Family Business Wiki's Town Square

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FAMILY PHILANTHROPY

Family philanthropy is a wonderful arena though which families in business can develop many skills. Governance and financial literacy are two good examples. In addition, families can learn about group decision-making and how to constructively deal with disagreements. It is hard to imagine a safer or more productive way for a family to learn how to collaborate than having them wrestle with whether or not to donate funds to cancer research or to a children’s hospital.

Through discussions like this, families will develop the capacity to discuss the “un-discussable” and these skills are essential for family members who will also be co-owning assets together in the future. Conversations regarding charitable giving may also be very challenging, but it will be much better for a family to develop these skills through discussions regarding what they will give instead of what they will get. As an added benefit, family members may be able to think more about what they are responsible for rather than what they are entitled to.

INCLUDING EVERYONE IN THE FAMILY

Family philanthropy also provides an opportunity to include some members of the family who may otherwise feel left out, perhaps because they are not directly involved in the family business. By being inclusive and sharing leadership
responsibilities, charitable giving activities when thoughtfully undertaken can help foster unity and goodwill in the family.
 
In addition to the benefits of the relational dynamics noted above, family enterprises around the world have also earned a reputation as corporations who are often known for their generosity. 
 
THINKING BEYOND OURSELVES

Perhaps some families give away money primarily for the tax relief that it affords, while others may give partly for the prestige that can come through making a large public gift. However, in order to truly think philanthropically, individual(s) must think beyond their own needs. 

WE ARE ALL RICHER THAN WE THINK

To gain perspective, it may be helpful to consider the following statistics:

• Anyone earning $25,000/year is in the top 10% in the world in annual income.
• An individual with an after-tax income of just $35,000 qualifies in the top 1% in the world.

Confronted by these numbers, it is clear that virtually all owners and managers of family enterprises are in the top echelon of income earners in the world. Consequently, family enterprises have an important, and strategic opportunity to be philanthropic leaders.

HOW SOME FAMILIES GIVE

Several years ago, I was invited to go to Mexico for a weekend, to build a house for an impoverished family. We arrived in Tijuana on Friday evening, and by Sunday night, a small, but carefully crafted home was completed for a very grateful mother and father, and their three small children. While working on the project, I met a business family from Alberta. I asked if they had ever done anything like this before. I was amazed to learn that this is something that they typically do four times per year. Instead of buying a recreational property for their family, this is how they “get away” together. It is also one of the ways that they have invested in building unity and purposefulness in their family. 

Another family, from Ontario, at one time had eleven operating companies. As the founder approached retirement, he decided to sell nine of the businesses and distribute the proceeds to his four children. His wife was worried that there would no longer be a family business to provide the “glue” necessary to keep the family together. In response, they decided to create a charitable foundation, which their offspring now run. Over the past several decades, it has been their privilege to give away an average of $1 million per year.  In the process, the next generation has been given an amazing opportunity to plan, manage, invest, give, and make decisions collaboratively. At the same time, they have made a significant impact in the world around them.

MONEY IS NEUTRAL

In their excellent book Financially Intelligent Parent, John and Eileen Gallo assert that money is neutral; in other words, it is neither good nor bad on its own accord. Rather, what a person chooses to do with it can be good or bad, and how someone thinks about it may be wise or unwise. A family business owner can choose to hoard money like Scrooge or share it with the Tiny Tims of this world. Therefore, money is a tool, which can be used for noble or ignoble
purposes. It can also be spent on lifestyle, given to our children or spent to bless others. Those who have been fortunate enough to create or inherit wealth will recognize that it provides a great opportunity to not only help their children but also help others. Those who have enough for the needs of their family can afford to think beyond themselves and should encourage their children to do the same.
 
GIVING IS AN ATTITUDE TOWARDS LIFE WORTH CULTIVATING

For many years, Bono, the lead singer of U2, has challenged wealthy nations to annually set aside approximately 1% of their gross national product to bring an end to world hunger. Around the world, many young people wear white
armbands as a symbol of their solidarity with this cause. Unfortunately, the self-centeredness and self-indulgence of the developed world have resulted in very few countries signing up to meet his challenge.
However, those of us who are privileged to be a part of business families can play an important role in making a difference in the world. We have the capacity to do an enormous amount to improve our neighbor hoods, our countries and our world. As Bono has encouraged the developed countries, I would like to encourage all family business owners to become active philanthropically and to teach the next generation to do the same. For some of us, this can be done by establishing tax-effective charitable foundations. We can also use life insurance structures and other mechanisms to extend our capacity to help others.
Bill Gates has pledged to give billions to charity, and Warren Buffett has already given away $42 billion. These are two of the most intelligent and successful business executives the world has ever seen. They might be on to something.
Prudent parents would be wise to consider following their example.

HELP YOUR FAMILY AND HELP OTHERS

Charitable giving is an opportunity for families to work “side by side” while helping others. It is an activity which all members of the family can be active in, regardless of their education or professional background. Some say that families who play together stay together. Others say that those who pray together stay together. Giving together can have similar effects.

By cultivating a commitment to philanthropy within a family business, family business owners have an opportunity to not only help those in need, but they also have a chance to help those they love the most, their own families, by teaching them to look beyond themselves.

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