Court battle over Newman’s Own Foundation raises important questions for philanthropy

Sep 13, 2022

The spotlight on the Newman’s Own Foundation invites scrutiny of its overall business model, one based on virtue-signaling intended to influence consumer behavior.

There is no obvious comparison between the late actor Paul Newman and Henry Ford II or John T. MacArthur. For one thing, neither of the latter two was anywhere near as handsome as Newman. But a lawsuit filed in Connecticut state court by two of Newman’s daughters against the Newman’s Own Foundation he founded reveals a disturbing commonality: a foundation that, they say, has strayed from the intent of its founder. 

The matter of “donor intent” has become important in American philanthropy. Foundations such as Ford and MacArthur, founded by defenders and promoters of free markets, have veered sharply left. John MacArthur, an insurance executive, was a major Republican Party donor and political conservative who once characterized environmentalists as “little old ladies and bearded jerks” who “just throw rocks in your path.”

Henry Ford II went so far as quit the Ford Foundation board in 1977, when he wrote that “[p]erhaps it is time for the trustees and staff to examine the question of our obligations to our economic system and to consider how the foundation … might act most wisely to strengthen and improve its progenitor.”

Now, say Susan and Elinor Newman, a version of the same scenario is playing out at Newman’s foundation. The daughters assert that the foundation, which focuses on organizations providing services to children, has de-emphasized charities they say their father would have supported, including those involved in the arts and environmental issues. 

The question here is not whether one set of priorities is to be preferred in the abstract over others—but, rather, what does a foundation owe to its founder?

In this context, there are a number of reasons to view Newman’s Own as a cautionary tale.

Unlike Ford or MacArthur—which boast large endowments—Newman’s Own continues to depend directly on Paul Newman, whose likeness graces Newman’s Own sauces and salad dressings on grocery-store shelves. The foundation’s substantial income—its most-recent publicly available tax form, covering 2020, boasts more than $233 million in assets—relies on the profits of its grocery sales, which, it says, are directed in full to the foundation.

In their lawsuit, the two Newman daughters assert that they are receiving hundreds of thousands less to disburse on charitable giving than their father had intended—and that causes he would have supported are being shortchanged as a result. They seek $1.6 million to distribute to charities of their choice—aligned, they say, with their father’s intent.

In something out of Dickens or Eliot, Newman’s daughters charge that their share of foundation income was reduced in a will amended when Mr. Newman, nearing death, was no longer mentally competent. So it is that, in the daughters’ view,  causes he might have supported are being neglected by a well-paid staff.

The spotlight on the Newman’s Own Foundation invites scrutiny of its overall business model, one based—similarly to fair trade coffee and chocolate—on virtue-signaling intended to influence consumer behavior. The foundation enjoys bountiful revenue provided by consumers who are, in effect, entrusting whatever price they pay above and beyond a less-expensive, generic food brand to their image of a celebrity, one who is no longer alive to be involved in the distribution of funds. Consumers, in other words, indirectly support causes that are not spelled out on grocery labels. The foundation reports grants totaling almost $11.5 million to hundreds of nonprofits in 2020.

Shoppers might be surprised to know that the foundation, according to its own tax forms, pays over $710,000 in employee compensation, including a $234,000+ salary to its managing director. A Washington law firm and public-relations group are also paid handsomely.

The point here is not to say that any of this is legally suspect. The Connecticut courts will decide whether the Newman daughters’ complaints have any merit. It is, rather, to question whether the Newman’s Own philanthropic model itself is one that should be emulated—and whether, per Ford and MacArthur, self-perpetuating foundations should continue long after the death of a founder. Mr. Newman was a great actor and an admirable person. Perhaps when he was alive it made sense for his fans to direct funds to his foundation in the belief that he would demonstrate wisdom in their distribution. He was, albeit in an unusual way, accountable to the public.

But his successors in the management of the foundation are not similarly public figures. Just as bureaucrats came to lead Ford and MacArthur, today only Newman’s likeness, not his judgment, remains involved in Newman’s Own. And Newman’s daughters believe what would have been his own preferences are being shortchanged. Far better for shoppers to shop frugally—and make their own choices about which charities they want to support. 

The man who played Butch Cassidy has ridden off into the sunset; perhaps it’s time for his foundation to do the same.

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