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Philanthropy 1992–2022: Shifts in the Sector Reflected National Events and Cultural Change

Part 3 of 4 // by Michael Moody
Philanthropy 1992–2022: Shifts in the Sector Reflected National Events and Cultural Change
Front cover of "Philanthropy 1992–2022: What difference can 30 years make?" report by Michael Moody, Ph.D.
The Center for Philanthropy and Nonprofit Leadership — now called the Dorothy A. Johnson Center for Philanthropy — was founded at Grand Valley State University in 1992. It seems fitting, then, on the occasion of our 30th anniversary, to look back at what things looked like at the beginning — as well as at the remarkable transformation and growth of the field since then.

This blog is the third in a series of four that not only reminds us what things looked like in 1992, but also reveals how the practices of giving, the makeup and number of institutions, and the intensity and breadth of research and teaching about philanthropy have all expanded and changed in dramatic ways. For instance, megadonors have become much more mega, the lines between the sectors have blurred more than anyone expected, and most institutions for research about this field — and most university degree programs — have been established in the past three decades. Still, many other aspects of the field and its institutions have endured — and not always for the better.

Let’s explore what a difference 30 years can make in philanthropy.

The Aramony scandal was the first of many, with consequences for trust.

By 1992, William Aramony had been head of the national United Way of America for 22 years and had steadily expanded the organization’s size and impact. But in February of that year, he resigned in disgrace amid numerous reports of sexual harassment, questionable relationships with young women funded through spinoff entities, and a lavish lifestyle of first-class flights, chauffeurs, posh gifts and vacations, and more, all expensed in suspect ways.

Aramony was eventually prosecuted, convicted, and put in prison for six years. But the scandal in 1992 was a signal moment for the sector, as it drew sharper attention from the media and the general public — many of whom were United Way donors in their own communities — to the internal workings of charities.

“[The scandal] was a signal moment for the sector, as it drew sharper attention from the media and the general public … to the internal workings of charities.”

Nonprofits in 1992 still enjoyed, on the whole, a high level of trust, especially when compared to trust in other major institutions such as the federal government. In the years since, however, that trust has declined, not in small part because of the increased post-Aramony scrutiny, and the apparent appetite of the public for reports of “do gooders” doing bad things — or at least things that do not feel quite right for a nonprofit. There have been constant stories — not just of outright fraud or malfeasance, but of nonprofit executive salaries that seem too high, unsavory associations with “tainted” donors, high rates of contributed dollars being spent on fundraising or “overhead,” and the like.

Public outrage continued in the aftermath of the Rodney King verdict.

In late April of 1992 in Los Angeles, a jury acquitted the four officers charged with beating Rodney King the previous year. Six days of civil unrest — referred to by some, controversially, as “race riots” — followed, and the whole country watched as parts of the city burned. There had been other notable examples of protests and public outcry in response to the treatment of people of color, but the aftermath of the Rodney King verdict struck a chord.

According to the Philanthropic Initiative for Racial Equity, the response to what happened in LA included new attention to race relations and diversity by foundations at the national and local levels and intensified minority-led organizing among grantmakers and nonprofits.

Unfortunately, as we know, what happened in 1992 has been repeated in many cities since, including the murder of George Floyd in Minneapolis in 2020 and the widespread protests against racial injustice and police brutality that followed. Many donors and nonprofits in communities across the country have responded repeatedly as well, and there is much debate in the sector now about whether those promises are being fulfilled, whether the response is expansive enough, focused enough on systemic injustice, and other issues.

Diversity, inclusion, equity, and justice became prominent areas of focus, but we still struggle to achieve them.

Compared to when the LA unrest happened in 1992, the philanthropic world today — especially donors and grantmakers — is much more focused on issues related to racial equity, social justice, systemic inequalities in communities of color, representation of diverse voices, and similar social challenges. This is a much more common topic at conferences in the sector and in industry and research publications.

To be sure, there were plenty of organizations, and some prominent donors, focused deeply on these issues in 1992. But it has become much more widespread in the last three decades. Unfortunately, this does not mean we have widespread agreement on best practices or effective solutions to address these persistent social problems and inequities.

A few voices in the field even disagree that diversity, equity, and inclusion should be priorities for philanthropy, arguing that so-called “woke philanthropy” is merely a current fad. But it is clear to many that concern for these issues is neither fleeting nor misplaced, and that we need better research knowledge — and more inclusive dialogue — about the best philanthropic and nonprofit responses.

A push for national and community service created enduring programs.

On the campaign trail in 1992, nominee Bill Clinton often promoted the idea of national service — something distinct from the mandatory military service that is proscribed in other countries. He talked about voluntary and community service, facilitated and coordinated by the federal government.

In 1993, President Clinton signed the National and Community Service Trust Act, establishing AmeriCorps as well as a new independent government agency, the Corporation for National and Community Service (CNCS). CNCS now manages AmeriCorps and many other service programs.

“[P]romotion of service learning and student volunteering was part of the original mission of the GVSU center that eventually became the Johnson Center.”

At the same time, many universities around the country were ramping up their own student community service and service-learning programs. In fact, this promotion of service learning and student volunteering was part of the original mission of the GVSU center which eventually became the Johnson Center. Several national nonprofits with a national service mission were also created at this time, including Teach for America in 1992.

Though the fervor around service has waned a bit in the decades since, it has by no means disappeared, and most of the programs created in those years around 1992 have endured.

‘Reinventing’ government made it an even larger source of nonprofit revenues.

Another, even more prominent campaign proposal from the Clinton-Gore ticket in 1992 was their plan for “reinventing government” — borrowing that phrase from the title of a bestselling book of that year (Osborne & Gaebler, 1992). One of the primary ideas in the book was that governments should be “steering not rowing” — meaning, in part, that they should move away from providing government-funded services through a centralized bureaucracy and try more entrepreneurial approaches like contracting those services out to nonprofits.

While this was certainly not the only factor (and federal funding has dropped for some nonprofits), this strategy helped contribute to the continued growth of government funding as a source of revenue for the nonprofit sector over the past three decades. Government now provides about one-third of total nonprofit revenue, and much more than that for certain kinds of nonprofits, such as human service agencies. This is likely one of many causes for the overall increase in the financial scope of public charities described in Part 2 of this series.

Measuring outcomes became the norm, and evaluation became a widespread practice of a new and more strategic philanthropy.

The professional practice of evaluation is, of course, not something invented since the ’90s, but it has certainly become much more widespread in the philanthropic world, with many more foundations requiring some sort of evaluation these days. Nonprofits are also now expected to track — and be accountable for — not just their outputs (e.g., the number of students served in an afterschool program) but also the eventual outcomes of their efforts (e.g., an increase in the graduation rate). And more donors, such as the often-passionate adherents to approaches like venture philanthropy and effective altruism (Singer, 2015) that arose in recent years, are basing their decisions on what one critic labels “metrics madness.”

This rising focus on measurement and evaluation was influenced greatly by the reinventing government push described above. The Government Performance and Results Act of 1993 embedded the practice of using logic models for planning and evaluating the government programs that funded nonprofits. Many foundations and charities adopted this practice more broadly, often substituting the idea of a theory of change for the more formal logic model.

This shift was also part of a larger move toward rethinking giving and grantmaking in ways that rationalized decision processes so they would be driven by measures of effectiveness, and prioritized accountability for results and scaling proven models. This more “strategic philanthropy” approach has carried many labels in the past couple of decades, and there is a healthy debate about just how different it is, despite its proponents’ claims that it is a new and better way forward for philanthropy (Breeze 2011).

The boundary between business and philanthropy became far more blurred than anyone in 1992 could have predicted.

Many of the topics and trends that draw a lot of attention in the sector today lie at the increasingly blurry intersection of business and philanthropy — e.g., impact investing, B Corps, charitable LLCs, and microfinance. It is surprising how little these topics were on the agenda or radar of the sector back in 1992.

There was some talk at that time about socially responsible investing, and the divestment movement in the 1980s used market power to help bring an end to apartheid in South Africa. But the many innovations now collected under the umbrella of impact investing were not being practiced or even predicted 30 years ago.

Few if any endowed foundations, for instance, were screening their endowment investment portfolios to ensure alignment with their philanthropic mission, something that is common today. In fact, the Gates Foundation was called out in a highly public way in 2007 — in a Los Angeles Times exposé — for having a ‘firewall’ between its grantmaking side and investments side. The foundation initially defended this position, saying they wanted to earn as high a return as they could so they could grant as much money as they could. But soon after the public turmoil, they started to reassess, and now have an official investment policy that ties their investments to their mission priorities.

Corporate social responsibility has also boomed in recent years, making it almost required for a corporation to show how it is doing good, not just making profits — and altering the relationship between corporations and nonprofits in the process. Ben and Jerry’s and Newman’s Own were operating as clearly socially responsible businesses in 1992, but today many more companies wear their social and/or environmental mission on their sleeves, often partnering closely with specific nonprofits or causes. The official B Corp certification was created in 2007 for companies that seek to maximize public benefit rather than just profits, and the number of B Corps has skyrocketed since.

Read Part 4

 

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Michael Moody, Ph.D.
Michael Moody, Ph.D.
Frey Foundation Chair for Family Philanthropy (2010–2023)
Michael Moody joined the Johnson Center in 2010 as the inaugural Frey Foundation Chair for Family Philanthropy — the world’s first endowed chair for family philanthropy — and held this position until 2023. In this role, Michael pursued a comprehensive,...
References

Breeze, B. (2011). Is there a ‘new philanthropy’? In C. Rochester, G. Campell Gosling, A. Penn and M. Zimmeck (Eds.), Understanding the roots of voluntary action: Historical perspectives on current social policy. Sussex Academic Press.

Osborne, D., & Gaebler, T. (1992). Reinventing government: How the entrepreneurial spirit is transforming the public sector. Addison-Wesley.

Singer, P. (2015). The most good you can do: How effective altruism is changing ideas about living ethically. Yale University Press.