Charged with not fulfilling its mission of advancing the public good, the philanthropy was put on trial Tuesday afternoon during the Council on Foundations’ (CoF) conference closing plenary session. The penalty, if found guilty, was the loss of its tax status.

It wasn’t quite “12 Angry Men.” Ultimately, there was no verdict because the trial ended in a hung jury, despite the suggestion of a “settlement.” Only two of the 12 jurors found philanthropy “not guilty.”

Gara LaMarche, president and CEO of The Atlantic Philanthropies, served as the prosecution, while Ralph R. Smith, executive vice president of the Annie E. Casey Foundation, took on the role of defense attorney. Presiding over the ballroom-turned- courtroom was retired Pennsylvania Supreme Court Justice Jane Cutler Greenspan and Trista Harris, executive director of the Headwaters Foundation for Justice, was the jury foreman. The jury? Twelve randomly selected conference attendees.

“Philanthropy is a privilege, not a right,” said LaMarche, as he launched into a 10-minute opening statement, which targeted the sector’s “excessive focus on self-interest,” along with its lack of diversity and strategic focus on systemic change as opposed to charity. “The favored tax status it enjoys in the United States makes sense only when it does so with integrity, transparency, fairness, inclusion and effectiveness,” he said. The argument, he added, is not whether philanthropy has accomplished good, but whether the tax-exemption is justified.

“Society has the right to recalibrate as needed,” LaMarche argued in referencing last year’s national debate regarding healthcare reform and how to pay for it, namely, reducing the charitable deduction to levels seen in the Reagan administration. The outcry from special interests was predictable, he said, “but we expect more from philanthropy.”

LaMarche attacked philanthropy for a lack of diversity on all fronts, from social justice grantmaking to nonprofit boards that have a dearth of board members who are young or non-white.

Smith countered that philanthropic dollars are being invested in projects inspired by a diversity of people, both libertarians who believe in limited government as well as those who believe it has the solutions. “Despite the ideological diversity, these folks are members of the Council and standard bearers of the field we call philanthropy,” said Smith. “This diversity of interest is what makes philanthropy great. It’s the hallmark of philanthropy, and it’s a diversity we ought to protect,” he said.

In things that matter, Smith argued that philanthropy has been present and engaged. “Have we done it well always, perfectly? Never — but we’ve done it,” he said. “You can go back to perfect being the enemy of the good. “If we hold any field to performance, there is no other organization, whether secular or sacred, public or private or social, that can meet that standard,” Smith said.

“What we have is a generational obligation to take what’s been left to us and make it better, and pass it on to those who come after,” said Smith. “It is the arrogance of a generation to believe that somehow if we don’t like the way an institution operates, we can get rid of it, because we know better than those who came before or after us. Our job is to continue the progress even if it’s incremental, fix these institutions and work toward perfection even if we don’t achieve it,” he said. If the question is whether philanthropy looks different than decade ago, Smith said the answer is yes.

“It’s difficult to resist the urge to make a gesture, saying something that has no cost and perhaps a hidden price,” Smith said. In a complicated world, he urged “jurors” to resist what appears to be a simple answer to a complex challenge. “We know that we have work to do…not guilty means we understand this is a serious challenge,” he said, and urged attendees to do it in such a way that honors the past, embraces the present and looks to the future.

The CoF must be responsive to a broad diversity of people and it has to find a way to represent those positions, said Smith. The logic argued by LaMarche, he said, is what’s happening in the current debate on The Hill over eliminating the mortgage interest deduction. “That deduction represents something. When we take that away, we’ve made a statement on giving up on home ownership as part of the American dream. It’s not a question of just math and how much interest can be deducted; what also counts is the message it sends,” he said. “For those small folks in philanthropy we ought to send a message… now is not the time to attack it.

In choosing to be generous to their church or local group, most people are not thinking about deduction, said LaMarche, so there’s “almost no impact” on the lower levels of giving as result of deduction, which is relied upon and enjoyed by people further up the philanthropic food chain.