Major Gift Donors Having Second Thoughts

With a goal of $120 million, the Bowling Green State University Foundation (BGSUF) completed a six-year comprehensive capital campaign at the end of 2008 having raised $146.5 million. Early this past January, the school started getting calls from donors to cancel pledges because of their economic circumstances.

Located a half-hour north of Toledo, Ohio, and just an hour from Detroit, Bowling Green, Ohio, is in the shadow of the auto industry. As the local saying goes, "When Detroit sneezes, Toledo gets a cold," according to Marcia Sloan Latta, senior associate vice president for advancement and campaign director at the foundation.

BGSUF had more than 70,000 donors during the campaign, which began in July 2002, with about 450 making gifts of $25,000 or more. Five donors who pledged gifts of $50,000 to $150,000 between 2004 and 2006 have reached out to the foundation this year to cancel those pledges. Three donors ended up extending the timeline of pledges, while two donors ultimately canceled the gifts altogether, Latta said.

In one case, a $100,000 pledge was from a donor who works in the auto industry and is taking a major hit right now. In another instance, a retiree had his pension cut dramatically and he’s trying to help his kids, who have lost their jobs and have their own children in college. In each instance, there had already been some payments made, she said.

The three donors who delayed their gifts originally contacted the foundation about canceling the gifts. "Through dialogue, we came to an understanding of delaying payments or extending the pledge period," Latta said. She stressed listening to donors’ wishes and letting them know they’re willing to work with them while recognizing the current financial stresses.

The five-year pledges were extended to seven years, allowing for either smaller annual payments or forgoing a payment while adding one to the back end of the pledge, she said. It’s necessary to look at a planned gift as a fall back option, Latta said, which she’s continuing discussions about with donors who canceled other pledges. "In a couple of these situations, they are commitments to capital projects, which you want to make sure those bills are paid. With scholarships, it’s easier to delay or make a gift through planned giving," she said.

"It’s important to work with people on thisÉthey mean well, they’re just going through a tough time. They’ll come out OK, you just need to work with them so it’s a win for everybody," Latta said.

Steve Brown, vice president for development at Indiana State University Foundation (ISUF) in Terre Haute, Ind., has restructured at least two commitments in recent months. One pledge was a million-dollar commitment that was altered from a five-year payout to a seven-year payout with more graduated payments during the final three years.

In another case, a foundation verbally communicated a six-figure commitment to ISUF in December but requested another six months to finalize the paperwork. Brown said the foundation originally expected a three- or four-year payout, but asked for a little more time to see how the economy, and its equity, bounces back. He said the foundation had some concerns about initial payments because its 5-percent distribution might be negatively affected as the size of the fund is down significantly, along with the stock market. "They asked for six more months to think through this," Brown said.

"It’s just that uncertainty of where they are, in a couple instances, where we’re working with individuals who are in financial services, maybe heavily invested in those services, and hesitant to make some commitments," Brown said. "Although folks still have significant capacity in their wealth, they’re asking for more time to not put them in that bind. They still want to feel good about their philanthropy," he said.

"Things are definitely dicey on the major gift side right now," said Barlow Mann, chief operating officer at The Sharpe Group in Memphis. He pointed to Sandy Weill, the former head of Citigroup, Inc., who stepped up for Cornell University and accelerated part of a $250-million bequest into a current gift for its medical college. Seven of the largest gifts in America last year were bequests, according to Mann, and some mega-philanthropists who still have substantial assets are stepping up their giving.

There are others, however, who are concerned about financial setbacks, are cutting back on new commitments, and might be forced to stretch existing pledges out longer. "This has happened before during recessions in the 1970s and 1980s," he said. "More recent recessions have been so short that this phenomenon has not been as pronounced, but as this one stretches out, with multiple donor sectors affected in the housing, banking, financial and other areas, we are likely to see the first dip in overall giving in decades," Mann said. "The main thing to avoid right now is the temptation to encourage bequests from people who are on the younger side, say under 70, and count them toward goals," said Robert F. Sharpe, Jr., president of The Sharpe Group. "That backfired after people did this in the early ’90s during down times and it came back to haunt them in the next round of campaigns in the late ’90s," he said.

Despite the downturn in the economy, Bruce Matthews, vice president at Campbell & Co. in Chicago, warned against making assumptions about donors. "There are some boards that get real nervous that they shouldn’t be asking anyone right now. You can’t assume anything. Large gifts come from people with wealth over a long period of time," he said. "You shouldn’t just assume because the economy is tough that people are not going to give anymore," Matthews said.

The industry standard five-year pledge period is being extended and graduated payment pledges also are taking effect, Matthews said, such as donors paying $1,000 one year and $5,000 the next. "Institutions are just trying to be as flexible and empathetic as possible in dealing with donors," he said.

Each institution defines major gifts differently depending upon their culture, but they’re usually at an amount high enough for a donor to receive special individual attention, Matthews said, such as migrating from an annual fund telephone call to personal attention of the major gift program. For universities, that’s usually $25,000 while for smaller nonprofits it’s usually $10,000.

"Everybody is in the same situation: gifts are down, investments are down, and current donors are their most precious commodities. Everyone is working to keep their current donors, solicit friends when ready, and be as flexible as they can with a payment plan," Matthews said. Everyone stresses empathy when dealing with donors, not only in the economics of the pledge but in the psychology of that first step of contacting the institution.

"When people make these calls, as fundraisers it’s very important for us to recognize that’s a very difficult phone call for a donor to make," Latta said. "They no doubt are feeling very vulnerable and so I think excellent listening skills and reassurance are very important for us to offer as fundraisers. These are people who have had success in their careers and no doubt will again. We want them to recognize we understand that life brings challenges along with opportunities, and these are challenging times right now, for many people," she said. NPT