Life in medieval and early modern Europe was, in philosopher Thomas Hobbes’s stark words, often “poor, nasty, brutish and short.” However, the moment of passing and time after were seldom “solitary.” Instead, death served as an important occasion for collective reflection and renewal.
By comparison, death has become a taboo subject in modern Western society. Hidden from public view and discussed openly only in the rarest of instances, death is cloaked in sanitized language so as to spare others discomfort, pain, or deeper knowledge of individual circumstances. Philanthropists, particularly those involved in global health initiatives, abstract death by speaking of mortality rates; “lives saved or improved the most per dollar,” a popular performance and impact metric among effective altruists, too, reduces human experience to a binary.
The third sector often fails to learn from the loss of its members.
Death is humanity’s great equalizer. People are born, they live, and they die, no matter the efforts of some Silicon Valley entrepreneurs to halt or reverse (their) ageing and prolong (their) life. Organizations, too, progress through similar developmental stages. They are founded, they grow, and eventually they reach maturity. Yet what happens afterward – or in cases of premature failure – is frequently misunderstood or ignored, especially when nonprofit organizations are concerned.
After a period of sudden or gradual decline, nonprofits cease to exist. How and why? Questions about the health of and survivability within the sector, beyond the overrehearsed topic of financial fragility, are notoriously difficult to answer. Death, once a familiar part of daily life in premodern societies, now lingers out of sight or is distilled into cold, distant numbers that reveal preciously little about the lives behind them.
Following the same pattern of emotional distancing, the third sector often fails to learn from the loss of its members. Much of this blindness stems from three widely accepted forms of organizational death – silent, heroic and defiant – that constrain much what could be learned.
Silent death
The strains caused by the COVID-19 pandemic, coupled with federal funding cuts and freezes during the second Trump administration, has placed nonprofit vulnerability and mortality at the center of current discussions in the United States, fuelling the sector’s unhealthy obsession with data tools, modelling and forecasts.
The surge in interest also reflects a new reality: even large, established nonprofits are no longer immune to collapse. Earlier assumptions about the liabilities of newness and smallness, and the protective advantages conferred by organizational age, size, reputation, and diversified revenue, have been replaced by an understanding that nothing and no one is too big to fail. But while this shift underscores the sector’s growing precariousness, it also exposes a deeper problem: methods for tracking, let alone explaining, organizational decline are found wanting.
As Chuck McLean showed in a notable 2014 Nonprofit Quarterly article, using IRS filings to track nonprofit birth and death rates is, at best, an imprecise science: “Readers should use these numbers at their own risk, and only to provide the most general and fuzzy estimates of the parameters of the sector.”
More than a decade later, government registries remain as prone to gaps and errors as they are to accuracy. Even when supplemented with self-reported data, real-time information from news outlets, websites, and social media, or insights from qualitative research, nonprofit data platforms and charity evaluators heavily skew toward active organizations. Consequently, defunct nonprofits vanish from view almost entirely.
This bias toward the present is understandable. Donors want to fund the living, not the dead; and tax officials are primarily concerned with compliance, not reflection. This leaves, however, a critical gap in our knowledge. Silent deaths prevent policymakers, practitioners, and scholars from understanding the full life cycle of organizations as well as the long-term structural dynamics shaping the sector.
Heroic death
The 21st century has been plagued by wars, market crashes, pandemics, ecological disasters, authoritarianism, and social upheaval fueled by widening economic inequality. This familiar barrage of systemic shocks, which some have labelled a “polycrisis,” has revived debates about the timing of philanthropic giving. Chief among them is the question of whether funders should adopt a limited-life model and accelerate the disbursements of all their assets within a specific timeframe.
The rationale behind this tried-and-tested model of philanthropy is that spending money now, rather than later, is more impactful given the scale and urgency of the world’s challenges. Implicit, though rarely stated as outright as Andrew Carnegie once did, is the idea that tackling the issues of today is also the more morally admirable choice, even if it may allow elitist power concentrations to go further unexamined.
‘Giving while living’ icons and their philanthropic vehicles, such as the Rosenwald Fund or Atlantic Philanthropies, are often invoked as successful examples of limited-life philanthropy. The Gates Foundation’s recent decision to accelerate its spenddown window and close operations by 2045 casts itself deliberately in this lineage of noblesse sacrifice, which successful funders across the border, like the Toronto-based Ivey Foundation, have also embraced.
The problem with sunsetting, spenddown, limited-life or temporal considerations in giving more generally does not boil down to impact: only future generations will be able to answer with certainty whether the quick or gradual (re)distribution of wealth improved their lives.
Instead, the language of voluntary martyrdom and heroic self-sacrifice will allow some organizations and their founders to skirt probing questions about why they really went out of business, all while profiting from a more favorable public image.
Specialist philanthropy media could create a dedicated ‘obituary’ section to contextualize nonprofit closures.
In retail, for instance, liquidation sales can happen for reasons other than financial distress: seasonal stock may need clearing, a market may be exited strategically, or a family-run shop may close because its owners are retiring. However, in the vast majority of cases, liquidation sales occur not for celebratory or positive reasons, but because a business has lost relevance in its industry, operated on an unsustainable business model, or botched a leadership transition.
Going out of business is still going out of business, even if customers or grantees briefly benefit from a temporary financial windfall. The aforementioned winner’s circle of limited-life philanthropies should not conceal an important truth about the wider field: not all sunsets are voluntary nor are they automatically driven by a desire for immediate impact.
Defiant death
While silent and heroic deaths can obscure the true causes of decline, the pursuit of institutional immortality represents the opposite extreme in the sector’s complex relationship with life’s final frontier. Three of the four East and West Coast legacy foundations I have examined closely over the past decade operate as perpetual entities, meaning they intend to exist and give grants indefinitely. So long as their investment returns exceed minimum payout requirements, that is, and the basic regulatory framework of the 1969 Tax Reform Act stays intact.
For scholars concerned with the long-term evolution of organizations, the theoretical possibility to exist in perpetuity offers an intriguing analytical vantage point for understanding cycles of decline and renewal, and decisions concerning governance, donor-intent preservation, asset allocation, and programmatic directions.
However, immortality can also come at a significant cost to the sector in two important ways. The very mechanism that allows foundations to keep their principal and grantmaking intact for generations to come – the artificial restriction of the annual flow of philanthropic capital into society – can limit the resources available to address emerging and urgent needs.
Some perpetual organizations, those that boast long lifespans, massive endowments, and relatively fixed areas of programmatic focus, can also pose significant systemic risks. Their size and permanence can create quasi-monopolies and breed heavily dependent, otherwise unsustainable, nonprofit ecosystems. In so doing, these organizations may inadvertently limit innovation and competition, running counter to the principles of famous Austrian economist Joseph Schumpeter’s concept of creative destruction.
Conclusion
In the past, communities faced death with remarkable openness and a shared sense of responsibility. This was shaped as much by the harsh realities of high mortality as by the pervasiveness of religion in daily life. Today, death takes place behind sterile hospital curtains and is softened with euphemisms. Processes of secrecy and abstraction that the nonprofit sector should avoid when confronting the loss of its members.
The sector’s uneasy relationship with death becomes evident when examining three forms of organizational death: silent, heroic, and defiant. Yet recognizing and acknowledging these forms are only the first steps toward addressing the sector’s blind spots. Fortunately, actionable solutions for civil society to adopt a healthier, more constructive approach to death can be easily crafted by relying on the expertise of other disciplines or optimizing what already exists. The creation of a centralized public database that tracks all defunct nonprofits and records both financial and non-financial reasons for their disappearance could help break the deafening silence surrounding nonprofit death outside academic circles. Nonprofits could also be legally required to provide a detailed narrative explanation (of at least 500 words) for their demise on existing dissolution forms, separate from any discussion of asset disposition or liquidation. This explanation could then be made publicly accessible. Alternatively, the records of defunct tax-exempt organizations could be deposited with rigorously vetted academic institutions for future research and analysis.
As part of their dissolution and sunsetting plans, nonprofits and foundations could also be compelled to allocate a small portion of their remaining assets to the research and writing of professional organizational histories, which could be submitted, alongside or in lieu of their records, to an accredited knowledge repository or philanthropic research center, or published with an academic press.
Specialist philanthropy media could create a dedicated ‘obituary’ section, online or in print, to announce and contextualize nonprofit closures for discerning audiences, potentially including interviews with departing staff to provide insight into the organization’s final chapter. Meanwhile, nonprofit sector consultants could draw on the literature on corporate longevity and organizational ecology to design resilience and risk management initiatives that may help clients avert premature collapse.
Because the true cause of death matters – and in the nonprofit sector, transparency and a commitment to learning demand that it always be made public and thoroughly investigated.
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Dr Tim Mueller is the founder and Managing Director of Chester & Fourth, a Canadian advisory firm that partners with mission-driven organizations and leaders around the world.
