Family Philanthropy

My task is to try to give you an overview from my perspective, as a family foundation practitioner and observer, of some of the trends and issues that are happening in the area of philanthropy and, in particular, family philanthropy.

No one could start an overview of what is happening in philanthropy today without taking note of what is happening in government, particularly in Washington. Congress is engaged in debate and action over legislation, redefining the role of the federal government in our lives and businesses. No one can be sure how it will all turn out since the president still has the veto and may or may not acquiesce with Congress.

Decisions reached there can have a fundamental impact upon foundation funding priorities. The current debate at the federal level over funding for the National Endowment for the Arts and Humanities is really not about saving government money, as the endowment's annual budgets are only a very small portion of the federal budget. It is much more about what government should or should not fund. Whatever the outcome in Washington, this debate is now spreading to state and local governments. As a result, the total funding potentially affected, if all governmental bodies reduce their assistance, could become of major significance to the arts all over the country. Such an occurrence would seriously increase demand for replacement funding from foundations.

We are living in a time when our society is reconsidering the roles and redefining the limits we have placed on our three major sectors. Government is contracting with business to carry out privatization of certain of its functions. Business contracts with nonprofit universities to conduct research. Government contracts with nonprofit organizations to provide services and nonprofits spin off for profit businesses to exploit their research discoveries or other ideas developed that are commercially valuable.

So, over time, the dividing lines of who should do what and why have become blurred. If what Congress is doing is redefining those limits and duties, then we and all of our nonprofit partners have a very big stake in the outcome of the political process. This is clearly a major happening and one with vast implications for what we do and why we do it.

Turning to family philanthropy, my observations are as follows:

1. Family philanthropy is growing in importance. Since foundations were first created in the early 1900s, most have been family run. However, as a group, family foundations have been quiet and somewhat reclusive until fairly recently.

It is estimated that families manage approximately two-fifths, or 40%, of the 42,000 or so private foundations, and make grants totaling more than $15 billion per year (48% of all family giving in 1998). Family philanthropy now comprises the largest portion of organized philanthropy in the country.

2. Family philanthropy is diverse and takes many forms. Most of us are concerned about family foundations, but families also use direct private giving and community foundations as vehicles to carry out their philanthropic objectives. And because many families' source of wealth comes from a family business, sometimes the business is the vehicle of choice to use in the helping of others, by donating goods, services and dollars directly from the business.

There is also wide diversity in the governance structures and administration of family foundations, some using all family, while others use nonfamily members in important roles. There are differences in methods used to involve and train successive generations for future leadership and many other variables in the style of operations and selections of giving focus.

3. The predicted enormous intergenerational transfer of wealth anticipated in the next 20 years will likely result in a great expansion of family-led philanthropy. Estimates are that as much as $10 trillion is expected to be passed down to others in this coming time frame. Many groups are actively working to encourage as much of this transfer as possible to go to charitable and philanthropic purposes.

As those with wealth begin to consider their options with the transfer of their accumulated fortunes, they will increasingly be interested in the models and methods those of us in the field today are using and demonstrating. Therefore, the more family foundations are seen as being able to contribute to society's meaningful progress while also promoting family unity, the more others will be drawn to this form of structured philanthropy. Or, if we do poorly, either by failing to engage in responsible and effective philanthropy or by letting the process of giving contribute to family disharmony, few donors will want to follow that lead.

4. The growing importance and activity in family philanthropy is being noticed and is attracting increased attention. The Council on Foundations' Family Foundation Services department provides an array of services to family foundations such as educational programs and networking opportunities, publications and resource materials, and governance and management assistance. Currently, over 35% of Council membership is composed of family foundations.

Investment firms and trust companies are focusing increased attention on families with wealth and providing seminars and programs for their benefit, including sessions on philanthropy.

Religious groups are beginning to take a closer look at how they can promote family philanthropy. I serve as chairman of a foundation set up to encourage the families at my church to remember the long-term needs of the church with their gifts, as well as the current ones. Interdenominational Christian groups have focused on their affluent believers to encourage philanthropy as a way to put their faith in action.

In a November 1993 publication addressed to a Jewish audience, several articles specifically addressed the opportunities presented through family foundations, saying: "The Jewish family foundation is about to come of age. It carries with it a beautiful potential for good." The author states: "I believe that by nurturing Jewish family foundations, no matter how small the corpus, we will be strengthening Jewish families."

Consultants and family business specialists are devoting more attention to family philanthropy. Publications, such as Family Business, are devoting sections on the subject. As scholars, writers and other groups pay more attention to the area we can expect more helpful and informative publications and programs that have been sorely needed.

5. The press is increasingly interested in foundations and especially family foundations. I believe that more and more interest will arise as the nation rethinks the role of government and the voluntary sector is asked to assume greater duties. Fair or unfair, as a major supporter of the independent sector, we can be expected to be carefully examined about our response to these new expectations for someone other than government, to provide societal safety nets.

Publications, such as the Chronicle on Philanthropy, are regularly beginning to sound out family foundations for their views about the issues affecting the nonprofit world. This is something of a new phenomenon for family foundations and one that may require some adjustment about conducting our work in a more public atmosphere, while keeping in mind that some of us like our privacy and may be uncomfortable about speaking to the press representing the views of a whole family.

6. This greater attention may have beneficial effects upon the formation and effective operation of new family foundations. Until recently, there were few places a potential donor could go to get help in really thinking through the many facets of creating a family foundation. As more and more of the operating and family dynamic issues receive attention, helpful information about the lessons learned, pitfalls to be avoided and successful solutions to family concerns should spread to potential donors, attorneys and other advisors. If used by them to carefully consider the donor's intent and plans, such information could be vital to the formation of more successful family foundations.

For example, few attorneys have focused with a donor on the importance of clear articulation of the goals founders have for their foundations. It is, therefore, not surprising that issues of trustees straying from donor intent arise. Trustees are often left with only past records, personal remembrances or anecdotal experiences to guide them.

Few creators of family foundations really carefully consider how the issues of generational succession and operating control could affect their grantmaking. With increased information about the complexities of family dynamics, donors can take steps to minimize potential dissension points, and, perhaps even more importantly, realize the importance of early training and family unity, building actions they can develop to help their families work together.

Families are inherited, not selected by choice. Families exist to nurture and support their members. Businesses and foundations must respond to public responsibilities and adhere to laws. A successful family foundation will manage both of these challenges to endure and prosper. Unless prepared, families can easily find themselves struggling to cope with the twin challenges of meeting family hopes and aspirations while also fulfilling a public expectation of responsible and valuable service to others.

The public obligations must be met whether or not the family issues can be resolved. It is not uncommon for family foundations and businesses to evolve away from family operation and control over time if family unity and common interest are not maintained. Common challenges include disputes concerning the managing of organizational growth, dealing with changing societal needs, coping with interplay of family dynamics and business operations and providing for leadership succession.

At the heart of a family foundation's existence is the assumption that the family will engage in the hard work of identifying the common values and beliefs that unify them as a group and give direction for action. Deciding how to seek improvement of human conditions involves difficult questions of factual knowledge and subjective perceptions on which reasonable people can and do disagree. Debating some of the basic questions of life is hard work.

Families need help with structures and procedures that reduce the potential for internal conflict and insulate the foundation from being held hostage to emotional family dynamics. And that is why it is encouraging to see the increased attentions being paid to the particular concerns of family philanthropy.

7. Congress looks to all foundations to fulfill the license they have granted for such institutions. They expect us to contribute a special value to American society in return for the added foundation administrative cost and time delay incurred in distributing charitable dollars. Families that have accumulated great wealth have generally done so through a successful family business developed around entrepreneurial risk taking and corporate values that support and enable the workers to succeed at their tasks. These skills and values could also be utilized to significantly enhance the work of grantmaking foundations. Family foundations need to take greater advantage of the special training they have received by watching and listening to the methods used by the entrepreneur founder and applying them to the foundation's work.

At the Meadows Foundation, our founder came from the oil business, and, as a result, we use concepts like joint ventures, farmouts, wildcatting and calculating risk to energize our efforts. Al Meadows was a genius at finance and in leveraging his money. We, therefore, experiment with paying longer term multiyear pledges with stripped interest from Treasury bills; using deep discount bonds for endowment payments; and sponsoring many different forms of challenge and matching gifts.

We try to honor his charitable interests but we really try hard to honor his underlying values and principles, such as helping those who are helping themselves, seeking always to support excellence in whatever we do and opening doors of opportunity for others.

There is much work family foundations must do to transmit the "stories and secrets" of our tribe to our family successors, our bonding base of values and feelings, our particular spirit and history. For out of such a mix can come commitment and passion to pursue creative solutions to the issues that vex our time. And we are desperately needed: according to pollster Daniel Yankelovich, "Our society now places less value than before on what we owe to others as a matter of moral obligation, less value on sacrifice as a moral good, less value on social conformity, respectability and observing the rules."

Philanthropy is not just about the head, it is also about the heart and spirit. Families are all about caring, loving and nurturing. Combined they constitute a powerful force for action on the conditions of our world. We cannot afford to waste our potential for good when there is such need all around us. This is why we must encourage all forms of family philanthropy to achieve their maximum effectiveness for all our sakes. All of us are vital to this effort.

Curtis W. Meadows, Jr.
Meadows Foundation, Dallas, Texas
Year established: 1983