Philanthropy Faces More Watchdog Pressure

Philanthropy has enjoyed a powerful asset: the benefit of the doubt. For decades, charitable giving has often been a proxy for civic virtue. This belief continues to be stress-tested, as outcomes drift further and further from narratives.

Here’s a simple comparison. Minimum wage laws have changed repeatedly since 1981, seven (7) times at a federal level and fourteen (14) times in Hawaiʻi. But in that same timespan, rules governing private foundation distributions, via the IRS, have been amended…zero. Zero times. 

The minimum distribution rule (MDR), aka the 5% payout rule, unchanged for fifty years, reflects a not-so-open-secret of what the system was designed to protect, not what today’s problems require. It’s a visible mismatch. Assets can compound indefinitely, and a foundation can remain comfortably compliant—a very low bar—by distributing the minimum (especially when qualifying expenses are included). Meanwhile, across the U.S., endowments sit on roughly $1.5 trillion (read: $1,500,000,000,000) in dry powder that is, by design, not fully mobilized in the communities that need it most.

This matters in Hawaiʻi because it’s a clean example of what we’ve chosen to quietly freeze rather than modernize, and who benefits from that quiet. We live in an economy where labor is asked to adjust to reality, but capital is not.

Which brings me to a recent Civil Beat story. A reporter called the owner of a derelict Waikīkī property, once home to about ten businesses, now vacant for eight years. The article reveals: the property owner is also one of Hawaiʻi’s leading local philanthropists, tied to the No. 2 most active private family foundations. By many accounts, they’ve done real good.

The foundation reports roughly $182M in fair market value of assets on its IRS 990 form (2024) and disburses around the IRS-required minimum of 5% annually (including qualifying expenses), about $7M annually. Separately, the family controls a well-known private business generating roughly $250M–$300M in revenue. When reached for comment about the Waikīkī property, the owner reportedly agreed: it’s an “eyesore”. It’s also, he said, too expensive to redevelop. Eek. 

This is a governance story. Our biggest philanthropic lever should come from local foundations. Many stop at the 5% minimum because the system tells them that’s what “responsible” looks like; it’s the consensus approach. And, it's compliance theater: meet the legal requirement, issue the press release, move on. It’s also no-longer best-practice. Spend down the endowments to solve problems of today. 

In 2026, expect the traditional posture to be challenged more openly and not by insiders (boards, traditional nonprofit consultants, etc.), but by journalists and watchdogs willing to connect the dots of charitable branding to real-world outcomes. Inputs to outputs. Philanthropy will not self-correct here. 

My prediction: that Waikīkī property will be transferred into the foundation and converted into a park or community space in the next twelve months, if not sold. More importantly, there will be more pointed, surgical reporting like this: call, verify, print. The facts. These stories will force public accountability and erode the idea that philanthropy, as it was designed 50 years ago, can no longer whitewash neglect of the community.

Our problems are too big to go small.

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