DATELINE: January 7, 2008, Chicago
Several weeks ago, William Barron Hilton announced that he was pledging $1.2 million to the Conrad N. Hilton Foundation. Since then, there has been much more focus on what the public perceives as Paris Hilton's lost inheritance than on the gift itself. Unlike Bill and Milanda Gates' or Warren Buffet's generosity, Hilton's generosity has met with...
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unwarranted criticism.
In recent days we have found ourselves focused more and more on some of the many poorly reasoned ideas that increasingly permeate the nonprofit sector. That uncritical thinking certainly is evidenced by Hilton's detractors. Specifically,
Taking Advantage of Tax Incentives. Hilton pledged $1.2 billion to charity--the foundation. That generous act should be applauded, not criticized. One commentator has suggested that Hilton shouldn't be praised because he receives a tax deduction for the contribution. Well, that criticism strikes us as a bit odd for two reasons. First, if this is truly a pledge, Hilton isn't entitled to a deduction until the pledge is paid. We can only wonder whether the pledge is to pay the funds through his estate following Hilton's death.
Second, we note that the charitable sector lobbies hard for all sorts of tax incentives to encourage giving. As of late, the sector has lobbied for extension of the IRA rollover provision, more lenient rules for donations of fractional interest in works of art, and a charitable contribution deduction for non-itemizers. It seems a little two-faced to entice giving and then criticize people when they take advantage of the enticement.
When Hilton passes, he really isn't going to care whether his billions went to charity, his family, or the government because he will no longer be in the here and now. But he has chosen charity over his family while he is still alive. Admittedly, his family is probably pretty well off given the family's apparent wealth, but nevertheless, Hilton has made a very real choice that affects the people near and dear to him. Like Warren Buffet, he deserves credit and praise for that decision. Nothing more, nothing less.
Compensation. Now, let's turn to complaints about Steve Hilton, the president of the foundation. One commentator complained about Steve Hilton's $229,100 salary (plus $41,172 in benefit plan contributions). Quite frankly, that doesn't sound like a lot of money for someone who is managing a foundation worth close to a billion dollars (according to its 2006 tax return). As it turns out, it isn't. In a February 9, 2006 article, the Chronicle of Philanthropy reports on a survey conducted by the Council of Foundations. According to this survey, the median salary in 2005 for the CEO of a private foundation with over $250 million in assets was $350,004. Please take note: Steve Hilton is paid less the median and considerably so. The Form 990-PF reports, that on average, Hilton worked 37.5 hours per week, which would make his position a close-to-fulltime one—it might actually be 40 hours with four-weeks of vacation. Let's not forget that charities are private entities. As long as they are compliance with state fiduciary and tax law, it is not anybody's business what employees are paid. That's a call that resides with the board of directors or trustees.
Investment Management Fees. Then there is the complaint about investment management fees. Sorry folks, Wall Street is not in the business of charity. Good investment advisors are expensive, but in this case, we don't even think these advisors were particularly expensive. The foundation reports assets with a combined value of $889,768,402 on its most recent publicly-available tax return. The investment fees were $2,521,422. That is 2.8 tenths of one percent. Before being critical of that amount, we suggest the critics take a look at the fees paid on typical mutual fund accounts and similar investments.
Gift to a Supposedly Unworthy Charity. The foundation provides support, among others, to groups associated with the Catholic Church, according to its annual report. One listserv post referenced our blog as support for its claims that the Catholic Church was an unworthy charity. First, we object to the mischaracterization of our prior blog posts. We have been critical of Catholic Church's financial management practices, as evidenced not only by anecdotal newspaper reports of numerous thefts by insiders, but also by a survey by two Villanova professors last year. We have also written about the bankruptcy issues related to abuse claims and allegations made against various archdioceses. However, we have never been critical of the Catholic Church as a worthy beneficiary of charitable dollars. In fact, we are aware of the many good works that charities affiliated with or run by the Catholic Church do. These good works are reflected in the foundation's 2006/2007 annual report, where it details some of the grants it has made.
Second, and more important, we do not think it is appropriate for people to comment on the worthiness of the charitable gifts of others. Each person is faced with a wide array of choices as to how they invest their charitable dollars. Education may appeal to some people, while medical research may appeal to others. People give for a variety of reasons. We should all respect those choices. For the record, here are some of the foundation's accomplishments, as reported in its 2006/2007 annual report and quoted therefrom:
Typically affecting persons living in overcrowded conditions and with limited access to water and health care, trachoma is the world's leading cause of preventable blindness. The foremost method of combating trachoma is the World Health Organization-endorsed SAFE strategy (Surgery, Antibiotics, Facial cleanliness, Environmental improvement). Over the past decade, the Conrad N. Hilton Foundation and Fund have committed more than $24 million to the activities of organizations that are tackling this easily transmittable eye disease...
Since 1990, the Conrad N. Hilton Foundation and Fund have committed $62 million to provide clean, sustainable sources of water in Africa in order to eradicate Guinea worm and decrease the prevalence of trachoma and diarrheal disease. Three of the four countries receiving Hilton support rank in the bottom 10 of the 177 countries listed in the United Nations Human Development Index....
This year, the Foundation launched a new initiative, Strengthening At Risk and Homeless Young Mothers and Children, aimed at improving the housing, health, and development of young at-risk and homeless mothers and children. Systems serving the housing and child development needs of homeless families will be better integrated through four innovative, locally based collaborations in Chicago, Los Angeles, and Minneapolis/St. Paul. To increase capacity and promote high-quality service delivery, training and technical assistance will be provided and best practices will be strategically disseminated nationwide. The Foundation's $7.5 million grant to The National Center on Family Homelessness will be leveraged by matching local funds of more than $3.5 million. The initiative was developed and will be implemented in collaboration with the National Alliance to End Homelessness and the Child Welfare League of America....
A $2 million grant to Marywood University created the Sisters Leadership Development Initiative to increase the technical, management, and leadership skills for Sisters ministering in Africa....
With Foundation grants of nearly $19 million, the Hilton/ Early Head Start Training Program continues to positively impact infants and toddlers with disabilities, their low-income families, and their service providers nationwide.
With Hilton's pledge, the foundation should be able to support these sorts of programs for years to come.
Eliminating Paris. Anyone who thinks Hilton made his pledge to the foundation to disinherit his granddaughter, Paris Hilton, is extremely naïve. In the first place, we suspect planning for this gift predates little Paris' rise to fame. Although she seems to have been with us for the last 100 years, she had only been an icon for six or seven years. Moreover, Hilton did not have to disinherit his entire family to punish Paris, assuming that was his desire. He could have just as easily written her out of his will, but left everyone else in.
Allegation That Hilton Previously Diverted Funds From Charity. One blog refers to stories that Hilton diverted funds from his father's estate that had supposedly been earmarked for charity, apparently intending to suggest that Hilton is just correcting a previous wrong. We suggest that people be very careful about making these sorts of suggestions until they know all the facts. As any estate planner can tell you, there is a lot of family history, emotion, and expectations tied up in inheritance. Many parents, children, and siblings are currently dealing with the complexity of passing wealth down through the generations and all the psycho baggage that comes with it. It's easy to tag another family's internal disputes as petty or the children as greedy. Before doing so, take a look at your own family. Have there been no fights over who gets mom's prized china or dad's fishing equipment?
Conclusion. We have seen very little intelligent writing or thinking about Hilton's gift. We hope this post helps set the record straight.
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