived as attempts by the wealthy to exert power. In these cases, people may ask by what ‘right’ do donors make these decisions that affect the lives of others? What is their legitimacy?

Both RPA and Seibert cite books^[1] published in the United States in the last two years that are creating a new wave of public attention and critique of the legitimacy of private philanthropy. These books come from a range of observers across journalism, academia, consulting and institutional philanthropy. This range and level of interest reflects the prominence of the role being played by wealthy individuals and also large foundations (whether new or long-established) in fundamentally important issues: education, health care, immigration, community development, environment and climate change. As many argue, the interest is also being prompted, as in the earlier days of the 20^th century, by the great income inequality and power imbalances created by public choices about the relationship between state and business under capitalism.

The critiques are American because the imbalances are particularly striking in the United States. But the suspicion of philanthropy and its connection to private wealth is everywhere, as is demonstrated by the criticism of the large philanthropic donors to the rebuilding of Notre Dame Cathedral. In Canada, as well as in Australia as Seibert notes, large individual donors and private foundations are less well-known and therefore their legitimacy is not challenged as frequently. Nevertheless, Seibert describes an Australian foundation (the Ramsay Foundation) which created controversy and accusations of impinging on academic freedom through its gifts to universities. In Canada there is a well-documented local critique of the work of a private foundation, the Lucie et Andre Chagnon Foundation, which mounted an ambitious collaboration with the government of Quebec to fund early child development, ultimately dissolved because of challenges to its legitimacy from the public. The question of the legitimacy of philanthropy is as relevant in Canada as it is south of our border, even if it not yet as vociferous.

So what do we do? Is there a way of justifying the practice of private philanthropy beyond simply stating that it is dedicated to public good? Do we rely for our legitimacy in the public eye on compliance with the regulations imposed by the government (in our case the Canada Revenue Agency)? Historical experience and current criticism suggest that there is an ethical and philosophical obligation to go beyond regulatory compliance. Seibert flags the need to be mindful of ‘non-state regulation’, or social and public influence on, and expectations of, behaviour. A private foundation must think of its legitimacy as both regulatory and normative. RPA and Seibert take this into the realm of practice with complementary suggestions.

RPA describes its concept of a philanthropic social compact, or ‘agreement’ that a foundation makes with stakeholders about the value it will create in society.  In effect this creates the foundation’s legitimacy or social license to operate. How does a foundation do this? Not necessarily through a formal statement. The key is to be willing to demonstrate accountability, which then builds public trust (i.e. normative legitimacy). This can be done through accountability to government regulators, and through transparency of goals and strategies and assessment of impact (internally and externally communicated).

Seibert adds to the construction of normative legitimacy by dissecting legitimacy into: input, output, throughput and context. These are helpful ways of thinking about the practical implications of creating legitimacy. Input legitimacy focuses on the inclusion of stakeholders. Output legitimacy focuses on the delivery of effective outcomes. Throughput legitimacy focuses on internal processes and how they optimize transparency and accountability. Contextual legitimacy focuses on the political and public setting in which a foundation is operating.

Clearly not every foundation is going to create normative legitimacy for itself in the same way. The range of philosophies and operational strategies among private foundations means that there is no single formula. The balance among the different forms of legitimacy creation will be decided by the history, context, governance and operating style of each foundation. And as Seibert notes, it is necessary in scrutinising philanthropy to avoid generalizations and to apply nuance. The contribution of RPA and Seibert is to force us to think more deeply about why foundations should care about their legitimacy, or license to operate, and to be willing to be scrutinized and to scrutinize themselves. In this way we can meet the criticisms and perhaps allay the suspicions that are rising again against private philanthropy.

Hilary Pearson, Founding President of Philanthropic Foundations Canada