The Future of Philanthropy, in 1 Question

You are at a board meeting of your charity. Board member Jane mentions her friend Peter, and says he might be interested in making a donation. Peter, she says, is the owner of a large software company.

Peter, to be clear, is NOT A CURRENT DONOR. He has not opted in or opted out or opted for anything at your charity.

Back at the office you put Peter’s name into Google. It’s in your legitimate interests to do so, and Peter would expect you to do this.

Turns out that Peter’s business is based in Newcastle.

You are in London, so there is time and travel cost to consider if you are to visit him. You use Companies House to find out about Peter’s shareholding and the company’s profits. These figures help you estimate Peter’s gift capacity. Again, it’s legitimate for a charity to estimate the size of a potential donation before it decides to spend money on a visit to Newcastle.

At an invitation-only event on the 21st of February, the Information Commissioner’s staff will tell charities and the Fundraising Regulator whether or not they can do this search.

The future of philanthropy in the UK hangs on the ICO’s reply to this one question.

Can a prospect researcher do the search outlined above?

If the answer to the question is “No”, then high-value philanthropy in the UK will change dramatically.

It will no longer be possible to use public-domain information to identify or understand potential donors. Charities, universities, museums, hospitals and theatres will have to stop, immediately, all proactive forms of reaching out to new high-value supporters.

How will high-value philanthropists react? They will give less. When charities stop asking, people of wealth will stop giving, or give less and less often.This is not just an assertion – it is demonstrated by research. In “Richer Lives: why rich people give”, Theresa Lloyd and Beth Breeze report that 69% of rich donors give ‘If I am asked by someone I know and respect.’ Charities, from cancer research to the lifeboats, will have to adapt to a dramatic cut in their income.

Some philanthropists will respond by setting up their own foundations. We know from Factary’s New Trust Update that they are already doing this in some numbers. They will manage their own projects via these foundations, meaning less money for mainstream charities.

If the answer to the question is “No”, then the ICO is taking on not just the charity sector, but pretty much every business in the UK. Because every day hundreds of thousands of secretaries, assistants and marketing people do this exact search to check up on potential customers. Can that really be the ICO’s intent?

If the answer is “Yes”, then the ICO is affirming prospect research. We CAN continue to research, understand, and evaluate potential donors and, with permission, actual donors.

We will know the future of philanthropy in the UK on the 21st of February.


Chris Carnie is the author of “How Philanthropy is Changing in Europe”, published by Policy Press. He writes in a personal capacity.

Have I Mentioned…?

Have I mentioned my new book? (It’s the vain author’s constant refrain.)

Yes, I know I have. But that was pre-publication. Now I have an actual copy in my hands, so that means that the orders have started shipping from Policy Press.

This is a book for practical people. It’s about how high-value philanthropy is evolving across Europe, so practical people in fundraising, in prospect research, in social investment, in policy making and in education will all find – I hope – useful information here.

If you are a major donor fundraiser interested in why your donors keep asking about impact, you’ll find an answer here.

If you are a private banker or wealth adviser who wants to understand why your clients keep on asking about foundations in France, you’ll find out why, here.

If you are a policy maker wondering whether to recommend further tax relief for donations, then you’ll find the arguments here.

If you are a prospect researcher, wondering where to look for potential supporters in Switzerland, you’ll find some answers here.

And if you are the director of an NGO, wondering what your strategic priorities should be, you’ll find some suggestions here.

The book includes case studies, detailed research, some how-to, and a bibliography of more than 300 sources and references in (count ’em, ladies and gentlemen) seven languages. Its focus is Europe, meaning that this is not about the UK + the Continent + Ireland – it’s about the Continent + Ireland, plus the UK.

I hope you find it useful.

 

Order “How Philanthropy is Changing in Europe” directly from Policy Press, here.

Divided Rules

Prospect researchers are at the nexus of a storm between five government agencies. Thanks to the monetary penalties imposed by the Information Commissioner in December 2016 on two leading charities we can now see the extent of the battlefield.

In one corner is the Information Commissioner’s Office, ICO. In its press release announcing fines for the RSPCA and the British Heart Foundation, ICO condemned the use of “information from publically[sic]-available sources to investigate income, property values, lifestyle and even friendship circles.”

This appears to put the ICO in direct opposition to the Charity Commission. In a series of papers entitled ‘The Compliance Toolkit’ the Commission reminds charities that they have a duty to check on donors and potential donors. Tool 6 in the suite is called ‘Know Your Donor’, and here the Charity Commission asks;

“Have any public concerns been raised about the donors or their activities? If so, what was the nature of the concerns and how long ago were they raised? Did the police or a regulator investigate the concerns? What was the outcome?”

How would you find out whether “public concerns” have been raised, if you did not use “publically-available sources”?

You simply have to use newspapers, government sources, and a search engine if you are to find out whether public concerns have been raised. There is no other way. And of course the Charity Commission says so, recommending that “full use should be made of internet websites” to check donors.

Your duty

The Commission goes further, and reminds trustees that “…if the trustees have reasonable cause to suspect that a donation is related to terrorist financing, they are under specific legal duties under the Counter-Terrorism Act to report the matter to the police. In the case of money laundering, reports can be made to the police, a customs officer (HMRC), or an officer of the National Crime Agency.” The Commission suggests a threshold for reporting – donations of £25,000 or more.

But we are not done yet. Because if you have the slightest suspicion that the donor may be a bit iffy, the Charity Commission requires you to “…check the donor against the consolidated lists of financial sanctions targets and proscribed organisations.”

Gosh.

That means this list.

The list contains 8,885 names of individuals who are under sanctions. It includes their date and place of birth, their passport or ID number, and a biographic note such as “Manager of the branch of Syrian Scientific Studies and research Centre.”

That is personal information held in the public domain, that the Charity Commission requires us to review.

The Libya Connection

Why are four government agencies – the Police, HMRC, the National Crime Agency and the Charity Commission – interested in these checks?

In part, the story is linked to the London School of Economics, and the controversy over a gift from Libya. The result of the controversy was the Woolf Inquiry, which published its report in October 2011.

After a detailed study of the history of this gift, Lord Woolf made a series of recommendations on accepting funds from “less well known” high-value philanthropists including an inquiry into the sources of their funds (p. 69) and a thorough due diligence assessment (p. 22).

These searches are only possible with public domain information.

Catch-22

Under questioning at last year’s CASE conference, ICO spokesperson Richard Marbrow did allow that we could use public domain information for due diligence purposes. But he went on to say that this same information could not be used for assessing gift capacity because that would be an “incompatible purpose” for the use of data.

But that leaves us prospect researchers in Catch-22.

I cannot carry out full due diligence on all my prospects. To do so would be a scandalous waste of charity resources. The Charity Commission suggests that the threshold should be £25,000. So if I am to decide that Mrs A or Mr B must be checked via due diligence…I have to assess their gift capacity.

To do that, I need the help of a fifth government agency, Companies House.

Open for Business

Mr Marbrow cited Companies House various times during 2016, telling fundraisers and prospect researchers that because the information in Companies House was collected for one purpose – regulation – it could not be used for another – prospect research.

What does Companies House say? Here is their July 2014 press release*

“Companies House is to make all of its digital data available free of charge. This will make the UK the first country to establish a truly open register of business information.
As a result, it will be easier for businesses and members of the public to research and scrutinise the activities and ownership of companies and connected individuals. … This is a considerable step forward in improving corporate transparency…

It will also open up opportunities for entrepreneurs to come up with innovative ways of using the information.”

So, Companies House wants us to “research and scrutinise the activities and ownership of companies and connected individuals,” and to find “innovative ways of using the information.”

The Battle for Philanthropy

Prospect researchers are caught in the centre of a battlefield between government agencies, between “innovative ways” of using information, terrorism legislation, due diligence and privacy.

We must defend our corner of this bloody battlefield.

We need our friends in fundraising and philanthropy, in Parliament and in civil society, to support the sensible, ethical, managed use of public domain information in the search for philanthropists.

 

 

*I am grateful to a colleague at a leading University for pointing this out.

Chris Carnie is the author of “How Philanthropy is Changing in Europe”, published by Policy Press. He writes in a personal capacity.

In Defence of the Public Domain

A university, a museum, or a charity does not raise £10m or £50m or more by accident. An alumna did not wake up one morning thinking “I must give £1m to my alma mater.”

This happened because a dedicated group of professionals managed a process that led to the alumna being asked for a very large philanthropic gift.

At the heart of that process was, and is, the prospect research team. The team used – like we all do – public domain information to identify and understand potential supporters.

But now one government agency, the Information Commissioner’s Office, wants to stop us using public domain information. In the emotionally-worded press release that accompanied the penalties for the British Heart Foundation and RSPCA, the ICO says that “companies used other information from publically [sic]-available sources to investigate income, property values, lifestyle and even friendship circles.” ICO staff members at fundraising and research conferences throughout 2016 told us that the information on directors held by Companies House is compiled for one purpose (regulation of business) and therefore cannot be used for another (prospect research.)

So perhaps we cannot use public domain information to identify and understand potential supporters.

Purposes

But think for a moment.

Why do I have my profile in LinkedIn? What is my ‘purpose’? Is it just a marketing tool, showing potential clients what a clever chap I am? No! I had all sorts of purposes in mind when I created my profile in LinkedIn. I wanted to reassure clients that I was, and am, a decent person. I am proud of what I have done and wanted – sorry folks, this gets personal – to boast a wee bit about setting up Factary, about the books I have written and the languages I speak. I wanted access to the profiles of other people with whom I might work or even play. I wanted to explain who I am and how I got here – it’s cathartic. And I wanted a useful depository for my lifeline – to remind me of exactly when I went to school or which year I started in fundraising.

I had a whole variety of ‘purposes.’

Expectations

As a result, I have a very wide variety of ‘expectations.’ This word is important, because the ICO believes that “millions of people who give their time and money to benefit good causes will be saddened” by the news that charities targeted them for more money; in other words, this is about what people expect. With my profile in LinkedIn I expected that people would look at my personal story. I expected that Southampton Uni, my alma mater, would contact me about a donation (they did.) I expected that I would be networked to, and with (and indeed welcomed that opportunity.)

The person who has her biography in Who’s Who, or who gives a personal interview in the Times, or who is listed as the director of a company, or as the trustee of a charitable foundation has the same wide range of expectations.

The ‘purpose’ of a personal interview in the Times is to sell advertising space on the facing page of the newspaper; “All the papers that matter live off their advertisements,” said George Orwell, in Why I Write*.

But that is not the ‘purpose’ that the interviewee had in mind when she was approached by the journalist. Nor is it the ‘expectation’ of the interviewee. She knows, when she agrees to give the interview, that her warts-and-all will be exposed to public view. She expects that she will receive praise, opprobrium, investor pitches, car sales teams and an approach from a headhunter as the result of her interview.

The Public Domain

Information on company directors in Companies House – the Registrar of Companies for England and Wales – is made public for various purposes. The Registrar was created by The Joint Stock Companies Act of 1844. In the debate of the Bill that would create the Act (3rd July 1844), Mr Gladstone said “The principal object of the Bill was, that there should be established a public office, to which all parties soliciting to take part in Joint Stock Companies might repair, in order to know the real history of these companies.” Mr Gladstone was talking very clearly about corruption; “…it was most important that the Legislature should put a stop to the system that had been so long carried on of attaching the names of hon. Members, and men of importance and property, to schemes in order to entrap the unwary.”

So here again, at Companies House, we have a variety of purposes for information in the public domain. It is right and proper that prospect researchers use Companies House information to establish the “real history” of “men of importance and property”, and, 172 years after Mr Gladstone’s speech, of women of importance and property too.

All the universities that are engaged in raising funds, along with our theatres, museums and charities, manage a process that results in high-value philanthropy. At the heart of that managed process is prospect research. And alongside every prospect researcher is public domain information.

People in the public domain – in Who’s Who, or LinkedIn, the Times or Companies House – are there for a variety of ‘purposes.’ They expect that the information will be used in a variety of ways – including, yes, by people who will lead them into great philanthropic acts.

We prospect researchers do great works with public domain information. It is wholly legitimate that we use public domain information for this purpose. We must defend our right to do so.

Chris Carnie is the author of “How Philanthropy is Changing in Europe”, published by Policy Press in January 2017. He writes in a personal capacity.

*The fuller quote, given here is:

“Is the English press honest or dishonest? At normal times it is deeply dishonest. All the papers that matter live off their advertisements, and the advertisers exercise an indirect censorship over news.”

How Much Can She Give? Some maths, from Spain

Prospect research in continental Europe is tough. You spend your life saying ‘if only we had [fill in name of favourite source]’.

There are rays of light, as Europe gradually opens up to transparency, but they are rarely truly illuminating.

The hardest part is to try to estimate Gift Capacity. At Factary we define Gift Capacity as ‘the largest gift that an individual could give to any cause in ideal circumstances, over three years.’ By defining it that way we are saying, as objectively as one can in the murky world of money, that this is the best of the best, the biggest possible gift. Not ‘how much she will give to my charity‘, but how much she can give. And not ‘how much can she give this year?‘, but an amount spread over a period of three years.

How much she actually donates to your cause depends on many factors, including the strength of the connection to her, her positive and negative feelings about your organisation and, of course, how much you ask for.

But here in Catalonia and Spain, even the starting point for Gift Capacity research is difficult. So it is a Red Letter Day when some data on wealth appears.

The annual publication on directors’ salaries by the Stock Exchange Control Committee (CNMV, www.cnmv.es) is just such a day. The 2015 report was published last week.

In part the interest is vicarious. Learning that the Executive Chairs of Ibex-35 companies are now earning an average of €3.45 million is galling when you are a prospect researcher in Spain (average salary unknown but unlikely to be more than €25,000, and mostly under €20k); those Chairs earn more in three days than you earn in a year of labour.

But the data – the full report is here – does help us. Non-Exec directors are now earning an average of €763,000, up a staggering 48% on the previous year (clearly these are hard-working men and women), and the average across all quoted company directors is €344,000, up a mere 8.2% on the previous year.

So now you have an idea of how much she is earning, can you reliably calculate gift capacity?

Unfortunately, there is very little data to help you do that.

A 2006 study of tax returns [1] showed that people earning more than €600,000 per annum were giving an average of €3,268 – meaning 0.54% of their income. This was their declared giving on their declared income, and both figures are likely to be conservative.

So at your most cautious you could say that the Executive Chair of an Ibex-35 company might give 0.54% of €3.45 million, which would be €18,760.

That’s a start!

1. Sánchez Pérez, Elisa. ‘Evolución y situación actual de la filantropía en España’. In La Filantropía: Tendencias y Perspectivas, 125–46. Papeles de la Fundación de Estudios Financieros 26. Madrid, 2008. http://www.fef.es/new/publicaciones/papeles-de-la-fundacion/item/189-26-la-filantrop%C3%ADa-tendencias-y-perspectivas.html.

The Newest Philanthropists

Thirty of the UK’s newest philanthropists are featured in a report published today by Factary.

The report is focused on the Ultra High Net Worth Individuals (UHNWIs) and High Net Worth Individuals (HNWIs) who have founded grant-making trusts and foundations during 2013.

We profile 30 of the richest people in the country who have created grant-making bodies, and analyse their wealth, philanthropic interests and biographical information to create a picture of the UK newest philanthropists. With a combined estimated wealth of £5.7 billion, these individuals represent a significant source of funding for UK non-profit organisations in the years to come.

The report includes:

  • Detailed profiles of thirty new philanthropists
  • Updated information on their trusts and foundations
  • Note that, with one exception, none of these trusts is listed in any other directory of grant-making trusts
  • Our analysis of the biographic, philanthropic and financial data on these philanthropists
  • Networking Index to identify the links between philanthropists, companies and the new trusts.

HOW TO ORDER
To order the report email Nicola Williams, nicolaw@factary.com

The report is priced at £135. New or existing subscribers to Factary Phi or Factary’s New Trust Update get a discounted price of £95.

From Bookmaking to Billionaires
Included in the report is a scion of a billionaire family, a Duchess, a Viscount and two Knights of the Realm. There are eight representatives from the financial services industry including two hedge fund managers and four investment bankers, along with philanthropists with other sources of wealth including landownership, art galleries, bookmaking and football.

London, and International
There is a strong geographic concentration on London and the Home Counties but also a continuing international flavour to the new philanthropists in the UK with seven of the thirty UHNWIs and HNWIs having nationalities other than British, and global connections identified to a wide range of countries including Zambia, South Africa, Italy, Nigeria and St Vincent and the Grenadines.

Oxbridge
There is a strong Oxbridge connection – a third of these new philanthropists went to either Oxford or Cambridge, with over 25% going to Oxford. Other UK universities attended include the University of Bristol, the London School of Economics, Leeds University and the University of Birmingham. Three of the people featured also went to the same public school; Charterhouse.

UK Philanthropy, Goes on Growing
During 2013 Factary’s New Trust Update reported on a total of 217 newly-registered grant-making trusts and foundations in the UK. This report shows that people of significant wealth are continuing to create foundations and grant-making trusts to support philanthropic organisations in the UK and abroad, creating a positive picture of philanthropy in the UK.

Venture Philanthropy in the UK Shows Similar Characteristics
The findings in this new report reflect the new philanthropists that we identified in our 2013 report on The Venture Philanthropists. In that report we found that 39% of UK venture philanthropists come from the financial services industry. We also found many people of wealth – £38 billion in combined personal assets.

Research:
This report was researched and edited by Will Whitefield, Senior Researcher at Factary. It is published as a special supplement to Factary’s New Trust Update.