UA&P Associate Professor Dr. Juan Mesquida delivered a lecture entitled “Leaving a Legacy: Lessons from History About Endowments” on August 15, 2023, at the Li Seng Giap Auditorium in celebration of the University Day. Below are excerpts from his lecture. The full text may be requested from the author at [email protected].
History teaches us that we are born with an altruistic heart. This becomes more acute as we contemplate the end of our lives and reflect on what we leave behind us that will help other people. While there are not necessarily better choices, because it depends on personal preferences, entrusting our bequests or legacies to established philanthropic institutions sounds wise. Likewise, giving in the form of endowments that will help people forever is equally desirable.
Below are some lessons from the history of endowments that teach us why contributing to building an endowment fund in our university is one of the best ways to leave a worthy legacy.
- Philanthropic societies play a vital role in a civil society
In a civil society, like a town or a city, the state cannot provide for all the needs of the members of the community. Minorities and the underprivileged are often left out. This is where private initiative can take over and fill the gaps that public authorities cannot reach. On April 16, 1594, a group of well-to-do Spaniards established a Confraternity of Mercy (Hermandad de la Santa Casa de la Misericordia de Manila, or Misericordia for short) and drafted an initial set of bylaws to provide for the needs of the disadvantaged members of the society.
Joining a philanthropic society is not a thing of the past. There are 1.5 million non-profit organizations in the United States at present. Many of these are charities whose profit is used to help the underprivileged.[1] Philanthropy, or love of humanity, helping other humans, is born from one’s concern towards others and from the awareness of the limits of public welfare and the necessity of private initiative to help solve problems of the civil society.[2] There are advantages to joining a charitable established institution.
2. Giving to an established philanthropic society has benefits
Establishing a Misericordia had a practical reason. Misericordias were welfare societies widespread in Portugal and in Portuguese overseas territories with many years of experience. By adopting the internal structure and objectives of a model of confraternities, it saved a lot of time and facilitated operating quickly, since they only had to follow its format.
Taking the name from the seven spiritual and seven corporal works of mercy of the Catholic Church, the Misericordia specialized in some of them. Giving weekly alms to impoverished Spanish citizens, like older couples, widows, and orphans. The members regularly visited jails to bring food and water. With the help of some Franciscans, the Misericordia put up and funded its own hospital for sick and indigent Spanish and mestizo women and sick and abandoned slaves.
Since the beginning, the confraternity relied on donations from members or generous people. The statutes contained penalties for the board members who mishandled the funds of the confraternity.[3] Being a corporation, with its statutes, mission, organization, and internal checks and balances elicited trust among potential donors. They knew that the money they donated was in good hands.[4]
Universities are also corporations, with a mission, regulations, organization, stakeholders, and a government. Most of them are not for profit. Their purpose is to provide higher education and produce research that will benefit society. Therefore, they are philanthropic societies. And like what had happened to those who donated to the Misericordia, gifting universities gives assurance that donations will be well utilized. When overseeing the funds, the members of boards of trustees of American universities are advised to assume that “the institution is immortal.”[5] In other words, handle the funds with the responsibility that they will last forever.
3. Establishing endowments prolongs one’s giving
A few years after the foundation, some of the donors of the Misericordia preferred to create endowments to finance their favored charities. An endowment differs from a grant or a consumable gift because it is associated with a financial instrument that guarantees a perpetual income, usually a yearly rent derived from some kind of investment. Most of the pious endowments entrusted to the Misericordia were established in the wills of the donors, to be executed after their death. American historian Natalie Zemon Davis, in her book The Gift in Sixteenth-Century France, has pointed out that gifts are supposed to be free and disinterested, but that is hardly ever the case since every gift triggers a relationship of reciprocity. The same author reminds the reader that after Martin Luther’s reformation, the Council of Trent took pains to explain in detail the Catholic doctrine about the relationship between good works and grace. Good deeds are necessary for salvation, but justification comes from grace. It is Jesus Christ who saves us, not our actions, although God wants our free correspondence to his grace doing good works. Prayers, alms, or like in this case, endowments, do not guarantee grace. However, there is an implicit belief that God will be happy with the donor and reward him or her in some way, and this is enough motivation for giving.[6] Since endowments had a built-in system to perpetuate themselves, it looked like a good spiritual investment to start a donation in the form of an endowment. Creating an endowment, then, was a smart way of multiplying one’s gifts and, hopefully, attracting God’s attention and grace.
There had been a lot of pious giving, such as grants or spendable donations, in the Middle Ages, but there were no endowments because the Church then frowned on lending with interest, which was considered usury. The Misericordia just happened to be founded at a time when the Church started to allow a modality of endowments where the money was invested in low-yielding real estate loans called the censo in Spanish. All Church-related philanthropic corporations of Manila adopted this type of grant intended for charity since the 1580s, following a trend that began in the 1540s in Spanish America.[7]
Creating an endowment, then, was a smart way of multiplying one’s gifts and, hopefully, attracting God’s attention and grace.
Developments in the field of economics in the middle of the sixteenth century would spill over to theology. Theologians Martín de Azpilicueta, Tomás de Mercado, and other professors in the School of Salamanca, Spain, observed the high inflation experienced in Spain because of the influx of precious metals and commodities from Spanish America. It made them question the ancient belief that money was static and its value unchanging. If the value of money could vary according to the circumstances, there could be instances when charging an interest was not necessarily immoral. This theological insight, apparently small, had enormous consequences in the economic world and particularly in the field of giving. Creating an endowment to be invested in loans with high interest could be permissible. Thus, in 1668, a Spanish merchant living in Manila, Diego Martínez Castellanos, entrusted to the Misericordia the managing of a new type of endowment that lent loans to maritime traders, selling mostly in Mexico, at very high interest rates. This new type of endowment was called a respondentia endowment. The high interest could be justified because of the lender assumed all the risks of the galleon trip. High risk allowed a high interest.[8]
Besides the benefits for one’s soul, endowments provided long-term financial aid to their favorite charities, which included all the religious communities, widows and orphans, hospitals, schools, beggars, and many more. Archival documentation from the endowments run by the Misericordia shows that many of the beneficiaries received financial help all throughout the eighteenth and nineteenth centuries.
Donors give to universities because they see the fruits of their generosity in the education provided to the students, and how it is also a direct means to help the betterment of society. Universities seek endowments to avoid borrowing and to have fewer financial worries.[9] Endowments also help them charge less for tuition while providing quality education. Differently from what happens in other countries, the USA does not have a public service of universities, but the government realizes that better education and research help improve the economy and the whole society profits. This explains why universities are exempted from taxes, and donors to universities may enjoy tax deductions. To illustrate how much endowments help universities and students, in 2016, income from endowments in Harvard covered 36% of its expenses, although the percentages were different per college, depending on which school or faculty, according to the restrictions accorded by the donors to their endowments.[10] Yale University spends 4.5 percent of the total endowment capital, as documented in a 1990 study, which was equivalent to the rate of return of the investments. That would be equivalent to almost two billion dollars at present.[11]
Vision matters
Among the advice learned from a professional fundraiser of university endowments, I want to highlight the importance of having a “vision.” At UA&P we have always had a clear vision: to pursue an integral education of our students with an interdisciplinary synthesis of humanistic, professional, scientific, and technical knowledge, inspired by a Christian view of man and the world, to make an effective contribution to the needs of the society. Our alumni are the best proof of our vision. A recent marketing study on our university confirmed that our alumni are well received by the corporate world, nationally and internationally, or engage in successful businesses. Others help the country from their political posts. Some graduates are actively involved in the world of the arts and culture or work in non-profit organizations.
The University of Asia and the Pacific has been and still is a much-loved beneficiary of philanthropy since its inception as the Center for Research and Communication in 1964. Our own campus was a generous donation of the Ortigas family. The names of donors grace the walls outside our classrooms and other facilities, like the Li Seng Giap Auditorium, the Ejercito Library, and many others. We still rely on the continuous generosity of alumni and friends. While most benefactors still give consumable or spendable grants, some sponsors have started to prefer creating endowments. This is the case of the three professorial chairs studying migration and Filipino overseas workers, social enterprise, and family and youth education. As we have learned from the University of Oxford, we have enough projects to match the preferences of each donor, like research or facilities, scholarships for deserving but underprivileged students, and the development of the faculty, to mention a few.#
[1] 26 Incredible Nonprofit Statistics [2023]: How Many Nonprofits Are in The U.S.?
https://www.zippia.com/advice/nonprofit-statistics/#:~:text=There%20are%20over%201.5%20million,based%20in%20the%20United%20States.&text=Nonprofit%20organizations%20represent%205.7%25%20of%20the%20U.S.%20economy (accessed on July 22, 2023)
[2] Terry L. Davis and Kenneth M. Wolfe, “Planned Giving” History News (Summer 2003) Vol. 58 p. 1-2.
[3] “Early Social Assistance in Spanish Manila: The 1606 Statutes of the Misericordia,” Synergeia, 3 (2009): 5-28
[4] Juan O. Mesquida. “La población de Manila y las capellanías de misas de los españoles: Libro de registros 1642-1672,” Revista de Indias, Vol. LXX, no. 249 (May-August 2010), 477-479.
[5] Henry Hansmann, “Why Do Universities Have Endowments?” The Journal of Legal Studies Vol. 19 no. 1 (Jan 1990), 14.
[6] Natalie Zemon Davis, The Gift in Sixteenth-Century France (Madison, Wisconsin: The University of Wisconsin Press, 2000), 100-110.
[7] Samuel K. Cohn, Jr. Death and Property in Siena, 1205-1800. Strategies for the Afterlife (Baltimore: The John Hopkins University Press, 1988); Mesquida. “La población de Manila y las capellanías,” 469-500.
[8] Francisco Gómez Camacho, “Crédito y usura en el pensamiento de los doctores escolásticos (siglos XVI-XVII)” in Ma. Del Pilar Martínez López-Cano, coord., Iglesia, estado y economía. Siglos XVI al XIX (Mexico City: Universidad Autónoma de México, 1995): 67-77; The Canons and Decrees of the Sacred and Ecumenical Council of Trent, trans. and ed. J. Waterworth (London: Dolman, 1848), 42-50, http://history.hanover.edu/early/trent.htm.
[9] Hansmann, “Why Do Universities Have Endowments?” 3-5.
[10] Sandy Baum, Catharine Bond Hill, and Emily Schwartz, “College and University Endowments. In the Public Interest?” ITHAKA S+R (2028), http: https://www.jstor.org/stable/resrep49547 (Accessed on August 1, 2023).
[11] Hansmann, “Why Do Universities Have Endowments?” 11-14.
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