Monday, February 9, 2015

Philanthropic Patterns of U.S. Family Foundations

Philanthropy is big business, particularly in the U.S., where family foundations are more common than elsewhere in the world. Of the 200 largest independent foundations in the U.S. in 2007, 111 (55.5%) were family run, with proportionate shares of assets, contributions and donations: $166 billion in assets, $23 billion in contributions (to the foundation by the family), and $11 billion in grantmaking (donations).

The authors of a study on family foundations, Lungeanu and Ward find that family foundation members exercise their influence over a foundation through their positions as members of the Board of Directors or trustees. In nonfamily foundations, board members are not connected through family ties, and the difference affects the donating practices of nonfamily versus family foundations.

Since family foundations include an active donor or donor family, they become more directly involved, either through family control or board control of the foundation, as compared to non-family foundations. But family involvement in a foundation tends to vary according to the generational stage of the family and the degree to which the family controls the board.

They also found that different-sized boards affect diversification of the donating by the foundation, and that family foundations are less diversified in their donations than nonfamily foundations, which they attribute to “general risk adversity.”

Given the impact of family foundations on philanthropic giving in general, it is worth trying to understand the role of a family foundation and its board in its distribution of resources and strategic direction, as the authors point out. However, the above main findings are enough for practitioners to know; it is not necessary to read the article in full.

Source: A Governance-Based Typology of Family Foundations: The Effect of Generation Stage and Governance Structure on Family Philanthropic Activities, published in the Family Business Review, December 2012 vol. 25 no. 4 409-424.


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