Ethics in Family Philanthropy: Putting Shared Values to Work

There are times when philanthropy is in the news for all the wrong reasons: stories of scandal and abuse garnering as much attention, if not more, than tales of valuable philanthropic contributions.

Despite unfavorable press coverage and eroding public confidence in the nonprofit sector, things are not as dismal as they may seem. In most situations, the emphasis continues to be on preventing a good charity from falling into bad habits or ethically questionable behavior.

The stories that make the news and spur congressional investigations are those of blatant and flagrant abuse: cases of the misappropriation of funds or exorbitant compensation. News-worthy cases are those of clearly illegal behavior, in which the judiciary system decides if and how offenders should be punished: by dismissal from a governing position and/or by a fine. But for most family philanthropists issues of ethics and questions of values are often much more ordinary, less dramatic, and more ambiguous than the egregious cases in the papers. In an Institute for Global Ethics survey of foundations that asked respondents about their most pressing ethical concerns, the top twelve issues included:

  • self-dealing
  • conflicts of interest
  • transparency
  • diversity and pluralism
  • nepotism
  • ethical investing
  • abuse of power and privilege
  • what to fund—charity or systematic change
  • arrogance in dealing with nonprofits
  • lack of candor and how to temper unbounded optimism; and
  • spending—long-term vs. short-term

[Excerpted from “Why Did I Make All This Money? Values and Ethics in Family Foundations,” by Rushworth Kidder in Splendid Legacy.]

These issues affect every facet of a family’s philanthropy from its structure (long-term vs. short-term grantmaking relationships/ perpetuity or spend out) and mission (charity or systematic change) to its investment, grantmaking strategies, and perhaps most importantly, governance structure. The role of ethics and values is so integral to how families define and carryout their missions, and the expectations for ethical behavior among philanthropists so high that it’s easy to become overwhelmed or stymied. So how does a family successfully address issues of ethics in their philanthropy?

The cornerstone is serious consideration of the motivation behind your family’s philanthropy, and the preservation of that sense of purpose throughout the life of your giving program. Values are the steam that powers the engine of a family’s philanthropy, serving as the impetus and guiding force behind all of the family’s philanthropic decisions. And for this reason, identifying shared values is an indispensable part of building a strong and thriving philanthropy and sharing those values is integral to establishing longevity in your family’s philanthropy.

If sharing common values is so integral to the success of a giving program how do families determine what those shared values are? How can you answer this question if your family or foundation board is diverse, encompassing many generations and/or points of view? The late Rushworth Kidder, founder and president of the Institute for Global Ethics, offered a good deal of advice in an interview in More than Money magazine, entitled “Ethical Fitness: Choosing Between Right vs. Right.” In the article, Kidder asserts that despite differences in religion, philosophy, geographical location, nationality, and race, human beings have a common belief in five core values:

  • honesty
  • responsibility
  • respect
  • fairness; and
  • compassion

Although they may not all become the overarching elements in your family’s philanthropy, considering these core values will help you to start a conversation about values at your family’s next meeting. Whether you are just starting out and have yet to confront the ethical dilemmas on our list, or have been involved in your philanthropy since before you could remember, it never hurts to revisit and reconsider your values. Don’t be discouraged by your differences, or fear the conflict that may arise by having an open conversation about values, because upon examination you may find agreement between the most unlikely participants. Your mother who staunchly defends an annual grant funding training programs for seeing-eye dogs despite a shift in the family’s grantmaking focus, and your college-age daughter, a card-carrying member of PETA, who threw away Grandma’s birthday gift of perfume in protest over animal testing, may find that they have a common value in respecting the lives of animals. In fact, having a frank discussion about the values driving your family’s philanthropy will empower all the members of your family and enable them to become more engaged and feel more invested in your philanthropic mission.

So once a family has an understanding of their shared values, how do they put them to work for their philanthropy?

The answer is: practice, practice, practice. Kidder contends that making ethical decisions is part of a process of learning and experience, requiring a great deal of persistence. In “Ethical Fitness: Choosing Between Right vs. Right,” he likens ethical awareness and behavior to training for a sport or practicing an instrument:

Ethics is not an inoculation, it’s a process. Most of us would scoff at a physical fitness program that says you can take a magic potion once in your life and be physically fit forever. Similarly being ethically fit involves constant practice and challenging yourself. You don’t “get” ethics by reading one article, talking to one guru, or going to one seminar. You learn a lot of fundamental ideas and get a conceptual platform to work with. But you need to do something to develop your skill, just as runners or musicians develop theirs.

In cases of right vs. wrong or legal vs. illegal, ethical judgments are easy to make: it’s clearly wrong—and illegal—to use charitable funds to pay for family vacations or personal expenses, or to contract foundation work out to your brother-in-law’s web design firm at above-average rates because he’s hit a rough patch. The waters become far muddier, however, when two values conflict or when you’re faced with deciding which of two valid choices is more right than the other.

Suppose your great-grandfather, a native of rural Pennsylvania, established your family’s philanthropic agenda with the intention of providing scholarships for the children of area coal mining families. Having grown up in the era of the company town and in that geographical area, he was profoundly affected by the suffering that demanding physical labor and educational limitations placed on working families in his community. In his will, great-grandfather specified that the family should continue to distribute a portion of its funds each year to this very specific, localized group, but as time passed and the coal mining industry in central Pennsylvania shrank, the pool of eligible applicants has dwindled.

Each year, the family debates what to do with the funds, and each year the debate is tabled until the next meeting because a decision cannot be reached. Your grandfather, out of respect for great-grandfather and his wishes, lobbies to continue the family tradition despite difficulties in finding grantees. Your father, who has fond memories of great-grandfather and his commitment to the community, interprets his wishes more liberally and suggests that the family maintain its regional focus but expand the grantee pool by opening the scholarships to families of the working-poor regardless of industry. You and your siblings, none of whom currently live in Pennsylvania, feel that the world has changed profoundly since great-grandfather’s time, becoming more global and inter-connected. And despite a shared belief in the importance of education and a respect for great-grandfather’s philanthropic impulse, feel that there are more pressing international concerns that you would like to address through the family’s philanthropy. Clearly everyone wants to use the funds to make positive changes in the world, but the disagreement is causing some strain among family members.

Dilemmas such as these arise from the conflict of two core values; in this case, loyalty to the founding donor and the truth that the context in which your family’s giving takes place has changed. So how does the family resolve the dilemma? When everyone is “right” how does the family determine how to proceed? By returning to the core values that have influenced the development of their philanthropy, this family can determine what the ethical action would be in this circumstance. Another option Kidder recommends is that families consider three traditional decision-making principles to determine what feels right for their family and what makes sense for the institution of their philanthropy:

  • ends-based principle: what produces the greatest good for the greatest number?
  • rules-based principle: what would it mean if this decision became a rule, and everyone acted as we are acting?
  • care-based principle: how would I feel if the roles were reversed? How would I want to be treated?

—adapted from “Ethical Fitness Choosing Between Right vs. Right”

In our example, perhaps the family will let the ends-based principle determine how they will proceed, and decide that the greatest good will be served by retaining their great-grandfather’s commitment to community but expanding their grantee search to include more needy families. Perhaps through a more directed discussion about values, the third generation of donors will decide that global concerns and community concerns are not mutually exclusive and that their work at the local level can have wider impact. One child able to attend college and see the world beyond his or her front door can cause a generational ripple effect, and become several generations of educated, global thinkers.

But the bottom line is that ethics and values are intimately connected to how a family perceives itself within and without its philanthropic framework, and that determining your values and putting them into action is a very personal process. Certainly there are resources available out there to help you guide your discussions about values and determine ethical behavior, but ultimately, beyond issues of legality, determining what’s right for your family is a matter of sitting down and talking amongst yourselves. It’s about taking into account your family history, philanthropic goals, and the context of your giving, and establishing a belief system and tradition of behavior that suits these factors, and to which you and your family can refer when confronted with difficult decisions.