When Family and Philanthropy Collide
Working for your family’s foundation to impact positive change and achieve philanthropic goals may seem like a “dream job” to some. What could be better? Doing good in the world and working closely with the people we love most. Yet the reality is that even amongst the closest, most loving families, conflicts with the foundation can, and do, arise.
A Case Study
For more than a decade, Eileen has led her family’s foundation, growing it from a small organization into a large-scale, professional operation. A third-generation family member, Eileen is the public face of the foundation, and her family relies heavily on her leadership.The reality is that even amongst the closest, most loving families, conflicts with the foundation can, and do, arise.
Now, well into her tenure, Eileen’s passion for the foundation has begun to fade. She’s become frustrated with the disparate directions other family members want to take the foundation, and for the first time Eileen begins dreaming about forging a new path free from familial constraints. Initially, her fear of hurting people’s feelings and causing a major disruption stymies any action, and she stays.
Eventually, Eileen makes the difficult decision to leave the foundation, but is confronted with sharing the news with the person who hand-picked her to lead the organization. Eileen’s father, an integral member of the foundation’s second generation of leadership and still active in the organization, saw the future of the foundation and its unlimited potential thriving in Eileen’s hands.
Initially, he’s hurt. In fact, he refuses to accept his daughter’s resignation and tries his hardest to persuade her to stay. He promises to help facilitate changes. What can he do? Where did he go wrong? What could possibly be better than this? What will the family think if you leave? In his view, Eileen leaving the foundation is like leaving the family.
But his pleas are to no avail. Eileen has made up her mind and set the wheels in motion. Now, he’s angry. Unable and unwilling to support her new direction, Eileen’s father calls her a “deserter.” The proverbial door shuts, and Eileen is on her own — disheartened, disappointed and a disappointment.
Unfortunately, though fictional, this scenario is all too common in family foundations. But it doesn’t have to play out that way, says Marguerite Griffin, Northern Trust’s national director of Philanthropic Advisory Services.
Set Foundation Expectations Early
“It’s hard to guard against hurt feelings, but families can build participation expectations regarding their foundations to ensure that family members who may want to can venture out on their own at a later time,” Griffin says."Families can build participation expectations regarding their foundations to ensure that family members who may want to can venture out on their own at a later time."
Before being allowed to join the full board, younger family members can attend board meetings without full voting rights, suggests Griffin. The board also can provide a clear path to full participation such as: reaching a certain age, achieving a certain level of education and participating on the organization’s advisory board for at least two years.
“This gives the next generation a peek behind the curtain,” Griffin says, “and an opportunity to fully understand the goals and mission of the foundation before agreeing to participate at the board level.”
Once children decide to participate in the family foundation, term limits can be established for each participant. For example, every four years, the board president can give an individual board member an opportunity to review his or her position, provide feedback on their experience and decide whether to renew their involvement.
If the family foundation is structured enough to have defined leadership roles, Griffin recommends establishing a yearly review process for the president or chairperson.
“Set it up so a few board members meet with the leader every year to take her temperature,” she says. “It’s not a formal review but more of a check-in with the leader to see how she feels about the direction of the family’s philanthropy and the foundation’s activities. Signs of waning interest may appear much sooner than if these conversations never take place.”
To give family members the freedom to explore their own interests within the foundation, families often set aside a percentage of the foundation’s distributable funds for discretionary grants. So while the majority of the foundation’s grant money — say 80 percent — goes to furthering the foundation’s mission, the other 20 percent can be divided among grants for family members’ causes, with an application process for the grants.
“That way they feel like they’re able to support causes and issues that are important to them,” Griffin says.
Establishing a Donor-Advised Fund
Another option for families, and one that may come with a bigger potential tax deduction, is to set up a donor-advised fund. This charitable giving vehicle is administered by a public charity that is created to manage donations on behalf of organizations, families or individuals.
“Since the sponsoring charity takes care of the somewhat burdensome administrative duties, family members can spend time involved in philanthropy that they believe in,” Griffin says. “I see more and more families choosing this option.”
The bottom line is that a family’s actions must speak louder than words. “If you’re saying that participation in the family foundation is important, but family members don’t have the space to meaningfully contribute or feel ownership over what’s happening, then cohesion within the foundation is more likely to break down,” she notes.
Ultimately, what keeps families together is mutual respect and love, not a foundation.
“I think every family system, to remain healthy, needs to provide space for group work and individual opportunities,” Griffin says. “It’s just, hands down, the healthiest type of structure.”