The John D. And Catherine T. Macarthur Foundation Business Information, Profile, and History

Company Perspectives:

The John D. and Catherine T. MacArthur Foundation is a private, independent grantmaking institution dedicated to helping groups and individuals foster lasting improvement in the human condition. The Foundation seeks the development of healthy individuals and effective communities: peace within and among nations; responsible choices about human reproduction; and a global ecosystem capable of supporting healthy human societies. The Foundation pursues this mission by supporting research, policy development, dissemination, education and training, and practice.

History of The John D. And Catherine T. Mac Arthur Foundation

The John D. and Catherine T. MacArthur Foundation, one of the largest grantmaking foundations in the United States, is most widely known for its 'genius' awards--the MacArthur Fellows Program which awards grants to creative individuals in any field. In addition to the Fellows Program, the Foundation's grantmaking programs are the Program on Human and Community Development, the Program on Global Security and Sustainability, and the General Program. Through these programs, the Foundation funds research, education, and policy development on such topics as U.S. energy efficiency, public school reform, arms reduction, biodiversity, and youth development.

From Rascal to Millionaire: 1897-1945

John Donald MacArthur was born in 1897, in eastern Pennsylvania, the youngest of seven children. His father, William, left the coal mines to become a traveling evangelist, eventually rising to national prominence. John dropped out of school in the eighth grade, where, according to Foundation literature, he was bright but 'extremely mischievous.' One story had it that he was expelled from school for a week for climbing into a girls' dormitory. He headed for Chicago a few years later and went to work as a salesman at his brother's insurance company. He obviously found his niche--when he was 19, he sold $1 million in policies in one year.

When the United States entered World War I, MacArthur wanted to see action. He joined the U.S. Navy but left when he was not sent overseas. The same thing happened when he joined the Royal Canadian Air Force. Eventually he was caught trying to stow away on a troop ship headed for Europe.

MacArthur tried his hand at journalism, working as a cub reporter for the Chicago Herald and Examiner, and then turned to small business ventures. In 1919, he married Louise Ingalls, with whom he had two children, Roderick and Virginia, and whom he later divorced. MacArthur returned to the insurance industry following his business attempts, working for an annual salary of $10,000.

In 1928, at age 30, he went into business for himself, buying the Marquette Life Insurance Company, which had assets of $15.31. He met and married Catherine Hyland, a secretary at his brother's insurance company. Unlike John, Catherine was detail-oriented, and she quickly became part of his business, handling the books. Their small office was in Chicago's South Loop, in an old building now owned by the Foundation.

In 1935, during the Depression, MacArthur borrowed $2,500 and bought Bankers Life and Casualty Company of Chicago, whose assets consisted of a box of papers. MacArthur first sold policies door-to-door, but then hit on a novel means of selling insurance--by mail. He put ads in newspapers and mailed out thousands of flyers. Within five years, Bankers had assets of over $1 million. The company expanded nationwide, with a sales force of 'ordinary people,' clerks, truck drivers, firemen. In 1942, at age 45, MacArthur became a millionaire.

Real Estate and Land Development: 1950s-70s

Bankers continued to grow through the 1950s, as MacArthur bought up small, struggling insurance companies. In 1958, the MacArthurs moved to Florida, where they and their two poodles lived in an old resort hotel John bought in the Palm Beach area. John, who worked out of the hotel's coffee shop, became interested in real estate and at one point was the largest landowner in the state, owning 100,000 acres of Florida. But business ventures were not the only things he got involved in. In 1965, he ransomed the Delong Ruby from underworld jewel cutters for $25,000. The ruby had been stolen from the American Museum of Natural History in New York City--John recovered it in a telephone booth.

In addition to the land and 12 insurance companies, MacArthur owned shopping centers, development companies, 19 commercial buildings in New York City, pulp and paper companies, radio and television stations, 6,000 apartments in Manhattan, and several publishing enterprises. 'I'm not rich,' he often said. 'I just work for companies that are rich as hell. And I happen to own the companies.' In the 1970s, MacArthur became a billionaire, one of two in the country. Bankers was the largest privately owned insurance company in the country and John MacArthur was the only stockholder.

Establishing a Foundation: 1978

MacArthur did not believe that children should inherit great wealth, so he placed 92 percent of his fortune in charitable trusts. All the stock of Bankers went into a trust to fund a nonprofit charitable entity to be called the John D. and Catherine T. MacArthur Foundation. Catherine received half of the remaining $70-$80 million and their children, Roderick and Virginia, each received a quarter in life estates. When John MacArthur died in 1978, the Foundation received assets worth approximately $700 million.

MacArthur left no instructions to the Foundation's board as to how he wanted the organization run or as to what types of activities it should fund. 'I know of a number of foundations where the donors tried to run them from their graves,' he wrote in a letter. 'I have guaranteed the trustees that when I am gone, they can run the show.'

A Rocky Beginning: 1978-84

The first board of directors included Catherine and J. Roderick MacArthur, both the president and the vice-chairman of Bankers Life and Casualty Company, the news commentator Paul Harvey, whose broadcasts were sponsored by Bankers, and two business associates of John MacArthur's. In addition to determining the direction of the Foundation, they had to deal with the MacArthur businesses. Tax-exempt foundations were not allowed to own more than 20 percent of an active business; the board had five years to sell Bankers and diversify the Foundation's assets.

Both of the board's responsibilities caused conflict, usually pitting Roderick MacArthur against the other board members. A millionaire in his own right, Roderick wanted to spend 80 percent of the available funds (some $30 million a year) to support 'MacArthur Researchers,' giving outstanding individuals multi-year grants with no strings attached. 'We'll fund Michelangelo,' Roderick told Forbes. The other board members liked the idea generally but questioned the magnitude. As that option was being debated, the Foundation made its first awards. Amnesty International received $50,000, as did the California League of Cities to study the effect of Proposition 13, which froze property taxes in that state. The third recipient was the Better Government Association, a 'good government' organization based in Chicago that used the money to begin nationwide studies of government corruption.

In 1980, the foundation's grants totaled $42 million. While $9-$10 million continued to support good government and education 'general grants,' the foundation began focusing on one of its major areas, mental health, which received $8 million that year. It also donated 1.5 miles of oceanfront property in Palm Beach (worth $18.3 million) as a public park and spent $1 million to rescue Harper's magazine.

In June 1981, the foundation announced the first 21 recipients of its 'genius' award. Paid over a period of five years, the prize amounts ranged from $24,000 to $60,000. Later that year, Catherine T. MacArthur died.

The other major conflict had to do with the Foundation's assets. Roderick wanted to sell the Bankers stock quickly and over the next few years accused the other members of conflicts of interest because of their close ties with Bankers and sued several for mismanaging the foundation's assets and paying themselves excessive fees. In 1979, the board added seven new members, people not associated with the insurance empire. John E. Corbally, former president of the University of Illinois, was elected the Foundation's first president. Other new members included Jonas Salk, inventor of the polio vaccine, and William Simon, former Secretary of the Treasury.

In 1984, the board sold Bankers Life and Casualty Co. to ICH Corp., a Louisville-based holding company, for a total of $482 million. Later that year, Roderick dropped a lawsuit seeking to liquidate the foundation and soon afterwards died of cancer.

Program Directions (Mental Health, Parasitic Diseases, World Environment, and More): 1979-88

The foundation concentrated on a limited number of fields. Its objective was to make investments where a small amount of money could have widespread implications and possibly effect long-term change. Mental health was one such field. Funding for research to prevent and treat mental illness had fallen substantially in the 1970s. But lack of money was not the only problem the foundation saw. The little research being done was very fragmented and tended to focus on curing mental illness; there were few studies about mental health.

What was needed, according to the foundation, was support for 'intellectual networking'--interdisciplinary research that involved scientists and other researchers from a variety of fields examining the developmental process across the lifespan. This approach supported, for example, researchers at Yale, Columbia, and London's Institute of Psychiatry working to determine whether adult and childhood depression were the same disease or were developmentally linked. In another example, interdisciplinary research led the shift in gerontology to focus on biological and psychosocial characteristics of successful aging. By the end of 1987, the foundation had committed more than $71 million to the mental health field and was the single largest supporter of research on mental health outside the federal government.

In 1983, the foundation began a five-year, $20 million initiative for the study of parasitic diseases. It established an international consortium of 11 research groups, recruiting specialists inside and outside the field of parasitic biology--geneticists, immunologists, and cellular and molecular biologists. Grants also supported graduate students working at the research centers, a summer course at the Marine Biology Lab at Woods Hole, Massachusetts, and related programs of the World Health Organization.

In 1982, the foundation established the World Resources Institute to develop ecologically sound public policies. The Institute was seen as a bridge between scientists and key policy makers and conducted studies of world energy needs, global warming, and acid rain; generated an international plan to stop the destruction of tropical forests; and examined how the World Bank, global corporations, and other institutions could improve resource management in developing nations.

Gradually, the foundation focused its environmental efforts on endangered tropical ecosystems and how to reconcile conservation and development in tropical regions. Grants ranged from funds to purchase portions of tropical forests in Costa Rica, Florida, and Hawaii, to strengthening local and regional conservation organizations in 20 developing countries, to educational efforts in support of conservation.

In 1984, the foundation initiated its Program on Peace and International Cooperation with the objective of increasing the understanding of the forces that lead to international conflict. To accomplish this, it worked to bring new talent into the field and to involve disciplines other than peace and security. The foundation funded research and graduate fellowships for scholars and analysts; and established fellowships for research and writing that related peace, security, and international cooperation to diverse issues, including the introduction of computer technology in the Soviet Union. Grants also went to National Public Radio for coverage of peace and security issues and for teleconferences between journalists from different countries.

Chicago received support from the foundation to address neighborhood problems and to build the capacity of local groups to cope with urban problems. A 1987 grant of $11.3 million established the Fund for Community Development for economic and housing development projects. Between 1979 and 1988, the foundation awarded an additional $48 million to cultural organizations in the city. Palm Beach also received significant resources from the foundation in addition to the John D. MacArthur Beach State Park created in 1980.

Initially, the foundation gave grants to universities and colleges to establish endowed professional chairs. By the end of its first decade, it had shifted its focus to children ages four through 14 and to involving families in local education. Grants supported adult literacy efforts, Reading is Fundamental, the application of successful models and curricula, and a study of the National Assessment of Education Progress. The foundation was also very involved in the decentralization and reform of Chicago's schools.

New Directions: 1989-98

In 1989, John Corbally stepped down as president of the foundation. Adele Simmons, president of Hampshire College in Massachusetts and a native Chicagoan, assumed that post in 1990. The foundation had $3.4 billion in assets, with an annual budget of $140 million.

Simmons began her tenure by committing $40 million over the next ten years to parent and community groups in Chicago involved in reform of the local schools and pushing for greater collaboration among foundations. In 1991, MacArthur joined the Pew Charitable Trusts and the Rockefeller Foundation in establishing the Energy Foundation to promote energy efficiency and alternative energy sources such as wind and solar power.

'It's hard to remember or realize that the MacArthur Foundation is a very young foundation,' Simmons told the Chronicle of Philanthropy in 1998. 'When I came, all the programs had really just been put in place. So it was first an opportunity to nurture and encourage those programs and help build linkages among them, and ultimately to restructure the existing programs.'

The restructuring, which occurred in 1996-97, integrated the foundation's six program areas into two large, interdisciplinary programs. Domestically, the Program on Human and Community Development funded organizations, researchers, and scientists working in the areas of economics opportunity, community capacity building, child and youth development, and mental health. The Program on Global Security and Sustainability provided grants internationally to address three global issues: arms reduction and security, ecosystem conservation, and population. Both programs stressed linkage and collaboration among researchers, practitioners, and policy analysts. In addition, the foundation's General Program supported work in telecommunications policy and in media, along with areas of special interest. Meanwhile, the MacArthur Fellows Program continued.

The MacArthur Fellows program was derided for over a decade by many on the left for 'discovering the already discovered,' according to a New York Times article. Complaints focused on the demographics of the winners, who were primarily white, male, and well established. Things changed in 1993 when a new director was named. Within two years, women comprised 60 percent of the awardees, and political conservatives complained that many awardees were selected for their political correctness.

1999 to the Present

In September 1999, Jonathan Fanton succeeded Adele Simmons as president of the foundation. Fanton was president of the New School for Social Research in New York City. The foundation's first new initiative under its new leader was announced in April 2000, a collaboration with three other foundations to spend $100 million to support improvement of universities and academic associations in several African countries.

Simmons summarized the foundation's efforts in her final president's letter: 'A long-term approach, investments in efforts to understand problems, coordinated application of a variety of approaches, collaboration with other funders, and tolerance for occasional failure--these make for effective grantmaking in the face of complexity.'

Principal Competitors: The Ford Foundation; The Carnegie Corporation of New York; The Rockefeller Foundation; The Lilly Endowment; The Bill and Melinda Gates Foundation; The W.K. Kellogg Foundation; The J. Paul Getty Trust; The Robert Wood Johnson Foundation; The Pew Charitable Trusts; The Robert W. Woodruff Foundation; The Anneberg Foundation; The David and Lucile Packard Foundation.

Chronology

• Key Dates:

• 1935: John D. MacArthur buys Bankers Life and Casualty for $2,500.
• 1950s:Bankers Life and Casualty ranks as largest private insurance company in United States.
• 1978: John D. MacArthur dies, leaving $700 million in stock to fund the John D. and Catherine T. MacArthur Foundation.
• 1988: Foundation's assets grow to $2.5 billion
• 1991: Creation of MacArthur Fellows Program, the 'genius' awards; Catherine T. MacArthur dies.
• 1998: With assets of $4 billion, Foundation is distributing $170 million in grants each year.