Many foundation investment advisors contend it’s best to keep the investment side and the grantmaking side of philanthropy separate.

“I hear it all the time,” says John Powers, a board member of the Educational Foundation of America (EFA), a family foundation based in Westport, Connecticut. “Let our money managers make money any way they can because you’ll have more to give away.”

Powers notes that much the opposite has been the case for EFA, pointing out that EFA’s socially screened portfolios have consistently outperformed traditional benchmarks. He feels that the socially responsible companies can better performers.

“In today’s volatile markets, a company that has a forward-thinking HR policy—that has job-sharing, flex-time, and day-care—has management that is demonstrating greater capability, greater flexibility, and greater adaptability to a shifts in the market,” Powers says. “When you’re socially conscious, you’re identifying management that is more adaptable to a changing world.”

EFA began looking at socially responsible investing in 1994, examining ways that its investments—through negative screens, investments in socially responsible projects, and shareholder activism—could be utilized to further EFA’s mission.

“[It’s] about getting the most you can done with every tool you have available,” says Powers.

Since 1995, the foundation’s investment managers have been directed to invest only in companies that pass EFA’s social and environmental investment criteria.

The foundation has also taken a lead in shareholder activism, where a foundation uses its shareholder status to attempt to influence corporate behavior.

Powers notes that it is difficult to gain support for shareholder resolutions. Management and large shareholders typically don’t want to change practices, and routinely vote their shares against shareholder resolutions. Institutional investors and disinterested shareholders either do not vote their proxies or vote with management on most issues. However, Powers contends that results can be achieved through dialogue with management, education of shareholders, and collaboration with other activist shareholders.

“15-20% of shareholders very, very rarely vote in favor of a shareholder initiative, but when the extraordinary happens, you’re seeing something like Halley’s Comet,” says Powers. “It doesn’t come around but once in a long, long time, and it catches management’s attention.”

EFA filings and co-filings have caught the attention of a number of corporations.

In 1998, EFA, along with the As You Sow Foundation and organizations such as Rainforest Action Network, Greenpeace, and Forest Ethics, succeeded in getting Home Depot to commit to phasing out sales of wood products made from old-growth forests. Home Depot’s competitors subsequently made similar commitments.

In 2000, EFA and Walden Asset Management introduced a resolution asking Coca-Cola to increase the amount of recycled content in its plastic bottles. In 2001, the company announced it had introduced 2.5% recycled content into 75% of its plastic beverage containers. The following year, PepsiCo agreed to match Coke’s commitment.

Currently, EFA is challenging Apple, Dell, Gateway, Hewlett-Packard, and IBM to take responsibility for the return and disposal of old computers.

Powers encourages other family foundations to look at their investments as potential tools for advancing their missions.

“You’ve got the tools of grants and the use of your endowment, tools for social change,” says Powers. “Why tie one hand behind your back when you’re trying to reach your goals? Why would you not use every tool you have available?”

For more information about the Educational Foundation of America, visit the EFA website.



Richard Prentice Ettinger and the Educational Foundation of America

“I pass to my children and their issue a heritage more important than wealth measured in dollars – the opportunity to be involved in and to strengthen and keep alive a family philanthropic enterprise,” the late Richard Prentice Ettinger, co-founder of Prentice Hall Publishing noted in his will.

Today, that family philanthropic enterprise of which Ettinger spoke is the $220-million Educational Foundation of America (EFA), which he founded with his wife Elsie P. Ettinger in 1959.

“The foundation started out rather modest, giving scholarships to junior college students, and it’s grown from there,” says John Powers, an EFA board member.

Ettinger earned his law degree from New York University at the age of 18. Too young to sit for the bar, he began to teach finance at NYU. He also wrote a textbook on finance, but could not secure a publisher. Consequently, to get his book published, he and Professor Charles W. Gerstenberg founded Prentice Hall Publishing in 1913. Taking their mothers’ maiden names for their new company, they created what became the premier US publisher of academic, business, and professional books.

As a teacher, author, and publisher, Ettinger wanted to improve the quality of education and help people reach their full potential, and that desire led to his creation of EFA in 1959. While his own passions drove its founding, Ettinger left his children great flexibility in determining EFA’s future.

“I have to hand it to him,” says Powers. “Mr. Ettinger would say, ‘Put my name on something? How long are people going to remember who Richard Ettinger was?’ “

“The point was the work, not personal recognition.”