Spotlight on Charity Navigator's Founders
Pat Dugan has not merely given to charity. He's given us all a gift by creating one of the most powerful watchdogs in the world.
This story was written for the summer 2013 issue of Wagner Magazine, the magazine of Wagner College, about Pat Dugan, a Wagner College alumnus of the class of 1957 and co-founder of Charity Navigator.
By Laura Barlament / Photos by Todd Marti
In 1969, Harlem resident Clara Hale took in her first abandoned, drug-addicted baby. That led to another, then another, until this amazing, caring woman, known to all as Mother Hale, became the leader of a major charity, Hale House. At the height of the AIDS crisis in 1985, President Reagan praised her selfless work and gave her the Presidential Medal of Freedom.
Thousands of people were touched by Mother Hale’s story, and millions of dollars in donations flowed in to Hale House. Some of those gifts came from Pat ’57 and Marion Dugan, successful business owners in the New York City metropolitan area. Having lost their first-born son at age 13 to a terrible, wasting genetic disease, they had bigger hearts than most for helping suffering children.
In 1992, Mother Hale died, and her daughter, Dr. Lorraine Hale, took over the organization. Dr. Hale seemed like the perfect person to continue her mother’s legacy, and the donations continued to flow in. The Dugans remained faithful to Hale House, and because their financial circumstances had dramatically changed when Pat’s business went public in 1998, they were in a position to do a lot more.
“I became, to be crass, richer by far than I’d ever been, and I wanted to do something to pay back,” Pat says. “I’d always been interested in charitable stuff, but just didn’t have that much in the way of resources. Because of the public offering, my company doubled in value overnight. This was something that I benefited greatly from, and I wanted to do something with it.”
In 2001, however, Lorraine Hale was fired from Hale House. The New York Daily News broke the story: The children were being neglected and kept in prison-like conditions, while Dr. Hale collected art, built a luxurious office suite, and borrowed funds donated for the children to renovate her own home.
Pat and Marion started looking more closely at Hale House and other scandal-plagued organizations, such as the United Way of America and Covenant House in New York City.
“I didn’t know what I wanted to do with my money,” Pat says, “but I knew I didn’t want to throw it down the rat hole.”
Pat could have hired his own personal advisors to help him find good, reliable, well-run charities. But Pat isn’t known as a visionary for nothing. And he didn’t forget that many other people had been duped by unscrupulous charities. Most people give based on emotions; Pat wanted people to be able to give based on facts.
Pat, in other words, had discovered his own cause: Giving everyday donors information, so they can make smart giving decisions. Today, that data is available to anyone, for free, through the Charity Navigator website.
* * *
Pat and Marion Dugan’s home in Garrison, New York, lies secluded up on a ridgeline at the end of a long, winding dirt driveway, with inspiring views of the Hudson River Valley.
Besides the views, what’s striking about their home are the books: stacked on tables and lining the floor-to-ceiling shelves of Pat’s study. Leather-bound classics rub shoulders with the latest literary fiction from Ian McEwan and Richard Ford, and the British humorist P.G. Wodehouse keeps company with philosophers, scientists, and historians. On the day of my visit to Garrison, Dugan was working through Jim Holt’s Why Does the World Exist: An Existential Detective Story, with a dictionary and an encyclopedia of philosophy by his side.
In a way, the house is a picture of Pat Dugan himself: Studious and thoughtful, while also extroverted and funny; sometimes cantankerous, but also deeply caring; a visionary whose favorite pastimes are taking solitary walks, reading good books, and driving his collection of nine bright red and yellow convertible sports cars (although he says it’s not a collection, since he does drive them all).
Above all, he’s a person who follows the charge he heard Wagner College President David Marion Delo make to his freshman class, 60 years ago: “Question everything.”
At the time, he was more than a little skeptical about the value of formal education. “You want me to ask questions?” he recalls thinking. “What a concept!”
Pat Dugan didn’t grow up with a lot of books in his home — his family couldn’t afford them on his dad’s salary with the New York City Water Department. He knew every plumber on Staten Island and the family was invited every year to the “plumbers’ ball” — which, true to his Staten Island roots, Dugan pronounces something like “plummahs bawl.”
But his family did like to read, especially his mother; they borrowed books from the library and got hand-me-downs from wealthy cousins. Pat became a reading addict in the second or third grade, when he caught rheumatic fever and was forced to stay in bed for months. With a cringe, he admits that his favorite books were the Bomba the Jungle Boy youth series, a take-off on Tarzan.
Despite being such an avid reader, young Pat was an indifferent student. He went to the local Catholic schools, but learning there was all about memorization, “pounding stuff into you,” he says now, with a hint of lingering resentment. “Spending a lot of time memorizing stuff that you give back to your teacher is a waste.”
By the time he reached high school, at St. Peter’s in West Brighton, he spent his free time hanging around on street corners with a bunch of guys whose highest ambition was to get out of school, get a full-time job, and get a car. “That was all the likes of me and these guys thought about,” he says.
* * *
Wagner College was a major turning point for Dugan; he calls it “one of the small number of great things that happened to me during my life.” Wagner’s dean of the college, Adolph Stern, lived around the corner from the Dugans. Pat knew him, but they didn’t really have a relationship. Nevertheless, one day when Pat was a high school senior, Dean Stern asked the boy to come and see him. So, Dugan paid him a visit.
“What are your college plans?” asked the dean.
“It’s not in the cards,” was Dugan’s reply. “I had terrible marks in high school, and I have no money.”
Dean Stern replied, “How would you like to go to Wagner College?” He offered him admission and a half-tuition scholarship on the spot.
“Dr. Stern opened the door for me and I thought, ‘I’ll give it a shot,’” says Dugan. “I’ve often thought, ‘How did he ever think about me, a boy around the corner, and do this wonderful thing for me?’” Years later, Marion Dugan revealed to him that Pat’s mother had asked Dr. Stern for his intervention.
Today, Dugan is doing the same sort of thing for Wagner students through a $1 million endowed scholarship fund for students with academic promise and financial need.
Meanwhile, Dugan came to Wagner with “no clue” about his career path. For his first three semesters, he majored in English. But then he decided that he wasn’t sure how he could make a living through that course of study and switched to bacteriology, a new major at the College. He flourished, enjoying the coursework and professors like Virgil Markham and Edythe Kershaw.
“Between classes, work, studying, and drinking a beer every once in a while, there was no time [for reading],” he says. He boarded at home and worked all kinds of part-time jobs, from stocking supermarket shelves to installing flagpoles and fences, to pay for the half of his tuition not covered by Dr. Sterns’ scholarship. He found his closest friends among the World War II veterans studying at Wagner on the GI Bill. He added his talent and height to the veterans’ intramural basketball teams and helped to organize them into the Circle K, the male counterpart to the Off Hill Girls Association (better known, Dugan says, as the “Awful Girls Association”).
Marion and Pat Dugan on their wedding day, March 8, 1956.
He also found the time to date Marion, a fellow Staten Islander he had met while she was still in high school at Notre Dame Academy, down Howard Avenue from the Wagner campus. They got married right after he graduated.
* * *
Pat decided to seek work in pharmaceutical marketing; but first, to avoid being conscripted into the Army, he enlisted for a three-year stint in the Coast Guard. He quickly qualified as officer of the deck, putting him in charge of a whole ship while it was underway and in port; but when his captain tried to talk him into “shipping over” — i.e., staying in the service — he said no thanks. He chafed at the slow pace of advancement, and he wanted to make more money.
After leaving the Coast Guard, he found a sales position with Pfizer, covering the Boston area. His ambition and personality distinguished him, says his longtime business partner, John Farley.
Many years before Pat Dugan founded Charity Navigator, he served as a U.S. Coast Guard officer from 1957 to 1961.
At the time, Farley was a sales rep for Upjohn, a rival pharmaceutical firm. He heard about Dugan from a physician they both knew. “Have you met Pat Dugan?” the doctor asked Farley. “He’s a big tall guy, and he’s really funny.” Dugan had made a sales call on the doctor, and with great seriousness told him that he was going to play him a recording by an expert in contagious diseases from the University of Palma in Italy. He put his tape player on the doctor’s desk, turned it on, and out came a recording of Dugan warbling a ditty about Pfizer’s name-brand antibiotic to the tune of “Happy Birthday.”
“Terramycin is good, Terramycin is good, …”
“So I was looking forward to meeting him, even though we were competitors,” says Farley.
After Dugan completed his MBA at Boston University, he got a job with the advertising agency Dean Burdick Associates in New York City. Farley followed him there, and they each went on to work for other big agencies as well, focused on pharmaceuticals. But they kept talking about “doing something together,” as Farley says. In 1971, Dugan took the leap, quitting his well-paid job with BBDO to start a niche business. Farley joined him, and it quickly grew into a full-scale firm. Within two years, they had surpassed their own first employer, Dean Burdick Associates. Their business grew to encompass four divisions with 70 employees.
One of Dugan’s major coups was redirecting Bayer toward what has become its primary marketing strategy, as “The Wonder Drug” that reduces the risk of heart attacks and strokes. Dugan did not create the tagline, but he was the one who pushed Bayer in that direction, once he started reading about powerful research findings showing that regular consumption of aspirin slashed the risk of stroke and heart attack.
What made Dugan so successful, says Farley, is that he has two sides: the side that relates well to people, and the side that sees what no one else is seeing. On the other hand, when Dugan knows that something is the right thing to do, he will stick by it, no matter what opposition he faces.
So, in the mid-1980s, when Dugan felt like he and his clients were no longer having a meeting of the minds, he decided to develop another division of the business, which he called Professional Detailing Inc. (now known as PDI). It represented an innovative direction in healthcare services: a contract sales organization, which provides an outsourced sales force for pharmaceutical firms.
At that time, no one else was doing this kind of business, says Nancy Lurker, PDI’s current chief executive.
“What he’s really good at is looking at trends and being able to understand where there is a need in the marketplace,” says Lurker. “The other thing is that he puts his money where his mouth is. He’s a risk-taker.”
After a few years, Dugan proposed to his business partners that he spin off PDI, exchanging it for his shares in Dugan Farley. The partners agreed, and Dugan became the sole owner of PDI.
In 1998, Dugan took PDI public. It went on the market for $15 a share and rose to a high of $121. Last year, PDI had $126.9 million in revenues. But back in the late 1980s, no one suspected the business had that much potential — no one, that is, except Pat Dugan.
“He had the vision to take the company public when most people would have thought, ‘I don’t know,’” says John Farley. “He’s always thought a little outside the box.”
* * *
Dugan’s vision, risk-taking talent, and basic stubbornness were all key ingredients to the creation and growth of Charity Navigator.
When www.charitynavigator.org went live on the Internet on April 15, 2002, it rated an impressive 1,100 public charities with a system of zero to four stars, familiar to users of websites from Amazon to Yelp. The ratings were based on financial data publicly available through IRS 990 forms, the informational tax returns that charities are required to file annually.
This did not win it many fans in the sector it was covering.
“People from charities, from foundations, anybody involved in the sector, pretty much said, ‘We don’t need you. Everyone is doing good work. There’s no need for people poking their nose in our business. So why don’t you just leave us alone?’” Dugan says. “That was an almost universal feeling amongst people in the sector.”
Their main argument was that Charity Navigator’s rating system reduced a charity’s work to its financial statements, which wasn’t a fair measure.
According to Trent Stamp, Charity Navigator’s first chief executive, Dugan was steadfast in the face of criticism. Even some of his own friends, who sat on the boards of charities that may not have received the highest rating, were annoyed. “Pat was resolute in the idea that this was a good thing, and it would be better for the charitable donor in the long run,” Stamp says. “He didn’t care what kind of heat came, as long as we were being fair in our processes.”
Dugan remains unapologetic about the rating methodology. “We’ve used what we’ve had available,” he says. “Up until fairly recently, our whole rating was based on these financial things about how much money they raised, how the trend was going, how much of a reserve they had, how much they put into programs as opposed to fundraising and overhead. That’s all we had to work with at that point.”
Charities may not have appreciated having their dirty financial laundry exposed, but donors liked the service. Most of the site’s traffic came via word of mouth and public relations efforts, and website usage more than quadrupled in the first year; in 2012, it had more than 6.2 million visitors. Media outlets started promoting it; Time, Kiplinger’s, Forbes, and many others endorsed it.
The rating system is not as blunt an instrument as some critics would lead you to believe, if you take the time to dig into the details behind it; and the Charity Navigator staff is diligent about refining the site’s methodologies and expanding its offerings. The first big revision of the rating system came in 2008, when the IRS changed the 990 form, responding to pressure from the public and from Congress to make sure public charities used donations responsibly. The new 990 information, plus additional research performed by the Charity Navigator staff, allowed the site to add measures of “transparency and accountability” to the rating system. These include board membership, executive salaries, audit information, and other factors.
And this refining process is far from over.
* * *
In January of this year, Pat Dugan was in the offices of Charity Navigator, along with the current CEO, Ken Berger, who has been with the organization since 2008. A veteran of the nonprofit service sector, Berger has an easy rapport with his boss, joking about how they are both wearing fashionable sweater vests.
Twelve years into this project, Dugan’s enthusiasm and commitment to it are undimmed. “When I bump into somebody who is educated, well-informed, and all that good stuff, and they’ve never heard of Charity Navigator, it’s like a dagger in my heart,” he says, holding a fist to his chest.
In this nondescript office building in Glen Rock, New Jersey, young people are working in every nook and cranny. They recently increased the staff to the grand number of 12 — in double digits for the first time — ramping up to launch three huge new features to the website: increasing the number of public charities rated on the site from the current 6,000 to 10,000; adding an informational page (not a rating) for each one of the 1.8 million legitimate nonprofits registered with the IRS; and lastly and most significantly, incorporating a new dimension to their rating system, a quest that Pat likes to call “the Holy Grail.”
“We are now working on something that is just leading the league, and everybody admits that we are on the forefront,” Dugan explains. “That is evaluating the outcomes and programs.”
In other words, instead of using indirect measures of a charity’s effectiveness — its finances, transparency, and accountability — Charity Navigator will look at each charity’s results — what it achieves with its programming and spending.
To rate charities by how well they achieve their mission seems like an obvious choice. But there are two big problems with moving in this direction: 1. Charities’ outcomes are not always easy to measure, and 2. Most charities have made no effort to measure their outcomes.
It’s a widely acknowledged failing in nonprofit operations. “A very low percentage of charitiespossess any measurable information about their results or effectiveness — much less data that are compiled by an independent party,” wrote Ben Gose in the Chronicle of Philanthropy in April 2009. Gose cited Charity Navigator’s attempts to get at this information — but a survey sent out to 110 organizations got only 15 replies.
At the same time, the biggest criticism of Charity Navigator’s rating system is that it doesn’t take outcomes into account. “So they’re putting us into this impossible situation — to measure something that they don’t provide,” says Berger.
Warming to the topic, Berger continues, “So while you’re throwing stones, the irony is: Back atcha! Now, own up. You want us to measure results? A. Start tracking it, and B. Once you start tracking it, publicly report that information. And then we’ll talk. Then we’ll get serious about measuring results. So the game-changer here is we’re going to incentivize charities to do the most important thing about their work: to share it with the public.”
Dugan nods and chuckles as Berger’s voice rises with indignity. In January, Charity Navigator started unveiling its preliminary work on this “third dimension of intelligent giving,” as they call it.
* * *
In the end, Charity Navigator is a lot like its founder: It may have its flaws and limitations, but you really can’t find a chink in its basic sincerity and integrity.
“The biggest thing that always impressed me is that [Pat] is uncompromising in his ethics,” says Trent Stamp. “He insisted that we do things the right way. He knew that if we were going to evaluate charities, people would be looking at us, and he made sure we were held to a higher standard.”
But Charity Navigator’s mission is bigger than providing a fair rating system. When donors direct their charitable dollars toward more effective charities, it will make the whole sector more effective, and therefore make a bigger dent in the problems charities are addressing — hunger, homelessness, health, or scores of other causes.
The goal is to change the donor paradigm from charitable giving to social investing, “to move away from giving something and just walking away from it,” explains Berger. “You’re investing and you want to see some return, some social value, as a return on that investment.”
That mission attracts smart and idealistic staff to the organization, says Dugan. “We can’t afford to pay them a lot, and many of them have advanced degrees,” he says. “They’re less interested in the money that they could earn someplace else. They want to change the world.”
Charity Navigator still takes a lot of hits from people in the charitable sector. At the same time, says Trent Stamp, who is now the CEO of the Eisner Foundation, “I think we’ve created an environment where people understand that there are good charities and there are bad charities; not every charity is the same.
“And now major charities are the first to trumpet their Charity Navigator four-star rating and tell people, ‘We’re doing better work than our peers, we’re a better destination for your charitable dollars.’
“[Pat Dugan’s] vision will live on for generations in the nonprofit world, and he should be very proud of it.”