The Fundraising Executive

PERPETUAL NAMING RIGHTS: Three Cautionary Tales and One Essential Piece of Advice

By Eddie Thompson | October 17, 2017 | Charitable Estate Planning

Two separate $100 million gifts to New York City’s Lincoln Center illustrate the naming rights dilemma that many nonprofit leaders face. The first mega-gift came in 2008 when billionaire David Koch (pronounced “coke”) donated $100 million, the largest single donation in the long history of the Lincoln Center’s generous contributions. Koch’s gift provided for a much-needed renovation of the theater that is home to the New York City Opera and the New York City Ballet. The gift also created an operating endowment. The facility named the “David Koch Theater.”

It’s not uncommon for the rich and famous to use philanthropy as a means of creating legacies or (more cynically) as self-promotions on a grand stage. That’s why the Lincoln Center contract with Koch is unconventional if not extraordinary. The naming rights for his $100 million will expire in 50 years. Consequently, institutional fundraisers will be able to again grant Lincoln Center Theater naming rights to another extremely generous donor. The contract also stipulates that if Koch’s heirs want the Koch name to remain on the theater, they have first right of refusal to match a future gift.

Seven years later in 2015, movie and music producer, David Geffen, pledged a second $100-million to fund a badly needed modernization of the symphony hall, the Lincoln Center’s other main auditorium. The development staff must have been ecstatic—another $100 million! Geffen’s pledge, however, had one condition— that Avery Fisher Hall would be renamed the “David Geffen Hall” and would remain so in perpetuity.

In 1973 Avery Fisher, an innovator in the field of audio-equipment technology, had given $10.5 million for the original construction of the hall (equivalent to $56 million in today’s money). Fisher never requested nor expected anything to be named after him. He was, however, persuaded by a team of most grateful fundraisers that the building should forever be known as Avery Fisher Hall. Thus, perpetual naming rights became part of a formal agreement.

Geffen’s pledge, however, had one condition— that Avery Fisher Hall would be renamed the “David Geffen Hall” and would remain so in perpetuity.

Though the modest Fisher had seemed ambivalent about naming rights, three decades later his heirs were anything but. In 2002 they began firing warning shots across the bow of the Lincoln Center Board, threatening aggressive legal action if the Avery-Fisher name were ever removed. And so, with the naming-right stipulation of Geffen’s donation and “lawyered-up” Fisher heirs, the Lincoln-Center Board was forced to negotiate. Eventually, the heated passion among the Fisher heirs to protect the legacy of their beloved ancestor seemed to cool with a $15 million settlement. The home of the New York Philharmonic Orchestra was forever named “David Geffen Hall”—once again, a perpetual naming right granted by contract.

I guess I should be a little more “charitable” about Mr. Geffen’s contribution—after all $100 million for the modernization is quite a gift! Actually, the net contribution was only $85 million after paying off the Fisher heirs. And Mr. Geffen did make the lead gift even though is was equal to only 17 percent of the proposed renovation costs, which is a whopping $500 million. Since naming rights had been assigned to David Geffen in perpetuity, the assumption was that his lead gift would inspire the additional $400 million to come in. Like a consumer who just emerged from a high-pressure sales presentation as the new owner of a time-share vacation, I can’t help but think that some of the Lincoln Center Board of Directors were asking themselves, “What did we just do?

The proposed name change set off a firestorm of anger among local residents, faculty, current students, and particularly among alumni…

For all I know Mr. Geffen is as kind, generous, and big hearted as they come. However, the insistence on perpetual naming rights certainly leaves a perception of profound arrogance and self-aggrandizement.

Which leads me to the third cautionary tale—an even more sordid story.

Paul-Smith College Fundraising Fiasco
Apollas (Paul) Smith arrived in the Adirondack Mountains in 1858, purchased 50,000 acres, and built a resort hotel. The hotel became the favorite of wilderness-enthusiasts and U.S. Presidents, including Calvin Coolidge.

Paul Smith died in 1912 and left his estate to his son, Phelps. Twenty-five years later in 1937, Phelps Smith also died with no surviving wife or children. The bachelor left the bulk of his estate (the 50,000 acres and $2.5 million) for the purpose of creating an institution of higher education for the people of the remote region of upstate New York. The will and testamentary gift contained an additional stipulation, that the institution would forever be named for his father—the “Paul Smith College of Arts and Sciences.”

Fifty-three years later in 1990, Sandy and Joan Weill bought a vacation home near the college. Sandy Weill was the Chairman of the Board for Citicorp and recognized in Time Magazine as one of the “25 People to Blame for the Financial Crisis” of 2009. Joan Weill became one of the most influential members of the Paul Smith College Board of Trustees, serving in that role for 19 years. During those years she gave approximately $10 million to the college for which the student union and library were already permanently named for her. Then in 2014 Joan Weill pledged another $20 million to the school with the condition that the name be changed to “Joan Weill – Paul Smith College.”

“The proposed name change set off a firestorm of anger among local residents, faculty, current students, and particularly among alumni who call themselves ‘Smithies.’ A petition garnered over 3,330 signatures and fiery language in the comment section. The local newspaper, the Adirondacks Daily Enterprise, set up a special page for letters to the editor.” 1

The controversy eventually ended up in New York State Supreme Court in Franklin County. Justice John T. Ellis said in his October 7, 2015 ruling that the college had not made a compelling case that it would not be able to fulfill its mission without changing its name.2 The school’s Board of Trustees decided not to appeal. After the long and nasty court battle, Joan Weill withdrew her $20-million pledge and has (thus far) disassociated herself from the Paul Smith College Board of Trustees and from her involvement with the college.

I’m familiar with another situation in which a college dormitory is in need of renovation or replacement. The college decided that it would be less expensive to replace it. However, the dormitory name has been granted in perpetuity for the largest donor to the project approximately 50 years ago—a name the heirs refused to surrender. The college moved forward with a new building giving the new dorm a new name and leaving the family of the previous donor very unhappy.

Perhaps the only fundraising option for the college is to demolish the building and replace it with a new facility at a much higher cost, but with the ability to negotiate naming rights. With this example and the three above in mind, here are a few takeaways on perpetual naming rights.

1. Among the thousands of donors I’ve assisted in creating current or testamentary gifts, I have rarely worked with a donor or donors who insisted on perpetual naming rights.

2. Some donors are more reluctant than others to have facilities named for them. In most cases, naming rights are offered by the nonprofit executive to inspire donors to make the lead gift on a capital campaign.

3. However, in every naming-rights agreement I can remember, nonprofit stipulated or implied that the naming rights would be perpetual—that is, the facility would forever be named for that particular donor or donors.

4. Our family made a gift to a capital campaign for a university in the name of my parents. At the suggestion of the major gift officer, we were granted perpetual naming rights to a conference room. Like most original donors, we would gladly surrender the name on conference room if it would help secure another gift for the hospital. We think our children would feel the same way. But my parent would be absolutely horrified to think that a future generation of Thompsons would hinder fundraising efforts at the hospital by trying to protect their name on a building.

Is it time to consider suggesting a term limit to naming opportunities? It’s unusual for fundraisers with a short-term perspective to think about their successors 20-50 years from now. The one essential piece of advice is that “you have not because you ask not.” Maybe institutions are stuck with perpetual naming rights agreements because fundraisers never ask for terminal agreements. Is it time for fundraisers and donors to follow the example and donor intent of David Koch and negotiate naming rights that can be terminated at a future date for new funding initiatives within a new generation of potential donors.

Eddie Thompson, Ed.D.
Founder and CEO, Thompson & Associates
Copyright 2017, R. Edward Thompson