2005 Annual Report: President's Report



As some readers will recall, I used the 2004 Annual Report to sum up: to reflect on the evolution of the Mellon Foundation during my tenure as president, describing elements of continuity and of change over nearly 18 years, and seeking as well to identify lessons learned.  I had thought that, depending on the timing of the search for my successor, the 2005 report might not be mine to write, and I wanted to leave open the option that my successor would prepare this year's report.  Thus, I did my own stock-taking last year.  The response to the 2004 report has been gratifying, and I have no intention of repeating (or revising) any of its content in this—my truly final—report.  Rather, I regard this document as an opportunity: (1) to introduce my extraordinarily well-qualified successor, Don Randel; (2) to note, ever so briefly, some highlights of the year just past; (3) to present some thoughts concerning governance of foundations, and especially the role of boards of trustees; and (4) to answer, very briefly, recurring questions concerning my own interests, going forward.

Welcoming the New President: Don Randel

Welcoming the New President: Don Randel

By far the most important development in 2005 was the election by the trustees of Don Randel, currently president of the University of Chicago, as the 5th president of The Andrew W. Mellon Foundation.  Careful searches often require more time than originally anticipated, and Mr. Randel's appointment was not announced until the end of July 2005.  Moreover, our new president feels an understandable obligation to serve the University of Chicago through the 2005-2006 academic year.  Accordingly, I have agreed to continue as president of the Foundation beyond the March 2006 annual meeting (when I was scheduled to retire), and to remain in office until July 1, 2006.

What matters, needless to say, are the qualifications of the individual chosen to lead the Foundation, not minor questions of timing.  I was not involved in the search process, since it seemed clear to all of us that the trustees needed to think ahead without feeling unduly bound by mindsets formed in days gone by.  But I was asked by the trustees to comment on the nature of the position, as I saw it, at the start of the process, and then, near the end, to meet with the individual about to be chosen.  It was so satisfying to be able to endorse strongly the superb choice the trustees made.  In my view, Don Randel has all the qualifications needed to be an outstanding president of the Mellon Foundation.  As those who have worked with him attest, he is not only a knowing and highly experienced leader of institutions of higher education, he is also an exceptionally warm and engaging colleague with a delightful sense of humor.  Moreover, the "fit" between his special interests and the Foundation's objectives is ideal.  A highly acclaimed musicologist, Mr. Randel is exceptionally well prepared to lead the Foundation's programmatic activities in the humanities and the arts.  In the release announcing his appointment, he said:

The Mellon Foundation is unique among the major foundations in its commitment to the humanities and the arts and in bringing new technologies to their support.  These are matters to which I have devoted all of my professional life, and it is therefore extraordinarily exciting to be offered the opportunity to aid in continuing the Foundation's great tradition.  I look forward to furthering the Foundation's collaborations with grantee institutions to strengthen them within all of the Foundation's areas of focus both in this country and abroad.

In another incarnation, I opined that the outgoing president of an organization should be judged by the quality of his successor.  I am happy to have that test applied in this instance.  I am confident that the trustees and staff of the Foundation will enjoy working with Don Randel, and I am equally confident that leaders in the fields in which the Foundation is active will find him to be both an effective and friendly collaborator.  If the Foundation were a publicly traded company, I would certainly buy its stock!

2005: Some Highlights

2005: Some Highlights

Appropriations totaled over $210 million in 2005, and allocations by major grantmaking category, other financial and operating data, and a listing of all grants made to individual institutions are presented later in the Annual Report.  Let me highlight just a few grants and other activities—recognizing that it will not be possible even to reference many important ongoing programs.  Readers interested in particular areas should consult the Foundation's Web site and earlier Annual Reports.

  • The Foundation has been gradually reducing its recurring grants each year to provide budgetary "running room" for a new president (who should thereby be able to make decisions concerning desired new initiatives without having to wait for existing grant commitments to run down) and simultaneously filling resulting gaps between recurring grants and IRS-mandated pay-out requirements with one-time awards.  In keeping with this grantmaking strategy (which is described in detail at the end of the 2004 Annual Report), the Foundation made substantial one-time appropriations to key institutions in which it has a long-term interest.  The American Museum of Natural History ($5 million), the Center for Advanced Study in the Behavioral Sciences ($5 million), and the American Council of Learned Societies ($2 million) all received support intended to help these institutions reposition themselves for the long run.  Also, a grant of nearly $4 million was made to the Brooklyn Institute of Arts and Sciences (the Brooklyn Museum) to support an inventory and digital documentation of its Western costume collection and to begin the process of making the collection available electronically to an international audience. 
  • As part of its continuing review of the best strategy for supporting graduate students and faculty members in the humanities and related social sciences, led by Harriet Zuckerman and Joseph Meisel, the Foundation decided to suspend its long running program of one-year fellowships for beginning graduate students.  The original rationale for this program, the recruitment of excellent students into the humanities, has been overtaken by changes in university funding patterns (the widespread practice today of making multiyear commitments to at least the most highly rated entering students).  The Foundation resources it required are being redeployed in new efforts to increase the effectiveness of the Foundation's support of humanities graduate students, particularly in the later years of their study.  A portfolio of faculty grants has been in place over the last several years, and in 2005 the Foundation renewed support for its Distinguished Achievement Awards, New Directions Fellowships, and Emeritus Fellowships.  One of the most interesting Distinguished Achievement Awards was made to MIT for Professor John Dower's research and brilliant Web site on the images Japanese and Americans have had of one another at key points in history.  Another went to the University of Chicago to support Phillip Gossett's imaginative work on Verdi and Rossini, which utilizes and deploys newly developed electronic databases.
  • In the performing arts, the Foundation continued its symphony orchestra program (and especially the Orchestra Forum), by making large investments in facilitating the search for new ways in which board members, artistic directors, and musicians can work together more effectively than has sometimes been the norm in the past.  The Foundation's program officer in the performing arts, Catherine Maciariello, has set as a major goal identifying "best practices" that will advance musical objectives by respecting the contributions that all members of the orchestra can make in pursuing this overarching goal. 
  • The Foundation has continued to provide core support for its digital progeny, ARTstor and Ithaka.  Under the leadership of Neil Rudenstine and James Shulman, ARTstor continues to add both new subscribers and valuable content, including (to cite only a single example) exceptionally high-quality images obtained from new photography of Lorenzo Ghiberti's Gates of Paradise.  ARTstor was also successful in negotiating a path-breaking agreement with the Artists' Rights Association that will allow it to incorporate images of contemporary art in its rapidly growing digital library (which is now projected to include over 1.5 million images by 2010).  Under the leadership of Kevin Guthrie, Ithaka has also made major progress in creating new content, and I mention immediately below the creation of a remarkable archive of African plants as one example.  More generally, Ithaka is establishing its reputation as an organization positioned to promote the interests of the broader scholarly community in a wide variety of arenas ranging from an examination of the potential of open source software, to the provision of primary source materials describing the struggles for freedom in Southern Africa, to the creation of an archiving solution for born-electronic content.  In this latter regard, an especially noteworthy development in late 2005 was Elsevier's agreement to contribute all of its electronic content to the "Portico" archive that has been warmly endorsed by the Association of American Universities. [1] 
  • The "African Plants Initiative," which, under the leadership of William Robertson, has evolved as a joint project of the Mellon Foundation and Ithaka/Aluka, was introduced in Vienna at the XVII International Botanical Congress.  The prototype database was very well received, and the project was widely acclaimed as a remarkable example of the value of international collaboration and the power of electronic technologies to assemble a scholarly resource never imagined before.  To date, the Foundation has made grants to 47 herbaria in 26 countries to create a coordinated digital database of images of Type specimens and related information (including drawings, watercolors, maps, and diaries) describing nearly all the plants on the African continent—a database that is accessed by means of sophisticated software that facilitates searching, zooming, and comparing high-quality images of plants of all kinds.  This project could become a prototype for botanical projects focused on other regions of the world.
  • As part of the Foundation's program in libraries and scholarly communication, Donald Waters and Suzanne Lodato recommended a series of grants in 2005 in support of the development of scholarly resources for classical and medieval studies.  Georgetown University is taking the lead in creating an environment for integrated access to a variety of scholarly resources important to classicists, including multiple versions of Homeric texts available in digital formats.  Faculty at Johns Hopkins University are continuing to develop ways of comparing multiple versions of the Roman de la Rose.  And the University of Cambridge is working with Stanford University to digitize and make widely available the remarkable collection of medieval manuscripts at Corpus Christi College assembled by Matthew Parker.
  • The Foundation's program in research in information technology, led by Ira Fuchs, continues to support the development of open source software for higher education.  This year the program expanded its scope into institutional administration with a grant to Indiana University for the development of an open source financial information system.  This software, known as "Kuali," is intended to offer institutions an attractive, cost-effective alternative to rebuilding their legacy systems or replacing them with commercial systems that do not meet their specific needs.  In addition, grants were made to MIT and Tufts University for the development of software associated with the emerging "semantic Web," a system that promises to facilitate and simplify interoperability across data archives, including JSTOR, ARTstor, and Aluka. 
  • The Foundation has also been actively involved for several years in encouraging the strengthening of science within art conservation.  Particularly noteworthy in 2005 is a grant to the Art Institute of Chicago to support a research program in conservation science undertaken in close collaboration with Northwestern University's highly regarded Department of Materials Science and Engineering and the Argonne National Laboratory.  The Foundation's program officer in museums and art conservation, Angelica Rudenstine, received the Forbes Medal, awarded by the American Institute for Conservation of Historic Works, in recognition of her outstanding leadership in this area. [2]
  • A very different Foundation initiative is the development of a new approach to addressing the post-retirement health needs of faculty and staff.  Unless cost-effective ways can be found to deal with these needs, individuals will continue to be inclined to postpone retirement to preserve their benefits, a prospect that entails major "costs" (monetary and other) for the entire higher education system.  Under the leadership of Pat McPherson and others, the Emeriti Consortium for Retirement Health Solutions ("Emeriti") has now passed regulatory review and is an independent not-for-profit entity with tax-exempt status.  A central feature of Emeriti is the use of a defined contribution approach which limits the financial exposure of participating colleges and universities.  Another key feature is the creation of an investment vehicle which permits individuals and institutions to contribute funds to health savings accounts on a tax-favored basis.  A third feature is the aggregation of risk and the ability of Emeriti to bargain for better health care options at lower costs than might be available to participants otherwise.  The Foundation has provided the start-up funding for Emeriti, and it is now up to the higher education community to seize this opportunity and to provide the ongoing support that will be required.
  • The Foundation also continues to make grants in support of a range of faculty enhancement initiatives at groups of colleges that are committed to facilitating the continued intellectual growth of faculty through collaborative programs.   Foundation staff with principal responsibility for the liberal arts colleges program (especially Eugene Tobin and Danielle Carr Ramdath, as well as Pat McPherson) increasingly believe that "collaboration" is the key concept for these colleges as they seek to strengthen their instructional and research capacities and their faculty professional development opportunities through access to the advances in information technology that are routinely employed at large universities.  The National Institute for Technology in Liberal Education (NITLE) has been established within Ithaka in an effort to meet this sector's special needs in a cost-effective way.  The Foundation has provided start-up funding but, as in the case of Emeriti, the continued success of NITLE will depend on the willingness of the liberal arts college community to support it.
  • At their final Board meeting in 2005, the trustees enthusiastically voted to renew the Foundation's support for the Mellon Mays Undergraduate Fellowship (MMUF) program, which was first established in 1988 under the leadership of Henry Drewry.  The purpose of MMUF is to increase the number of minority students, and others with a demonstrated commitment to eradicating racial disparities, who are pursuing PhD programs in core areas of the arts and sciences.  In recommending that the program continue, the current director of MMUF, Lydia English, pointed out that 34 colleges and universities, and the consortium of 39 member institutions of the United Negro College Fund, participate in MMUF, and that as of October 2005, 164 MMUF fellows have earned the PhD.  Five hundred additional participants in the program are in various stages of graduate school.  It is hard to exaggerate the likely long-run impact of MMUF on higher education, through both the teaching and scholarship of talented individuals and the even larger "community of interest" that MMUF has fostered.
  • One very special—and, we hope, not-to-be-repeated—feature of Foundation grantmaking in 2005 was the need the trustees and staff felt to respond to the tragedy of Hurricane Katrina.  Fortunately, our budgetary situation, with a provision already in place for one-time grants, allowed us to commit $10 million more or less immediately to key grantees affected most severely by Katrina and later to add another $1.2 million to this total.  This decision to assist specific institutions the Foundation has worked with in the past, rather than to make broad-based grants for humanitarian relief, was consistent with the strategy that worked well for Mellon in the aftermath of 9/11 when we provided $50 million of special appropriations to selected arts organizations, museums, libraries, and gardens/parks in New York.  Initial grants went to two Historically Black Colleges and Universities in New Orleans that were especially hard hit (Dillard and Xavier Universities), as well as to the Southern Education Foundation and the Associated Colleges of the South (ACS).  The ACS in turn disbursed funds to institutions that took in large numbers of displaced students from New Orleans and also had to cope with the effects of Katrina on the circumstances of already enrolled students from the Gulf region.  Among many creative and innovative initiatives, it is encouraging to note the role that NITLE played (in collaboration with Southwestern University) in enabling Dillard faculty members to develop online courses in preparation for the University's reopening.  Subsequent grants went to Tulane, which has worked with Dillard and Xavier to meet common needs of staff and students, and to the Louisiana Philharmonic Orchestra, the New Orleans Museum of Art, and the University of Delaware (which is addressing art conservation issues in the Gulf region).
  • Grantmaking is of course the core of what the Foundation does, and for that reason I have focused this brief recitation of 2005 highlights on that central area of activity.  But I would be remiss if I failed to report the successful completion, in December 2005, of a major renovation of the Foundation's space at 62nd Street.  Work was completed the previous year on new space on 61st Street, across the garden from the original 62nd Street buildings, which houses ARTstor and Ithaka as well as staff providing IT and other services shared between these Affiliates and Mellon.  The time had clearly come for a major face-lifting at 62nd Street, where, for example, many of the windows were over 100 years old and the existing configuration of spaces was far from optimal.  As always, the disruption was greater than could have been anticipated, and it was only as a result of great dedication and much patience all around (with leadership provided by Pat Irvin, Pat Woodford, and Ronnie Sheppard) that staff survived the renovation process—and managed to maintain an astonishingly normal work schedule along the way.  Visitors to the Foundation will now have use of public spaces that work much better, even as they retain their original character.  Speaking personally, I did not want to leave to my successor the unwelcome task of dealing with such inevitably irritating matters, and I am pleased that the renovation is now complete.

Governance: The Role of Foundation Trustees

Governance: The Role of Foundation Trustees

In last year's report I paid tribute to the great contribution the Board of Trustees has made to the work of the Foundation during the years I have served as president, but I did not elaborate.  I now want to redeem the promise I made then to say more about the role of trustees—focusing on my own experience at Mellon, but also offering a somewhat more general commentary.

Let me begin by repeating an assertion I made just over 10 years ago in a small book on the workings of boards of for-profit and nonprofit organizations:

In my view, the trustees of foundations have more opportunity to affect institutional performance than do the directors of any other set of entities in either the for-profit or nonprofit sector.  Such opportunities obviously can be used wisely, wasted, or even abused. [3]

The intervening years have only strengthened my conviction that this statement is correct.  The reasons have to do primarily with the wide range of programmatic choices available to most foundations and especially with the relative lack of constraining forces—other than the discipline that the board itself imposes on the organization.

The Presence (Absence) of Constraining Forces

The Presence (Absence) of Constraining Forces

At the conceptual level, I find it useful to think of three kinds of constraining forces that can operate on entities in both the for-profit and nonprofit sectors: (1) markets and, more generally, competition for scarce resources; (2) "process" constraints, which include both internal mechanisms for structuring decision-making and external scrutiny; and (3) government regulations, which may be either substantive (such as pay-out requirements for foundations) or procedural.  My thesis is that the first two types of constraints are much more limiting in the case of most organizations, in both the for-profit and nonprofit sectors, than they are within the world of the large grantmaking foundations.

In the for-profit sector, markets are by far the most powerful constraints.  In the case of publicly traded companies, stockholders dissatisfied with corporate performance can dispose of their shares, and rapid adjustments in market prices and valuations tell their own stories—which of course financial analysts and the media often "spin" in one way or another.  Companies are subject to detailed disclosure requirements and, in addition, are subject to the judgments of rating agencies as well as external auditors.  The occasional Enron-like aberration notwithstanding, much reliable information is available to guide the process by which markets ration capital.  Moreover, companies (and parts of companies) can be bought and sold.  Erratic, if not disappointing, performance can have severe consequences.  New technologies, the emergence of new competitors, the economic environment, and, more generally, the constant surveillance of markets guide actions and bound the choices available to directors.

This is hardly to say that boards of for-profit companies are of no consequence.  Their directors make (or ratify) decisions of great moment, including both the determination of strategic directions and judgments concerning the leadership of the company.  As is evident to all of us, bad decisions can have major effects on stakeholders of all kinds as well as on the public at large.  But members of forprofit boards know full well that they operate within a domain that is constrained by powerful external influences mediated primarily through markets.

In the nonprofit world, many kinds of constraints also operate, including constraints that reflect market forces similar in some respects to those present in the for-profit sector.  For example, the leaders of performing arts organizations that must sell tickets remind us regularly that market demand matters greatly to the health of their organizations, as it does to museums and many historical societies that rely for revenues on paying visitors.  Such entities and many other nonprofits that provide social services, including libraries, also have to pass what are, in effect, market tests of another kind when they recruit volunteers and appeal to donors to raise the funds on which many are utterly dependent.  We are reminded every day that educational institutions compete vigorously with each other for students and faculty, as well as for charitable contributions and government funding.  As their stepped up advertising attests, nonprofit hospitals and health care providers compete for patients as well as for private and public funding (as do "think tanks" and research organizations).

What I have called "process constraints" are also very important in many nonprofit settings, with colleges and universities serving as particularly good examples of this general point.  Long established internal decision-making processes, including faculty responsibility for many curricular matters as well as for academic requirements and academic appointments, constrain what trustees can do in many areas of college and university life.  More generally, the actions and inactions of trustees of both small colleges and large universities are constantly scrutinized by the media (including student reporters!), alumni groups, parents, and faculty—the most demanding group of all.  Trustees of such institutions cannot expect to lead unexamined lives.  They must find effective responses to continuing challenges—whether the challenges are external or internal in origin—if they are to retain legitimacy and succeed in advancing educational goals.

Grantmaking foundations may think of themselves as influenced, directly and indirectly, by some of these same pressures, but surely in much, much smaller measure.  By and large, they do not compete for students, patients, or audiences; they do not routinely raise new money; and they are largely insulated from the powerful market forces that can lead in other settings to mergers, forced sales of assets, or resignations of CEOs.  Foundations are of course subject to the terms of deeds of gifts and the charters that established them.  They are also subject to some degree of public scrutiny as well as to myriad government regulations (discussed further below) and, on occasion, to review, if not discipline, by membership organizations such as the Council on Foundations.  Nonetheless, trustees retain a great deal of leeway within which to set directions and make choices.  I can think of no other major institutional players so free to chart their own courses.

This is not at all a bad thing, provided that proper oversight is provided by responsible boards of trustees.  Quite the contrary.  Considerable freedom of action is one of the great strengths of independent foundations, and a major justification for the tax privileges they enjoy.  Such freedom is especially important in a society in which it is often hard to generate support for programs that serve broad public purposes, rather than simply someone's self-interest or this or that political agenda.  Also, in my view, our society needs private initiatives able to overcome bureaucratic impediments to change, as well as other forces of inertia, and to test out ideas.  For my own part, I would much prefer to live in a world in which freedom of action leads to some poor decisions (as will inevitably be the case) to a world in which foundations are fearful to strike out in new directions or to support unpopular causes.  The challenge is to find ways of preserving freedom of action while simultaneously meeting proper standards of accountability.  It is in reconciling these objectives that trustees of foundations have a decisive role to play.

Failure of boards of trustees to provide strong oversight is the surest way to encourage the most obvious alternative remedy for abuses: more governmental regulation.  There is, without question, a need for appropriate governmental rule-making and monitoring in the foundation world.  In particular, I favor clear proscriptions against self-dealing, reasonable standards for ensuring that enough funds are disbursed for charitable purposes on a regular basis (the purpose of pay-out requirements), and insistence on a great deal of transparency—by which I mean public disclosure of grants made, levels of administrative expense, and compensation of officers and trustees. [4]  It is ironic that much of the pressure for more detailed regulations (some of which I regard as overly mechanical and generally unwise) stems from a failure by the Internal Revenue Service to invest enough resources to make sure that basic standards of right behavior, that exist now, are enforced.

Roles of Foundation Trustees

Roles of Foundation Trustees

The general lack of both market constraints and process constraints in the foundation world, and the necessarily general character of governmental regulation (if it is not to be stifling), means that the real responsibility for careful oversight rests with boards of trustees—which is where I believe it should rest.  The remainder of this commentary consists of suggestions as to how the boards of foundations can discharge their substantial governance responsibilities effectively.

The first requirement is having committed and knowledgeable members of the board.  The process of identifying and recruiting trustees should be as rigorous as the process of searching for a new president.  A determined effort must be made to find the most qualified candidates.  Required is a careful assessment of the needs of the board, taking into account the qualifications and special skills of existing members so that the final "portfolio" of board members will be well-balanced in terms of interests and experiences as well as ages, backgrounds, and other salient characteristics.  There is an obvious need for both individuals with substantial investment and business competence and individuals closely attuned to the programmatic/grantmaking objectives of the foundation.  Ideally, a number of members will be well-qualified along both dimensions, but identifying and electing such individuals (the proverbial "triple-threat" players) requires a demanding search and screening process. [5]  It will not do for trustees to be satisfied with adding their "friends" to the board.  Board members need to be individuals of outstanding ability who have not only impressive credentials in areas such as financial management and investments but also enough knowledge of the fields in which the foundation is active to participate effectively in substantive discussions.

This seemingly obvious point leads directly into a discussion of the "independence" of board members.  In the case of the Mellon Board, every one of its nine members has or has had associations with institutions in the fields in which the Foundation makes grants: colleges and universities, research libraries, performing arts organizations, museums, and so on.  To which I can only say: "Thank heavens!"  Far from compromising the ability of the Board to think "objectively," the presence of experienced, knowledgeable individuals is the best protection against making uninformed decisions.  To insist that the Board be comprised of individuals with no past or present involvement in the institutions that are the obvious candidates for support would deprive the Board of the competence it needs to exercise its fiduciary responsibilities.  Nor would it work to decree that institutions with which trustees have or had an affiliation are ineligible for Foundation support—under such a regime, no leader of such an institution would agree to serve on the Foundation Board.  To be sure, it is imperative to protect against conflicts of interest, and the Foundation has a well-developed set of procedures in place.  But it is a mistake to conflate notions of "independence" (thought of in Sarbanes-Oxley terms, in the context of for-profit companies) with a proper concern for the avoidance of conflict.

Judicious selection of trustees is all the more important if the size of the board is kept small.  And, in my view, small size is itself highly desirable—especially if the trustees are expected to participate actively in substantive discussions of directions and priorities, as I think they should (a point discussed in detail below).  Setting a limit of, say, 10 or 12 on the number of trustees also serves the important purpose of emphasizing that board membership is an important responsibility.  Each trustee is able to contribute, and expectations concerning attendance and preparation are readily understood.  Individuals who are absent are missed; there is "no place to hide" when serving on a small board.

In last year's Annual Report, I wrote about the way in which the Foundation has blended elements of continuity and of change during my tenure in office.  Trustees play a major role in articulating the values, the common assumptions, and the basic principles which together assure a reasonable degree of continuity and which establish, de facto, a set of norms for developing and evaluating specific proposals.  Staff members have said to me on a number of occasions that they just "know" that this, that, or some other initiative would not fit within the grantmaking framework that has evolved at Mellon—and which is transmitted, in the words of one trustee, "more or less by osmosis."  Such assumptions can of course become too rigid and outdated, and trustees have a major responsibility for constantly assessing how well these shared modes of thinking serve the purposes of the Foundation as it operates in an ever changing environment.  It is helpful, however, to have a point of departure when contemplating new directions.

A much more specific way—and perhaps the most important way—in which trustees exercise their collective fiduciary responsibility is by selecting a president who will provide strong and principled leadership.  In choosing Don Randel, the Mellon trustees have passed this test with flying colors.

Then, with a strong president, an excellent staff, and some common assumptions as a starting point, trustees have an opportunity—and, I believe, an obligation—to participate actively with the president and staff in setting programmatic directions.  The absence of so many of the external constraints ("governors") mentioned earlier means that strong internal direction is needed if a foundation is to focus its energies properly and take fullest advantage of the opportunities its resources offer.  This point cannot be emphasized strongly enough.

There are many ways in which a collegial process for setting directions can be managed.  Much will depend on the history and character of a particular foundation.  At the risk of seeming to want to impose on others a set of policies and practices that I think has worked well at Mellon, let me state my own preference for a process whereby trustees are involved in thinking—actively and early on—with the president and the staff about basic grantmaking directions and priorities.  Periodic "retreats" offer one good opportunity for this kind of shared thinking.  In addition, staff can be asked to prepare background papers discussing the pros and cons of supporting one initiative or another—so that there can be informed discussion of general approaches in advance of considering actual grant recommendations.

In encouraging trustee engagement with substantive issues, there are, I think, two extremes to avoid.  One is for individual trustees to "pronounce" so strongly on a course of action in which the trustee believes that no general conversation is welcomed.  In my view, trustees have a collective responsibility to be prepared, if necessary, to resist any tendency toward the development of individual trustee fiefdoms.  The other extreme is for trustees to be reluctant to state any substantive views of their own and to function in a purely reactive mode.  My preference is for a more nuanced approach whereby trustees join the president and the staff in substantive discussions of directions so that ultimate decisions benefit from a rich variety of perspectives.  Ideally, the outcome will be a truly collective sense of the right ends to pursue.  This model assigns to trustees a more active substantive role than some might think is appropriate—even though, as I hope is clear, I am certainly not proposing vesting anyone with anything approaching dictatorial authority.

A comparison with university governance may be helpful.  In a university setting, trustees can and should rely on tenured faculty to provide leadership in setting and maintaining academic standards; as I said above in discussing "process constraints," universities generally have an internal structure for developing policy recommendations of many kinds, and trustees rely heavily on such structures to vet ideas before they are brought to the board for review.  At foundations, on the other hand, there may be much more to be gained through ongoing interactions at the board level when directions are first being formulated.  The Mellon Foundation has an outstanding professional staff, but senior staff would be the first to agree that vigorous discussion, debate, and questioning at the trustee level sharpen their thinking and lead to better outcomes for the Foundation.  They neither expect nor want a "rubber stamp" process.

At the same time, trustees recognize that staff members have an essential role to play in developing options and investigating proposed directions before decisions are reached.  And of course staff must be relied on to review proposals from grantees and to prepare grant recommendations.  Foundation trustees should never try to micromanage the grantmaking process, any more than university trustees should try to micro-manage the faculty staffing process.  But trustees may have more to contribute at the "macro" level in a foundation setting than in the typical college or university setting where overall objectives are well-established and widely understood.

There is a delicate balance to be struck between the roles of the various parties that is hard to define in abstract terms.  It goes without saying that it is the president who has the major responsibility for orchestrating a decision-making process in which each participant contributes constructively and appropriately—by which I mean consistently with what the individual knows, and in keeping with the individual’s level of responsibility.  With proper organization and preparation, careful review by foundation trustees of proposed policies and priorities can be a highly effective oversight mechanism.

Trustees can also promote accountability in a number of other ways.  To cite an example from our experience at Mellon, the process of developing specific grant proposals is enhanced greatly by asking staff members to prepare recommendations in writing well in advance of Board meetings, and asking trustees to read these recommendations carefully and come prepared to ask hard questions.  No staff member wants to be embarrassed by failing to respond effectively to a challenging inquiry from a trustee, and it is also useful to have a clear understanding all around that no grant proposals should be considered in the absence of written documentation distributed in advance of a Board meeting.  One specific initiative encouraged by a former trustee is the inclusion in each docket recommendation of a short paragraph stating "expected outcomes" if the proposed grant is approved.  Then, after the fact, staff can be asked to compare results achieved with expectations at the time the award was made—recognizing that in many cases the evidence will be qualitative, at least in part.

It is also helpful to have periodic reviews of particular programs by outside advisors and to commission panels of experts to recommend which institutions should be given grants through a competitive process.  These and other mechanisms for soliciting informed opinions of how well (or poorly) certain initiatives are working are especially valuable in the foundation world because of the reluctance of many grantees, and potential grantees, to be critical of foundation policies and decisions.  There is an old saw to the effect that a foundation president should never again expect "to be given a bad lunch or to hear the truth."  Being aware of this potential problem is helpful, and, if there is a will, ways can be found to circumvent any tendency to suppress candor.

Trustees can also help a foundation maintain proper standards of accountability by working with the president to insist on careful monitoring of established principles of record-keeping and reporting—on the part of both staff and grantees.  The Mellon Foundation has recently added an internal auditor to its staff (at the suggestion of a trustee), and this individual, who reports directly to the chairman of the trustee Audit Committee, has already made significant contributions.  No doubt there is room for further progress.  Mellon's trustees have also promoted a different kind of accountability by encouraging staff members to publish things they write and to participate in professional meetings—activities that invite critiques that should be welcome.  At the end of the day, "accountability" is as much a state of mind as it is a set of procedures, and trustees can make a real contribution by asking probing questions and monitoring performance.

Let me end this discussion with perhaps the most important point of all: the effective performance of boards depends critically on the leadership of the person who chairs the board of trustees and the relationship between this individual and the president.  The Mellon Foundation has been blessed beyond its just desserts in its chairmen (as the men and women who have occupied this position have wished to be called).  It has been my good fortune to work with four truly exemplary leaders of the Board, very different from one another in many respects but each absolutely committed to the Foundation and its core values.  The four have shared a capacity for hard work, a desire and an ability to think freshly about new initiatives (but with no inclination to be "trendy"), and a stubborn commitment to the highest standards. In order of service, the four are:

William O. Baker, former president of Bell Labs (1975-1990);
John C. Whitehead, former undersecretary of state and co-CEO of Goldman Sachs (1990-1997);
Hanna H. Gray, a distinguished historian and former president of the University of Chicago (1997-2003); and
Anne M. Tatlock, chairman and CEO of Fiduciary Trust International (2003-).

It is no exaggeration to say that whatever standing the Foundation enjoys today is due in no small measure to the dedication and leadership of these four trustees.

Looking Ahead: My Own Plans

Looking Ahead: My Own Plans

Reluctant as I am to conclude this report by talking about myself, I feel an obligation to answer the questions I continue to be asked about my future relationship to Mellon and, more generally, my interests and plans.  Perhaps the reason for this curiosity is that I apparently do not give the impression of someone likely to take naturally or even gracefully to "retirement!"

In any event, I have always been a strong believer in the adage: "When you leave a presidency, leave!"  That is the way I approached my departure from the President's Office at Princeton and it is the way I will approach the handing over of responsibility to Don Randel at the Mellon Foundation.  As I have said often, and only partly in jest: "One president at a time is enough—maybe more than enough!"  After July 1, 2006, I will have no role in grantmaking, investment, and staffing decisions, or administration at the Foundation, and I will no longer serve on the Foundation's Board of Trustees.  A new president deserves to have the freedom of action that could only be compromised if the "ghost of Christmas past" were looking over his shoulder at board meetings or gatherings of the staff.  I will of course be available to answer any questions that our new president wishes to put to me, but I will operate solely in response mode.

There is, however, one activity at Mellon in which it does seem to make sense for me to continue to play a role—albeit one that will not interfere with the transfer of full responsibility for the Foundation's grantmaking and administrative activities.  Mr. Randel has asked me to continue to oversee the Foundation's in-house research associated with the use of the College & Beyond database and especially with the new studies we have recently undertaken on ways in which opportunity in higher education can be extended to larger numbers of students from modest circumstances and from racial and ethnic minorities—a subject of enormous importance to the country and a field of research in which the Foundation has considerable experience and some standing.

This ongoing research program grows directly out of a number of other studies the Foundation has carried out with the strong support of its trustees, starting with The Shape of the River and including most recently Equity and Excellence in American Higher Education.  My social science background has proven useful in this context.  In addition there is a strong argument for maintaining continuity in relationships with presidents and others at participating colleges and universities, as well as with individuals at the College Board, the ACT, and the Spencer Foundation (with which we share research interests).  My role will be to take some lead in providing overall direction for the research, to work with the young scholars whom we recruit to participate in these major empirical studies, and to provide the formal oversight of studies involving sensitive data that, for legal and other reasons, require the direct involvement of a senior person.  I expect to serve as an unpaid "senior research associate" on a year-to-year basis.

I also expect to continue as chairman of the board of Ithaka Harbors, Inc., operating out of an Ithaka office on 61st Street, and as a member of the ARTstor and JSTOR boards.  All of these "Affiliates," as we call them, are now independent 501(c)(3) organizations even though they continue to interact with the Foundation, as well as with each other, in a number of highly synergistic ways.  Direct responsibility for such interactions will rest, however, with the president of Ithaka, Kevin Guthrie, and with the executive directors of ARTstor and JSTOR (James Shulman and Mike Spinella, respectively), not with me.  If all goes according to plan, I will have time to work with the officers of the Affiliates, participating in discussions of strategic directions, providing other advice as appropriate, and perhaps helping with the search for additional sources of support.

Much as I will miss the close day-to-day relationships with colleagues at the Foundation who have been friends as well as professional associates, I look forward to having more time for research, for greater involvement with the work of the Affiliates, and for a limited number of other activities.  There will be, I suspect, no lack of mountains to climb, and I shall always be grateful for what I regard as one of the greatest privileges of life: to be able to work hard for causes in which I truly believe.

William G. Bowen
January 2006



[1] For a fuller description of these developments, including their relationship to JSTOR, see William G. Bowen, "New Times Always, Old Time We Cannot Keep," Remarks at the annual meeting of the Association of Research Libraries, October 26, 2005.  Return to text.

[2] The citation reads: "For her pivotal role in guiding and supporting the advancement of the conservation profession.  She has tirelessly promoted serious scholarship in conservation and conservation science while seeking greater communication among art historical, scientific, and conservation communities."  Return to text.

[3] William G. Bowen, Inside the Boardroom: Governance by Directors and Trustees [John Wiley & Sons, NY: 1994], p. 11.  A number of people have encouraged me to revise this book, in light of both subsequent changes in the "environment" and recent experiences I have had on several high-profile boards.  This idea intrigues me, and I hope to find time to try my hand at a revision.  My intention is to treat many of the topics only alluded to in this discussion in more detail in such a revision.  Return to text.

[4] The "Proposed Governance Principles for Discussion with Large Foundations," drafted in June 2004 by the presidents of a group of the largest private foundations, elaborates on this approach to governance.  These guidelines are available at: [http://www.cof.org/Content/General/Display.cfm?contentID=1753].  Return to text.

[5] In recruiting a good mix of highly capable board members, foundations have a major advantage over universities and other organizations that have to assign substantial weight to fund-raising requirements and to meeting the expectations of various constituencies.  These special requirements generally lead to larger boards within other parts of the nonprofit sector than among grantmaking foundations.  Return to text.