The Indiana University professor talks to Michael E. Hartmann about the degree to which trust, or lack of it, in wealth and the wealthy may or may not have played a role in the creation of Big Philanthropy at the beginning of the last century, through to the 1969 Tax Reform Act that essentially still structures the nonprofit sector, to today. He also discusses the growth of nonprofits in the urban context, as well as some ramifications of that growth.
Leslie Lenkowsky’s knowledge and wisdom about philanthropy and public policy are borne of a career’s worth of experience in and scholarly study of it. He has been director of research at the Smith Richardson Foundation, deputy director of the United States Information Agency, president of the Institute for Educational Affairs, president of the Hudson Institute, a professor of philanthropic affairs and public policy at Indiana University, chief executive officer of the Corporation for National and Community Service, a fellow at the American Enterprise Institute, and director of graduate programs at the Center of Philanthropy at Indiana University.
Among other things, Lenkowsky has also been a director of the Philanthropy Roundtable and an adjunct faculty member at the Institute of Philanthropy and Voluntary Service at Georgetown University. Before all this, he was once a teaching and research assistant to several Harvard University professors, including Nathan Glazer and Daniel Patrick Moynihan, whom he also later served as a consultant. Lenkowsky is now a professor emeritus at the Paul H. O’Neil School of Public and Environmental Affairs at IU, where he’s a member of the Lilly Family School of Philanthropy faculty, too.
To the online Vital City journal’s high-quality, wide-ranging issue on “Nonprofits and the City” last month, Lenkowsky contributed an informative and insightful article about “The Paradox of Nonprofit Trustworthiness.” “Though the details differ, today’s concerns about the trustworthiness of nonprofits and their donors echo those expressed throughout American history,” he writes in the piece. “Paradoxically, Americans have long made philanthropy a central part of their civic life (as Alexis de Tocqueville famously noted), but at the same time, have never entirely trusted it.
Today, “[t]he organizations they are most likely to trust are those they are involved with directly,” according to Lenkowsky. “But the ones that have the greatest capacity to deal with urgent problems are apt to be more distant, managerial, complexly financed, politically engaged and, as a result, less trusted.”
Lenkowsky was kind enough to join me for a recorded conversation late last month about trust in philanthropy and the nonprofit sector. The just less than 21-and-a-half-minute video below is the first part of our discussion; the second is here.
During the first part, we talk about the degree to which trust, or lack of it, in wealth and the wealthy may or may not have played a role in the creation of Big Philanthropy at the beginning of the last century, through to the 1969 Tax Reform Act that essentially still structures the nonprofit sector, to today. He also discusses the growth of nonprofits in the urban context, as well as some ramifications of that growth.
As large, establishment philanthropies came into being during the early 1900s, “I don’t think trust was a big problem,” Lenkowsky tells me. “It really comes to the fore I think in the ’30s and ’40s, when articles began to be written about people using foundations a means of tax evasion. There was also a critique from the left,” a part of which was that “foundations of the wealthy were thought to be Republican-leaning” and “exerted too much power in society.”
Among the first big grantmakers, John D. Rockefeller, Sr., specifically “had a very nasty reputation,” according to Lenkowsky. “The story goes that mothers used to warn their children that they better behave, or else John D. Rockefeller might get them. … There was a level of personal distrust, not so much distrust of the foundation,” though “some felt that the Rockefeller Foundation would basically be John D. Rockefeller Incorporated in perpetuity.”
Leading up to the 1969 Tax Reform Act, “certainly there is a lot of distrust of the Ford Foundation,” Lenkowsky says—including, among other things, because of a number of grants it made to support former aides to Sen. Robert F. Kennedy, Jr., and voter registration in the months prior to a Cleveland mayoral election. This distrust was “exacerbated by a disastrous appearance by Ford’s president, McGeorge Bundy, before a congressional committee.
“The genesis of the ’69 Tax Act really came from two other sources,” however, Lenkowsky continues. “One was a very traditional populist distrust of wealth” and
concern about tax evasion and undue influence, led by a Texas Congressman, a Democrat named Wright Patman.
The other source of this, interestingly, was someone who had come into government with John F. Kennedy—a Harvard law professor named Stanley Surrey, who was an official of the Department of Treasury—and made the argument that tax exemptions and tax deductions should be treated as what he called tax expenditures. In other words, just as if they were actually government appropriations. That money not collected … should be subject to federal oversight, as well. That also led to questions about whether or not donors who had created foundations were behaving charitably—in this case, simply spending the money for charitable purposes, rather than keeping the money in a tax-exempt foundation.
Since 1969, “we’ve certainly seen, overall, growing mistrust of all institutions in American society,” Lenkowsky says. “It’s still the case, though, that nonprofit organizations—such as religious ones, medical ones—enjoy higher confidence among the public than Congress, the presidency, and the media, to just take three examples. But we do have a higher level of mistrust in in society.”
At the same time, he notes, “we’ve seen the growth of many charities” to the point where
they’re not really the kind of Tocquevillian, local charity that lives in our mythology or imaginations. They’re big businesses and they often operate like businesses—much more dependent on earned income than on donated income, and also government grants and contracts. Donations, in fact, are the third-leading source of revenue, behind earned income and government grants. So they look a lot different than charities traditionally used to look.
We’ve also seen the growth of very large foundations, much larger than existed even in the 1970s.
And “almost by definition, what foundations do is political,” Lenkowsky says. “We think about foundations serving the public good in one way or another. But if that’s their mission, you can’t avoid politics there,” so “we have seen this develop as well.
“The final point I would make on this,” he says, “is that increasingly, the American public is becoming less familiar with nonprofits and certainly with foundations.” They have become “more professionalized, especially among the larger organizations.” These professionalized groups are much less inclined to need, much less even look for, a connection with volunteers and other non-professionals who could otherwise help them fulfill their mission—and “unlike the old aphorism about familiarity breeding contempt, in the case of nonprofits, familiarity turns out to breed trust. As Americans have become less familiar with nonprofits, they have also become less trusting of them.”
Asked whether urban nonprofit networks are something akin to new political machines, Lenkowsky says nonprofits “do play a very important role in the governance of the city. During the Great Society, as federal social programs began a large expansion, President Johnson and his colleagues hit on the idea that rather than increase the size of the federal bureaucracy,” we would “be better off to rely on the delivery of services through nonprofit organizations. There were several reasons for this”—including, “in theory anyway, if you’re relying on networks of nonprofit organizations, you could tailor programs a little better to the needs of particular localities.
And “[s]ince all nonprofit organizations have boards of directors and staffs who also vote, this was a way of building political support for these programs, whether a person was a Republican or a Democrat.”
In the conversation’s second part, Lenkowsky discusses the challenges of interpreting survey data about trust in philanthropy and the nonprofit sector and, the historical “paradox of nonprofit trustworthiness,” and the relationship between civil society and the state writ large—as well as, writ smaller and looking ahead, that between exempt nonprofitdom and the tax system.
This article first appeared in the Giving Review on April 7, 2025.
