Thomas Adam, PhD., from the University of Arkansas, joins us to explore how philanthropic foundations are shaped by donor intent—and what happens when the world changes faster than the mission. We unpack why “forever” can be both inspiring and limiting, and how legal, historical, and practical factors affect who benefits and how.
Jeffrey Snyder, Broadcast Retirement Network
Joining me now is Dr. Thomas Adam. He’s an expert in not-for-profit and philanthropy for the University of Arkansas.
Dr. Adam, it’s great to see you. Thanks for joining us this morning.
Thomas Adam, PhD., University of Arkansas
Thank you so much for having me.
Jeffrey Snyder, Broadcast Retirement Network
And I should say you’re an expert on other things as well, which maybe we’ll get to at another date and time. Dr. Adam, you know, I reached out to you or we reached out to you as a team because we were very interested in a column you had on the Washington Post, for the Washington Post around foundations. And in particular, can foundations outlive their charitable mission?
So what’s your thesis here? Can foundations or do foundations actually outlive their purpose?
Thomas Adam, PhD., University of Arkansas
Some foundations do and some foundations don’t. It always depends on the purpose and how narrow the mission of a specific foundation is. If you have a foundation which is charged with providing housing for low-income families, I mean, this foundation is a pretty safe shoe in because we know this problem’s around for centuries and it will be around for centuries.
If there’s a foundation which supports a college or university, we also know that this will be around for a long time. Becomes a little bit trickier when foundations have very narrow mission statements. And this was the reason for this piece I wrote for the conversation.
Because foundations such as the Laverne Noyes Foundation have a general target with regards to supporting education and that would normally mean that they are around for a long time, but they have narrowed their mission to a very small field. And this is where it becomes a little bit trickier.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, historically though, and I should have asked you this maybe first, but let me kind of circle back to historically, America, United States has had a lot of foundations. You go back to Andrew Carnegie, John Rockefeller, right? We have traditionally been a very charitably focused country.
Thomas Adam, PhD., University of Arkansas
Yes, so let me give you a little bit more background here. I’m not just working on philanthropy and nonprofits in the United States. I actually do this with regards to North America, United States, Canada, and also Europe.
So I’m looking at foundations, at philanthropy as a global phenomenon, but I also look at this as a phenomenon which is with us not for a hundred years, but for millennia. Philanthropy foundation that goes back to the early middle ages. And we have countries such as Germany, for instance, where you still have foundations around which are eight, 900 years old, and they still function.
These are foundations which support, for instance, hospitals. These are foundations which support partially education. So these are missions which are somehow eternal.
However, with regards to the United States, you are absolutely right. There’s Carnegie, there’s Rockefeller, but by comparison with Europe, the United States foundations in the United States are still very young. Foundations begin in the 20th century in the United States, not in the 19th century.
So meaning that they haven’t run into the problems yet. Foundations in Europe, in the UK, in Germany, in other countries have a long time ago. And so some of these problems come up with some time delay.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, and obviously you’re right. I mean, America is only 250 years old. When you look at Europe and the rest of that area, those countries have been around for centuries and centuries.
So we have a lot of catching up to do when it comes to philanthropy. If you’re a board member of one of these philanthropic foundations, in either in Europe, North America, wherever, what should you be looking at in terms of the viability of the foundation? So setting the mission statement, I’m sure that there are new foundations always being set up when wealth is created.
Typically there’s foundations that are being set up, but what should you be thinking about as a board member for an existing foundation?
Thomas Adam, PhD., University of Arkansas
So in the piece you were citing, I focused on the Laverne Noyes Foundation or the Laverne Noyes Fund, I think was the correct name. And when this foundation was created in 1919, it was an extremely progressive enterprise because the donor wanted to provide scholarship support for men who had served in World War I on the American side and who wanted to go to college afterwards. And he wrote in the mission statement that these scholarships should be given to anyone, regardless of gender, regardless of race, regardless of religion, regardless of political affiliation.
I mean, it’s the perfect setup. And one should expect that this would last for a long time. The problem is that this foundation is created in a society that changes over time.
And the problem came with these changes with regards to the composition of American society because the scholarships can only be given to either soldiers of World War I. I mean, we are now more than a hundred years past. Yeah, I mean, they’re probably all gone.
Or their descendants. And of them, there are still many around. But American society has changed.
After 1945, many immigrants came from different parts of the world to the United States. But because of when they arrived in the United States, these immigrants and their children will never be eligible for receiving these scholarships. Today, about a quarter of American society has no relatives, has no great grandparents who lived in this country before World War II.
And that trend will only grow over time. So that means that this once very, very progressive foundation has become actually pretty conservative because it privileges people who came to this country before World War I. And these people came from Europe and these people were white and these people were Christian.
You see where this is going. So this was not the intention when this foundation was created and no one could foresee this. But this is just the development which emerged because of the changing nature of American society, which collided basically with a foundation that has a narrow and nearly unchangeable mission statement.
And that makes it a problem.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, so let me ask you, and again, I’m coming from this as the lay person without any perspective. That’s why, obviously, why you’re on the show. Can you change your mission?
So using the World War I scholarship as an example, if that is no longer serving a purpose in the sense that there’s no one around from World War I and maybe there are some descendants. So by and large, it’s not serving the original purpose. Can a foundation pivot?
So for example, if we eradicate, say a foundation set up for the eradication of a disease, if that disease is eradicated, can you pivot to a new mission and how viable does the foundation become?
Thomas Adam, PhD., University of Arkansas
Okay, so there are two things here. So one thing is that a mission statement for a foundation is written in stone. It’s near unchangeable.
There’s a way to do this, there’s a legal doctrine, the legal doctrine of Cypress, which allows for changes to a mission statement of a foundation. But the condition is that the foundation needs to be failing and the redrafting of that mission statement has to be as closely as possible to the original donor intent. So first of all, with the Laverne-Noyes Foundation, the foundation isn’t failing.
There’s plenty of money. There’s still plenty of applicants, but even if there are not enough applicants for as long as it’s doing well and investing money, there is no problem here. So it is very hard to change that.
And the example you brought up was actually true for the Polio Foundation, which actually wasn’t a foundation, but a nonprofit organization. And the Polio, this Polio Foundation faced that situation that it defeated polio. So the purpose for its existence was gone and it had two choices, either dissolve or find a new purpose.
In this case, there was a redirection towards a different kind of disease and shifting this towards this. But in this case, it was possible because it wasn’t a foundation. It was a nonprofit organization, which did not just have one donor, but which lived from the membership piece of many members and from donations from a large group.
So the problem here applies to foundations, not to normal nonprofits or other nonprofits, normal is the wrong term here.
Jeffrey Snyder, Broadcast Retirement Network
So the famous example of the Gates, Melinda Gates, Melinda and Bill Gates Foundation, they wanna kind of pay out all the money, I think by the time they depart the planet, go wherever you go after we all live. That’s a famous example, but it would seem to me, and again, I’m a lay person, if you eradicate or you achieve your mission and your mission is set in stone, those assets are, yes, they’re invested and they typically invest in different portfolios, but are those assets sitting idle? And could they be, if we loosened up the restrictions, so to speak, not we, but if they were able to loosen up the restrictions, wouldn’t those assets be able to be used for the betterment of others, which would be true to the original, close to the original intent, I guess.
Thomas Adam, PhD., University of Arkansas
So that is the example of the Hershey School Trust. And this is exactly the problem where the money sits idle. The Hershey School Trust was created in 1909, first with property, then with 60 million in endowment for the purpose of creating an orphanage.
The problem was that from a very early point on this foundation, which was supposed to support an orphanage was created at a time when the institution of orphanages fell out of favor with educators and with psychologists. So from a very early point on, that foundation had more money than it could ever spend. And that situation got only worse because orphanages disappeared.
The foster care system instead, but this foundation was sitting on the money and was obliged to spend it on funding an orphanage. So that means that over time, the foundation did very well with their investment. The 60 million at the beginning of that foundation has, if I remember correctly, increased to something like 23 billion as of 2023.
Wow. Or 2024.
Jeffrey Snyder, Broadcast Retirement Network
That’s a good return. That’s a good return.
Thomas Adam, PhD., University of Arkansas
They have a very good return. They make $850 million every year, which they cannot spend. They spend $90,000 a year on every single student in that boarding school.
But they are simply shamed to the original mission statement, which simply doesn’t work anymore. And because that foundation is so successful in making money, the CyPRIF legal doctrine cannot be applied because it isn’t failing. So this is exactly the problem that in some cases, these foundations sit on so much money, which cannot be spent, and it just accumulates.
The school trust is the largest endowed secondary school in the United States.
Jeffrey Snyder, Broadcast Retirement Network
So it just seems so inefficient. It seems archaic, you know, again, coming as a lay person, when I hear and read what you laid out and what I hear you saying, it just seems like that the laws and the rules may need to be updated because if you have capital sitting idle, and I guess you can make the argument that it’s sitting invested, it’s been invested in public stocks, private, whatever, that it is doing something, right? It is invested in the economic structure, you know, in the economy.
But it just seems to me that Congress or whoever needs to change the laws a bit so that we can morph and direct monies to people that, and, you know, things that need it.
Thomas Adam, PhD., University of Arkansas
This is where it becomes tricky because we need to keep in mind that this is not the result of bad will. I mean, these donors had a very good idea of what they wanted to make, of what they wanted to accomplish. And that’s true for many donors.
And every donor, like any human being, makes decisions based on past experiences. When Hershey set up that foundation, he looked into the 19th century, and in the 19th century, orphanages were the rule, and no one would have predicted in 1909 that 20 years later, orphanages would no longer be needed. Laverne O’Yes could not foresee the changes to American society.
Neither can we. So we need to keep in mind that these donors did not do this out of bad will or anything. This is just the nature of our decision-making process by experiences, by experience of the past.
We cannot foresee the future.
Jeffrey Snyder, Broadcast Retirement Network
Well, go ahead, finish your thought.
Thomas Adam, PhD., University of Arkansas
The second thing we need to keep in mind is that the donors have many motives to do what they do. But one of the motives is they want to be remembered. And what better way than to create a foundation which is there for eternity?
I mean, this is the reason why all of these foundations have the name of a donor attached to them. And the promise to the donor is that 100, 200, 300 years later, they will still be remembered. So this is where this becomes complicated.
If you take away, if you mandate that foundations can only last for 40 years or so, in 1929, Julius Rosenwald, a very famous donor, suggested that no foundation should last more than 40 years because after 40 years, most of the goals would be outdated. If you mandate that, then you take away that motivation of being remembered because who wants to be remembered for 40 years and then it disappears? So there needs to be a very, a balance between these donor interests and the interests of society.
And this is where we need to find a balance. You’re absolutely right. But this is not easy.
Jeffrey Snyder, Broadcast Retirement Network
No, and I didn’t mean to suggest it. Obviously I’m coming at it.
Thomas Adam, PhD., University of Arkansas
I just wanted to explain that.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, no, no, I think you’re absolutely right. It’s not an easy decision, but it sounds like at least a conversation, you’re starting a conversation, hence your piece in the conversation. And I guess we’ll see kind of where it all leads.
Dr. Adam, it’s great to see you. Thanks for sharing your perspective. And we look forward to having you back on the program again very soon, sir.
Thomas Adam, PhD., University of Arkansas
I would love to be back.
