chapter nine

The Unique Role of Family Foundations

The rewards on a family investment in philanthropy are—or can be—extremely high.… Family members report an excitement and fulfillment going far beyond what they had known simply being blooded (often bloodied) members of a tribe.… There is something distinctive and precious about family foundations that suggests they should remain as they are: a unique opportunity for families to make and leave their mark on the society around them, to share with others the fortune they have enjoyed and the creative energies they so often possess.

—the late Paul Ylvisaker, former Program Officer in Charge of the Social Development Program, the Ford Foundation¹

Among the most effective and successful foundations over generations are family foundations. Where the genes and values of founding individuals or families are strong enough, families not only can endure but can blossom in pursuing a kind of philanthropy that adapts well to changing times while preserving the essential focus of their founders. Many family foundations, large and small, operating nationally as well as locally, have distinguished themselves over the course of three to six or more generations by their achievements for the public good as well as by their adherence to the values of the matriarchs and patriarchs who founded them. These institutions offer a strong rebuttal to the belief that family foundations eventually suffer from the passage of time, the growing size and diversity of new generations, and the increasing distance from the spirit of the founders. On the contrary—here are just a few examples.

THE SURDNA FOUNDATION

The Surdna Foundation will be 100 years old in 2017, and its professionalism has earned it a seat alongside some of the largest private foundations in the nation. It describes itself as a “national family foundation,”² and over its history it has developed a systematic plan whereby descendants of its founder, John Andrus, elect both family and nonfamily members in roughly equal numbers (12 in total) to serve as trustees. Within the past decade, the foundation’s endowment reached about $1 billion in value. As of the end of 2014, its annual grantmaking was about $47 million.

THE WILLIAM AND FLORA HEWLETT FOUNDATION

William and Flora Hewlett established the private foundation named for them in 1966, and that foundation is now among the 25 wealthiest private foundations in the United States. In 1998, following the death of Flora Hewlett, William Hewlett along with other members of his family created the Flora Family Foundation as a memorial to his wife, in which successive generations of their family could participate in significant philanthropic initiatives. The Flora Family Foundation has a two-tier structure, consisting of the Family Council, of which the five children and 12 grandchildren of William and Flora are members, as well as the spouses of those offspring, and a board of directors made up of some of the Hewletts’ children and grandchildren, usually six or seven of them, plus two nonfamily members, each serving one-or two-year terms.³ Since the Flora Family Foundation was established, family members chosen to be directors of the William and Flora Hewlett Foundation have come from among those family members who have had the prior experience of serving as directors of the Flora Family Foundation. The bylaws of the William and Flora Hewlett Foundation require that, at any given time, four members of the Hewlett family be serving as directors of the William and Flora Hewlett Foundation.⁴ These arrangements for involving successive generations are widely regarded as among the most effective ways of achieving intergenerational family participation. They permit Hewlett family members to acquire experience and demonstrate their abilities in a small pond and thereby create a track record on the basis of which other family members can make a reliable judgment as to who should be elevated to the board of the William and Flora Hewlett Foundation.

THE DAVID AND LUCILE PACKARD FOUNDATION

The David and Lucile Packard Foundation is another of America’s largest family foundations that has remained faithful to the values and program commitments that its founders cherished, while at the same time adapting those commitments to changing times. The three daughters of the founders—Julie, Nancy, and Susan—as well as their respective spouses and their children, play an influential role in foundation decisions on the 15-person board of trustees, aided by distinguished outsiders. Packard is one of America’s leading donors to the effort to diminish global warming and its consequences, having committed in 2008, along with the Hewlett Foundation, $500 million each over seven years to establish and support ClimateWorks, the philanthropic collaborative dedicated to battling climate change. In addition, in 2015, the Packard Foundation made a new commitment of $350 million over seven years. Packard is also a leading national foundation in early childhood education, marine biology, and other fields in which the founders pioneered.

THE ROCKEFELLER BROTHERS FUND

The Rockefeller Brothers Fund, created in 1940 by the five sons of John D. Rockefeller Jr., and joined in 1954 by their sister Abby Rockefeller Mauze, has distinguished itself not only by its consistent devotion to the forward-looking values and interests of its founders but also by its example of how well a large and ever-growing family can consistently manage to overcome differences among its members in order to achieve consistent congenial collaboration in philanthropy at its most impressive.

THE ANNENBERG FOUNDATION

The Annenberg Foundation was established by Ambassador Walter H. Annenberg in 1989, and he presided over it until his death in 2002, at which point his widow, Leonore (Lee) Annenberg, succeeded him. When she passed away seven years later, her daughter, Wallis Annenberg, became the chairman, president, and CEO, and three of her children—Lauren Bon, Charles Annenberg Weingarten, and Gregory Annenberg Weingarten—became vice presidents and directors. The foundation is director driven; each of the four directors leads a program of his or her own, though all of the directors make the final funding decisions together, assisted by a small program staff. As the Annenberg Foundation has been in existence through only three generations so far, it is not possible to know how its governance might evolve in the future.

THE SALL FAMILY FOUNDATION

Every family that has a family foundation struggles with how best to involve their progeny in their philanthropy, and there is no one right way to do so. It depends on the values that the parents have transmitted to their children, how well the offspring get along with one another, and the extent to which they are interested in the substantive kinds of philanthropic objectives on which the founders have chosen to focus. The Hewlett family’s way makes a great deal of sense if one has a sufficiently large pool of philanthropic dollars and a large number of children and grandchildren, but other less highly structured arrangements can work well too. The Sall Family Foundation, which was created in 1993 by John and Ginger Sall—subscribers to the Buffett–Gates Giving Pledge—uses a less formal structure. John and Ginger Sall have elected their five children, the children’s spouses, and several of their children’s peers and friends to a young persons’ committee of the Board of the Sall Family Foundation. Their plan is to add their grandchildren to the board when they reach 18 years of age. (They have only one grandchild at present, and he has 18 years to go before becoming eligible, as of the writing of this book.) They have now established a $1 million annual budget, which their children use for grantmaking without the need for their parents’ approval. Ginger Sall expresses their reasons for doing so:

One is to have some of their peers on the board. [Our children] don’t want to be slackers or uninterested when their peers are on the board. Among those in their late 20s, early 30s, there are plenty of promising, enthusiastic people who would love to have access to some capital to do good in the world or to work and serve… as an experience builder for themselves. Maybe they’re all future board members of the Ford Foundation or something like that. The other incentive… is… to have [our children]… learn by doing.…

That came about, at the first foundation meeting with our expanded board. We sat down in our dining room, looked around the table at our kids and their very smart, energetic, enthusiastic peers… [and]… I thought, “Oh, my goodness, we’ve got to give these people something meaningful to do. They just don’t want to read reports and proposals from our large, complex grantee or would-be grantee organizations. They want to get their hands into this and talk to people and network.” Some of them were quite accomplished networkers at that time already. It would have been a shame not to use those networks. We realized that they were interested in small start-ups—what we call sports-car, hot-rod organizations—the kind where you can figure out what they do when you read their annual report.… I have to say, the committee that volunteered for this work really surprised us. They didn’t just go out and find organizations they liked. They studied the field. They talked to people for whom it was their professional job to invest in these sorts of organizations. They used their networks and asked around. They understood the fund, gained some understanding of the funding life cycles of these organizations and decided what part of the life cycle they thought we should invest in.… They figured out, relative to the budget of the organization, what the right percent would be for our grant and that these were going to be unrestricted grants.… The first year, we allocated a total of $300,000 for this committee to grant. The second year, it was $500,000 and in our third year, we’re at $700,000.… And they’re enjoying [the process].⁵

In all of my interviews for this book, I questioned perpetual foundation presidents about whether their boards had ever discussed the possibility of spending down. Many of them responded that their boards had talked about the possibility but concluded that they would do so only if they could identify an initiative of the highest priority to their mission and donor intent in which there was great likelihood of success in achieving the desired impact. The views they expressed were not different in substance from those quoted above from George Soros and Chris Stone.

In other interviews, the foundation leaders were emphatic in their intention to exist in perpetuity. Most of those were heads of family foundations, and their views seemed implicitly premised on the continuing commitment of their progeny to the mission of the respective foundations. For example, Lester Crown, the chairman of Crown Family Philanthropies in Chicago, a second-generation leader, strongly asserted, “We are not spending down; instead we are spending up. As far as we’re concerned, the continuation and building up of the charity funds is part and parcel of keeping the family together.”⁶

Lynn Schusterman, founder and cochair of the Charles and Lynn Schusterman Family Foundation, another subscriber to the Buffett–Gates Pledge, expressed a similar view. She referred to a Talmudic tale called “Honi and the Carob Tree,” which goes as follows:

One day, Honi the Circle Maker was walking on the road and saw a man planting a carob tree. Honi asked the man, “How long will it take for this tree to bear fruit?”

The man replied, “Seventy years.”

Honi then asked the man, “And do you think you will live another seventy years and eat the fruit of this tree?”

The man answered, “Perhaps not. However, when I was born into this world, I found many carob trees planted by my father and grandfather. Just as they planted trees for me, I am planting trees for my children and grandchildren so they will be able to eat the fruit of these trees.”

Ms. Schusterman then noted that a carob tree adorned by a quotation from that tale is the logo of the Charles and Lynn Schusterman Foundation, and continued:

One of the things I love most about the Honi story is the way it exemplifies how so many Jewish teachings have become universal values. As a proud Jew, I believe we all benefit from the lives of those who came before us, and each of us has a responsibility to try to make tomorrow brighter for future generations. And while I don’t know what may lie ahead, I am committed to doing whatever I can to provide those who share my belief in the fundamental goodness of people the opportunity to repair the world and make it a better place.

I started the foundation with my late husband, Charlie. He was a wildcatter and was not afraid to take risks. Although he knew he would sometimes drill a dry hole, he never let the fear of failure stop him from pushing ahead. I want to give people the same kind of confidence so they, too, can take the chances necessary to succeed in their efforts to make positive change.

I believe the future is full of promise for everyone, and I am committed to making it possible for those who will be around long after I am gone to help the Jewish people and all humanity achieve their full potential.⁷

What more is there to say?

The Rothschild Foundation

The Rothschild Foundation is based in London, where Jacob Rothschild has long lived, and it is now in its eighth generation as a family foundation. Its focus is primarily on the State of Israel, where it operates under the Hebrew name “Yad Hanadiv,” which means “hand of the willing giver.” For many years, the Rothschild Foundation has been among the largest, perhaps the largest, philanthropic foundation first in Palestine and now in Israel. According to Lord Rothschild, on several occasions his relatives have thought seriously about spending the foundation down, but his relative by marriage, Mrs. James Rothschild, who led the foundation prior to him, said, “Well, that would be a pity. We have a long history in Israel, and I’d like to go on.” “So,” Lord Rothschild added, “she devoted quite a bit of her resources toward doing just that.”⁸

Lord Rothschild feels precisely the same way. He told me, in his characteristically understated way:

For us, because it’s sort of important to Israel, the foundation, sentimentally, and historically, because the Rothschild family were there from the very beginnings, because we’ve done some notable things in terms of the institutions of Israel, like building the Knesset, building the Supreme Court, building the Israel National Library. So, if I look ahead [I would] say, after my lifetime [it should continue because] I’ve got a daughter, Hannah, who is very interested in the Foundation and is a trustee, and would want to carry on this work even though she’s not religious.

But what I’ve done is… [to create] a balance of power between the family and the other trustees, who are a distinguished group of people [and who are strongly committed to working in Israel]. We have a powerful executive, so even if my family weren’t taking an interest, it would go on. They are, however, involved, and I’m confident that they will want to remain involved. In addition to me, there are two family members who are Trustees of Hanadiv.… Is it tempting to do a spend-down foundation, or do the historical arguments dictate that this thing should go on, because, as I say, we are inextricably involved with the history of Israel. My feeling is that we shouldn’t have a spend-down foundation.… Even if there isn’t a member of my family who wants to get involved, I think it should go on, and I hope there always will be one who will pop up, do you see?¹⁰

He then added: “In an ideal world, we should have a Rothschild as a chairman, but you don’t have to have one if there isn’t a suitable one. So, there is a sort of balance of power between the non-Rothschilds and the Rothschilds.”¹¹

The Jack, Joseph and Morton Mandel Foundation

Morton Mandel and his two brothers founded the Premier Industrial Corporation, which in 1996 merged with Farnell Electronics PLC, a British company, at which time Morton Mandel became vice chairman of Premier Farnell, the merged company. He served in that role until 2002. Morton Mandel has long headed the three brothers’ foundation. In my conversations with him, he vigorously argued against spending down, insisting that there would always be worthwhile initiatives to undertake in the primary areas of the Mandel Foundation’s priorities—mainly Jewish education, nonprofit leadership, the humanities, and social service in the United States and Israel—and that he continues to have confidence in the faithfulness of his philanthropic successors in deploying the foundation’s resources in consonance with his family’s intentions. He has a board of trustees whom he trusts, and he has named Jehuda Reinharz, formerly president of Brandeis University, as president of the foundation and his designated successor as chair.

THE IMPORTANCE OF NONFAMILY BOARD MEMBERS

All happy families are alike; each unhappy family is unhappy in its own way.

—Leo Tolstoy, Anna Karenina

The first half of Tolstoy’s aphorism may be correct in general. When it comes to family philanthropies, however, the fact that a family is otherwise happy does not automatically mean it will function happily and congenially as a family foundation board. Even otherwise compatible family foundation trustees may hold different opinions regarding the programs their foundation should fund, and sibling rivalry is hardly unknown in these boardrooms. Still, a generally happy family brings trust, respect, and, yes, love to the table, which makes the resolution of differences much easier. Countless parents have told me that the early and continuing involvement of their children in their families’ philanthropic decision-making has created strong bonds between parent and child and among the children themselves.

On the other hand, many parents seek to solve their intrafamily disagreements by engaging their progeny in philanthropic grantmaking decisions; not only does this rarely succeed, but it often adds to the areas in which family members can vehemently disagree. Family foundation participation is definitely not a cure-all for family pathology.

It is also true that leavening family foundation boards with a limited number of carefully chosen nonfamily members can be of enormous help to either close or contentious families engaging in philanthropic giving. Not only can outsiders mediate family disagreements and bring independent perspectives to bear, but they can also enable close families to be even more collaboratively productive. As Ginger Sall observed, “Having non-family members on a family foundation board is a very useful way of motivating all family members to behave properly and to work hard.”¹²

Similarly, placing a founder’s business associates on the board can help maintain the foundation’s vitality and fidelity to the founder’s intent over time. The history and track record of both the Robert Wood Johnson Foundation (RWJF) and the Alfred P. Sloan Foundation testify to the effectiveness of that practice.

When General Johnson established his foundation in 1972, he stipulated that virtually all of the trustees would come from among the senior officials of Johnson & Johnson, the corporation that he founded and led. His view was that the foundation board members would be a combination of “church and state,” with those with business expertise as “the state” and those well versed in health care constituting the program staff, “the church.” The trustees chose as the first president of the foundation David Rogers, who had been appointed dean of Johns Hopkins University Medical School in 1968 at the tender age of 42. Dr. Rogers recruited a staff of young stars in the world of health and health care, virtually all of whom made names for themselves as well as for the foundation under Rogers’s leadership. The often tension-filled collaboration between church and state produced a foundation that not only adhered to the values and intent of General Johnson in supporting important initiatives but that set perhaps the highest standards of accountability and transparency for large American foundations. Even with more foundations today following in its transparency and accountability footsteps, RWJF continues to set the pace qualitatively and also publishes an annual compilation of evidence-based reports on its programmatic initiatives. Its 17-person board has nine current members with careers in business, five of whom are former senior officers of Johnson & Johnson.

The history of the Alfred P. Sloan Foundation is similar in this respect. When Alfred P. Sloan retired as chairman of General Motors Corporation in 1956, after working there for 33 years, he took on the role of presiding over his namesake foundation, based in New York, which he had founded in 1934 and gradually endowed over the years. Until his death ten years later, Mr. Sloan chaired and created the foundation’s program, which remains substantially in effect to this very day. From the beginning, its central focuses were on business education, science, engineering, and economics, and it has been one of the few foundations to dedicate itself to facilitating the development of new methods and fields of scientific knowledge, such as genomics, bioinformatics, STEM (science, technology, engineering, and mathematics) research and education, and digital information technology applied especially to scientific research. It is likely that Mr. Sloan established the pattern of board governance starting in 1956 that General Johnson emulated when he founded his foundation in 1972. Some of the Alfred P. Sloan Foundation’s original trustees came from General Motors, some had backgrounds in other corporations, and some came from the world of teaching science and economics. At present, of its 14 trustees, six are distinguished professors in the biological sciences, economics, or social sciences, three are present or former heads of universities, and five are from the corporate and finance sectors, one of whom was formerly president and CEO of GM. Like RWJF, the Alfred P. Sloan Foundation has a reputation both for identifying and supporting initiatives of very high quality and for manifesting meticulous loyalty to the values and intent of its founder-donor.

While one cannot prove causation and should be wary of generalizations, I am convinced that the quality with which both of these foundations have served the missions and visions established by their donors can be attributed in a significant degree to the continuing presence on their boards of a substantial group of trustees both from the corporate world and with the highest level of achievement in science.