Risk-Averse Philanthropy: How General Counsels Can Advance or Stifle Progress

a stack of paper with a padlock binding it, the key in the keyhole. Image by stevepb on Pixabay

Hi everyone. Before we get started with today’s post, next week, to kick off AANHPI heritage month, I’ll be on a virtual conversation with colleague Jennifer Li Dotson on May 3rd at 12pm PT. It’s free, with automatic captions. I hope to see you there.

I am still reeling from this op-ed published a few days ago. A time of relentless attacks on our communities and on democracy itself requires our leaders to take bold stances, not engage in the white moderation and both-siding that has led to the rise of antivaxxers, climate change deniers, flat-earthers, and people who think Love Actually is a good movie. (I said what I said!)

However, progressive-leaning philanthropy has always been like this. Months ago I was having lunch with a colleague who works at a prominent national foundation. We were lamenting how risk-averse progressive-leaning funders are, how board trustees and CEOs are hesitant to take bold actions.

“It’s also the GCs,” said my colleague, “the General Counsels. They have a lot of power and often prevent foundations from doing anything even remotely risky.”

At that moment, I realized we have barely paid any attention to GCs and the role they play in the sector, including in stifling progress. It’s kind of like a murder mystery where at the end, you find out that it was the barely acknowledged background character who was pulling the strings all along: “That’s right! ‘Twas I who poisoned the Mayor’s daily green smoothie! Me, the Assistant Director of Archives, who only had two lines of dialogue in Act 1! This will teach you to not decrease funding from the Archives department again!”

For those who are not familiar, a General Counsel at a foundation is a legal professional who provides legal advice and guidance. They review contracts, communications, strategies, intellectual property stuff, etc. Their job is to help ensure compliance with existing laws and to reduce risk for the foundation, especially mitigate the possibility of the foundation getting sued or its status revoked by the IRS.

That is all vital and important work, and I can only imagine how difficult it is, especially in this sociopolitical environment. But it seems over time many GCs (at progressive-leaning foundations) and their avoidance of risks and liabilities often prevent courageous strategies and actions. Another funder colleague told me how the GC at their foundation revised an RFP and associated communications to remove words like “race” and “Black,” when the grant itself was created to address racial disparity and lack of funding going to Black-led organizations. This was in order to avoid being sued for “reverse discrimination.” Yikes.

There are other ways GCs’ risk-aversion, amplified or directed by boards’ and CEOs’, can manifests. They could prevent a foundation from engaging in advocacy or lobbying, and forbid nonprofit themselves from doing these things. They could stop the foundation from funding vital organizations and issues because they may be “controversial.” They could put the kibosh on a foundation increasing its annual payout rate (the percentage the foundation spends of its endowment) beyond the legal minimum, which is currently 5%. They could shut down the foundation’s plans to take bold public stands that would advance equity, for instance supporting trans rights or abortion rights.

We haven’t focused much on General Counsels, but clearly they have significant impact on the entire field, and we need to pay more attention to this crucial but often invisible role. A GC who is aligned with the mission and who is thoroughly versed in the law can balance out trustees and CEOs’ risk aversion and help a foundation significantly to advance equity.

On the other hand, a GC who is mainly focused on reducing liabilities will amplify trustees’ and CEOs’ equal tendency to avoid risk. This risk-aversion may spread through the rest of the foundation, toward other foundations, and to nonprofits, creating an entire sector that is terrified to take meaningful actions for fear of legal liabilities. How can we advance equity in that state of mind?

Here are some potential solutions to unlock GCs potential to help advance equity:

Recruit and retain general counsels who have lived experience and come from marginalized communities: While I couldn’t find much information on the demographics of GCs at foundations in terms of race, the legal profession in general is very white (81% in 2022 in the US), so we can assume the majority of GCs at foundations are white. Hiring GCs who come from marginalized communities and who’ve experienced racism, homelessness, poverty, etc., may help to increase urgency to solve these issues.  

Hire GCs who are aligned with the mission and who have a track record of taking bold risks: All GCs who come on the team, just like everyone else, should be aligned with the foundation’s mission, vision, and values. Find the ones who talk about using the law to advance the mission and vision, and not just complying with it. Hire the GCs who have experience working with organizations and foundations that have taken courageous actions to advance equity.

Provide professional development opportunities for general counsel beyond just legal stuff: In attending over a hundred conferences now I have yet to meet a single general counsel from a foundation. This seems to be the pattern, that the people with the most power at foundations (board trustees, GCs, CEOs) are rarely on the ground, yet they are the ones making pivotal decisions despite missing some critical conversations and debates the rest of the field is having about equity and justice.

Discuss and agree on a set of equity-aligned values and guidelines: Discuss, develop, and formally adopt a set of guidelines that prioritize equity and justice. Discuss things like the difference between “doing things right” and “doing the right things,” which I wrote about earlier. This will help the general counsel feel more confident in providing legal advice that would help advance the foundation’s mission instead of always focusing on mitigating liabilities.

Create a culture of risk-taking, and include GCs on this: It seems that everyone else in the sector can talk about taking risk, embracing failure, etc., except general counsels, who must always be on the alert and help the foundation avoid risks. This creates an unhealthy dichotomy and dissonance. Our entire sector needs to embrace risk-taking, as that’s needed to effectively address many of the issues we’re working on. Board trustees and CEOs must lead in fostering this culture, and ensure the general counsel is included.

Learn from conservative foundations and movements and their legal counsels: A stark difference many of us are noticing between conservatives and progressives is that conservatives use the law as a tool to advance their agendas, taking advantage of every loophole they can find or create, and pushing legal boundaries; while progressives are terrified of the law and mostly spend time and energy complying with it. It’s time progressive-leaning foundations use the law to advance equity, not sacrifice equity to comply with unjust laws.

Let me know your thoughts, especially if you are a general counsel. Overall, GCs at foundations play crucial but often unacknowledged roles at foundations. They do important things. And many GCs are awesome. But the role’s natural gravitation toward risk avoidance can prevent foundations from taking meaningful actions that would advance equity. This then trickles out to the entire sector, lessening our effectiveness in creating a just and equitable world. And this is just terrible.

Like Love Actually.

Buy Vu’s book. Proceeds until June go to supporting earthquake relief.