A post to Exponent Philanthropy's blog

Perpetuity Doesn’t Have to Be Forever

Foundation surveys often ask if the foundation is operating with a limited life span, or in perpetuity. The choice is typically presented as a binary one: Did you set a time limit, or are you going to be around for eternity? There is a third choice, however, if perpetuity is not mandated in the foundation’s charter.

At its biannual board retreat, trustees of the Durfee Foundation ask the perpetuity question in a different way. Do we commit to operating in perpetuity for the next five years? That is, for the next five years do we believe that our mission and purpose are best served by not setting a deadline for the foundation’s existence? If we answer yes, then we commit to maintaining assets, investments, and operations as though we are operating in perpetuity. We know that we will revisit this question in two years.

One of our independent (non-family) trustees came up with the “perpetuity for the next five years” framework at a retreat several years ago when the board was flummoxed by the notion of committing to operate forever. We knew that we didn’t want to set a deadline to sunset the foundation at the moment, but were we ready to say that we wanted it to go on until the end of time? Who knows what the future might hold? The five-year horizon allows us to make a meaningful decision about the foreseeable future without getting bogged down in speculation about what might happen in the distant future.

Posing the perpetuity question with regularity and rigor shines a light on a foundation’s mission and tactics.

If your mission is to battle climate change and your endowment is $20 million, it could make a lot of sense to pour all your resources into this time-sensitive issue and sunset in a few years. Urgency motivated the Aaron Diamond Foundation to spend down in the 1980s and ‘90s to find a cure for AIDS. The Diamond trustees decided that a large infusion of cash for medical research would be most helpful at a critical time in the epidemic. On the other hand, if your mission is to support individual artists, a perpetual foundation might be the best structure to serve an evergreen need. There is no right or wrong answer about perpetuity in the abstract; it depends on your mission and how it can best be fulfilled.

Perpetuity also depends on the stakeholder pipeline for the foundation. Can you forecast who will be on the board in 10 or 20 years? Do you have a process for identifying, cultivating, and onboarding new board members? If you are a small family foundation with dwindling numbers of family members, you might want to start bringing independent trustees on the board or consider sunsetting.

Freeing ourselves from the specter of “eternal perpetuity” has allowed the Durfee board to focus on its place-based mission. Knowing that we will regularly pose the perpetuity question ensures that our work retains urgency and relevance.

Carrie AveryCarrie Avery is president of The Durfee Foundation in Los Angeles, which focuses on leadership by providing fellowships, grants to new grassroots organizations with dynamic leadership, and sabbaticals to longtime nonprofit leaders. She serves on the boards of Grantmakers for Effective Organizations in Washington, D.C., the RGK Foundation in Austin, Texas, and the Berkeley Repertory Theater in Berkeley, California. She is a past board chair of the National Center for Family Philanthropy and Northern California Grantmakers, and co-chaired the board of the Lawyers’ Committee for Civil Rights in San Francisco.

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