Back to Volume 14
	The New Philanthropists By Matthew Krieger

As a new generation of donors have involved themselves in gift-giving, philanthropy in Israel has been transformed from being a “plaque on the wall” business into a living, breathing and exciting industry that is rewriting the rules of how and why people give away their hard-earned money. In what is being called “venture philanthropy,” in hebrew “Amutot” (nonprofit organizations) are positioning themselves for larger checks, donors are seeking more active roles in the organizations they give to, companies have begun allocating stock options for donation, and donor consultants are providing vital information to their clients before they open their checkbooks.

“We look at philanthropy through the eyes of a businessman,” says Dana Miller of Israel Venture Networks (IVN), one of the country’s leading venture philanthropy organizations. “We have very strict criteria for nonprofi ts in terms of their stated goals and their past performance—we take a business-based approach and bring it into the philanthropic world.”

IVN is dedicated to upgrading and providing access to better educational opportunities for Israeli children in deprived socioeconomic areas in the north of the country, as well as in expanding social leadership initiatives.

Using the “best-practice” business model, IVN places integration teams into local municipalities, which help coordinate government bodies and NGOs with the aim of developing joint objectives aimed at raising student achievement in the basic skills of English, mathematics, Hebrew literacy, civics, and computers.

There are currently close to 200 members in IVN, comprised of Israeli and American companies mainly in the business sector, each of which pays $5,000 to join the organization. Th is money is used for the general funding of the organization’s projects and, according to Miller, if there is an IVN member particularly interested in an amuta, they can donate additional money to that organization.

Tmura: Israel’s Public Service Venture Fund

Unlike IVN’s members, which are established successes in the business world, many of the member companies of Tmura are still in the nascent stages of development, yet due to Tmura’s unique model of giving, these young companies are still able to involve themselves with charitable work.

Tmura, an organization represented by Ruder Finn Israel, is an “Israel Public Service Venture Fund” that was founded fi ve years ago as a conduit for the hi-tech and venture capital communities to become more involved in charitable work there by sharing their wealth with nonprofi t organizations. “Th ese sectors had done incredibly well, and we needed to fi nd a way to give back,” says Tmura’s founder, Yadin Kaufman, who is the founding partner of Veritas Venture Partners.

“Tmura receives donations of equity stock and stock options from private and some public companies,” explains Baruch Lipner, the director of the organization. “Once a company’s shares are liquid, Tmura exercises the options, sells the shares and then allocates the proceeds of those donations to worthy nonprofi t causes in Israel, with a focus on education and youth-related organizations.”

Lipner says Tmura has compiled a list of organizations that have been evaluated and visited and recommended to a company for giving based on their proven success, or a company can choose to direct their funds to an organization of their choice.

Lipner points out that corporate philanthropy has grown signifi cantly in Israel over the past few years, and Tmura’s model of giving has allowed smaller and younger corporations, which are usually strapped for cash, to be involved in giving through the allocation of some of their stock for donation. 

To date some 150 companies have donated shares to Tmura, allowing the organization to donate close to $2 million to more than 20 amutot.

Corporate Social Responsibility

The companies that contribute to Tmura donate because they believe in the importance of corporate social responsibility, a phenomenon that has become increasingly more important in Israel since the launch of the Maala Index on the Tel Aviv Stock Exchange in February 2005. Maala is an organization that has become the leading professional resource assisting Israeli businesses in developing and implementing a Corporate Social Responsibility strategy that contributes both to the companies’ success and to the enrichment of Israeli society.

The Maala Index enables investors to invest in a group of leading companies selected not only due to their excellent fi nancial performance but also according to their management and performance of their impact on the environment, their employees, the community, and their ethical performance. It gives crucial information to investors, consumers, employees, suppliers, etc.

The Index also enables those companies that participate and others to review their performance as a benchmark to their sector colleagues as well as introduce management tools and processes that will enable them to better their social responsibility programs in the future.

Corporate Social Responsibility, or CSR, as defined by David Waldman and Donald Siegel, two of the pioneers in the fi eld, includes not only philanthropic corporate programs but also the willingness to advance goals of groups like employees, suppliers, the local community, non-governmental organizations or broader societal objectives.

The challenge for Israeli companies has been communicating the importance of a CSR program to not only their employees but to their customers as well. Recently, Siegel, Professor of Entrepreneurship at the University of California at Riverside, and Waldman, Professor of Management at Arizona State University, were in Israel, where they addressed the subject at a forum hosted by the Jerusalem Institute for Market Studies.

“Findings from scientific research are becoming increasingly clear with regard to how CSR is essential for the long-term sustainability of a firm,” Waldman says. “Firms that blindly and narrowly pursue the profi t motive, without concern for the broad spectrum of stakeholders that are relevant to the long run, are increasingly shown to lack sustainability.”

The key to a fi rm initiating and sustaining a successful CSR program, says Waldman, starts at the top.

“Firms must have visionary leaders who are able to ‘connect the dots’ and understand how various stakeholders, and the satisfaction of their needs, represent interrelated challenges. For example, the strategic management of human resources is related to customer satisfaction, and it is essential for fi rms to attempt to understand and deal with this connection,” he explains.

For Waldman, the importance of CSR is that, in order to understand it, “one must consider the holistic attempt, on the part of a fi rm, to engage and conduct a meaningful dialogue with a wide spectrum of constituents or stakeholders.” Stakeholders, according to Waldman, include employees, suppliers, contractors, customers/clients, shareholders, government, community leaders, and nongovernmental organizations.

Essentially, says Waldman, corporate leaders can act more socially responsible without using large expenditures of corporate funds.

“Strict, calculating profi t maximization is too narrow a goal, and shareholders are increasingly demanding that their fi rms do more—they should ‘do well by doing good,’” he said.

In a paper he wrote about the subject, Waldman noted examples of fi rms practicing CSR, including those that are committed to employee development and empowerment as well as those that openly share information with employees about a move toward downsizing. “Moreover, a fi rm that is committed to the production of safe, reliable and innovative products or services in line with customer needs is strategically involved in CSR,” he wrote. “CSR is, therefore, a management approach that takes into consideration an integrated set of indicators that map the fi rm’s impact and reciprocal eff ects within the realm of its economic, societal and environmental existence.”

While Siegel agrees with Waldman that the correct corporate leaders are needed for the success of a CSR program, he debates the appropriate motivational factors that drive socially responsible decisions.

“Managers have the moral obligation to pursue profi t and engage in social responsibility only when there is a clear return to investment,” he says, noting that leaders are driven by profi t maximizing and that CSR is only one component of profi t-maximizing behavior.

“A firm’s decision to engage in social responsibility is a strategic choice and simply an investment decision that can lead to increased profi tability, and companies will only decide to become socially responsible if they anticipate a benefi t from these actions above their costs.”

Siegel also points out that reputation enhancement, the ability to charge a premium price for its product, and the recruitment and retainment of high-quality workers are examples of the potential benefits of CSR to the firms.

Donor Consultants

While donations from Israeli companies and individuals are on the rise, many nonprofi ts are funded by foreign donors looking to contribute more than just their money. “It’s an issue of attitude, as donors today want to make an impact, and they want to take their donations seriously — including viewing their gifts as ‘investments.’ Th e donors today are much more proactive than reactive,” explains David Roth, a Jerusalembased donor consultant. Consultants such as Roth have sprouted up across Israel over the last few years as foreign donors seek to give to Israeli charities or non-profi ts, yet may be hindered by a lack of accurate information or sheer physical distance. Roth, a consultant with Donor Associates of Israel, provides “on the ground guidance” for foreign donors looking to give here, enabling them to feel confi dent that their money is going to be well-spent.

According to Roth, donors want to see “social returns” on their donations, so more and more non-profi t “investors” are seeking active roles on the boards of the organizations to which they donate.

“Generation X’ers are making more money at younger ages than the previous generation,” he says, “and they are looking for their money to be used in certain purposeful ways — they are not writing a check and walking away.”

Roth added that today’s philanthropists are very interested in contributing their ideas and skills to the amuta, and they therefore view their donation as entering into a partnership with the organization.

“In the old model of giving, donors gave to large umbrella organizations, yet today we see a surge of targeted giving — not just giving to a black hole,” explains Aaron Katzman of the Profi le Investment Group, which operates Profi le Family Offi ces, a division dedicated solely to ensuring that donations from abroad achieve their designated purpose.

According to Katzman, while most Israeli nonprofi ts are tremendously accomplished, they tend to not be well organized, and there are those that are not doing what their mission statement claims they are. Consultants like Profi le Family Offi ces and Donor Associates work hard to do the necessary due diligence and research before advising their clients on which nonprofi ts are good choices and which to stay away from. “We represent the donor from start to fi nish and allow them to make the best possible decision when choosing their investment,” adds Katzman.

NonProfi t Banking Services

Due in part to the rise of venture philanthropy and the "professionalization" of giving in Israel, nonprofi t organizations have realized that they need to remake themselves to properly compete for donations, as well as manage their money in line with the demands from their donors.

To meet these needs, the Bank of Jerusalem has taken the lead in Israel in off ering banking services tailored toward attracting nonprofi t organizations while providing them with advice not only on proper money management, but on all banking-related matters that arise when dealing with amutot.

“We market our banking services to nonprofi ts,” says Matti Munk, manager of the bank’s business development sector. “However, our added value comes from our understanding of the system—the rules and regulations of donations—both here in Israel and abroad.”

The Bank of Jerusalem has distinguished itself as the only bank in the country with an entire department devoted to nonprofi t organizations and the donors who give to them.

“We are a full-service financial institution and are able to help out both the organization and the donors because we understand the needs of both of them, and therefore we can act as a matchmaker between the two sides,” says Hillel Suna, the Jerusalem branch manager.

Much like donor consultants, he explains that the bank’s team of nonprofi t advisors know what the new generation of donors is looking for when considering a donation.

“They want their funds to go to certain projects and be used in certain ways — and we help them make that happen,” says Suna.