Questioning Big Philanthropy At The Skoll World Forum: Is It Too Powerful And Out Of Touch?

At a conference about nonprofit endeavors and the people who run them, big philanthropy came under the microscope.

Last week at the Skoll World Forum, 1,200 people from 81 countries gathered at the University of Oxford, England, to celebrate those deemed to be the world’s most promising social entrepreneurs—people on a mission to make a positive change in areas that governments and for-profit businesses have overlooked, ignored or failed at. There were CEOs of billionaire-backed foundations, philanthropy consultants and hundreds of smart, risk-taking individuals working on solutions to a host of knotty problems. Call it Davos for the nonprofit set.

The conference was put on by the charitable foundation of billionaire philanthropist Jeff Skoll, who built a fortune as the first president and first hire at online auction house eBay. There were panels discussing pressing issues, including how best to treat refugee children and how to feed an expected global population of 10 billion in the face of climate change. There was an Oscars-style ceremony for five winning social entrepreneurs, each of whom was awarded $1.5 million. And there was some soul searching. Just as billionaires have come under attack this year for having outsize influence, not paying enough taxes and, for one coffee-chain tycoon, discussing running for president, philanthropy had its turn—but in a thoughtful manner.

At a panel discussion entitled “Is Philanthropy Part Of The Solution Or The Problem?” the moderator began by asking the roughly 250 people in the audience if they agreed with this statement: “Philanthropy is at a moment of reckoning.” Nearly everyone raised their hand.

The issues are many, it turns out, starting with the power dynamic: Typically older white men control most of the fortunes and purse strings when it comes to philanthropy; they hire experts who are often well-educated to devise solutions to problems like poverty, lack of health care and lack of education—all without getting input from the people who are meant to benefit from the services being funded. Or as panelist Edgar Villanueva, author of the book Decolonizing Wealth, put it: “Philanthropy is top-down, closed-door and expert-driven.” Villaneuva works as a vice president at the Schott Foundation for Public Education, so he knows the sector well. His advice: “We need to show up and listen to understand what a community wants.“

One big challenge for philanthropists is what they can do to reverse the stark wealth inequality. Panelist Rodney Foxworth, executive director of BALLE, a group that promotes supporting local communities, warned that the trajectory for savings for African American families is headed toward $0. In Boston right now, Foxworth said, the median household wealth for an African American family is $8, compared to $247,000 for a Caucasian family. “This is a conversation we have to have. ... What will the U.S. look like when the majority of its citizens no longer have the wealth to sustain themselves? It’s a question about our collective futures.”

It’s a point that Randall Lane, Forbes' chief content officer, explored in a cover story last month titled “Reimagining Capitalism.” Billionaire hedge fund manager Ray Dalio also weighed in recently on LinkedIn, saying that capitalism “is not working well for the majority of Americans” and  is creating wider income, wealth and opportunity gaps.

Another problem aired was the power of a few among nonprofits, a condition perhaps exacerbated by awards handed out to a small number of organizations by groups like the Skoll Foundation. These awards serve as a shorthand to validate the best of the bunch, while plenty of others may be doing equally good work.

There are 1.5 million registered nonprofits in the U.S., 66% of which have expenses under $500,000 a year, said panelist Ella Gudwin, president of VisionSpring, which provides eyeglasses for the world’s poorest. Gudwin, citing data from the Urban Institute, explained that just 5% of U.S. nonprofits have annual revenues of $10 million or more, and this group accounts for 87% of charitable expenditures. In other words, a small number of nonprofits get the lion’s share of charitable grants each year.  

Part of this hierarchy among nonprofits arises from a lack of information about “which organizations are making a meaningful difference in the communities they serve,” Gudwin said, adding, “On the philanthropists’ side of the equation, it can be hard to penetrate the market and find top performers. On the charity side, it can be hard to break through and get noticed by philanthropic investors.” Organizations doing wonderful work may be starved for capital, merely because the information about their success is not communicated to those with philanthropic dollars.

Issues of funding kept coming up in discussions I had with social entrepreneurs throughout the conference. Many foundations give out money for specific projects (“restricted grants”) that can’t be used for paying for rent and computers to keep the nonprofit functioning. Or they give one grant and then move on to the next bright shiny nonprofit solution. Contrast that to the venture capital world, where investors don’t dictate how the investment dollars are used—leaving that decision to the people running the startups. And investors who are happy with a startup’s progress keep backing it with additional capital. “Wouldn’t it be nice if there were A, B, C, D series of funding awaiting effective organizations?” VisionSpring’s Gudwin said in an email.

Every industry has its flaws, and the philanthropy sector is no different. Delving into the difficulties doesn’t usually get air time at celebratory events. Kudos to The Skoll Foundation for making it part of the conversation last week. It’s a dialogue that should continue.