The Missed Opportunity of Gift Acceptance Policies
In a recent workshop, the speaker, an experienced attorney, offered a room full of planned giving professionals a hypothetical: what if a major donor insisted on an unusually high rate of return on a charitable gift annuity? After only a small amount of hesitation, the consensus of the room was that this is when you really need to have a policy in place. I would consider that an understatement, and I would not like to find myself in the place of a gift officer who suddenly realized that they are in an alarm-bell-raising area of conversation, and that their own policy might not be very strong on investment arcana.
In the nonprofit sector, every decision must ultimately refer back to the core mission. Gift acceptance policies risk alienating donors if they do not demonstrably reflect the shared values of the donor and the charity. When a major gift has relied on partly on building rapport based on these shared values, the idea of throwing cold water on the donor’s enthusiasm with a dressed-up version of “sorry, store policy” is not going to seem like a great response in the moment, particularly if the policy itself might not be much to fall back on.
Were I a gift officer in that potentially uncomfortable situation, I would be grateful to have read Pioneering Portfolio Management, the book on managing university endowments by David Swensen, Yale’s legendary endowment manager. Many people assumed his decades-spanning Midas-like results came from some deep, proprietary insight into market. In a way they were right: in the first chapters of his book he lays out with the inarguable weight of a lifetime of experience that gains -true, reliable, and ultimately industry-leading gains- do not come from slavering after increments in alpha, but from the slow, steady increase in the underlying value of solid investments, of which ROI at any given moment is something of a statistical byproduct. You also can tell Swensen had decades of experience making this point to a somewhat incredulous audience by the time he wrote Pioneering; he takes pains to explain this with the inexorable calm of someone who trained scores of young associates whose reach-to-grasp ratio he understood better than they.
Swensen became one of the great endowment managers by consistently avoiding the appealing fallacy of trying the beat the market, and he had the gravitas to make his point. Faced with an enthusiastic donor asking for an extra point from their CGA, a gift officer might not be able to communicate the economics of funding a perpetual institution quite so clearly. Few could. But if this conversation actually became any kind of a stumbling block to a major gift, my first thought would be: bad lawyering. Because this is the exact type of situation that the legal specialists charities employ should understand and preempt with a thoughtful line or two (in plain language) in a well-drafted gift acceptance policy.
Unfortunately, many nonprofits simply use legal templates or vague statements that don’t reflect much of a guiding principle (or really say much at all). Apart from being largely unhelpful in practice, these represent a huge missed opportunity. A well-drafted gift acceptance policy is an opportunity for a meeting of minds between a charity and a donor. It’s an opportunity to genuinely impress a donor at the beginning of the relationship by demonstrating a sophisticated understanding of how to turn donations in to outcomes. It’s a powerful way of saying “before our conversation even started, this charity has figured out how to make donations support work you care about.”
It is also, fortunately, a legal document, and one that puts the charity and the donor on a shared footing that can create a strong sense of shared values from the outset, and, should some dispute arise in the future, dramatically shrink the universe of points at issue, should any remain at all.
The converse is also true, and some very fine people, both donors and employees of charities in major gift situations have unfortunately lead their beloved institution (with the absolute best will and intentions) into a hellishly complex legal quagmire that may have no good legal solution.