Governance and Family Philanthropy

Mike Haroz joined the Social Innovation Forum in September 2017 as an Access to Justice Fellow. Over the course of the year, Mike will be blogging here about a variety of topics related to philanthropy and the nonprofit sector.

When was the last time you got excited about a meeting to discuss governance? Or by-laws? The very idea often puts people to sleep.

What if 'governance' was viewed not only through the lens of operational necessity but also as a means to articulate, promote, and sustain achievement of a family’s philanthropic goals across generations?

But what if “governance” was viewed not only through the lens of operational necessity but also as a means to articulate, promote, and sustain achievement of a family’s philanthropic goals across generations? Kitt Sawitsky, Esq. at Goulston & Storrs in Boston recently shared with me his view of family governance in this context (full disclosure here, I am “of counsel” at Goulston and Kitt is a corporate attorney who specializes in family-owned businesses).

First, a bit of background. Governing structures can be critical to the establishment, promotion and preservation of fundamental values and goals. Consider our US Constitution—our foremost governing structure—and its values. The Framers knew our young country needed clear “rules of the road” to affirm, reinforce, promote and preserve our founding principles for future generations.  

In structuring family governance mechanisms for family charitable work, Kitt’s advice is to start in the same place and create a two-step process:

1. Identify and capture the family’s shared mission and values;
2. Decide the procedures that will help sustain intergenerational participation and nurture ongoing consensus.

A family “constitution” could both articulate values and provide for procedures and structure that sustain and reinforce those values. Intergenerational sustainability requires processes that promote inclusiveness, diversity of views, transparency, accountability, and a sense of “stewardship” (rather than ownership) of family assets.  

Kitt also recommends the following when creating family-based philanthropic structures:

• Minimize conflicts and foster focus: Create a structure that is separate from any other family business or endeavor. Family foundations often co-exist with ongoing family businesses and some family members may be concurrently involved in both, while others are not. Conflicted interests and the competing needs of running a company can dilute and diverge attention from the nonprofit. “Separateness” also can empower leadership within the next generation’s philanthropic efforts, independent of a particular individual’s interest in (or aptitude for) the family business.
   
• Get formal: Establish a written a structure that all family members agree to follow. Procedures that establish explicit ways to set or change strategic goals, provide for operational management, insure wide participation, transparency and accountability and address succession will go a long way in avoiding destructive, ad hoc methods of dealing with these fundamental issues. Ultimately, it is these formal embodiments of the family’s values, and the processes to implement them that will pass from generation to generation and, hopefully, survive to promote the greater good of the family and wider community.

In my conversation with Kitt he was quick to point out that there is no fixed form for a governance structure to carry out a family’s philanthropic endeavor. To borrow a phrase from Kitt, “When you have seen one family governance structure, you have seen one family governance structure.” But you do need your one.