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The Light and the Dark Sides of Philanthropy

March 25th, 2019

By Sarah Davies, CEO Philanthropy Australia

Power and influence

Philanthropy is a significant source of power in our community and is one of many forces which influences policies, priorities and debate. This influence involves money, and there are two aspects that frame it:

  1. the use of private wealth by individual, institutional and corporate philanthropy, freely given, for public good or benefit, and
  2. the role of the state and the taxpayer in ‘co-funding’ philanthropy through the tax deductibility and concessions which are available for philanthropic donations and capital investment. 

The light and dark

Philanthropic giving has particular and unique features. It is given voluntarily, freely and, apart from regulatory requirements, is not subject to direction other than by the individual donors, trustees or directors. Philanthropic giving is not bound by the policies of government or by prevailing thinking. It has a high degree of freedom and the capacity to take risk. To paraphrase a marketing slogan associated with Heineken Beer, philanthropy ‘reaches places other dollars cannot reach’.

A mature analysis of philanthropy requires that consideration be given to both the light side and the dark side that its characteristics naturally create. The characteristics that make philanthropy so exciting and so important, are the very same characteristics that can give it a shadow side. This is especially obvious when philanthropy operates at scale. We need to be honest and open about the potential shadow side and find ways to mitigate the consequences (unindented or otherwise), without hobbling the features that we need philanthropy to flex for good.

Four features

Here are four ways we can examine the light and dark side of philanthropy:

Philanthropy as risk capital

One of philanthropy’s ‘super-powers’ is that it can take risks – indeed it is often referred to as our social risk capital. This identifies philanthropy as perhaps the key resource to support social innovation and experimentation in society.

It is, however, largely unaccountable. Philanthropic decisions are made by unelected and often influential individuals and institutions. When operating at scale, the allocation of these funds can absolutely influence the design and operation of systems. But outside of good practice principles, values and behaviour, where’s the mandate for such influence? There are no voters or shareholders to hold questionable or poor decisions to account. The Zuckerberg digital learning program in New York is a recent example.

Philanthropy as a source of pluralism

Philanthropy gives voice to disparate and diverse groups, and importantly to those who are disempowered or who do not have access to those who hold power and influence. As such it is a protection against a ‘mono’ culture and agenda which can dominate government policy agendas and funding cycles. Supporting and socialising alternatives to government policy are critical aspects of a healthy democracy and philanthropy is well-placed to enable and give this life.

However, critics of philanthropy claim that philanthropy does not significantly challenge the societal arrangements that generate the inequalities of wealth creation. Indeed, philanthropy may sustain the systems that give rise to private wealth creation, and where wealth is a determinant of power and influence, is therefore self-perpetuating. A recent high-profile book – ‘Winner takes All’ – by Anand Giridharadas, describes philanthropy as ‘generosity as a cheap substitute for justice’.

The long-term nature of philanthropy

Philanthropic funding is not subject to electoral cycles or any external time restraints, it can take long views and provide extended funding directed at long term and often global and multi-generational issues (e.g. climate change, mass displacement of people, pandemics, etc). It can start a funding relationship without knowing where it might end up, and without limiting the time horizons needed for complex change. In a similar manner, it can address issues that transcend national and geopolitical borders.

But where philanthropy has benefited from a tax subsidy or deduction (e.g. on establishing a Private or Public Ancillary Fund) these long-term horizons and exploratory relationships might not be seen to be delivering enough short to medium term return or benefit. This can challenge the continuation of the tax concession environment which supports philanthropy.

Philanthropy as a human and civic virtue

Philanthropy is an expression of active citizenship and agency. It is a powerful mechanism for people to express their humanity and individuality. At the same time, we acknowledge the benefits to self from such pro-social behaviour – such as positive emotional, psychological and physical health. It is a vital means of civic and community participation and expression of what we value and nurture.

It is not always the case that philanthropy is ‘pure’. We all have different motivations and values which will not always align. Depending on views about the generation or source of wealth and of its motivation, philanthropy can be ‘tainted’ – reference the current discussion of, and response to, the Sackler family’s philanthropy in the US.

How do dial up the light and mitigate the dark?

We can’t address the dark side by taking away the light. So, if we need the characteristics that give us the light, how do we mitigate the dark side? We think there are a few strategies, all which I hope you recognise in Philanthropy Australia’s strategy, activities and advocacy.

  1. Good charity laws give rigour and clarity to the system and build confidence which encourages support for philanthropy and allows it to grow in purpose and capacity. The ACNC, contemporary charity laws and an effective DGR framework are vital in protecting and improving the philanthropy environment.
  2. Sunlight being the best disinfectant, maximum transparency demonstrates accountability and builds trust. Encouraging the telling of reflective stories about the work of philanthropy (its failures as well as its successes), annual reports and sharing data are all essential.
  3. We need constant education, insight and reflection to keep pushing us towards understanding and adopting best practice. Case studies, conferences, web resources, peer collaborations, Awards and thought leadership activities are all examples of how we can keep track.
  4. We need to be deliberate and intentional about acknowledging and understanding philanthropy’s characteristics, deliberately playing to the light side and strengths to maximise the benefits, setting the dollars to work as hard as possible.
  5. We also need to be aware of, and vigilant to, the shadows it creates, and to have the confidence to explore the shadows: how do we use and share our power? How can we be accountable and to whom? How do we build better practice models? How do we build transparency in the sector around where the money goes and how decisions are made?

We need more and better philanthropy, and by being smart about playing to its strengths and mitigating its shadows, we will all continue to benefit.

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