The Flowering of Foundations

Once Carnegie and Rockefeller had shown the way, many others followed in their footsteps. One of the more outstanding of the smaller followers was the Russell Sage Foundation, established in 1907 as a widow's revenge on the deceased “donor.” By all accounts, Russell Sage was America's answer to Ebenezer Scrooge, except that he never was visited by three spirits. His biographer, Paul Sarnoff, wrote, “to the world at large … he was the meanest, most miserly skinflint that ever lived” (1965). Upon his death, Mrs. Sage used a goodly portion of the $64 million that he had left behind to establish the Russell Sage Foundation. The naming of the foundation fairly dripped with irony, as did its first major grant, which funded an exposé of the usurious practices by which Sage had gathered his fortune. Despite its miserable antecedents, however, the Russell Sage Foundation quickly distinguished itself in the fields of social work and social reform. Another foundation deserving of mention is the Julius Rosenwald Fund, which contributed to the construction of 5,357 public schools and teachers' homes across the U.S. South, focusing its efforts so as to bring maximum benefit to the African American population. Rosenwald chose to spend his fund out of existence, which goal was achieved in 1946.

In 1914, a banker named Frederick Goff, an employee of the Cleveland Trust Company, conceived the notion of a foundation that would be made up of a collection of trusts large and small, which would enable individuals from all walks of life to become philanthropists. The Cleveland Foundation thus became the world's first community foundation and the prototype for hundreds more to follow, first in the United States and, more recently, worldwide.

Corporate foundations also made their appearance during the twentieth century, although most are not endowed but rather what are called pass-through operations—that is, a portion of the corporation's profits are channeled through the corporate foundation to be given as charitable grants. Naturally, pass-through operations work well in good years, but when profits drop, so do contributions. The relatively few endowed corporate foundations are able to keep their programs on a steady keel, in both good years and bad. The typical corporate foundation usually confines its giving to those communities in which the corporation has operations, although there are some that carry on national and even international giving programs. Some corporate foundations also make matching grants to augment contributions made by employees.

As the twentieth century rolled on, the process of foundation formation accelerated rapidly. There were but eighteen foundations in the United States in 1900. That number doubled in the decade from 1900 to 1909, more than doubled during 1910 to 1919, and almost doubled again during the Roaring Twenties. Not even the Depression decade of the 1930s slowed the “foundation express,” as the number formed doubled yet again. The rate more than tripled during the 1940s. (More were formed during that decade than in all the previous history of the nation.) In the 1950s, the feat of the 1940s was nearly repeated. As the 1960s dawned, there were over five thousand foundations in operation across the United States. Foundations, it seemed, were multiplying faster than mushrooms after a rain, and apparently nothing could slow the growth.