On the other hand, such a rule could potentially dampen the philanthropic urge and is not widely supported by regulators. “Foundations need to be concerned about the due diligence issue,” says Belinda Johns, a deputy attorney general in California. “But there is no reason why they can’t employ people who are related if they are getting what they pay for.”

Though Senate opposition may kill the measure, debate continues in Congress over whether it is a good idea to put a $100,000 cap on the salaries, an approach that could discourage foundations from spending more on personnel than on charity. However, Harvey Dale, the director of the Center for Law and Philanthropy at New York University, predicts that the stipulation would accomplish the opposite because it would legitimize any salary under six figures. He sees no problem with the “reasonable” standard. It might need greater enforcement, he says, but “it is one of the oldest standards of law.”

The Fallout
The legislative moves and media exposés have made an impact. Many foundations have been shocked into reexamining their administrative practices. These efforts are long past due, according to many philanthropic consultants, among them Julia Kittross, founding partner of The Giving Practice in Seattle. “One thing that happens with foundations,” Kittross says, “is that the family may be engaged in philanthropy, but they end up not creating the kind of policies that any organization should have, whether it be staff and CEO review policies or who has the ability to write checks. It isn’t until they get stung that they realize they should have had those policies.” One foundation abandoned a program that matched donations made by trustees and employees to charities of their choosing for fear that this practice would be regarded as self-serving. “I didn’t think people would perceive that negatively, but they didn’t want to cross that line,” Kittross says.