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The great big family giveaway

Governance : philanthropy

Business-owning families are becoming savvier all round. Nowhere is this more evident than in the world of philanthropy, where families are not only giving more, but giving more wisely. Andy Rosenbaum investigates the latest trends in giving.

Andy Rosenbaum is a freelance writer based in the UK.

Five years ago,  Julie Toskan-Casale lost her husband. This entrepreneurial Canadian woman, who had run the global marketing department at Toronto-based MAC Cosmetics, subsequently decided to apply her skills to the family's philanthropic efforts. The then 33-year old businesswoman worked with the London-based Institute of Philanthropy to redirect the goals of the already considerable family philanthropic efforts. She was determined to build a philanthropic venture based on sound business strategy, one that would make a difference.

In 1999, Julie became the first Canadian to graduate from the renowned Rockefeller Foundation's Philanthropy Workshop. In 2001, she established The Toskan-Casale Foundation – a family foundation dedicated to supporting and strengthening community-based social programmes and organisations. One of its most notable successes since is the Youth and Philanthropy Initiative, a programme that provides high school students in the Toronto area with exposure to how philanthropy works, including visits to sites where charitable works take place. The programme has since raised almost $1 million for various causes.

The Toskan-Casale family provides a good example of how family businesses are creating and changing the face of philanthropy around the world. "Families in business are no longer content to just write cheques," says Institute of Philanthropy director Salvatore LaSpada. "Families want their philanthropic work to reap the same kinds of rewards as their overall efforts in business and in family education. They want to see their investment make a difference and they want to involve the entire family in making that happen."

Cultural contexts
Family philanthropy is in the midst of a sea change, as Etienne Eichenberger, director of the Geneva-based WISE Foundation, which advises family businesses on philanthropy strategy, points out. "The future of philanthropy is about building a framework for strategic giving," Eichenberger says, "but the means for doing this are different in different regions."

Philanthropy is heavily influenced by its cultural context. Factors such as religious traditions and the relative importance they assign to giving, politics and even business basics like tax incentives all play an important role in determining how families in business choose to give. So it's worth taking a look at how these factors differ from one geography to another.

"The main characteristics of the Anglo-Saxon approach apply both to the US and the UK," Eichenberger says. "In these two countries, civil society is viewed as a natural substitute of the government and the state. Where the state cannot, or will not intervene, then private individuals and families take on its role. This natural balance is reflected in the legal and fiscal systems, which provide important incentives for individual donations and gifts." Therefore, it is perhaps not entirely surprising that in the US charitable giving per year is about equal to 2% of GDP, and that in the UK total giving reaches close to £40 billion ($77.90 billion). Many parts of Middle East and Asia fall into this category as well.

"But in Western Europe," Eichenberger continues,  "expectations about the role of the state in ensuring public good are far higher, and civil society often plays a much smaller role." Yet, within Europe, the families who are seriously involved in global giving often have a more important footprint than those of the Anglo-Saxon world. The Continental effort tends to be well-managed. In Germany, 40% of new foundations have been created in the past 10 years at a current rate of over 850 new foundations per year. In France, the increase in the number of new foundations has reached 28% over the same period.

Challenging choices
Be it in Europe or the Anglo-Saxon world, the process of organising philanthropy has one aspect in common: a family is beset by fundraisers for any number of worthy causes. As Eichenberger points out, it is not that fundraisers are necessarily difficult to deal with, but they do make it more difficult for a family to make choices. "It's necessary to get beyond the solicitation phase," he says.

Rather than considering individual causes to give to by themselves, a family should start by considering what aims the family philanthropy should be devoted to. "There is so much good that needs to be done, a family in business must first decide where and how its funds can achieve the impact they desire," LaSpada points out. "There is a social return that is very like a return on investment in business." But families need to manage and direct their expectations to achievable goals. Many families in business simply hire a trustee to handle a philanthropic foundation or effort, but the trustee may not have the same agenda as that of the family. "Hence it is better to keep it in the family," LaSpada says, "while working with experts who can help the family to achieve its objectives."

Effective education
Many parents in business want to involve their children in the philanthropic effort. "Philanthropy offers an excellent means of educating children in business strategy, and in working together with the entire family to achieve objectives," Eichenberger adds. "There is no better way for children to build financial literacy and to become a working part of family governance. As children become effective philanthropists, they will become effective business people."

Experts agree that a family in business should certainly link its philanthropic efforts with the business, and take a long-term perspective in choosing goals. The two should become part of a single effort, rather like that originally intended by Bill Gates for his foundation, which was intrinsically linked with Microsoft at the outset.

Eichenberger gives a good example of a successful family effort like that of Gates. One family (which prefers not to be identified) settled in Switzerland, has been involved in giving for generations. Boasting five children, the family had never involved its members directly in philanthropy.

A year ago, the parents decided that it was time to introduce the children into the business world, using philanthropy as a stepping stone with a specific approach: they were to learn about how to create new wealth in the family and to become familiar with basic financial concepts; they were to learn to support those who are less fortunate, but to choose their objectives in giving; and they were to learn about collective decision-making and how to work with each other.

The result has been an important collective effort on the part of the family and the children. WISE took the children to see philanthropy at work on site and helped them to decide, along with their parents, what goals they wished to achieve. The family has selected several worthy causes, and they are working with the financial advisor to decide on a structure to serve them best. But the parents have been extremely pleased with the way the children have committed themselves to working in philanthropy, and thus learning about their place in the world around them.

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