Spelman College’s decision to terminate a $20 million program supported by Bill Cosby, embroiled in allegations of drug-related seduction, reminds us that donors and recipients mutually depend on good behavior and shared intentions, which are imperiled about once a decade for most charitable organizations.
The problem can originate on either side, as where a recipient wishes to disaffiliate because a donor’s behavior or reputation becomes objectionable–as in the Spelman-Cosby case–or where a donor objects that a recipient is not using funds as intended–as in the 1995 case of Yale University returning $20 million after alumnus Lee M. Bass complained that the school had not used the donation to create classes in Western civilization the donation called for.
Litigation does not often result, but when it does, it can be ugly. Negotiations and structured solutions are usually preferred. Take an example of each: Princeton University’s acrimonious litigation with the Robertson family and Lincoln Center’s friendly accord with the Fisher family over renaming Avery Fisher Hall at Lincoln Center.
In 1961, Charles and Marie Robertson made a $35 million endowment gift to Princeton for the purpose of educating graduate students for government careers. They embraced the spirit of the times, captured in President John F. Kennedy’s call to “Ask not what your country can do for you, but what you can do for your country.” Establishing the Robertson Foundation, Princeton invested the $35 million and used the rising investment income to fund such programs—along with many others outside the Wilson School. Indeed, the Robertsons’ gift—which grew to nearly $1 billion today—become a sizable component of Princeton’s overall endowment—about $15 billion today.
While Princeton administrators loved the large and seemingly flexible funding, the Robertsons’ children, who retained a role in overseeing the use of funds, objected. They insisted that Charles and Marie intended a specific and limited use of the funds, solely for training in government careers at the Wilson School. Unable to resolve the disagreement amicably, the Robertsons sued the University in 2002, seeking to terminate the gift and recover the principal.
In the acrimonious litigation, the Robertson family said the university allocated $250 million of foundation funds to non-foundation pursuits, including a new sociology department facility, international affairs programs, and public policy studies—none of which focused solely on training for careers in public service at the Wilson School. The family contended that the University commingled foundation funds with general university funds with the result of disguising how foundation funds were used.
Princeton countered that the University was a complex institution with multiple interconnected missions that result in overlap between Wilson School government careers and broader programming on public and international affairs. It argued that the narrow literal and historical reading of the donor’s intent should yield to a contextual, flexible and evolving understanding of donor intent in relation to the University’s needs.
After six years of legal wrangling during which the two sides incurred legal fees exceeding $40 million each, they settled. The Robertson Foundation was dissolved, with $50 million going to fund a new “Robertson Foundation for Government” independent of Princeton and under the family’s auspices. The University also agreed to pay the Robertsons’ legal fees.
While both sides claimed victory, informed observers saw mostly mutual defeat, a pair of Pyrrhic victories. After all, while the Robertsons wrested control of a foundation from Princeton rededicated to their perception of their ancestors’ vision, it was far smaller than what the original endowment had become, and the bruising litigation did not entirely promote family unity. While Princeton retained control over most of the funds along with an expanded authority over allocation, the philanthropic community saw a bald assertion of power over donor intent that is likely to make some donors unwilling to trust the school with their beneficence.
In 1973, Avery Fisher, founder of Fisher Electronics Co., donated $10.5 million to support the renovation of New York City’s Philharmonic Hall, the music house built in 1962 on Manhattan’s upper West side. The pledge agreement provided that the Hall would be renamed Avery Fisher Hall and called for that title to “appear on tickets, brochures, program announcements and the like . . . in perpetuity.” The site has hosted innumerable grand classical musical performances over the decades, and the name is etched in the consciousness of many a New Yorker, and gave Mr. Fisher, who died in 1994, a bid to immortality. Read More