Winter 2004

Doing Well, Not Just Good:
Revisiting the Principles for Minnesota Grantmakers

After Eight Years, MCF's Principles Still a Leading Model for Grantmaker Accountability

by Sylvia Lindman

Eight years ago, the Minnesota Council on Foundations adopted a straightforward document that outlines grantmakers' accountability to the public. In a nutshell, the Principles for Minnesota Grantmakers state that grantmakers will be respectful, responsible, accessible, informative about their programs and ethical in their behavior.

	"The principles focus on respect and good common sense, and those are things that are held very highly at our corporation, as at most foundations and businesses," says Deluxe Foundation's Jenny Anderson.

The eight principles have become a distinction for Minnesota grantmakers. For the past eight years, MCF has been the only regional association of grantmakers in the country to approve a set of standards for the field and to require its members to subscribe to them. Just last month, the Council of Michigan Foundations became the second such association to do so, using Minnesota's principles as a model. Although the principles resulted from 15 months of debate and a certain amount of conflict, many members today consider them basic to their business.

Early on, a few foundations declined to endorse them, according to MCF president Bill King, but the Council's membership did not drop in the long run. Indeed, membership in MCF has risen from 150 to 165 organizations since subscription to the principles has been required of members.

"The principles focus on respect and good common sense, and those are things that are held very highly at our corporation, as at most foundations and businesses," says Jenny Anderson, director of the Deluxe Foundation, who served on a corporate committee that provided guidance in developing the principles.

Anderson presented the principles for board discussion before the Deluxe Foundation decided to subscribe to them. "We wanted board members to understand them, so we went over them as a board and adopted them officially," she says. Now she is considering a further step: including the principles as part of orientation materials for new members of the board and grantmaking committees. "Grantmakers who follow them serve as good representatives of their foundations because [the principles] pretty much say it all," Anderson says.

The principles were developed to address a growing public scrutiny of foundations. Maintaining that a formal code of conduct could help show philanthropy's accountability and responsibility to the public, much as accreditation does in other fields, MCF established its Task Force on Standards and Practice in 1994 to provide "benchmarks for governance, ethics and practice" for foundations, King says.

To prepare for its work, the task force met with foundations and nonprofits and reviewed numerous documents related to grantmaking practices around the country. After much review and discussion, the task force developed two key documents: eight principles applicable to all grantmakers, and four sets of illustrative "practices" to accommodate differences among funders - community/public foundations, corporate grantmakers, private independent foundations and private family foundations.

Michael O'Keefe, who chaired the Task Force on Standards and Practices and was executive vice president of The McKnight Foundation at the time, explained the rationale in an article in "Foundation News & Commentary" magazine. "What works for a foundation with $70 million in giving and a sizable professional staff does not work for a small family foundation with an answering machine and a checkbook on the dining room table," he wrote.

The two-part document of principles (values) and practices (statements of desirable behavior that reflect those values) were accepted by the MCF board in 1996 and became a condition of MCF membership as of January 1998.

A Useful Guide

For some foundations, the principles have faded into the background - they exist but are seldom talked about. For others, the principles provide periodic opportunities for serious discussion of how grantmakers ought to behave and why. For still others, they are integrated into the funder's operations.

The Women's Foundation of Minnesota is an example of the latter. In putting together a strategic plan in 2001, the Women's Foundation looked to the principles to assure its accountability to the public and the field of philanthropy. Foundation president Jane Ransom was new to the organization at the time, and she was glad to have a document that articulated a commitment to high ethical and behavioral standards. In discussing the foundation's new strategy, she says, "we 'checked in' on the principles to make sure we were in alignment, just as we checked in with our mission statement to make sure it was still representative of our organization."

Many foundations place the principles in their publications and/or on their Web sites, hang them on their walls or add them to their board books.

"Each year, we use the principles in three ways," says Karen Muller, executive director for H.B. Fuller Company Foundation. "At our annual meeting, the board packet includes a copy of the principles so that at least people are reminded we subscribe to them. For new board members, the principles are part of orientation. And it is also part of the annual orientation for our contribution committee, which is made up of mid-level managers in the company. We review the principles briefly and explain that this is our code of conduct — how we expect to be measured by any constituency in doing the work of the foundation."

At the Fargo-Moorhead Area Foundation, the principles are "first and foremost a symbol or tool we can use to say that we are ethical, responsible stewards of the public's dollar," says executive director Jan Ulferts Stewart. Although MCF does not require formal board action to renew a foundation's subscription to the principles, Stewart says, "every year, at the first meeting of the year, our board chooses to adopt them by a motion of the board. This is a good way to self-check once a year. It aligns our work for the coming year with the standards of working with the public trust."

The St. Paul Companies, Inc. Foundation is typical of many MCF members in its regular use of the principles. "The principles are listed in our grantmaking guidelines, so when we distribute the guidelines, those principles are included and we say we subscribe to them," says Mary Pickard, president and executive director of the foundation. "That lets grantees know what to expect and lets people know that the standards are part of our guidelines. In addition, when we set up new grantmaking committees, the principles are part of committee members' orientation."

Problem Areas

As has been the case from the outset, individual principles remain concerns at some foundations, particularly family foundations like the Marbrook Foundation, says Conley Brooks Jr., the foundation's executive director. A foundation with an all-family board and one staff person, for example, cannot easily reflect the cultural diversity of its community among board and staff (Principle No. 6).

"Family foundations being family foundations, and in many cases very small, aren't always in a position in hiring staff or adding to boards to do anything about the diversity question," Brooks says. "So to sign onto principles that stated that as an objective seemed a bit hypocritical." Marbrook was persuaded by the language in the principle stating that diversity should be a goal "within the limits of [a foundation's] charter." Marbrook can and does reflect cultural diversity in its grantmaking, most notably with the American Indian Family Empowerment Program, which Marbrook created about 10 years ago. Marbrook operated the program for about six years on its own, and two years ago established a collaboration with the Grotto Foundation to continue the program.

MCF's King notes that Marbrook is a good example of how a family foundation can effectively address the principle on diversity. "Even though the foundation's structure prevents it from having a diverse staff and board, Marbrook has addressed issues of diversity through its grantmaking and by working with an advisor in the American Indian community," says King. "That totally embodies the intent of the principle."

In a rural, mostly white community like southern Minnesota, the Southern Minnesota Initiative Foundation is also challenged to attain diversity. "We always struggle with the challenge of inclusiveness," says president Trixie Golberg, who served on the Task Force on Standards and Practice. "In our board and volunteer make-up, while there's growing diversity in the region, still 95 percent of the people we actually serve are white Americans of European background.... We try to be inclusive in terms of our grants, programs and loans. How do we help build capacity so we have more entrepreneurs of color? How do we help build capacity among emerging nonprofit organizations working with diverse cultures when we have limited resources? That will always be a struggle for relatively smaller organizations in a somewhat defined geography."

Since adopting the principles, MCF has developed a number of resources to help grantmakers address issues of diversity in their work. MCF created a Diversity Framework that guides the discussion of grantmakers' diversity practices around the four roles they play in a civil society. And together with three colleague associations, MCF developed "Building on a Better Foundation: A Toolkit for Creating an Inclusive Grantmaking Organization," which offers straightforward guidance to help funders practice diversity both within their organizations and in their grantmaking.

Accessibility (Principle No. 2) is also sensitive. Although the words "as fairly as possible" help qualify this principle, some wonder: Does accessibility mean agreeing to meetings with anyone who asks? For small foundations with few or no staff, that may not be possible.

When reading the accessibility principle, people sometimes incorrectly interpret the principle as requiring face-to-face meetings, according to King. "Most foundations have no staff, so it is not reasonable to expect foundations to have face-to-face meetings with anyone who requests them," he says. "A grantmaker can be accessible in many other ways, such as by publishing your contact information and guidelines in public resources such as MCF's directory and database."

Accessibility and "making information available" (Principle No. 3) also challenge foundations that give only to pre-selected charities and don't accept proposals. Some such foundations "have asked if we could develop something that reflects that a little differently for them," King says. "While there's nothing they disagree with, it just isn't part of their process. We've said from the beginning we need to look at that question but haven't formally done so.

"The principles still work, whether you accept proposals or not," he adds, "but when you look at the practices, there might need to be some attention to those — how to use these effectively if a foundation doesn't accept proposals."

At H.B. Fuller Company Foundation, which has just a two-person staff, Muller has resolved the respect and accessibility issues in this way: "We try to treat everybody the same," she says. If people want to meet, she explains that staffing doesn't allow face-to-face meetings with everyone who requests one, "but we do that during site visits after we've gleaned through proposals."

Raising the Bar

Despite a few reservations, foundations mostly say they are pleased to subscribe to the principles and believe they are valuable as a condition of MCF membership. "I don't think we'd be as aware of them if we didn't sign off on them," says Anderson of Deluxe.

"It's the only way to have a standard, as opposed to a recommendation," says Stewart of Fargo-Moorhead Area Foundation.

"Subscription will always be part of this," King says. "That's the piece that gives this some teeth." Enforcement is a matter of mutual good will among foundations. "We're not going to be police officers," King says. "We take people at their word that they're behaving well. The role of the association is to set high standards for the field and then help members learn how to apply those high standards to their work."

King is proud of Minnesota's leadership in establishing a code of conduct for grantmakers. "The fact that for eight years we were the only place in the country that has them gives us an opportunity to make that case about principled, thoughtful philanthropy," he says. "They are in many ways one of the distinguishing aspects of being a member of this association."

As one grantmaker says, "I think the principles are critical to our success."

Time to Review and Refresh?

That same grantmaker, however, also says: "To be honest, we have not reviewed [the principles] for a while. I'm not even sure our new trustees and staff are aware of them." In a spot check of how foundations use the principles, such responses were common, suggesting that the principles and practices may be due for another discussion, lest they be taken for granted.

Some foundation executives say they should encourage internal discussions of the principles among their own boards and staffs periodically. Some would like to see MCF organize annual or biannual workshops on the principles. Some say it is time to revisit and perhaps revise the principles.

"I am one of the people quietly beating the drum that it is time to update the language and engage in that conversation [about values]," says Golberg of the Southern Minnesota Initiative Foundation. As part of the team drafting the principles, she remembers what issues were on the radar screen. Today's issues are different, she says. "We should go back, and given the measure of time, ask if we are still emphasizing the right areas," she says.

One example of how times have changed is the use of electronic proposals, which weren't much of an issue when the principles were developed. The St. Paul Companies, Inc. Foundation is moving to electronic proposals in 2004. Pickard wonders how that affects accessibility: "If you have an online grantmaking system, does that mean you're not available to talk to people?" she asks. "Our hope is that, by going to online grantmaking, it will free us up to talk to more people who need us."

Foundations owe it to their communities to explore the use of technology, Pickard says. "You have to create efficiencies so staff has the time to implement the principles, and high tech creates efficiencies," she says. "Through technology, we free up staff time to provide more personal interaction with people making grant requests, which in turn allows us to focus on the substance of proposals."

O'Keefe, now president of the Minneapolis College of Art and Design, has been both a grantmaker and a grantseeker. He too recommends that MCF start another conversation about principles.

"The value of developing them was the process of developing them," O'Keefe says. "That's another good reason to revisit them. Their value and usefulness will be enhanced by revisiting them, no matter what happens."

Another value, he says, is simply having the documents to respond to public scrutiny. As public criticism has turned its focus in turn to corporations, financial institutions, health care organizations, churches and charities, he says, foundations should anticipate that their day will come and should be prepared.

"Revisiting these principles in a new environment created by new sensitivity to corporate and institutional behavior would have a lot of value," O'Keefe says. Among the issues he and others mention as ripe for discussion are salaries, administrative expenses (especially when grantmaking budgets are being cut), tenure and performance evaluations of staff, and the appropriate balance between proactive and responsive grantmaking - "strategies to keep people in touch," as O'Keefe puts it. Another subject that may arise again is ethical investing. It was considered by the first task force but ultimately rejected as too intrusive in individual foundation decision-making.

If changes are made, King says, they are more likely to come in the practices than the principles. Mentioning topics such as trustee compensation and administrative expenses, he says, "we might want to be explicit about what is good practice."

To the rest of the country, it is no surprise that ethical standards for grantmakers should have emerged in Minnesota - a state long recognized for good government, active community involvement and strong values. The Principles for Minnesota Grantmakers make the state a model of responsible grantmaking as well, providing guidance, inspiration, training and an opportunity for reflection that helps foundations do their work better.

"Doing good is not enough," as Pickard says. "You've got to do it well."

© Copyright 2003 Minnesota Council on Foundations
Reproduction in any form without the written permission of the publisher is prohibited.

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