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The Progress Road for the “Second Generation of Charitable Family”

:2017/08/14

Since 1990s, family charity has developed rapidly in America. Grant-making foundations have more than tripled over the past 20-plus years. Currently there are more than 100,000 family (private) foundations and more than 200,000 Donor-advised funds. Donor-advised fund allows donors to open an exclusive account, receive tax benefits and make recommendations on the use of funds and investment over time.



By contrast, family charity is in the ascendant in china. According to the statistics by Family Philanthropy Legacy Center, China Global Philanthropy Institute, currently there are approximately 500 foundations with family background in China which had an estimated net worth of RMB 10 billion in 2015, accounting for less than 10% of the total net worth of Chinese foundations. More than 200 family foundations’ net worth reaches RMB 2 million, in approximately 20% of which the second generation members of the family serve as secretary general, director or other important roles.


In the prosperous family charity field in America, what does charity mean for the next generation of the family?


Some families use charity as the tool to educate the next generation of the family to help them understand the value and responsibilities of wealth.


Some families use charity as the carrier of family values to achieve the family mission;


Some families use charity as a means of interaction with society, building a wide range of social capitals while contributing to the society;

……


On the whole, charity is a family gift that can be handed down from generation to generation. The American charity families’ experience in the charity education for the next generation can also be seen as a “gift” to Chinese wealth families. Focusing on subjects related to intergenerational transition, this paper summarizes the value of American family charity for the development of the next generation as new tools, new dimensions and new social contact. Through the case analysis of American family charity, we can summarize the strategic path characteristics of the next generation’s participation in charity as organized, funded and practical.


The value of family charity for the development of the next generation: new tools, new dimensions and new social contact



InPhilanthropy, Heirs & Values,Roy Williams and Vic Preisser outline the researches on more than 3,000 families and nearly 100 family foundations. They believe that involving the next generation of the family regularly in family charity can increase the success rate of family business transition. The book takes charity as the teaching tool for successors and gives specific actionable recommendations for involving the next generation at various ages in charity.


They believe that the value of involvement in charity at different ages is as follows:


Ages

Stages

Manifestation

5-10

Awareness

Discovery of personal influence

11-15

Exploration

Self-discovery in changes

16-20

Development

Understanding of responsibilities

21-30

Application

Maximization of contributions

30+

Mentoring

Unification of the whole family with charity


At various ages, values, mission and responsibility, the three core elements influencing family charity and succession, are highly relevant.


Values are the belief basis on which the heirs who can make decisions independently establish their attitudes towards money. On the “separation” of the children's self-esteem from the amount of money they need for living, family charity can play a major part. With appropriate education and shaping, family charity can help the younger generation develop an idea: money cannot determine “who” I am. With the right values, children tend to see money as a tool rather than a personal symbol, which can have a positive effect on their self-esteem.


Mission refers to the concept of the heirs on how to use the family wealth. If seen as a tool by the heirs, money will become a lever for achieving mission, enhancing family cohesion, establishing family power and inheriting family values. Then the potential role of money as a "separating factor" will retreat to the back.


Responsibility is the third main element that can be strengthened through participation in family charity. In the early education for the heirs, firsthand experience of charity projects, such as site visits and volunteer services can enhance young people's innate sense of responsibility; responsibility is the key to successful wealth management and self-management for an adult.


Charity as a new dimension of value inheritance to strengthen family cohesion


UBS conducted a survey of more than 200 charitable families in Asia, and one of the questions was, “what drives your family to do charity? “More than half of the families responded that they want to establish long-term family heritage through family charity.


Family charity not only helps the next generation understand how to spend money meaningfully, but also bears a family's commitment to spiritual tradition and the inheritance of values. Wealth families regard charity as a tangible carrier of the family values and a platform for strengthening family unity and preventing family wealth loss arising from disputes over property.


In China, for the majority of wealth families, family values are still in the construction phase and will be formed in the collisions and interactions between the first and the second generation. The “rich second generation” phenomenon in China is actually caused by “relationship imbalance” because the second generation cannot properly handle the relationships with the first entrepreneurship generation, wealth and the society. The “charity road” of American wealth families may provide reference for breaking the ice between the first entrepreneurship generation and the second rich generation in China.


In America, families committed to charity will bring charity elements into family gatherings. For example, in the Lawrence Welker family, the elders will get together to discuss how to give back to society while the children are listening. The children in the family will also be asked to plan how to participate in various activities, such as public service, money raising and social assistance. They will also make decisions on what institutions will be the targets of financing. In this way, the family dedication spirit and the values of giving back to society will be passed down the generations.


For a family that flourishes for generations, it is also vital to strike a balance between tradition and innovation. Elliott Donnelley, the fifth generation successor of the Donnelley family, an old and well-known family involved in the printing industry, once said, “We should cherish tradition but cannot rest on the heritage of the ancestors. Excessive dependence on tradition will become a burden, so every generation must have the entrepreneurial spirit of the first generation.” The inheritance of values does not mean staying the same.


Charity as a new social channel of the family to build a wide range of social capitals


For the next generation of the family, family charity is usually the first platform for them to enter society. Charity is from the inside to the outside which originates from the family’s mission to give back to society but the actions are targeted at solving social problems and participating in social activities. More and more wealth people are getting together to talk about charity rather than money or feelings. Charity has become a common discourse system for high net worth people. New social media are playing a positive role in the development, utilization and maintenance of social resources of the family.


In general, as part of the family heritage program, charity is vital to the growth of the next generation. It can educate the next generation on how to discover their missions and take on a wide range of responsibilities and achieve long-term goals.


The strategic path characteristics of the next generation’s participation in charity


Organized: learning how to make decisions in organizations


Many charity families set up youth board, youth advisory committee and youth board of trustees and other organizations for the next generation for their participation in charity decision-making, governance and project evaluation. At the same time, these organizations also build bridges for communications with the family foundation board where the members can voice their opinions on behalf of the younger generation of the family. When reaching a certain age (usually adult), they can hold posts in the family foundation board. Youth board mainly comprises family members and some non-family members (such as the children of the employees of the family enterprises) to bring more ideas and vigor and play the mutual influence among the young people.


The empowerment of the next generation in decision-making and expression rights not only enables them to participate in charity in organized and planned ways but also stimulates their enthusiasm for charity. The members of the youth board can not only develop personal skills and expertise but also prepare for future board work and careers.


Funded: learning how to spend in “real” donations


When the next generation participate in charity, the family will provide financial support to allow them to freely manage their donations according to their interests and learn how to spend money meaningfully in the process of donation. For example, David Rockefeller gives his children some pocket money every week, 1/3 of which can be spent, 1/3 can be saved up and 1/3 can be given to tramps on the streets. In this way, the children can learn the functions of money as savings, investment and contributions to the society. At the Fawkes family foundation, the board allocates $2000 for every member of the youth board every year to allow them to give 1 to 2 contributions to organizations that fit their purposes. The members select nonprofit organizations, record nomination videos, explain the purposes of the organizations and the programs they want to finance.


At the same time, some families will employ donation matching programs and awards etc. to inspire the next generation members to do charity work with their influence and ability and link more resources to help them solve social problems they are concerned with.


Practical: looking for course of action and ways in personal practice


Practical activities are the best ways to stimulate the enthusiasm of the next generation in charity and can help them develop the concept that “charity is not merely donating money”. The Tarsadia Foundation organizes international service activities about every 18 months which are planned by the foundation and financed by family members involved. They visited countries such as India, Peru and Kampuchea. In these international tour activities, the members volunteered to conduct community development activities with local organizations.


In addition to the above common strategies, American charity families also have their distinctive characteristics in terms of the next generation’s involvement in charity. There are many merits, including respect for the interest of the next generation, step by step from an early age, elders’ wisdom and experience sharing, professional learning and so on. In the charity activities, the next generation learns how to communicate with others, how to cooperate with others, how to resolve conflicts and how to make decisions together, which are crucial to family life and business.


By: Fan Zhihong, Cao Xiaohui

Family Philanthropy Legacy Center

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