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Feeling Pinched, Some U.S. Philanthropists Give More


Meanwhile, nonprofits, from women's shelters to community theaters, are scrambling to find innovative ways to attract donations as they anticipate that 2009 will be the most difficult fundraising climate in years

Pete Peterson has an uncanny sense of timing. The Wall Street billionaire pledged $1 billion early this year to create a foundation aimed at reining in the U.S. budget deficit and teaching spendthrift Americans to save. The Peter G. Peterson Foundation's first big initiative—a documentary called I.O.U.S.A., with cameos from Warren Buffett and Alan Greenspan—was released on Aug. 21, shortly before the credit markets collapsed. Since then, Peterson's foundation has been flooded with requests for special screenings from universities, retirement centers, and even branches of the American Farm Bureau Federation. "We're suddenly energized by the crisis and what needs to be done about problems that have been perfectly obvious for some time," says the 82-year-old co-founder of the Blackstone Group and former U.S. Commerce Secretary.

Peterson is a newcomer to BusinessWeek's annual list of America's 50 Top Philanthropists, ranking at No. 8. Unlike donors who give to such traditional causes as education and fighting disease, Peterson is trying to tackle the root of U.S. economic problems—"an aggravated case of short-term-itis" that he says has led to more than $53 trillion in national debt.

Peterson isn't without critics: He financed his foundation with his ample proceeds from Blackstone's IPO in June 2007, but shareholders have seen the firm's stock plunge 86% since. Still, the son of Greek immigrants insists he wants to use his fortune to promote financial prudence for governments and citizens alike. Peterson learned to count his pennies during the Great Depression. He recalls the sign on a paper towel dispenser in the cafe his father opened in Nebraska, after getting his start as a railroad kitchen worker: "Why Use Two When One Wipes Dry?"

Like Peterson, many givers on BusinessWeek's list made their fortunes during the market's boom times. Now, instead of wealth creation, the U.S. is experiencing a period of wealth contraction, which is influencing just about everything in the philanthropic world. The crisis is inspiring divergent approaches to giving. Some big donors, such as investor George Soros (No. 4 on our roster), plan to boost individual giving while the slump strains public finances and nonprofit budgets. Others, such as real estate developer Donald Bren (No. 9), are slashing their donations.

The economic downturn's greatest impact is likely to be felt next year, when wealthy individuals have a better sense of how much their net worth has shrunk. Since many will have fewer dollars to give, donors are picking their causes more selectively and keeping more money in the U.S. "We've got to step up to the plate," says Eli Broad (No. 20).

Broad stands out in the ranking because he gave $18 million more to his foundation this year than in 2007, despite a major stake in troubled American International Group (AIG). The insurance giant is the parent company of SunAmerica, where Broad was chairman and CEO for 11 years until 2000, two years after AIG bought the company. Broad says the value of his AIG holdings has declined by $375 million since June 30. Even so, this year his Broad Foundation made a $400 million grant jointly to Harvard University and Massachusetts Institute of Technology to fund genomic research—the foundation's largest gift ever. An additional $6 million went to Harvard for research labs to improve public education. Broad believes bolstering education is crucial to U.S. competitiveness. That sentiment is shared by three newcomers to the list: former Cisco Systems (CSCO) Chairman John Morgridge (No. 14), financier Henry Kravis (No. 44), and mutual fund guru David G. Booth (No. 34, after pledging $300 million to the University of Chicago Graduate School of Business).

This year 12 new philanthropists join BusinessWeek's 2008 list, which ranks donors based on their gifts over a five-year period. The most generous newcomer is hotel magnate William Barron Hilton, whose $1.7 billion pledge late last year to fund children's and global health causes made him No. 5. His foundation's assets have suffered losses, even though they were diversified in stocks ranging from pharmaceuticals to finance. That will likely squeeze giving next year, Hilton says.

The need to diversify is this year's big lesson for philanthropists. T. Boone Pickens (No. 16) lost some $2 billion in his energy investment fund in 2008, causing him to pull back on giving. Former AIG CEO Maurice R. (Hank) Greenberg had planned to donate most of his fortune, valued last year at $2.5 billion, through his family foundation. Now he says the plunge in AIG's share price has cut his net worth by more than 90% and he has downsized his plans. "Others are going to cut back quite severely, too," says Greenberg, 83. "It's a tragedy."

Harvey Najim (No. 49) sees the decline of Greenberg's foundation as a reminder to take a tough businesslike approach to his philanthropy. "I have a fiduciary responsibility to make sure that I invest the money and invest it properly," says the IT entrepreneur, who pledged $200 million to children's causes in his hometown of San Antonio. Despite the economic downturn, he vows to maintain his giving.

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McConnon is a staff editor for BusinessWeek in New York. Delevingne is a BusinessWeek reporter in New York.

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