Shifting the power dynamic in funding

Max Rutherford, Head of Policy at the Association of Charitable Foundations, considers how the funding pot can create a power imbalance – and what foundations and others can do to change it.

The collective assets of charitable foundations in the UK enable them to take the long view as well as respond to emergent need. They allow them to preserve social good when it is under threat, catalyse it where it is absent, and facilitate independent thought and action. These assets – including an annual grant spend of £3.3 billion and investments of £65 billion – give them the confidence to resist short-termism in the face of political or economic turbulence and pursue unpopular causes.

Assets bring power, and the power dynamics between the funder and the funded are the focus many discussions in domestic and international philanthropic communities. From these, a number of questions have arisen, including: “What does it mean to be an integral part of civil society, with our own charitable mission, when our organisation’s wealth can create a power imbalance between us and those we support?”

Some foundations believe that “putting their money where their mouth is” is only part of the answer. They also need to be their mission. This means being intentional in everything they do – aligning not just their grants to their mission, but also their investment choices, supply chains, independence, voice, access to decision-makers and networks. Many foundations have sought to recognise and level their power imbalance in a variety of ways, some of which are set out below.

Pushing for diversity and inclusion

A growing number of foundations are seeking to alter staff and board recruitment practices, appointing people from marginalised or minority groups in order to become more expert in the issues they care about and more representative of the communities they support. Efforts to increase diversity within foundations are all the more urgent in the light of stark research that reported foundation boards as being 99% white, 60% over the age of 60, and two-thirds male.

Many foundations have sought to make grant processes more inclusive, for example by involving grant applicants in funding decisions, or requiring those seeking funding to state how their project will be shaped by service users and lived experience. Others have created funding programmes that aim to make a specific change to society, established in-house campaigns, set up initiatives to develop leadership talent among underrepresented groups, and boosted resilience in under-threat, specialist parts of the charity sector.

Although not yet a prominent driver in the UK, peer pressure among foundations has led to increased efforts to demonstrate greater diversity in philanthropy. For example, diversity, equity and inclusion statements are now commonplace on the homepages of US foundation websites. These often include a public commitment to delivering board and staff diversity, and pledges to allocate specific proportions of grant budgets to particular communities.

Opening up about data

Voluntary transparency efforts are gathering pace among grant-makers, and driving collective change. In the UK, a growing number of foundations, and other kinds of grant-makers, are opening up their grants data. So far, 100 grant-makers in the UK are signed up to 360 Giving, sharing £24billion worth of grants data, searchable by the public. In the US, nearly 100 foundations are opting in to movements like the transparency initiative Glass Pockets, which scores and accredits foundations based on their performance “in providing information in an open, accessible, and timely manner”.

Several foundations have commissioned independent research to gather honest and open feedback from grantees, and some have published the results. The popular model of consumer review sites has also reached foundations. US-based Grant Advisor is a fast-growing web service that “facilitates open dialogue between non-profits and grant-makers by collecting authentic, real-time reviews and comments on grant-seekers’ experiences working with funders to encourage more productive philanthropy”.

There is also growing awareness that foundations may find themselves subject to enforced change. A recent meeting of Association of Charitable Foundations’ Stronger Foundations Diversity, Equity and Inclusion Working Group identified this issue. It took evidence from the co-founder of Equileap, an organisation providing data and insights on gender equality in the corporate sector, whose Gender Equality Global Report & Ranking aims “to make the gender performance of public companies transparent and comparable, and to enable corporations to understand how they can improve performance”.

The report ranked the top-performing 200 global companies, measured against a range of categories including equality of pay, parental leave policies and promotion opportunities, and attracted significant media attention. As a result, many companies are changing their practices aiming to be in the list next year. Those doing well are using the data in their marketing. The research even contributed to the creation of new laws in some jurisdictions. Since 2017 in England, Scotland and Wales, “any organisation that has 250 or more employees must publish and report specific figures about their gender pay gap”.

The group also heard from the Director of the Cabinet Office’s Race Disparity Unit, which uses data from across government to identify race-based disparities in terms of service provision and outcomes. As a result of the Unit’s work, the Prime Minister announced that all government departments must explain or changethese disparities in policy and practice.

Recognising and redistributing power

The creation of performance league tables, and the principle of explain or change, could well be applied to those beyond the public and private sectors, including foundations.

There is a significant and growing effort among many foundations to recognise and redistribute the power they have, and a clear direction of travel towards greater transparency in grant-making. The potential for imposed change may be reduced if voluntary change happens at a sufficient pace – change that appears both increasingly necessary and urgent if foundations are to be as effective and impactful as their assets potentially allow.

Making change happen: actions for foundations to consider

  • Foundations could consider how they can be intentional in everything they do – aligning not just their grants to their mission, but also their investment choices, supply chains, independence, voice, access to decision-makers and networks.
  • In terms of diversity and transparency, foundations could test themselves against the explain or change principle.