An interesting speech - see half way down.

Trusteeship in a Time of Change A Tale of Two Gardens

In this session I want to discuss three key concepts:

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 charities and stewardship -

 charities and radical ideas -

 charities and risk

I want to begin by taking you for a walk around two gardens. The first is at Chatsworth House in Derbyshire. This is of course a complete misnomer; a classic example of British understatement. Chatsworth is a huge palace palming itself off as a mere house. In France, it would be a chateau; it is worthy of a Bourbon or a Majesty. But what is really remarkable is its gardens. The whole landscape around Chatsworth has been carved out to create a unifying vision of the Duke of Devonshire’s idea of what a perfect countryside environment should look like. It’s landscape as backdrop. And it is worth remembering that this vastly expensive edifice and grounds were built on the profits of that brutal, dangerous and exploitative business – early coal mining.

There is an amazing water cascade and in the1840s James Paxton, who later built Crystal Palace, designed an enormous greenhouse which at that point was the largest green house in the world. It housed exotic plants from all around the globe. It also was an expression of power and wealth. It had huge underground heating systems, prodigious boilers, 30 miles of pipes. Of course it was ruinously expensive to operate and fell into disuse during the First World War. When taxes rose and cheap labour was in short supply, it was then demolished.

Visiting Chatsworth is to be impressed by the scale of vision of the rich aristocracy but one gets no sense of something created for public benefit, at all. Chatsworth shouts “wealth”, and “look at me”. It encapsulates aristocratic pride, power and status.

On the other hand take a walk around the University Botanical Gardens in Cambridge. These are far smaller than Chatsworth. They only extend over 40 acres and have been going since 1846 - almost at exactly the same time as James Paxton was creating the Chatsworth greenhouse. What strikes you when you walk round these gardens is that they are dedicated to a scientific approach to the world. A fantastic range of trees and plants support research which goes on there all the time. Currently they are doing a lot of work on sustainable horticultural; water and fertiliser use, weed control etc. There is a greenhouse - on a modest scale- so it has not been demolished. The University Botanical Gardens are a tribute to what charities create – public benefit for the long term. Chatsworth is the plaything of the rich, The University Botanical Gardens represent a serious, combined effort of generations of brilliant people studying botany for the long term good of humanity. The Botanical Gardens are not a display of wealth or power; rather demonstrate the serious use of a wealth of talents for common purpose. The men and women who have worked there over eight generations, have lain down strata of intellectual property – for the common good.

If you walk around many of the best cities in the world, I would argue that what makes them great is the fact that many of their assets are held for the long term in public ownership. This is particularly true of cities like Oxford and Cambridge but it is equally true of London with

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its parks and museums. What all these represent is a concept of stewardship; assets held for the public good in the long term. No one can benefit from them personally. You can go down to the betting shop and put your shirt on the 3.30 p.m. at Tadcaster with your own money but you cannot do that with trust moneys – that is the key difference. Trusteeship brings with it notions of stewardship and long term care that are at variance with short term profit maximisation or the adulation of individual wealth that has become such a feature of our economic system over the last 30 years.

What is also powerful is that because these buildings, gardens etc are held in trust, it means that lots of people can use them. And this space allows more academics and students to develop, engage in blue sky thinking, and undertake experiments. We too often forget that civil society in its broadest definition – including the universities – is the research arm of society. So many of the great ideas and inventions that the private sector cash in on were created in the public domain. Anthony Hilton in a recent Evening Standard article mentioned Professor William Janeway’s book ‘Doing Capitalism in the Innovation Economy”.

This highlights the little understood fact that most of the big American technological breakthroughs have been a result of state and foundation funded research, not private enterprise. It was blue sky funding which paid for the research which developed the algorithms which underpin Google and which funded research that first discovered the technologies which Steve Jobs brilliantly assembled into the iPhone. Professor Janeway’s take on this is that, “venture capital success only happens in sectors of research where the state invested at sufficient scale in the translation from scientific discovery to technological innovation.” In other words, the state does all the risky hard work and only when it has got to the point to be a pretty safe bet, does the venture capital industry get involved. To this I would add that charities have also played a key role in funding this type of deep research.

As a result Professor Janeway says four out of the five venture capital investments are either in the information communication technology or biomedical sectors because this is where the government’s money goes. There has been very little venturing outside these areas.

The point here is that most government money goes to universities which are charities whose structure encourage long term research not geared to a particular product. It is that deep research which produces the intellectual property that can create system changing breakthroughs. Professor Janeway also argues that it is not necessarily so much the money that creates innovation but pools of clever people and role models and where do you find those? but in universities, research institutions, or hubs.

The ideas and the thinking behind the books, and blogs, tweets, publications that come from universities are but one example of the torrent of ideas that civil society organisations create.

Another point:

People often criticise charities for not “going to scale”. However, I would like to put a contrary view. One of the problems that has developed over the last 30 years is the development of huge institutions that are “too big too fail”, particularly the banks. A resilient system is a network system with a large numbers of players rather than an oligopoly of a few dominant players “too big to fail”. The stewardship mind set rarely breads the desire to go to massive scale. I believe that is a strength, not a weakness. In the modern world we will increasingly talk about networks of organisations and individuals and seek to find ways of

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creating alliances between individuals and organisations to allow them to flourish rather than create great new organisations. The unbundling of the state that the Coalition Government is encouraging could at its best be part of this – if genuine public service mutual are established that do not get hoovered up by Capita, Serco or Assura. I believe the internet will encourage the development of an ecology of smaller organisations – like civil society. And on that note it is probably worth contrasting Wikimedia – and Google. The Wikimedia Foundation is a charity. It turns over US $51m. Yet is has an amazing presence throughout the world. Wiki has become a prefix eg, Wikileaks; or Wikipedia. Wikimedia’s phenomenal growth has been driven entirely by voluntary donations and voluntary effort. Google has the preposterous slogan “you can make money without doing harm” and then engages in sophisticated tax planning so that its marginal corporation tax rate on UK profits is 3.5% rather than the 24% it should be. Wikimedia Foundation demonstrates as well another aspect of stewardship – the ability to make a lot with small resources.

The other vital aspect of civil society is at their best civil society organisations are constantly challenging the status quo. And so often ideas that have been radical in one generation become accepted and even conservative in future generations. Take as one example the National Trust. When Octavia Hill started campaigning to preserve parts of the British countryside and buildings in the 1880s, this was a radical step. No one today, I suspect, thinks the National Trust is a radical organisation but 130 years ago it was.

An even more striking example is of course the anti-slavery movement. When Thomas Clarkson, William Wilberforce and a bunch of Evangelicals and Quakers decided to challenge the slave trade in the 1770s, it is estimated that one third of the world’s population was either in slavery or bonded labour. A voluntary organisation had decided to take on the then equivalent of Big Oil; Big Pharma and the Arms industry all rolled into one. Can you imagine doing that today? But they did it. They did it through mass mobilisation coupled with huge patience and determination.

That was a huge gamble. The point here more than anything else is that charities are in the risk business. There is a paradox at the very heart of charity. At the one hand the notions of trusteeship and stewardship for the present and the future can imply a conservative, conservation mind set. On the other hand the fact of the matter is that charities operate at the cutting edge, the coalface of the society. Many charities go where most organisations care or dare not to go - because there is no money there. You do not make money out of dealing with disabled children; people with autism, drug addicts, the needy, the dispossessed, the elderly, the poor – all the potential beneficiaries of charity. Charities take risks. It is in their DNA. Without risk, in a sense, charities are nothing. So the Trustee mind set is a curious one. It has to combine a concept of preservation and a concept of welcoming challenge. To put it another way charities need to have a conservative approach to property but a radical approach to ideas.

I believe these two qualities are the essence of charity. I believe too many people get hung up on the idea that the voluntary principle of trusteeship is what marks charities out. The volunteer principle is noble and useful but it is not so much at the heart of charity as the twin concepts of stewardship and risk. Indeed in those universities which have colleges, they are charities with paid trustees because the Dons sit on the governing bodies and are paid.

Now, to shift perspective, I am sure historians will see 2008 as one of those seminal years in history along with 1929, 1939, 1968 and 1989. We are still living with the fall out of the end

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of the long boom and the collapse in faith in liberal free markets. The world economy still has a massive hangover and no government has yet started to develop a pick me up. As governments seek to tame deficits; worry about long term trends in demography; reach the limits to growth caused by environmental degradation, I feel that Harold McMillian’s phrase, “you’ve never had it so good” will come back to haunt us – we may never have it so good again. That we cannot continue as before is clear. We have to find a way to run our economies that delivers genuine prosperity for all but without endangering the planet. It may sound grandiose but I think the twin pillars of charity which I have been describing – that is

stewardship and an acceptance of risk, are the essential mental and emotional ingredients that society needs in order to be able to adapt and change. I believe there is a lot that the system could learn from civil society.

In particular I would like to offer you trustees a new opportunity. As you may know one of the sponsors of this conference is Bates Wells & Braithwaite and BWB is proud to be in partnership with NCVO, not just in running this conference but in running a business called Trustees UnLimited which finds Trustees and non-executives for social enterprises. One of the constant refrains over the last 10/15 years has been that charities need to learn from business and need to become more business like. However, I think the time has come for businesses to become more like charities. In particular, I am very keen on seeing boards of private and public companies having at least one director who can represent civil society – a senior non-executive director to represent a wider view than just the bottom line and the short term. And where will we find the people to take on this role? I would suggest in this room and in charities generally. So going back to my horticultural thoughts, I would like to plant a seed in your minds. You could become a director on a private company board to represent the concept of stewardship and a willingness to change and adopt new ideas. The voluntary sector has been a leader compared with business in terms of the number of women who hold senior positions – something for which the sector should be justly proud. I am sad to see that attempts by Lynne Berry and others to get some leading lights onto the board of public companies have thus far not succeeded. [It is essential, in my view, that Lynne Berry, Barbara Stocking and others do not give up with this endeavour.] Their potential involvement on the boards of leading companies could I am sure be hugely valuable. There is a lot of evidence to show that boards make much better decisions when they have a diversity of membership including of genders rather than when they are a homogenous bunch all locked into group think. Indeed the Economists’ prescription for de-risking financial markets is very simple. Take the testosterone out of the room, in particular out of the dealing floors. You do this by employing women and older men.

In conclusion I would like to take you to America. I was recently in San Francisco at the Social Capital Markets Conference. It was inspiring. In particular, the chutzpah showed by some of the new American foundations such as the Bill and Melinda Gates Foundation, the Omidyar Foundation and others in embracing the idea that trusteeship of capital brought with it the right as well to take risks. This may sound paradoxical given what I have been saying earlier about conservation. But what Bill and Melinda Gates and others are doing is recognising that a small part of their capital can be deployed on social investment – seeking to ensure that their money creates not just a financial but also a social gain. And I was particularly struck by comments from the Rockefeller Foundation. The Rockefeller Foundation has been going since the 1880s built on the back of the profits from Standard Oil. In the 1950s the Rockefeller Foundation was one of the key funders of the research that resulted in the green revolution in India which meant that crops yields doubled and more. Rockefeller funded that research just like governments and other foundations have always

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funded research. They gave the money away and funded the creation of intellectual property for the public good. But of course there was also a colossal private gain; the seed companies, and the fertiliser companies cashed in on the intellectual property that had been funded by the likes of Rockefeller. That’s normal, that’s what we expect. The state, foundations and charities create intellectual property, put it into the public domain and then companies cash in, be it Apple, Google or Monsanto to name but three.

But it does not need to be like that. What was interesting listening to Rockefeller was to realise that they have realised it does not need to be like that. So this time round as they fund African agriculture they are doing it differently. This time Rockefeller is giving grants to help develop agriculture in certain areas but they are also investing, and taking equity stakes in projects which they have grant funded to get to a stage of investment readiness. Rockefeller is using new financial tools in the box. They are not just giving out grants and allowing the private sector to cash in, they are ensuring this time that they are using some of the tools of capitalism to make sure that they can get some stake in any potential upside or capital growth that their subsidy has helped create.

I think that is the way of the future, a more hybrid; nuanced approach. We need to move away from a binary world where governments and charities are on one side of the ring and business is on the other. Increasingly we are going to see organisations that operate across a spectrum, comingling charity and private sector money and values at the same time. This is going to be confusing; it is not going to be easy but I believe that the civil society sector with its historic and abiding concept of stewardship and its proud record of nurturing and developing new ideas has got to be the seed bed for the change we all recognise is needed. Civil society needs to develop these new ideas – as it always has. Civil society needs to help develop a more responsible capitalism. Civil society has always seen money as a means to an end – not an end in itself. Civil society needs to spread the word that money needs to be put back where it belongs as a means of achieving economic exchange, as society’s servant and not its master. I’d like to close with a passage from Franklin Roosevelt’s inaugural Address in 1933:

“The money changers have fled from their high seats in the temple of our civilisation. We may now restore that temple to the ancient truth. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.”

Stephen Lloyd Bates Wells & Braithwaite London LLP 2-6 Cannon Street London EC4M 6YH

9th November 2012

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