The Now Realities of Institutionally Related Foundations

In 2019, AGB convened several chief executives/executive directors of institutionally related foundations to revisit the seminal 2005 AGB work Margin of Excellence: The New Work of Higher Education Foundations, edited by Richard D. Legon. Based on the group’s work and with Legon’s editorial leadership, AGB published an updated version in 2020 titled The New Realities for Public Higher Education Foundations, which covered the waterfront of “what foundations do,” including philanthropy, endowment management, entrepreneurial ventures, the relationship between a foundation and its related institution, and foundation financial support to the college or university.

The New Realities is as relevant—and important—for volunteer board leaders and foundation staff today as it was five years ago. However, much has occurred since the fall of 2019 in the higher education environment, not the least of which was the disruption of the COVID-19 pandemic. Global political and economic stress in the years since has created more disruption and thereby added new pressures on today’s college and university presidents. These include enrollment challenges, shorter tenures for presidents and other key campus leaders, divergent stakeholder demands (stemming from issues such as campus protests and calls for divestment in endowments), rapidly changing technology, redefinition of the education model, and new court rulings and state regulations concerning diversity, equity, and inclusion, among other issues. These stress points tend to flow downstream, and thus we are hearing from foundation chief executives and board chairs about their “now realities.”

It might be useful to reinforce understanding of the purpose of an institutionally related foundation. As we say often at the annual AGB Foundation Leadership Forum and the Institute for Foundation Board Leaders and Chief Executives, “If you have seen one foundation, you have seen just one foundation.” Not all foundations have the same capacity or are at the same level of maturity in the organizational life cycle. However, regardless of the scale of a foundation’s operations, its structure, its relationship to the institution, and where it might lie on the business/governance maturity continuum, all foundations have the potential to provide their respective host institutions with several advantages and benefits, including:

• A trusted partner by engaging influential and generous volunteers committed to benefiting the institution.
• Informed advocacy through institutional leaders engaging these influential volunteers in acting as well-informed advocates in the communities where they live and serve.
• Philanthropic leadership through performing an evident and substantive role in supporting, funding, and leading transformational fundraising initiatives, including campuswide campaigns.
• Donor stewardship by gaining and fulfilling donors’ trust and assuring donor intent is honored.
• Asset management through providing flexibility and thoughtful leadership in the investment, management, and expenditure of endowed and unrestricted resources.
• Entrepreneurial ventures by exercising the ability to seize opportunities and take on prudent risk for the benefit of the institution.

For more examples, see Institutionally Related Foundation Boards: An Introductory Guide for Board Members (AGB, 2019).

In good times, and where the relationship among campus, trustee, and foundation board leadership is long and strong, all six of these benefits of an institutionally related foundation may be self-evident and require little to no reminder or reinforcement.

However, when the primary beneficiary (for example, the university or college) is dealing with one or more of the stress points listed earlier, it is incumbent on the foundation board chair and senior staff to invest time and energy in educating multiple campus constituencies. This is especially true when the foundation has the primary responsibility for the stewardship of donors’ intent and the fiduciary requirement to protect and grow endowed assets.

Once the students (and, in some cases, the faculty) are literally or figuratively “manning the barricades,” it may prove difficult to explain the role and responsibilities of the investment committee, the tenets of the investment policy statement, the meaning of “a perpetual pool of funds,” asset management, the Uniform Prudent Management of Institutional Funds Act, and so forth. Although not as volatile as in times of campus unrest, the arrival of a new institutional president or chancellor also may open the way for questions and challenges to foundation policies and practices.

Several situations reflecting these issues were raised during a recent meeting among AGB’s senior leadership and 25 foundation chief executives. The executives who were weathering the storms of 2023 and 2024 well offered a simple, yet tried and true, approach: “Be proactive!” AGB would add: “Be transparent!” as an accompanying adage. It is never too late to start being proactive and transparent.

The following are a few takeaways from those institutionally related foundation teams already demonstrating such actions:

• Schedule and conduct periodic meetings between the foundation board chair and institutional chief executive, with a written agenda (and preferably not during a campus crisis).
• Also consider establishing a campus “leadership quartet” or “leadership trio” (for example, the institutional president/chancellor, foundation board chair, foundation chief executive, and institutional/campus board chair).
• Never assume a new president/chancellor (or new provost, dean, or campus chief financial officer) is aware of the benefits and advantages of an affiliated foundation.
• At the same time, communicate details clearly—never assume anyone outside the investment committee understands the tenets of the investment policy, including the endowment’s spending policy.
• Create your own version of the six advantages/benefits listed above, with specific examples of what your foundation has done, is doing, and plans to do within each of the subject areas.
• Draw in student leadership and faculty leadership (both to attend and to present at regularly scheduled foundation board meetings). For example, if there is a student investment organization, invite representatives to your investment committee meetings, take the mystery out of the process, and turn them into enthusiastic and credible advocates for the work your foundation is doing.
• Prepare an annual report for each campus dean enumerating the various restricted or endowed funds aligned with that dean’s college or school. In cases where the funds are not being spent, educate the dean on the importance of donor stewardship and demonstrating the impact of such gifts.
• Ensure that your own board is fully aware of its collective and individual fiduciary responsibilities (and hold members accountable).
• Determine who speaks for the foundation in times of stress or in times when a decision may create concern on campus (this is usually the board chair, but with independent foundations the chief executive often plays that role). Make sure that foundation statements are coordinated with institutional communications.
• Work to establish and nurture a “habit and culture of collaboration” so that the foundation’s reputation for leaning forward is known across campus and to any new campus leader coming aboard.

Colleges and universities have looked to their respective foundations for many years, whether to raise or invest money, acquire real estate, or act as a fiscal agent, among many other supportive activities. In today’s challenging higher education environment, the value, importance, and positive impact of foundations is greater than ever before.

Make sure your foundation is at the top of its game, and if you are not sure, there are opportunities to learn more. Multiple sessions about highly effective foundation board governance will be offered at AGB’s 2025 Foundation Leadership Forum in Washington, D.C., January 29-31, and at its 2025 Institute for Foundation Board Leaders and Chief Executives in Newport, Rhode Island, June 4-6.

George P. Watt, Jr., is a senior fellow and senior consultant at AGB.