Philanthropy: a Family Affair
19/02/2014

ESSEC’s Anne-Claire Pache and Arthur Gautier present their new book at the “Rencontres Internationales des Philanthropes”



19/02/2014

Philanthropists are people like you or me. In fact, today they make up a bigger part of the population than ever, as family foundations continue to multiply and grow in the US and around the world.

 The diversity of these family-run foundations was one of the key takeaways from last month’s Rencontres internationales des philanthropes (International Meeting of Philanthropists). The event - organized by the Fondation de France,  le Monde and sponsored by BNP Paribas Wealth Management - brought together a diverse group of individuals who shared one common denominator: they all represented family-run foundations

“What sets these family foundations apart from their corporate counterparts is their freedom and flexibility as they look to achieve goals,” says Anne-Claire Pache, Professor of Public and Private Policy and head of the ESSEC Chair in Philanthropy. “For them, the impact of their activities is a matter of morality.

Professor Pache leads one of the event’s round-tables and was given the opportunity to unveil a new book, La philanthropie: une affaire de familles, which she co-authored with her Chair in Philanthropy colleague, researcher Arthur Gautier.

The Triggers: Loss, Inspiration and Abundance

According to Arthur Gautier, the diverse triggers that can push families to start foundations can generally be classified in one of three categories. First, the initiative can stem from a painful personal experience, such as death, illness, or the disability of a loved one. Second, a new career move can also act as a trigger, especially when a family business is sold or when a large sum of money all of a sudden enters into the equation. Finally, the trigger can also be a personal encounter with an inspirational figure or an individual in trouble.

In most cases, the decision to make a foundation is made with the children, and even the extended family of the founders. Nevertheless, some of these scenarios can create tension within the family, especially when the heirs to a family fortune no longer wish to involve themselves in the foundation, when family stakeholders are scattered around the world, or when personal conflicts arise between family members. To avoid these conflicts, philanthropists are increasingly turning towards external project managers as well as private banks and consultants, but the risks are still very real.

Out of the Shadows and into the Light

“Family philanthropy” can bring together a diverse group of relatives. So understandably, the term is notoriously hard to define. They can include both nuclear and extended families, and even sometimes stepfamilies which can complicate matters because there’s always the risk that one branch of the family will quarrel with the other. Furthermore, until recently it was very difficult to identify individual philanthropists because they tended in the past to be even more reclusive than they are today.

Moreover, identifying family foundations is a particular problem in France because family philanthropy has no legal status own. Most families create a foundation under the aegis of Fondation de France or other “umbrella foundations”. But suffice it to say that family philanthropy is booming today:

In the United States, there are some 40,000 family foundations. Although there are only 250-300 family foundations in France, their numbers are growing and  the largest ones, such as Fondation Bettencourt-Schueller and Fondation Daniel et Nina Carasso, distribute over €10 million per year.

Measuring Impact: It’s More Than Just Good Intentions

According to Anne -Claire Pache, the impact of family-based philanthropy is often a matter of morality. In this regard, two major postures can be distinguished.

Firstly, we find families who consider that donation is an end in and of itself and an expression of personal values. These families generally favor gratuities, and their platform can sometimes have a religious dimension. According to them, the idea that one can be interested in the impact suggests that they expect a return, which is negatively perceived.

Secondly, there are families who believe that giving is a way to generate a change in the broadest sense of the term. And when it comes to measuring impact, they’re eager to do it even though it’s not easy. A few families work beyond these difficulties to try and measure their impact, as far as this is possible.

Measuring the impact of philanthropy is increasingly important as the world is open to more risks. According to roundtable participant François Rebeyrol, about 60 % of projects funded by his family foundation have been successful, 30% have experienced mixed results and only 10 % have failed.

That said, some family philanthropists start foundations with the express desire to ensure their donations have an impact. When roundtable participant Michael de Giorgio sold his business and came into a sum of money, he was approached by several charities. These same charities that he donated to came back the following year to ask him for another donation.“But when they couldn’t tell me what they had done with my last donation, and when I saw that most of it went to pay salaries, I founded my own charity to ensure that my money isn’t just paying administrative costs, it’s really making a difference.” Mr. de Giorgio embodies a new generation of entrepreneurs-turned-philanthropists, who are very keen on philanthropic efficiency and impact evaluation.

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