I recently read the wonderful book by Vanguard Investments founder John C. Bogle entitled Enough. This book is filled with wisdom and insight into the accumulation of money with focus on the financial sector. Enough includes discussion about the salaries that CEO’s of the large financial firms made just as the economy began its nose dive. Mr. Bogle paraphrases Winston Churchill saying, ” ‘Never has so much been paid to so many for so little’ in the way of accomplishment.”
I recommend the book to anyone with an interest in philanthropy but most importantly for anyone who finds him or herself in a position of owning or being the beneficiary of significant wealth.
After reading the book, I remained disturbed about the newspaper reports of compensation and bonuses offered to investment firms and banks that had been the recipients of the Troubled Asset Relief Program (TARP) initiated by the Federal Reserve just short of one year ago. I need not go into the details. Suffice to say I was listening to a story about executive compensation on the National Public Radio’s Market place on September 2, 2009. Bailout bank CEO salaries very healthy. I listened as I drove through working-class neighborhoods of the Ohio county where I live. These modest homes owned by people who, for the most part, worked in the manufacturing industries that were once numerous – Ford Motor Plant, Republic Steel, American Shipbuilding not to mention numerous smaller manufacturers. In one neighborhood alone, I counted fourteen houses for sale. I am quite certain that most are in foreclosure.
I think a challenge for the philanthropic sector is to set a standard for what people can do with this sudden wealth. The thought brought me back to exactly ten years ago when, new to my job in philanthropy, I was asked by the then Donors Forum of Ohio to come to Columbus to provide testimony to the State Attorney General Betty Montgomery and her Tobacco Task Force which was called to gather ideas on how Ohio should deal with the approximate $10 billion windfall in tobacco settlement monies. We argued that the State should set up three Trust Funds overseen by the general public with protections that would ensure that money would be focused on reducing tobacco use in the State and take aggressive measures to improve public health. The state did establish funds, but did not relinquish power to a general public fund similar to a community fund. As a result, a significant amount of the funds were used by the governor to pay for budgetary shortfalls beginning in 2006.
After the funds came to Ohio, it became evident that a number of lawyers began receiving huge salaries for their involvement with the funds. In September 1999, I wrote the following piece addressed to lawyers who benefited from the windfall. I submit it to this blog asking the reader to imagine the same suggestion to CEO’s and hedge fund managers who have won mightily at the game of risk management, often on the backs of those who have lost savings and their homes. The Presidents have changed, but the call to give back still holds. not only to CEO’s but lawyers and any professional that stands to earn well in a time when others are loosing everything.
The question is what leader in the political or philanthropic sector is willing to keep the theme in front of those who benefit from the bounty.
Tobacco Settlement for Lawyers Fees –
Dreams of What Could Be
About a year ago, I was asked to Testify before the Governors Task Force Committee on Tobacco. I an my colleague Lyn Hiberling-Sirinack from Donor’s Forum of Ohio stood before the committee which included State Attorney General Betty Montgomery. In our testimony, we gloated over the fact that we were the only people in the room not requesting money. Instead, we made a plea that the Governor not spend all the settlement money at once, but reserve a portion (we recommended one third) of the 10 billion dollars in settlement monies into a charitable foundation. Our testimony demonstrated that placing approximately $3.5 billion in a Trust for all the people of Ohio could increase in value over time, and in doing so, ensure charitable off-sets for inevidtable shortfalls in the State Budget for years to come. Although we do not pretend to take credit for the decision, the Task Force did make the recommendation to set up two “Trusts” that would be used to support development projects well into the future. The recommendations were accepted and two Trusts have been set up to serve the citizens of Ohio.
A year later, I find myself stunned at the unprecedented amount of money $265 million dollars that the Tobacco Free Arbitration Panel has decided to award three Ohio Law firms and five out-of-state firms for legal fees for successfully working with the State of Ohio to secure the $10 billion dollars. I am in no position to make any comment or pass judgment on the size of the legal award and the amount of time that went into the effort. I do find myself wondering however about how that money will be spent.
A quick scan of recent newspaper articles reveals that many law firms involved in the state tobacco settlements have contributed to the political campaign of a Seattle attorney whose consultations enabled a number of private law firms to reap as much as $20 billion dollars in legal fees. That is quite an accomplishment. A New York Times article describes hundreds of thousands of dollars from tobacco settlement legal fees going to support Democratic candidates. In one instance, a lawyer from Charleston, West Virginia who headed up the legal team for the Florida tobacco settlement gave $30,000 for charities in three cities in that State.
If there were a panel like the one I testified last year, I would make a plea that the three Ohio and the five out-of-state firms to apportion some of this windfall for public charities. I would love to challenge the lawyers to think boldly, strategically and bravely and apportion on half of the award $130 million – to an existing or new charity to respond to any number of charitable needs. A Tobacco Lawyers Charitable Trust with an operating corpus of $130 million dollars, invested properly could yield approximately $6.5 million dollars each year for charitable programs throughout the State of Ohio. If a national charity were established with just a fraction of the $20 billion dollars awarded to legal firms, the impact would perhaps be as significant as
Just as an example, wouldn’t it be great to have the lawyers Trust fund a program that would resurrect speech and debate programs in all Ohio public schools. Speech and debate programs could encourage young people to engage constructively in public debate and perhaps groom some future lawyers.
Surely the lawyers who have benefited from the Tobacco Settlements have the right to choose how to spend their money. Supporting political candidates is entirely within character and perhaps to be expected. Curiously however, each of the Presidential candidates has made a point of encouraging philanthropy. The Chronicle of Philanthropy quoted George W. Bush as wanting to take a “muscular” approach to encourage giving. Mr. Bush stated, “”We could be on the verge of one of the great philanthropic periods in America, where enormous wealth has been generated,” he said in an interview. “The next president needs to encourage that wealth to spread. People need to give back.”
Let the lawyers of this State exercise this muscular approach to encourage giving back.
Ten years later, the characters change, but the call has not.