The art of giving: family business philanthropy · 8 The art of giving: family business philanthropy The focus of family philanthropy should not be its assets, but rather its ideas

Family Philanthropy Services

The art of giving: family business philanthropy

2 The art of giving: family business philanthropy

Philanthropyneeds role models —like you andAndrew Carnegie

Andrew Carnegie was an extraordinary entrepreneur and one of the most generous men and greatest philanthropists of all time. He helped shape the US steel industry in the 19th century and became one of the richest men of his time. But his lasting legacy comes from his support of culture, science, education and much more, donating more than US$350 million in his lifetime — the equivalent of US$4.9 billion today.

You don’t have to pay big money to have a big impact on society. With our Family Philanthropy Services, EY can show you how to use your existing resources for maximum effect, and how your social commitment can benefit you as a family business, while benefiting society as a whole.

The art of giving: family business philanthropy 3

How family businesses canmake the world better

Family entrepreneurs are used to taking charge and shaping things according to their vision, both within their companies and in the larger world. Either way, they tackle issues in order make improvements and drive advancement.

Why do family businesses owners want to do good? There are a lot of reasons, chief among them is a feeling of social responsibility, and an appreciation for their good fortune manifesting in a desire to give back to the world.

Whether you want to give time, money or expertise, there are many options available to family businesses. We’ll take a closer look at some of these options on the following pages and show you how you can engage in philanthropy with an impact.

There is a long tradition of family businesses working for the common good. Their efforts to fight poverty, enhance education, the arts, culture and more, have made lasting contributions to society



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Philanthropy today

Philanthropy in the past

• Often no direct relationship to the core business

• A wide variety of activities over the years

• Social obligation with no expectation of a measurable impact on business

• Doing good without claiming or demonstrating any measurable effect

• Related to self-image

• Relevant to the “social license to operate“

• Follows clear allocation procedures and responsibilities

• Based on specific social needs

• Identifies intersections with the core business

• Uses the most suitable tools and activities in a targeted manner

• Measures and communicates the improvements that are achieved


From generous donorto purposeful manager

The goals of philanthropy are the same as they’ve always been. However, there are now many more ways to reach those goals and the expectations for results have changed. Philanthropy today should be effective, efficient and transparent. Furthermore, the public increasingly expects companies to work to promote the common good

In the past, family business philanthropic endeavors tended to take a scattershot approach. Today things are different.The image of the noble donor who intervened here and there has given way to the dedicated entrepreneur whose social commitment is guided by modern management criteria: effectiveness, efficiency and transparency.

Traditional forms of philanthropy, such as donations or foundations, are now supplemented by contemporary options such as impact investing or social ventures, which involve investments in socially committed enterprises and charitable projects, either directly or through managed funds.

Whichever form you prefer, we recommend a professional strategy, since the modern public (including your customers) tends to scrutinize corporate ethics closely and critically. Consumers do not want companies to offer superficial “greenwashing,” but rather a measurable and sustainable contribution to the common good — consider it a “social license to operate.”


Philanthropy unifies

Many family businesses underestimate how powerful an instrument philanthropy can be to unify the family, particularly across generations


The focus of family philanthropy should not be its assets, but rather its ideas and values. That’s why, when giving advice, we don’t start with tax implications or the structure of succession. We start with what holds your family together — its shared values.

Discovering and codifying these values is a revealing and often surprising process for families. It is also very valuable, because shared values are what make a family a cohesive unit.

Planning philanthropic efforts can be an opportunity to first identify and articulate shared values, and then to use them to make fundamental decisions, such as:

• How can we better manage our business?

• Which asset strategy corresponds to our family values?

• Which form of investment should we pursue?

• What do we want to give the world in which we live?

Once identified, we strongly suggest that families use these values as the basis of a family constitution. We can help on both counts.


Business andfamily

Personal connection

Charitable foundation

Charitable association

Donation

Social ventures

Sponsorship

Impact investing

Knowledge transfer

Values

History

Culture

Society


“ Any time you give, it has to be from the heart. You have to give to something you are passionate about.”

Melinda GatesCofounder of the Bill & Melinda Gates Foundation(Forbes 400 Summit)

Planning: what motivates you?

Whether you prefer the role of a traditional benefactor or that of a modern investor in social causes, support can take many different forms. We’ll work with you to determine what is right for you and the causes you care about


In the process of finding the right philanthropic fit, one thing is revealed time and again: the closer the personal relationship to the project, the better the results. That’s why it’s worth choosing an issue that is meaningful to you, either globally or closer to home. Potential areas include:

• Food. Fighting hunger around the world; promoting the use of sustainable production methods

• Education. Improving educational opportunities at all levels of society and supporting educational institutions

• Energy. Promoting clean technologies, mitigating climate change and reducing carbon emissions

• Environment. Conserving natural resources and biological diversity as well as reducing environmental pollution

• Art and culture. Preserving and displaying works of art

• Water. Creating access to clean drinking water, ensuring proper sanitation and conserving water

• Financial services. Offering financial support to people in need as well as small and microbusinesses (e.g., microfinancing)

• Health. Giving access to preventive health measures and treatments to the elderly and people with low income

• Housing and municipal institutions. Helping to create and improve subsidized housing

Implementation: achieve your goals with clear guidelines

Once you’ve decided on the right philanthropic commitment, we’ll take care of the legal, fiscal and organizational framework. Remember: the better the planning, the more successful the project


There are three main pillars of your philanthropic commitment: a solid legal basis, clearly defined roles and responsibilities, and secure financing.

We’ll advise you on sound legal form and review which country offers the best conditions for your project. Then we’ll help you draw up a suitable constitution and establish the structures and governing bodies you need to manage and control it.

Of course, tax considerations play an important role in all charitable activities. We’ll help you find the best strategy for compliance, including endowments, donations and bequests.



Successful foundation• Clear focus

• Clearly defined target group

• Solid financing, low expenses

• Board comprised of family + management + external parties

• Flexibility, ability to cooperate

Good work calls for a good foundation

For many family businesses, having a foundation is an excellent opportunity to connect philanthropic objectives with family’s unity and financial security. We can help you set up a strong foundation that meets your goals


A charitable corporate foundation can help your family business benefit society while generating income.

Income generated from a foundation’s capital and other assets is used to carry out its mission. That means the foundation’s capital should be substantial to work efficiently — at least US$25m.

Before setting up a foundation, you need to consider the applicable tax and foundation law carefully. The foundation’s objectives and legal framework play a significant role in its requirements and opportunities. Think it through first, because it’s much more difficult to modify later.

That’s why we have the right professionals available to help you design, plan and structure your foundation, tailoring it to fit your family’s goals.

Manage, control and organize philanthropy

Successful philanthropy isn’t done randomly. It’s the result of a series of good decisions, effective management and continuous improvement. We can advise you on the most important factors for success


What is the best organizational form? Do you want to be personally involved, or would you prefer to entrust a family member or a family office with the management of your foundation? Who will handle the finances? Who will provide proof of nonprofit status, if applicable? How can the success of the commitment be measured, and by whom? How can its effectiveness and efficiency be increased? Are there tax or other risks that have to be managed?

To ensure that your objectives are met, you must be able to answer these and other questions correctly.

Wherever you are in the world, we can provide you with cogent advice for all of the aspects of your philanthropic commitment.

At EY, you’ll find the right contact for every situation:

• Our auditors can help you with legal requirements and their impact on your annual financial statements, as well as setting up internal control systems and audits.

• Our risk and performance professionals will help you improve effectiveness and efficiency.

• Our transaction professionals can help if your philanthropic commitment is affected by the purchase, merger or sale of a company.

• Our private client specialists will help you structure your charitable activities tax- efficiently, wherever and however many jurisdictions you support.



Goal Commitment Effort Impacts — what are the effects of your efforts:

What are the long-term effects you’re hoping to achieve:

Compare your results against your goals

What change do you want to make?

What should you invest, and how much?

What activities do you pursue (financially, personally)?

• On your target group?

• Within your company?

• In your target group?

• In society?

• Within your company?

• Have you achieved your goals?

• Where do you need to make improvements?

• What facts and figures do you need to prove what you achieved?

• What lessons have you learned?

Input vs. outcome: evaluating your actions is key

Whatever type of philanthropic endeavor you choose, you want to be sure your efforts are worthwhile. Only measurable progress can be communicated effectively and improved systematically. Thus, professional philanthropy involves regularly evaluating the success of a project


By measuring the performance of your philanthropic endeavors, you get a precise idea of how much time, money, staff and expertise you are investing, as well as the changes your corporate citizenship is helping to bring about in your company, your employees and the world.

We tailor our evaluation to your specific projects, and gather key quantitative and qualitative figures that indicate the success of your efforts.

Quantitative information includes donation amounts, amount of invested capital, the number of employees involved and the people in need who have been reached. Qualitative performance indicators can include information on the acquired or improved skills of the individuals reached or highlight potential changes, such as in employee motivation.

We differentiate between the services provided, the associated long-term changes, and the resulting impact on the target group, the company and society. We also work with you to develop a detailed input vs. outcome comparison with concrete suggestions for improvement and key performance indicators, which you can use to demonstrate and communicate your achievements.

Philanthropy influences your public image

Positive public recognition is an increasingly important form of social capital for companies. Getting the kind of recognition you want depends on the perception of your company’s contribution to the common good, including philanthropy


The extent of a company’s contribution to society used to be more of a subjective perception — a feeling.

It doesn’t take a major disaster, or even a company’s social media gaffe, to see that perception has an impact on business and also on employee loyalty. For example, studies show that people are willing to pay more for a product if the manufacturer is considered to be doing good in the world. Employees even accept lower pay if their employer enjoys the right sort of reputation.

So it’s worth it for companies to work in a targeted manner toward having a high “public value.”

The “public value approach,” developed at the University of St. Gallen (see cse.unisg.ch/), attempts to make this value measurable. It assesses how much a company contributes to the fulfillment of human needs through its core business.

This is about much more than merely providing jobs. There are five factors at the center of this approach. The average

value of these factors represents a company’s perceived contribution to the common good (i.e., its public value). The higher the value, the more significant the perceived contribution of the company among those surveyed.

Together with the University of St. Gallen, we have developed a Public Value Scorecard, which can help you to discover your company’s public value, and to plan and assess philanthropic projects.


Common good 4,87

5,07

Cohesion 4,7

Quality of life 4,91

Morals 4,81

Public value: the perceived contribution to the common good


Is it objectively?

Is it reputable?

Is it politicallyacceptable?

Does it enable positive experiences?

Is it ?

Opportunities

Risks

Public Value Scorecard:perception is reality

Destroying public value Creating public value

How companies can manage their contribution to the common good:

Avoid a mismatch between the objectives and values of the company

Ask: “What should we stop doing?”

Identify when corporate objectives have been achieved

Take advantage of opportunities to promote public appreciation of current or new business models

Ask: “What should we continue to do?”

Ask: “What should we do now?” 1 2 3

The Public Value Scorecard: a navigation tool for your philanthropic commitments

What is good for the company? What is the best decision morally? How can you, as a company, support social cohesion and a high quality of life? The Public Value Scorecard can help you answer these questions and more


The Public Value Scorecard demonstrates the impact of your corporate decisions on public perception and even warns you of potential problems. It gives you the opportunity to take public opinion and social impact into account when making business decisions.

The scorecard uses five criteria to provide a precise opportunity or risk profile for each action. With it, you can align your decisions, philanthropic and otherwise, more closely with your values and self-image. It also helps you better prepare, manage and carry out your philanthropic activities.

Many public and private companies around the world are using the scorecard as an early warning system for public criticism or worse. With the scorecard, we can help you optimize your philanthropic commitment and tailor it to your company’s values.

Help shape society:building a legacy for your family business

We want to help you transform your philanthropic commitment into a proud legacy for your company, your family and your employees


The work your company does for the common good has many positive effects, both inside and outside your company. It can improve the quality of people’s lives, strengthen your family’s cohesion, and increase the standing of your company in the public’s perception. You can strengthen your company’s reputation as a brand — and an employer — through successful philanthropic activities.

Employees tend to be more loyal to companies that involve them in community engagement and philanthropic activities because they identify more strongly with the company. Sustained philanthropic commitment not only leaves a mark on the company’s culture, it can also noticeably improve the cohesion of the family that owns it, bringing family members together for a greater purpose, increasing pride in the family and offering new opportunities to younger family members.

Philanthropic activities are great training and proving grounds for talented young employees and family members. Setting up a foundation or other organizational structure may offer employment opportunities for more members of the family.

Thus, philanthropy not only serves the greater good outside the company — it also creates positive change within the company and the family.


“ In my family, from my great grandfather John D Rockefeller Sr. and on down, the three philanthropic tips that have been values and principles of our family include; looking for root causes, finding really smart advisors and thinking strategically.”

Eileen RockefellerVenture philanthropist, social entrepreneur and author


Philanthropy

1. 2. 3. 4.

Analysis: Selection and planning:

Structure and implementation:

Control and communication:

What values and convictions hold the family together?

What do we want to stand for (internally and externally)?

• Objectives (intended impact — internal and external)

• Type of commitment (financial, content)

• Select projects in accordance with the values of the family

• Legal form

• Domicile

• Organization (internal, family office or foundation)

• Structure and responsibilities (tax-related, legal, organizational)

• Financing and integration in the wealth concept

• Obligations

• Evaluation of project success

• External communication

Step-by-step: toward a customized commitment

The philanthropic commitment of a family company requires a holistic approach


There is no single recipe for the successful philanthropic endeavors of a family business. Quite the opposite, in fact: the more you tailor your philanthropic activities to your particular family values, the better the results you achieve.

The question: “What are this family’s fundamental values?” is particularly important. Finding the answer to this question can give you important insight into the right philanthropic focus for your family.

We can help you from the very beginning. From initial deliberations through implementation and evaluation, our professionals will be there to help you choose the right vehicle, plan and structure. Once that’s been defined, we’ll work with you to find the optimal framework for your project: legally, fiscally, organizationally and financially. And with our international network, we can develop cross-border approaches whenever the need arises.

As your philanthropic efforts gain momentum, we’ll support you in carrying out your obligations, monitoring performance and its impact on the public value of your company, and communicating your successes to the public. In short, we’ll help you get the most out of your philanthropic activities, directing them to become an ongoing benefit for your family, your company and society as a whole.


Family business philanthropy: creating lasting impact through values and legacy

Our latest philanthropy study sheds new light on key themes in family business philanthropy in order to enhance our understanding of the increasingly important field and its global contribution to society.

The following five questions regarding family business philanthropy are particularly relevant and had been little explored before our study:

• What form of philanthropy do family business owners pursue?

• What drives family business philanthropy?

• How is family business philanthropy organized?

• Does the government support family business philanthropy?

• How is family business philanthropy evaluated?

These were the high-level questions that we put to respondents as part of a large-scale international survey of family business owners and managers, which encompasses 525 responses from 21 countries. The survey was dedicated exclusively to family business philanthropy and was conducted by EY in collaboration with the Center for Family Business at the University of St. Gallen between January and February 2016.

To read the full report, visit ey.com/familybusiness

http://ey.com/familybusiness


Successful philanthropy by a family business is a winning proposition for the world and the company. When both those activities manifest, the values of the family become a strong unifying element

When family businesses or family offices approach us, philanthropic considerations are not uppermost in their minds. Their concerns lie elsewhere. They are thinking through the question of optimal succession, how to secure the family’s assets or the important issue of family governance.

Philanthropy can be valuable when making these important decisions, if you take the planning of these activities as an opportunity to take stock of your ideal legacy – your values, your passions, your character. In short, what really holds your family together.

Once defined, family leaders can recognize quickly which decision is best for the company and where they might want to change course. This makes philanthropy a visible manifestation of the family’s values and hence a unifying element across generations.

And when this sense of unity grows, then the enthusiasm that sustains the philanthropic activities of the family grows as well. This is the prerequisite for an activity being perceived as fulfilling, even if it is “only” time that is expended.

Philanthropy benefits your family, your company and society as a whole. We can show you how best to proceed, and how you, as a family business, can benefit from your philanthropic endeavors over the long term.

With best wishes,

Peter Englisch EY Global and EMEIA Family Business Leader


“ Honest, heartfelt enthusiasm is one of the most effective factors in success.”

Andrew Carnegie

EY Family Business Center of ExcellenceThe Family Business Center of Excellence brings together advisors from the EY global network to share knowledge and insight to address family business challenges and provide seamless service for internationally based, family-owned companies. Wherever you are based or whatever your needs, there is someone ready to help you to succeed for generations.

Visit ey.com/familybusiness for more information about our Family Business Center of Excellence.

Follow us on Twitter: @EY_FamilyBiz, #EYFambiz.

Peter Englisch

EY Global and EMEIA Family Business Leader

[email protected]

+49 201 2421 21800

Carrie Hall

EY Americas Family Business Leader

[email protected]

+1 404 817 5740Twitter: @CarrieGHall

Ian Burgess

EY Asia-Pacific Family Business Leader

[email protected]

+61 7 3243 3711

Makoto Hara

EY Japan Family Business Leader

[email protected]

+81 80 6862 3013


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The art of giving: family business philanthropy · 8 The art of giving: family business philanthropy The focus of family philanthropy should not be its assets, but rather its ideas