Donor Intent: The Legacy of Zalman Chaim Bernstein

By Tony Proscio

Zalman Chaim Bernstein, entrepreneur, financier, philanthropist, master of research, lover of books, seeker after knowledge, violator of norms, died on January 6, 1999, at Memorial Sloan Kettering Cancer Center in Manhattan, of complications from lymphoma. He was 72. A philanthropist and iconoclast, he was the creator of the giant asset management firm Bernstein & Company (today AllianceBernstein) and was a Ba’al Tshuva who had recommitted himself to Judaism in his 50s. Apart from the colossal wealth he had created, for himself and many others, and the towering enterprise he had founded, he left behind a philanthropic legacy, including a foundation called AVI CHAI, dedicated to his own deeply held vision of the future of Judaism and the Jewish people.

Preserving that vision from later distortions was one ambition that never wavered in the 15 years he chaired and directed the work of AVI CHAI. Time after time, he proposed amendments to the foundation’s by-laws to ensure that the board would adhere to his direction and continue to function as it had under his leadership, and that it would continue, after his death, to be led by people he had chosen and who were close to his thinking. He continued to be haunted by the cautionary stories in which foundations had departed from their donor’s wishes as trustees gradually replaced the founder’s world view with their own.

His first line of defense against that fate was to populate his board with people who, he believed, would remain faithful to his intentions. Though he recruited trustees widely and sought out candidates with markedly different backgrounds and perspectives, he was also careful to choose people with whom he felt a close personal chemistry, whose essential values were close to his, and whose commitment to preserving his vision seemed firm.

Yet even with them, the trust went only so far. He made certain to reserve controlling authority on most issues to himself and to a tiny inner circle of Members (the Executive Committee) – initially himself as sole Member, then later adding his two closest philanthropic confidantes: Arthur Fried, former managing director of Lehman Brothers and later the chief executive of Yad Hanadiv, and Samuel J. Silberman, a prominent Jewish philanthropist and longtime president of Consolidated Cigar Corp. Near the end of his life, rather than designating any sitting trustee to replace him as a Member upon his death, he instructed that his wife, Mem, be his successor as both Member and trustee. Though she had not previously had any formal role in the foundation, her role in her husband’s life, her loyalty to him, and her understanding of his ambitions and world view trumped that lack of experience.

At least twice during these first 15 years, Bernstein also considered what could have been the ultimate protection against mission drift: spending out the endowment and ending the foundation before future leaders could take it off course. In 1992, soon after AVI CHAI’s sixth birthday, he suggested to Fried and Silberman, at a meeting of Members, that they consider “dissolving the foundation at the death of the last trustee who served with” the donor. The idea of time-limited foundations, set to close during the donor’s lifetime or soon thereafter, would gain traction among emerging philanthropists in the coming years. But for reasons not disclosed in the meeting’s minutes, the Members rejected it. Instead, they decided to recruit another board member, “young enough to outlive the current trustees,” who would have plenty of time on the board to become steeped in AVI CHAI’s culture.

That approach was consistent with Bernstein’s other core principle for the running of his foundation: He wanted it to be driven by its trustees, “actively directing the foundation in the pursuit of its mission.” Trustees with such a depth of involvement in the foundation’s work would be less likely to deviate from its founding spirit and would be more personally invested in its success. “The members of the Board are involved not only on a policy level,” he wrote in his first five-year report, “but also in project development.” The idea of an engaged, committed, and long-serving board of trustees functioned, at least in Bernstein’s mind, as a prime defense against mission drift.

Yet the idea of setting an end-date surfaced again four years later, at another Members’ meeting. Once again, the board concluded that “the foundation’s mission is ongoing, and we shouldn’t fix a terminal date for its activities.” Still, both discussions, in 1992 and 1996, ended on a note of unease, as if the Members remained anxious about the long-term risks but were reluctant to contemplate ending such a young and still-evolving philanthropy – one whose mission could never be achieved in a single lifetime, or even a few generations. At both meetings, they pondered alternative legal arrangements, such as an outside auditor or supervisor who would scrutinize the board’s decisions for any deviation from the donor’s intent. These arrangements were likewise tabled, but the question appeared never to be fully settled.

Although Bernstein himself rejected the spend-down option at least twice, he did so only in the expectation that some kind of external authority could eventually be empowered to audit or regulate the choices of future trustees. In private conversations late in his life, recognizing that this sort of “mission policeman” was neither practical nor strictly reliable, he told Fried and others that a sunset might well be his preferred choice. Ultimately, this preference was fulfilled when, five years after Bernstein’s death, the board did decide to limit the foundation’s life and bring its grantmaking to a close by a date certain (originally it was 2027; after the losses in the 2008 financial crisis, the board moved the sunset to 2020).

At the time the decision was made, in 2004, there were only three trustees, out of a total of 11, who had not been personally screened and approved by Zalman Bernstein. As this is written, there are just two such trustees. All three of the inner core of Members are Bernstein choices: Arthur Fried, Mem Bernstein, and former publishing executive Lauren Merkin. Although Arthur Fried played a critical role in initially recruiting most of the trustees and bringing them to Bernstein’s attention, the AVI CHAI board remains, at its core, the creature of its donor, and largely a team of designees who spent years practicing their leadership of the institution under the donor’s gaze.

Yet even a board of hand-picked trustees with a bedrock of common values must sooner or later grapple with issues and choose among options that never confronted the donor, and on which he left no guidance. In practice, as AVI CHAI’s executive director for North America, Yossi Prager, pointed out, “the trustees almost never asked ‘WWZD (What Would Zalman Do?).’ Decisions were made by reference to the mission statement and the principles he set forth in his lifetime, but it was almost never framed as a question of what he, personally, would have decided.” It was, in fact, reasonable for trustees to conclude, from the way they were chosen and from the kind of intellectual jousting that Bernstein always seemed to crave, that a slavish imitation of his own methods and style would not have made him happy.

AVI CHAI trustees speak cautiously, and with humility, about their success at preserving “donor intent” in their management of the foundation. It is a value broadly and deeply shared among the board members. But how confident can they be that Bernstein would have been satisfied with their effort?

On one hand, as one trustee put it, the question almost answers itself: “He was never satisfied with anything, including his own work. Some things he thought were good, some not so good; but nothing was ever good enough.” On the other hand, the question is unanswerable. Even in his lifetime, times and circumstances changed; opportunities came and went; today’s bold initiative became tomorrow’s tepid disappointment, while something entirely different was arising to take its place. To drive the foundation in accordance with Bernstein’s own wishes, it would be necessary to know how those wishes would have adapted to a constantly flowing stream of issues, experiments, and choices.

It is not surprising, then, that the board ultimately took the surest course to prevent AVI CHAI from drifting too far from its founding vision, principles, and methods: spending out the endowment and closing the foundation within two decades after Bernstein’s death. That would ensure that his mostly hand-picked board had the last word, and that time and memory would have little chance to dim the vivid set of purposes with which the enterprise began. As Bernstein told Fried and others that a sunset might well be his preferred choice, that preference will now be fulfilled.

Excerpted from a forthcoming book documenting the history of The AVI CHAI Foundation by Tony Proscio.

Tony Proscio is a writer and consultant to foundations and national nonprofits. From 2013 to 2019 he was associate director of Duke University’s Center for Strategic Philanthropy and Civil Society.