Celebrating Darren Walker’s Most Important Leadership Move

Why the Ford Foundation’s social bonds of 2020 mattered so much

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Darren Walker’s announcement last month that he will retire as president of the Ford Foundation next year has prompted an outpouring of celebration of his accomplishments there, as well as assessments of his impact. But one important move has gotten short shrift in this analysis, and this week I think it deserves a closer look.

Lifelines in a storm

In the dark Spring of 2020, when the economy suddenly collapsed with the pandemic, Walker took a very bold step. First, he acted quickly, especially by the standards of institutional foundations. (When we worked together at the Rockefeller Foundation many years ago, Walker used to occasionally joke about something being a “foundation emergency.” If someone asked what that meant, he wryly noted that the phrase “foundation emergency” was an oxymoron.)

In less than three months from the shutdowns of mid-March, Walker galvanized his own Board, and then enlisted other leading institutional foundations—Doris Duke, Kellogg, MacArthur and Mellon—to borrow money and increase their giving even as their endowments were depressed. When the plan was announced, the financial markets had begun to recover, but the Dow was still down 12% from its pre-pandemic peak.

Ford and a number of the others issued “social bonds” to increase spending, taking advantage of low interest rates, but most importantly leaning in as most nonprofits, including many nonprofit newsrooms, faced economic crises of their own, many of them possibly existential. Ford borrowed a billion dollars, the others collectively added almost as much. (The Chronicle of Philanthropy story on Walker’s retirement was an exception in regarding this as a key moment in his Ford tenure.)

Against the grain

You might think that this was all just common sense—it came at the same time as the Congress was spending literally trillions on pandemic relief for taxpayers and businesses-- but in the world of institutional foundations, you’d be wrong. The sad truth is that most institutional foundations most of the time spend more money when times are good and markets are rising (like now), and less when times are tough and markets are falling (like Spring 2020). The Dow did not regain its pre-pandemic high until after Biden was elected in November.

Needs are surely greater when the economy is contracting, but the highest value of foundation presidents and boards, all too often, is securing the perpetuity of the size of their own endowments, rather than responding to grantees’ economic distress. That may not be the intent, but it is the inevitable result when annual spending is set at five percent of the value each year of the endowment, as it is at many foundations.

When one then quite large foundation with which I was familiar responded to the Great Recession of 2008-09 by stepping up spending, with the predictable result that its endowment shrunk, many in institutional philanthropy regarded it as a sad story of a fading giant, rather than a heroic tale of its leader moving bravely into the breach.

Darren Walker

But in 2020 Darren Walker drew a different conclusion, and brought key colleagues, and thus much of his industry along. (Disclosure: my late wife was Darren’s deputy at Rockefeller, and while we are not close, we have remained friendly.) This was a brave and visionary act in the context of that moment. Moreover, by enlisting colleagues before announcing the move publicly, while still acting promptly, Walker did not merely lead by example, he actively enlisted others, providing them with cover with their own boards, and no doubt inspiring yet more funders across the country.

What it meant— and could mean

The result—along with all that federal aid, very much including the Paycheck Protection Program—meant that the most severe economic contraction in modern American history did remarkably little permanent damage to the social sector, including the growing nonprofit news industry. That’s a very big deal.

As Walker now passes the philanthropic torch, likely to a new generation of leadership, I hope that the spirit of his social bond initiative, and his pandemic courage, might provide broader lessons. Even when, as at Ford, Rockefeller, Carnegie and elsewhere (although not Gates), donors have established foundations in perpetuity, there is nothing that says that perpetual existence requires perpetually increasing endowments. In fact, new wealth is almost always being created, and today’s institutional leaders, if they will lean into contemporary needs, can pretty much count on new institutions arising to fund tomorrow’s requirements.

Leaders who understand this, and are focused on meeting the needs of nonprofits that depend on philanthropy, would do well to resolve that in the next recession—presumably a more conventional contraction—they too would step up to soften the blow, even perhaps at some cost to their own holdings. Such a commitment could be Darren Walker’s most significant legacy.