A Bubble Bursts

A scandal at the Silicon Valley Community Foundation (SVCF) has roiled the world of philanthropy. It’s a blockbuster story with dramatic elements worthy of an HBO mini-series: An imperious and (until now) impervious CEO, secretive billionaire donors, abusive treatment of employees, sexual harassment, operational dysfunction, intrepid investigative journalism, and, finally, rolling heads as the board of directors belatedly recognizes the scale of the problems and reasserts control.

As documented by journalists Marc Gunther in the Chronicle of Philanthropy and Kerry Dolan in Forbes, SVCF had a culture that valued growth over everything else. (In a scene reminiscent of “Wolf of Wall Street,” Dolan relates how at the beginning of each monthly staff meeting the Foundation CEO, Emmett Carson, would chant, “We’re as small…” and the employees would respond, “…as we’re ever going to be!”) Carson – a guy with significant stature in the field – seems to have been downright besotted with the growth of the foundation. He was also largely absent, spending much of his time on the road, talking about philanthropy instead of overseeing it.

Carson more or less left Mari Ellen Loijens, the foundation’s chief business, development, and brand officer, in charge. Loijens by all accounts was a manager from hell, abusing and belittling the staff, and spewing forth inappropriate sexual comments to the point where she and staff established a safe word – “muskrat” (you can’t make this up) – when her lewd comments made staff members uncomfortable. Tellingly, Loijens was the organizational rainmaker. She knew how to work with high-tech billionaires and translate their stock holdings into enormous gifts. Her expertise as a fundraiser made her untouchable, even after repeated staff complaints to HR – at least, until last month.

Meanwhile, SVCF failed to invest in the human or technological infrastructure to keep up with its enormously rising volume of business. Checks to grantees were delayed or misdirected, and lower-level staff worked long hours at modest wages and under abusive conditions to transact basic business. Staff turnover ran at extremely high levels, and online ratings of the SVCF work experience were atrocious. Now, thanks to Gunther and Dolan’s excellent investigative journalism, we have a sense of what’s been going on there, and so does the SVCF board. Top executives (including Loijens) have since resigned or, in the case of the CEO, been put on administrative leave.

Many aspects of this story – with the unusual twist of having a woman, rather than a man, in the role of the sexual harasser-in-chief – could have happened nearly anywhere in the business or nonprofit world. But the problems at SVCF went well beyond everyday poor management. This was an organization in dysfunction overdrive, thanks to three overriding characteristics: an obsession with pleasing rich donors, a striking lack of transparency, and an embrace of growth for growth’s sake. And I would argue that what amplified these characteristics into such a public meltdown was SVCF’s primary role as a sponsor of donor-advised funds (DAFs).

Let me explain.

Silicon Valley Community Foundation is not alone in trying hard to please its biggest donors. Every nonprofit worth its tax exemption works to cultivate and provide stewardship to its major supporters. But here’s the difference. Most charitable organizations have a compelling mission describing why they exist. They are saving an endangered species, counseling veterans, curing diseases, teaching immigrants, providing housing, training nurses, feeding children, preserving a historic home, or what have you. These organizations try to get donors to connect with the organizational mission and to see that work as vital. The contributions then follow. This is the basic building block of charitable fundraising.

But what about an organization whose mission, essentially, is whatever the donor says its mission is? At a basic level that’s how a donor-advised fund sponsoring organization operates. If the donor cares about saving elephants in Africa, that’s the mission or the organization. If the donor cares about educating orphans in New Brunswick, that’s the mission, too. The SVCF mission statement reads: “Silicon Valley Community Foundation is a comprehensive center of philanthropy. Through visionary leadership, strategic grantmaking and world-class experiences, we partner with donors to strengthen the common good locally and throughout the world.” I read that to mean: “Our mission is whatever the donors think the mission is.”

For commercial gift funds like Fidelity Charitable, where the interaction between the organization and the donor is purely transactional, the mission is indeed whatever the donor says it is. But historically, community foundations have been about much more than that. Community foundations have been about making their cities and states better places. They have been about providing community leadership. They have been about supporting and representing the nonprofit sector. They have been about focusing attention (and charitable and governmental resources) on critical issues. And, yes, community foundations have helped their donors be philanthropic in an informed, efficient, and effective way.

Most community foundations continue to strive to do just that. But the leaders of the Silicon Valley Community Foundation found the notion of geographical community too limiting. As Emmett Carson himself wrote in The Stanford Social Innovation Review in 2013, SVCF serves “a community whose geographic location, interests, and identity cannot be placed on any one map.” He went on to say that there are profound questions “about whether traditional definitions of place and community can or even should remain constant in a century when people are increasingly global citizens and issues come in and out of relevance.”

Emmett Carson and SVCF wanted to attract donors with broader interests – and they made it clear that, because the donors’ interests were their interests, the foundation’s focus was not limited to a geographic region. Yes, SVCF distributed gobs of money around Northern California – it was so enormous, it could hardly help but do that. But even though there were communities of great need in and around Silicon Valley, SVCF made it clear that its interests – that is to say, the interests of its donors – were far broader. And SVCF not only gave much of its grant money thousands of miles from Silicon Valley, but it sought donors from other areas, going so far as to open offices in San Francisco and New York City.

If a community foundation draws from donors all over for causes throughout the world, is it still a community foundation? Certainly not one with a focus beyond growing ever larger. It’s clear that for Emmett Carson, Mari Ellen Loijens, and the other top execs, becoming as big as possible became SVCF’s be all and end all. (The salaries of Carson and Loijens rose accordingly – but you could have guessed that already.) And the way to get bigger was to make the organization as welcoming as possible for the high-tech billionaires of Silicon Valley. The donors’ interests were the foundation’s interests.

Meanwhile, the foundation was a black box. People could speculate about what was going on behind the scenes, but nobody knew. Transparency was simply not a value at SVCF, particularly if providing information conflicted with protecting the privacy of its donors. A few months ago reports surfaced that SVCF assets had increased by an astounding $5.3 billion in 2017, and that most of that growth seemed to come as a result of investment returns, not donations. But the foundation wouldn’t explain these extraordinary returns. Observers speculated that SVCF was holding a significant amount of specific company stock – such as Facebook, perhaps – presumably at the request of its donors, who include Mark Zuckerberg. But we couldn’t know for sure. In fact, we still don’t.

If SVCF were a private foundation, that investment information would be a part of its IRS Form 990-PF IRS. But SVCF is a public charity, and it doesn’t have to reveal the details of its investment information, and it certainly doesn’t describe its grantmaking or investing on a fund-by-fund basis. Nor would the foundation have been interested in sharing that information. That’s because SVCF’s primary customer is not the public, or the nonprofit organizations it supposedly supports, or the community in which it is based. The primary – and, in truth, only – customer who matters for a community foundation that has lost its way is the donor, and the way SVCF has so carefully kept its records private has been part of its big attraction to the 16 billionaires and other donors who have opened funds there. If a donor said, “I’ll give you $500 million in company stock, but you have to hold onto it for the next few years until I tell you to sell,” my sense is that that’s exactly what SVCF did.

So now we have the spectacle of the country’s largest community foundation, and the third-largest charitable foundation of any type, losing its executive leadership – and, more importantly, its credibility. The Forbes article speculates that many of SVCF’s large donors may be transferring their funds to DAFs at other organizations, such as Fidelity Charitable. (I wrote about these DAF-to-DAF transfers here and in the Chronicle of Philanthropy last year. Now these transfers – officially considered grants – may increase dramatically.) We can shake our heads and dismiss what has happened at SVCF as a one-of-a-kind story of failed leadership – and, certainly, there’s only one Silicon Valley, and consequently only one community foundation with this kind of size, visibility, and potential for hubris. But I would argue that community foundations that lose their mission focus and forget the meaning of “community” – and, for that matter, nonprofits of all types that lose sight of who they are and why they exist – can find themselves following this same sad and self-destructive path.

Copyright Alan Cantor 2018. All rights reserved.


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8 Comments. Leave new

  • Perhaps this type of loose management of significant funds will promote donors to once again turn their funding directly to non-profits whose mission they can align with and support, rather than to aggregators like this who hold funds and meter them out in sometimes less meaningful ways. The human issues that occurred can happen anywhere and no one should forget that, so we must be ever diligent in not supporting such behaviors.

  • This is an excellent contribution to the ongoing discussion of the crisis at SVCF.

    From the outside it appears that several elements came together to generate this crisis:

    1) Growth into the non profit sector version of a tax free banking institution but without anything like the infrastructure that kind of institution requires. Internal controls would appear to be very weak. As far as I can tell they don’t have a general counsel and they use a non-Big Four accounting firm.

    2) Growth fed by the massive explosion in valuations of unicorns that faced exits or liquidity events for their founders. As their valuations increased so too did the tax risks. Somehow the two worlds – venture backed startups heading into IPOs and a community foundation – intersected. It is very unlikely this came just from the two executives at SVCF. Bankers, lawyers, others had to play some kind of role setting up this scheme.

    3) A board that was either asleep at the wheel or complicit in creating this dysfunctional business model. Too often experienced for profit executives come on to non profit boards and leave all their skill set and antennae behind.

    Short of a massive organization overhaul with new leadership at the board and executive level I can’t see a way out. Sadly, a crisis at SVCF is a crisis for the Valley as a whole which, as you rightly point out, has real social and economic needs.

  • Mary Rogier
    May 9, 2018 12:26 am

    Al — excellent piece on a really disturbing story. Thanks for covering it so well.

  • Al, Great summary of this train wreck. I’m not surprised this happened in the valley; growth for growth’s sake is a value held in high regard there. Some startup values just don’t translate to philanthropy. I’m left wondering if this was unusual or if the DAF model of growth at community foundations is just ripe for abuse.

  • Thanks, Al, for another great article. So important to shed light on bad actors in our sector. Always look for the real motive. I agree the bankers and lawyers likely cooked up this scheme and it was too juicy for some with weak moral compasses to turn down.

  • I knew Mari Ellen well just after she graduated from college. I long ago predicted her rude, arrogant and offensive personality would get her into big trouble. She knew no bounds to verbally abusing others so this does not surprise me in the least. What is sad is that she was even hired in the first place and allowed to advance her career. I could not even stand being in the same room as her never mind hiring her. To me her personality was a red flag obvious to anyone who met her never mind interviewed and worked with her. So glad karma finally caught up with her.


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