Family philanthropy - beyond giving

It can become the life-force that invigorates the family identity and the keystone for the survival of the family dynasty
By JUNE LEE
IT HAS always been a tradition in Asia and across the globe that the very rich give substantial sums as alms to the very poor. The motivation varies, but normally revolves around the theme of social responsibility: 'giving back'; remembering roots and 'appeasing the gods' (as one philanthropist put it); or repaying a debt of gratitude for good fortune or assistance received - 'paying it forward'.
Among the most active companies in this arena are family-controlled businesses. It is a way for the families to thank the communities that have allowed their businesses to thrive, and to build closer ties with employees as owners who are engaged and in touch with their responsibilities to the community.
Family philanthropy takes on an added significance for families who have sold the family business. For such families, the sale of the operating business results in the loss of the most visible component of their identity. Family philanthropy has the opportunity to fill the void. Sitting together to deliberate the family philanthropy philosophy and strategy can be a way of reconnecting with the values and vision of the patriarch or matriarch.
Increasingly, philanthropy has been mooted as the 'glue' that keeps members of wealthy families connected to one another.
Family philanthropy is often associated with legacy as gifts are made in the name of the family foundation, which, more often than not, bears the name of the patriarch or matriarch. Well-known examples of some structures funded by family philanthropy are the Lee Kong Chian School of Business at Singapore Management University, the Khoo Teck Puat Hospital, and the Shaw Foundation Symphony Stage at the Singapore Botanic Gardens.
Perhaps family members feel some degree of pride and belonging when they encounter media publicity about such gifts from the family foundation. Perhaps the deliberations on grant-making provides a platform for them to reconnect with the vision and values of their predecessors. Perhaps the value is in the fact that, were it not for such occasions, they would rarely even meet each other.
The truth is that family philanthropy can be all those things and more.
It is clear that the effectiveness of family philanthropy in reinforcing the family legacy depends entirely on how well the family's philanthropy is planned and executed.
A cleverly designed family philanthropy programme can be the action learning theatre for nurturing values and developing a culture of collaboration among the younger generation of future shareholders and leaders of the clan and family business. It can be crafted as a new focal point, not just as an occasion to bring family members together, but also as a means of keeping the founder's legacy alive. In effect, the family's philanthropic activities can become the life-force that invigorates the family identity, and ultimately the keystone for the survival of the family dynasty.
At the most rudimentary level of engagement, family members should participate in the nomination and selection of beneficiaries to receive support from the family foundation. Subject to applying common sense in ensuring the level of participation and decision making is age-appropriate, involving young family members in such an exercise has much merit.
The Myer family, founders of the Myer Stores in Australia, have an interesting approach to involving family members in their family philanthropy. They have created a Family Grants Program in which family members' personal donations to approved charities will be matched by the Myer Foundation. In addition, they have created a separate platform for philanthropic giving involving their fourth generation. The G4 Program, as it is called, has a family development mission in addition to its philanthropic mission. The G4 program seeks to create opportunities for fourth-generation members of the Myer Family to gain hands-on experience in philanthropy, and in this way develop the G4 Committee as future leaders of Myer philanthropy in the 21st century. Causes supported are youth-related. With mentoring and guidance, young family members gain exposure to governance concepts and project evaluation, and develop an understanding of issues facing other young people.
Another edifying practice concerns the giving of grants for causes supported by young family members. For young family members who have no independent income, grants are given in proportion to the amount of volunteer time the young family member has personally contributed to the cause. This reinforces superbly the link between effort and reward.
Involving a family's young generation in site-visits and hands-on projects puts them in touch with reality and could be an eye-opener that helps reinforce good values and develop character in young family members. In addition, leaving them to discuss possibilities and come up with proposals allows them practice in working together as a team. Business families can look upon this as a safe ground for developing teamwork as decisions will have no impact on - and therefore pose no risk to - the operating business.
In the best-case scenario, as younger-generation family members continue their interactions, a natural leader could emerge from the cohort, who could be nurtured and further developed into the next CEO for the family business.
The Lien Foundation provides an excellent case study in the evolution of a family's philanthropy and the role it can play in igniting the family passion to yield tangible results.
The Lien Foundation was founded in 1980 by the late Lien Ying Chow, also founder of Overseas Union Bank. Dr Lien focused his energies on the bank, while the foundation restricted its activities to responding to requests for grants in the area of education and health.
In 2004, the foundation was restructured. Margaret Lien, widow of the late Dr Lien, felt that the foundation should not only honour the memory of his name, but also his spirit and values. The board of governors was expanded to include three family members (one each from the first, the second and the third generation of Liens) and two independent governors; a professional manager with substantial experience in the philanthropy arena was hired, and additional funding priorities were added.
Instead of merely reviewing and approving requests for grants, the Lien Foundation began to engage in a slew of activities ranging from awareness raising to capacity building, to conceiving of projects, their funding and realisation. Their basic tenet was that the activities must be impactful and create change. The transformation of the foundation completed, Mrs Lien stepped down from the chair to make way for the younger generation to take over at the helm. In June 2009, a new board of governors was appointed. The two senior-generation Lien family members retired. In their place, two more members from the third generation of Liens were appointed.
Today, the Lien Foundation is recognised as a leader in the social space, and family members take renewed pride in their origins and heritage.
Families taking their first steps on their family philanthropy journey can learn from these two exemplary families to ignite family passions through impactful family philanthropy, and to use the opportunities it provides for developing the next-generation team of potential family leaders.
The writer is head of family governance at UBS Wealth Management in Singapore

Fidelity investment's Lynch urges charity

(BOSTON) Famed investor Peter Lynch, whose knack for picking winning companies helped millions of Americans make fortunes in stocks, is now urging the wealthy to follow his lead anew and give a lot of it back. To charity, that is.
'People who have been much luckier than everyone else should do more of the giving,' Mr Lynch, a vice-chairman at Fidelity Investments and trustee of the Lynch Foundation, said in a telephone interview.
The 66-year-old money manager, who earned his fortune by running Fidelity Investment's Magellan stock fund for more than a decade, is echoing the call to action billionaires Warren Buffett and Bill Gates made only days ago when they urged other billionaires to part with a chunk of their money.
'I hope it makes people think more of giving,' he said of Mr Buffett and Mr Gate's suggestion that other billionaires consider donating half their net worth.
Mr Lynch and his wife, Carolyn, announced on Sunday that they are making a US$20 million donation - their biggest ever - to support a programme to train principals at Boston College, the money manager's alma mater.
In the two decades since retiring from Magellan, Mr Lynch has stuck to what worked best for him - picking common stocks to make his foundation's money grow.
At Fidelity, Mr Lynch turned Magellan fund into a household name and the world's best performing mutual fund by increasing its value 700 times from US$20 million in 1977 to US$14 billion in 1990. Later, he wrote best-selling books that sent generations of Americans into equities.
Known for his shock of white hair and common sense approach to investing, Mr Lynch kept things simple by buying companies whose products he and his family used, like General Electric and the auto company Ford .
He also coined such axioms as 'Behind every stock is a company. Find out what it's doing.' Since retiring from running Magellan where the father of three routinely worked every weekend, Mr Lynch said he has concentrated on investing his foundation's money and mentoring younger analysts and portfolio managers at Fidelity.
'I'm like their older brother,' Mr Lynch said about guiding newcomers at the privately owned mutual fund giant in Boston.
His interest in passing on knowledge is now being spread very tangibly to education, long a favourite cause for Mr Lynch and his wife, who met as students at the University of Pennsylvania.
Discussing the project, Mr Lynch ticked of statistics making him sound exactly like the stock picker whose talent for numbers helped his investors earn a market-beating 29.2 per cent return at Magellan.
'The penalty of being a high school dropout is severe,' he said, laying out the low probability that people who do not finish high school face in finding decent work as the nation's unemployment rate hovers just below 10 per cent.
While Carolyn Lynch - whose father was a high school principal - runs the couple's foundation and searches for worthy causes, it is Peter Lynch's job as head of the investment committee to keep the millions growing.
According to 2008 IRS documents - the year the financial crisis decimated stocks - the Lynch Foundation had US$64 million. Documents for the previous year show US$113 million in 2007.
Over the years, Mr Lynch, who was sometimes seen in the Fidelity offices wearing sandals and holding his dog on a leash, hasn't changed much in the way he picks stocks. 'It is 99 per cent common stocks,' he said about how he invests the foundation's money.
But his frenetic work schedule has slowed over the years.'I don't work on Saturdays anymore,' he said.
Lynch also acknowledged lagging in the technological revolution and joked that his children had to teach him how to use a cell phone.
While sounding still very much like the stock picker he is, Mr Lynch also sounded like the philanthropist he has become in the last two decades. 'We are trying to make a difference where it counts,' he and his wife agreed.
Long ago, the Lynches - who have been married for 42 years - made education their cornerstone cause, supporting programmes like Teach for America and institutions ranging from Harvard Medical School to Marian High School in Framingham, Massachusetts.
The Lynches said they hope the programme to train principals will be duplicated in other cities around the country and eventually help narrow the divide between some of America's top-notch universities and what many call a crumbling public school system. -- Reuters

40 join US billionaire charity club

NEW YORK: After giving away billions of their own wealth, two of the world's richest men have roped in 40 other American billionaires to pledge to donate at least half their fortunes.
Microsoft co-founder Bill Gates and investor Warren Buffett are spearheading the Giving Pledge campaign which they launched in June.
Those who have signed up include Oracle co-founder Larry Ellison, New York mayor Michael Bloomberg, media mogul Ted Turner and Star Wars film-maker George Lucas.
Mr Buffett said that he, together with Mr Gates and wife Melinda, had spoken to 70 to 80 billionaires in the United States.
'In most cases, we had reason to believe that the people already had an interest in philanthropy,' said Mr Buffett.
'It was a very soft sell but 40 have signed up.'
The campaign asks US billionaires to give away at least half their wealth during their lifetime or after their death, and to publicly state their intention with a letter explaining their decision.
Mr Gates has an estimated US$53 billion (S$72 billion) fortune, making him the world's second-richest man on the Forbes list. Mr Buffett, who made his fortune with insurance and investment company Berkshire Hathaway, is ranked third with US$47 billion.
'You don't have to wait to die to give it away,' said Mr Bloomberg, a mayor and media tycoon whose worth is estimated at US$18 billion. 'It never made a lot of sense to me why you'd want to change the world for the better and not be around to see it.'
Almost all on the list are self-made tycoons, such as Mr Bloomberg. A few represent longer-established fortunes, including Mr David Rockefeller.
'I've long stated that I enjoy making money, and I enjoy giving it away,' said energy tycoon T. Boone Pickens, who is worth about US$1 billion, in his letter.
'I'm not a big fan of inherited wealth. It generally does more harm than good.'
The campaign has predicted that it will eventually draw US$600 billion into philanthropy - or about twice the estimated total amount given by Americans last year.
It has sparked debate in philanthropic and non-profit circles since its launch, with some experts dismissing it as a publicity stunt and others predicting that it will produce a flood of new money to support non-profit groups.
Mr Buffett said none of the members of the Giving Pledge campaign was driven by tax breaks. 'Not one has talked to me about taxes,' he said. 'Anybody who is entitled to take a tax deduction takes it but I think the motivation goes far, far beyond taxes.'
Perhaps the biggest surprise on the list was Mr Ellison, who became the bad boy of philanthropy after he withdrew a US$115 million gift he had made to Harvard in protest over the resignation of Mr Lawrence Summers as president.
In a brief note addressed 'To whom it may concern', he disclosed that he had assigned 95 per cent of his wealth to a trust and that he had given away - quietly - hundreds of millions of dollars to medical research and education.
'So why am I going public now? Warren Buffett personally asked me to write this letter because he said I would be 'setting an example' and 'influencing others' to give. I hope he's right.'
Mr Buffett and Mr Gates will hold more dinners later this year to recruit more billionaires, and Giving Pledge members will meet annually to discuss their philanthropy.
The pair is also due to meet some of the wealthiest people in China next month and those in India in March.
'We...hope that this catches fire in some other countries,' Mr Buffett said. 'If they want to take what we think is a good idea and run with it, we will be cheering.'