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Can Philanthropy play a role in Strengthening Business Family Bonds?

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Can Philanthropy play a role in Strengthening Business Family Bonds?

Mar 12, 2024

The global landscape of philanthropy is evolving, with traditional practices expanding and becoming more adaptive to the needs of those giving and receiving philanthropically. This evolution has been particularly noticeable in the world of business families, where philanthropy is starting to play a more integral role according to both research and practice.

Financial contributions from family-owned foundations and family-business linked giving alone total billions of dollars per year and services a myriad of societal causes1. Whilst this upward trend is widely acknowledged, what’s sometimes overlooked is the potential for philanthropy to help strengthen relationships across family members.

The Motivations Behind Philanthropy

Family identity and family legacy are some of the motives driving family business owners to be philanthropic explains Andra Ilie, Senior Advisor, Family Office, Governance & Philanthropy, HSBC Global Private Banking

Often stemming from altruism, aspects such as an overall instinct to reinforce family values are some of the motivators for those embracing philanthropy. For others, education and upskilling successors, or making a mark in the communities in which they operate can be the primary catalyst for action. More often than not, families tend to evolve their philanthropy to the point where it becomes a platform for cultivating family principles and nurturing younger generations, whilst at the same time shaping legacy and responsible business behaviour.

For example, a family may support youth educational programmes through bi-lateral giving and a private family foundation, whilst their business entity might operate an apprenticeship programme and encourage their staff to volunteer their time in support of literacy. This allows the same values to permeate the border of personal and business philanthropy and can bring stakeholders together behind a common goal – whilst creating a learning environment and the potential for long-lasting impact.

The Evolution in Philanthropic Practices

“As philanthropic motivations evolve with each generation and individual mind-set, so too do the practices” says Ilie.

Depending on the jurisdiction, philanthropic initiatives range from bi-lateral giving, all the way through to collaborative giving, donor-advised funds and private, or indeed, corporate philanthropic foundations. "Families rarely opt for a single means. In practice, we tend to see a lot of hybrid giving, especially driven by the younger generations who wish to add their own brushstroke to the family’s philanthropic canvas and create enduring impact" observes Ilie. “A notable change has been the strategic lens added to more traditional philanthropic practices alongside the importance of measurement, transparency and accountability promoted by the next generation.”

The rise of co-giving initiatives and the shift towards quantifiable, sustainable impact are changing the way in which philanthropy is approached2. Added to this is the democratisation of philanthropy through technology, enabling donors to contribute to their chosen cause and come together to create greater synergistic change. 

Deeper immersion into philanthropic programmes is also a growing trend within family businesses. Offering family members the opportunity to pitch for funding to their families in support of philanthropic plans is one of the fresh ways of bringing business families and key stakeholders together to create meaningful change – and there are lots of skills to be gained along the way.

The Outcomes and Future of Philanthropy

The practice of philanthropy can create positive outcomes for the individual driving it, the family as a whole, and the broader business. For the immediate family, philanthropy can serve as an education tool for the next generation. One example is where philanthropic structures can be seeded and funded, and used to see how successful the next generation manages, invests and distributes the assets for philanthropic purposes. 

The results can provide insight on how prepared the next generation may be for managing the family’s broader wealth and family business, as well as providing them with a safe learning environment and developing them in the first instance for the future. Furthermore, it can foster stewardship values, equipping family members with valuable skills around applying business skills to philanthropy and vice versa. 

“We often see a new dynamic being created when current and future generations partner on philanthropic projects. It can be a brilliant bonding experience to work with a clear, important purpose that sits outside of the structures of the family business,” says Ilie. 

The world is becoming more attuned to philanthropy, in its various practices and reach.  For some, it can be a tool used to bring family members together through a common interface, whilst fostering a culture of generosity and shared values. For others it can be a novel means for deploying surplus wealth into the communities that have made the family business successful in the first place. Why are you involved in philanthropy and is it helping you strengthen your family bonds?

1 Foundation Giving Trends 2021, Pears Foundation, Accessible: ACF179-Foundation-Giving-Trends-2021_Design_DigitalVersion_v3.pdf (pearsfoundation.org.uk) 

2 The Rise of Collaborative Giving, Financial Times, Accessible: The rise of collaborative giving - Financial Times - Partner Content by Gates Philanthropy Partners (ft.com) 

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