Giving Till It Hurts

To the outsider, the world of private foundations is one of those buttoned-down places where happy people stare out of the pages of dull annual reports. Yet whenever powerful people gather to give away money, there is bound to be tension. Occasionally that tension cracks the veneer of charity, leaving an ugly mark. That is what has happened at the Manhattan-based Charles Hayden Foundation, an organization devoted to bettering young lives in New York and Boston. Founded in 1937 by its namesake, a prominent Wall Street figure, the Charles Hayden Foundation in its last annual report boasted assets of more than $292 million, and said it gave more than $11 million last year to such recipients as the City Kids Foundation, Barnard College and the New 42nd Street.

But while the foundation’s donations have continued smoothly, the organization has been in turmoil over the last two years. Three of its five trustees have either resigned or not been reappointed, including, this June, its president, Gilda Wray. The foundation’s current acting president, William Wachenfeld, who has been with the foundation since the late 1950′s, has been accused of creating an unassailable power base for himself within the organization.

No one is accusing Mr. Wachenfeld, an attorney and retired executive with Prudential Insurance, of any legal wrongdoing, and those who criticize him inevitably praise his foundation work.

“Bill Wachenfeld for so many years, as a trustee and a head of the staff, did an excellent job. It’s a shame to have it all end this way,” said Malcolm MacKay, a former Hayden trustee who was not reappointed this July and who heads the not-for-profit division of Russell Reynolds Associates, an executive search firm. “But he does bear the responsibility for the way it’s ended. I think he’s tarnished himself badly.”

“I would much prefer not to have become involved in these issues, nor do I relish having it all surface again,” said John Esty, another former trustee, who left in 1998. “But I believe it is the obligation of a trustee of not-for-profit organizations to be true to the public trust by speaking out against practices that seem contrary to that trust.”

For his part, Mr. Wachenfeld, 73, did not seem fazed by the accusations. “If that’s what some people say, then that’s what some people say,” he told The Transom.

Critics of Mr. Wachenfeld explain that much of the problem lies in the structure of the Hayden Foundation, which is termed a membership corporation. The foundation has members, some of whom, such as Mr. Wachenfeld, are chosen for life. The members set the bylaws and appoint the board of trustees. The trustees elect the foundation’s officers–such as president, treasurer and secretary–and give out the grants.

But, as Ms. Wray pointed out, “The fact that [the members] elect trustees on an annual basis means that the trustees essentially serve at the pleasure of the members.” According to Mr. Wachenfeld, he became a trustee of the Hayden Foundation in the late 1950′s (his father was a foundation member and had sat on the New Jersey Supreme Court). About 15 years later, he said, he became a member as well, and in the mid-1980′s, he became president and chief executive officer.

In 1997, tension began rising at the Hayden Foundation. There were only two members, Mr. Wachenfeld and Ken Merin, an attorney and former insurance commissioner under New Jersey Governor Tom Kean, and five trustees, two of whom were Mr. Wachenfeld and Mr. Merin. Critics of Mr. Wachenfeld often accuse Mr. Merin of being his yes man. Mr. Merin replied that he has disagreed with Mr. Wachenfeld on a number of issues, including the appointment of trustees, and added: “It’s hard for me to accept the fact that I would do anything that Bill wants me to do.”

A few years before 1997, there had been three members, but as they retired, Mr. Wachenfeld did not rush to appoint new ones. “I haven’t gotten around to it, I guess,” he told The Transom. “There was no need for it to have occurred.” The seeds of controversy were sown at the foundation’s annual board meeting in July 1997, when Mr. Wachenfeld proposed that Ms. Wray, who had been hired in the 80′s as a staff assistant, become the foundation’s new president. Ms. Wray was voted in unanimously, but some at the meeting were unsettled by Mr. Wachenfeld’s assertion that he himself would take a brand-new title, chairman and chief executive officer. Mr. Wachenfeld was approaching his 72nd birthday, the mandatory retirement age for trustees, and the trustees had expected him to begin relinquishing power. But Mr. Wachenfeld explained that the first year would be a transitional year for Ms. Wray.

Sources familiar with the situation said Ms. Wray didn’t question Mr. Wachenfeld’s decision until he told her not to send a press release announcing her appointment to the foundation’s grantees. Mr. Wachenfeld allegedly told Ms. Wray: “If you send it to our grantees, they will write to you instead of to me.”

Mr. Wachenfeld said he had no recollection of this, and he told The Transom he had created the chairman position because, “I wanted to have some position honoring my 40 years of experience in which I could hang around and tell them historical reasons for doing things.”

As the five trustees met in subsequent months, Mr. Esty and Mr. MacKay began to question how this new relationship between chairman and president would work since, according to the bylaws, the foundation’s president, Ms. Wray, was actually also its chief executive officer. By 1998, it became clear Mr. Wachenfeld was looking to change the bylaws so that he would not have to retire as a trustee. Sources allege he often overruled Ms. Wray and brusquely belittled her ideas.

Then, in February 1998, Mr. Wachenfeld asked the trustees whether he had their support for extending his stay. Ms. Wray recused herself. Mr. Merin said Yes, Mr. Esty and Mr. MacKay said No. Another trustee, Kristen McCormack, allegedly said she wasn’t sure how she would vote. (Ms. McCormack did not return a call for comment.)

The meeting left Mr. Wachenfeld in “high dudgeon,” according to one source who was present. According to sources familiar with the situation, Mr. Esty learned that Mr. Wachenfeld planned not to reinstate him as a trustee at the July meeting. “It was increasingly difficult to get a discussion of governance issues on the board meeting agenda,” said Mr. Esty. “We had to push for it at the February meeting, and I was later told that it was my temerity in raising the issue that led to the determination to discontinue my trusteeship.”

At the June meeting, Mr. Esty beat Mr. Wachenfeld to the punch by resigning. He read a statement that both praised and criticized Mr. Wachenfeld.

“The assets and operations of the Hayden Foundation are public funds, subject to a charitable trust,” Mr. Esty told The Transom. “My fiduciary duty, and I believe the fiduciary duty of the other members of the Foundation’s Board, is to resist efforts to assume and exercise personal control over assets and operations.”

Mr. Wachenfeld claims his break with Mr. Esty was an act of self-defense. Mr. Esty, according to Mr. Wachenfeld, “undertook a campaign to become chairman of the organization. He tried to replace me. The membership had to take appropriate action.” The membership being, of course, Mr. Wachenfeld and Mr. Merin.

Replied Mr. Esty: “I have never wanted to be chairman of the Hayden Foundation.”

At the July 1998 meeting, Mr. Wachenfeld announced that the bylaws had been changed. He would remain as chairman, and Mr. Merin would be vice chairman. Ms. Wray would be given the title of chief executive officer to add to her title of president. Mr. Merin claimed the board of trustees had approved of the members’ decision to eliminate any retirement age for trustees. “Bill was insistent on saying that he would not stay beyond 72 years unless he had majority support of the board,” said Mr. Merin. Ms. Wray said she did not recall such a vote.

Peace did not prevail. “Bill repeatedly attacked me at board meetings,” said Ms. Wray. “He would say, ‘Gilda wants to change everything here.’” Mr. Wachenfeld apparently was incensed by a grant Ms. Wray had designed for the Boys & Girls Clubs. When the board approved it, “Bill was furious,” said Ms. Wray.

Mr. Wachenfeld replied: “Mrs. Wray got 99 and nine-tenths of her recommendations approved. Since she resigned, she’s gotten 100 percent of her works approved.”

This June, Ms. Wray said she was visited by Mr. Merin, who said that the members had made a decision. “He said, ‘Your position is no longer to be that of a voting trustee,’” recalled Ms. Wray. “I said, ‘Then, you know, I will have to leave.’ He said, ‘The board wants to take back control.’ I said, ‘You mean Bill wants to take back control.’ He kind of nodded.”

Mr. Merin does not deny this exchange nor his reaction. “Bill and I both wanted to bring back control to the board,” he said. “I did not feel as comfortable with the way Gilda was running the organization. I felt there was less communication between her as president and me as trustee than when Bill was president and I was trustee.”

Mr. Merin also maintained that Ms. Wray was going to be named an “ex-officio trustee” and that she would have been allowed to remain president of the board of trustees. “To my way of thinking, she would have had a vote,” said Mr. Merin.

“Nobody told me that,” replied Ms. Wray. She said that Mr. Wachenfeld called her after the meeting and asked, “‘If you remained a voting trustee, would you consider staying?’ I said Yes. Then he said he needed to talk to Ken. He called me the next day and said: ‘We were unable to reach a compromise and therefore will have to accept your resignation.’”

In her resignation letter to Mr. Wachenfeld, Ms. Wray wrote: “It is abundantly clear to me now that beginning in 1997 you never really intended to change the leadership of the foundation, only to shuffle around titles and the workload.”

Of Ms. Wray’s decision to leave, Mr. Wachenfeld said he was surprised by it and added, “You’ll have to ask Mrs. Wray.”

Meanwhile, Mr. Wachenfeld denied sources’ contentions that he told Mr. MacKay that the reason he was not being reappointed as a trustee was that Mr. MacKay was a Scotsman and that Scotsmen bear grudges. Mr. Wachenfeld reportedly surmised that Mr. MacKay had borne a grudge against him ever since Mr. Esty’s departure. Mr. MacKay declined comment.

When Ms. Wray left, Mr. Wachenfeld became acting president of the foundation. Mr. Merin became chairman. For the six months that he will hold his position, Mr. Wachenfeld will collect a pro-rated version of Ms. Wray’s $175,000 salary (however, according to Mr. Merin, a chunk of that salary goes toward leasing an apartment in Battery Park City near the foundation’s Liberty Street offices).

Several times during his interview with The Transom, Mr. Merin stressed that this brouhaha “is a dispute among people about Bill’s role. It’s not about the foundation and the good work the foundation has done.” One person who has worked with Mr. Wachenfeld opined that he has held on so tightly to the reins at the foundation because, “Bill’s entire life and ego is tied up with being president of the Hayden Foundation.”

Meanwhile, Mr. Wachenfeld says that come Dec. 31, he will resign. “I walk out the door. I will end all title to the organization.” But, he added, “I will be a member until the day I die, and I will continue to select trustees to operate the foundation.” The foundation has taken on two new trustees, one of whom, William McGuire, is a partner at a law firm where Mr. Wachenfeld’s brother is also a partner.

Currently, the money is on Mr. Merin to end up running the foundation. Until then, the grantees must write to Mr. Wachenfeld.