In philanthropy, a deal is not always a deal

DealPhilanthropic gifts are not like business deals. That’s despite the fact they often involve tens of millions of dollars and some of the world’s most successful business people. When the terms of a business deal change and are at odds with the original agreement, no one disputes the right of either party to pull out. But when it comes to philanthropy, the rules, behaviour and attitudes are different.

A great example is a story that appeared in the New York Times last December. It details the saga of the beleaguered Paul Smith’s College that successfully solicited a $20 million naming gift from prominent philanthropists Joan and Sanford Weill. There was however a small problem. It seems that the school’s founder and original benefactor had, as part of his testamentary gift to school, stipulated that it forever be known as Paul Smith’s College of Arts and Sciences. The school’s creative solution was that it would change its name to Joan Weill-Paul Smith’s College.

It seemed like a win-win. The terms of the Smith beneficiary gift were maintained while providing the Weills with the recognition they sought. Not so fast. It seems that although the college was operating at a deficit, there were many who objected to the agreement and the whole matter was forced into the courts. A judge eventually ruled that the evidence of financial hardship was insufficient to allow the name change.

With the deal no longer viable, the Weills withdrew their gift. That seems not only fair but also unquestionable. Apparently, not everyone agreed. A lawyer representing the alumni association said it was unfortunate that the Weills were not going ahead with the gift and vilified them by saying, “If they really wanted to give a gift to the school, it shouldn’t be contingent on something as self-glorifying as naming the school after Mrs. Weill.”

Hang on a minute. The terms of a multi-million dollar deal can’t be met but when the agreement falls apart, one of the parties is subject to harsh criticism. That would never happen in a business deal.

Interestingly, in our interviews with Canada’s top philanthropists, we discovered that the Weills may be an exception in the world of philanthropy. Numerous top donors told us about gifts that had gone wrong but amazingly, in almost every instance, the philanthropist had continued to support the organization. We’re not talking about small oversights. These are cases where the terms of the donor agreement were not met, where funds were not used as stipulated and in one case, where a donation had been used to build a library instead of a gym. And yet, in almost every instance, the philanthropist remained a supporter of the organization.

Jay Hennick’s comment likely resonates with many donors. “What I really should have done is said, ‘Give me back my money.’ But I didn’t think it was the right thing to do.”

Whether it was the right thing or not, it’s clear that the rules for philanthropic deals are definitely not the same as those for business deals.

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