Prologue

Foundations—Their History, Structure, and Societal Role

Program officers work in foundations, so before we discuss the work that program officers do, it is important to begin by discussing how foundations have developed in the United States. The idea of a foundation—an endowment established, whether for a fixed term or in perpetuity, the income from which is dedicated to charitable or philanthropic purposes—is a very old one, indeed. As Warren Weaver notes in U.S. Philanthropic Foundations: Their History, Structure, Management, and Record (1967), the notion can be traced, in Western cultures at least, as far back as Plato's academy, founded in Athens about 387 B.C. Plato left the academy, along with its supporting farmland (in effect, an endowment), to his nephew, stipulating that it be administered for the benefit of Plato's followers. His nephew proved a better manager than most nephews tend to be, and the academy endured for more than five centuries.

It was a pupil of Plato, Aristotle, who was one of the first to conceive of the difficulties inherent in administering such endowments for the good of others. In Book Two of Nicomachean Ethics, Aristotle stated: “Anyone … can give away money or spend it; but to do all this to the right person, to the right extent, at the right time, for the right reason, and in the right way, is no longer something easy that anyone can do. It is for this reason that good conduct [in such matters] is rare, praiseworthy, and noble” (Aristotle, 1962).

Greeks of Aristotle's time developed a tradition of making benefactions for the good of the populace as a whole. The Athenian Herodes Atticus, for example, made gifts of a theater to Corinth and a stadium to Delphi. These charitable acts were performed during his lifetime, however, and even bequests like Plato's academy were generation-to-generation transmissions that lacked the permanency essential to truly develop the foundation concept.

In 150 B.C., Roman law took an important step toward laying the basis for foundations by declaring charitable corporations to be both “sendent reasonable beings” and “immutable undying persons.” These principles opened the way for the establishment of long-term endowments that could endure for generations after the death of the donor or, if desired, in perpetuity. For the remainder of the Roman republic and throughout the era of the Roman Empire, foundationlike societies, such as guilds and collegia, gained endowments and carried out programs of good works. The Julian emperors gradually extended the right to accept and administer bequests of funds to cities, towns, and villages.

The Roman emperors pioneered in foundation scandals as well, looting municipal endowments for their own uses between A.D. 192 and 324. Partly as a corrective to this problem, Constantine I issued an edict allowing the Christian Church to receive legacies and administer them as ecclesiastical foundations in accordance with the will of the donor. Roman law also made another critically important contribution to the foundation concept: the doctrine of cy pres. This principle recognizes that the terms of a perpetual trust can, over time, become outdated or impossible to fulfill, and allows for modifications to render the trust able to meet new needs and changing conditions. The Emperor Justinian used these doctrines to dissolve Plato's academy, by then nearly six hundred years old, on the grounds that it taught heretical ideas. (Actually, the academy was teaching the ideas that it had taught for almost six centuries; it was the beliefs of the Roman Empire that had changed.)

Ecclesiastical foundations grew in size and importance during the Middle Ages. In England, churches and monasteries were becoming so well endowed that the sovereigns feared their growing power. Henry VIII and Edward VI both met the perceived threat by expropriating ecclesiastical wealth for the Crown and its favorites. These confiscations met with general approval, but there was considerable resentment about how the proceeds were distributed. In 1601, partly as a result of this discontent, Parliament passed the Statute of Charitable Uses, the bedrock law by which both British and U.S. charitable and philanthropic organizations, including foundations, are essentially governed, even today. Perhaps the most important principle laid down by the statute was that of fundatio incipiens, which required charitable foundations to secure legal incorporation from the state. In practice, this principle meant that all foundations were destined to have a dual character: endowed privately but chartered publicly. Although it seems not to have been the original intent, fundatio incipiens created the concept of a foundation as an instrument for transforming private funds into a public benefit.