The nonprofit-sector leader talks to Craig Kennedy and Michael E. Hartmann about the politics of policy reform in philanthropy, the pressures brought to bear on those either proposing or receptive to reform, and the importance of the nonprofit sector.
Jan Masaoka co-founded the Philanthropy Project with Jon Pratt last year to highlight the beneficial roles that public accountability can and increased regulation could have on American philanthropy. Masaoka and Pratt are the group’s co-chairs.
From 2011 to last year, Masaoka was chief executive office of the California Association of Nonprofits. Pratt is executive director of the Minnesota Council of Nonprofits.
Earlier this year, the National Council for Responsive Philanthropy awarded Masaoka and Pratt its Pablo Eisenberg Memorial Prize for Philanthropy Criticism—which is very fitting, because Eisenberg was widely known and respected for his admirable willingness to offer critiques of philanthropy and suggest meaningful reforms of its legal and regulatory structure, as well as its management and operating practices. Masaoka and Pratt share that same admirable willingness.
In 2019, Masaoka and Pratt also co-founded Grant Advisor, an online platform modeled on TripAdvisor where nonprofits can anonymously review foundations and foundations can respond. For 15 years, Masaoka wrote about systemic problems in philanthropy for Blue Avocado, which she founded, and she is the author or co-author of three books on nonprofits.
Masaoka was kind enough to join us for a recorded conversation last month. In the first part of our discussion, which is here, she talks first about some positive trends in philanthropy, then about several of its problems and areas for potential reform—including making a few specific suggestions.
The just more than 17-minute video below is the second part, during which we discuss the politics of policy reform in philanthropy, the pressures brought to bear on those either proposing or receptive to reform, and the importance of the nonprofit sector.
Underscoring a point to which she previously alluded and characterizing the discourse surrounding contemplated policy reform surrounding donor-advised funds (DAFs), Masaoka offers an analogy. “Agribusiness has been very smart about holding up the image of the family farm,” she says,
So when people think about farming, they think about Mom and Pop with a pitchfork and two pigs, you know? And instead, it’s literally hundreds of thousands of acres under machine-based cultivation with undocumented people from Mexico picking strawberries. So I think we need to do a better job of saying, We’re trying to regulate big business, but … we intend to protect family farms.
In the philanthropy context, reform advocates “have not made that differentiation very clearly,” according to Masaoka.
There is an unfortunate reluctance among nonprofit leaders to publicly criticize DAFs, she says, given their groups’ dependence on donations through DAFs and the relationships they value with existing or would-be donors who use them and community foundations that sponsor them.
As Masaoka describes, moreover, these community foundations and other nonprofits that sponsor DAFs have allied themselves with commercially affiliated nonprofit DAFs because these large financial behemoths (think for-profit Fidelity and Schwab, among others) generously fund lobbying efforts to protect all entities in the DAF sector, resulting in wide opposition to any proposed reforms threatening its underlying structure and the business model of the money-making behemoths.
“[T]he community foundations are saying, Cool, we don’t have to do anything. We just have to show up at the hearing,” she says. “Fidelity doesn’t even show up. They just send us our talking points ahead of time and they pay the $50 million dollars in lobbying fees to do this. To me, that’s been a huge change in the politics of it.”
Masaoka broadly emphasizes the importance of the nonprofit sector as the operationalization of First Amendment freedoms, urging that any reform respect and protect civil society and voluntary, small-scale nonprofit charities. The “right of speech, freedom of religion, freedom to assemble peaceably, freedom to petition, the government—these are all made real through the nonprofit sector,” she says.
Asked whether civil society more broadly needs the tax-incentivization of nonprofit status to exist and succeed, she answers, “if we got rid of the tax deduction, we would keep the all-volunteer organizations,” which are 70% of the nonprofit groups in America, and we would keep the big, national, heavily government-funded nonprofits, but “we would lose the mid-level, locally based organizations and I think those are really important.”
Then, asked whether the word nonprofit is being misused or abused, Masaoka concludes, “I guess every word is misused. I mean, Christian is an example of a word that’s misused a lot, but that doesn’t mean that Christians should stop calling themselves a Christian.”
