A recent article in the Chronicle of Philanthropy reported that a significant portion of foundations plan to reduce their grant contributions in the face of falling endowments. Their primary motivation in doing so is to preserve their corpus.

If they previously gave away 5% of a billion dollars (= $50M) and that corpus is now worth, say, only $600M, they will still give away 5% (= $30M). The point is that their highest priority must be to maintain their size, not necessarily to make a difference in the world during these challenging times.

Are major foundations really worried they will go out of business if they continue to award grants at their pre-recession levels? That seems unlikely. They would have to give away a lot more than 5% to risk that danger. In the example above, a difference of $20M in grantmaking would not endanger a $600M foundation.

Then why reduce grantmaking? The only reason I can come up with is scorekeeping. Major foundations must look at their relative size in annual compilations and decide that their goal is to maintain their ranking, maybe even to improve it. If this is true, a foundation prioritizes its relative size or ranking over its stated mission. This is not only a shame but a missed opportunity.

The foundation community could collectively provide its own 2009 stimulus package to the nonprofit sector by increasing its giving to, say, 10% of its 2008 levels for one year. This would not endanger a foundation’s long-term health, and in fact, if foundations work collaboratively they could maintain their relative rankings, like race car drivers doing laps during an accident clean-up under the yellow flag.

With no harm to the foundations’ sustainability, think what good a doubling of 2008’s foundation giving would do for the world.