Editor's note: In his 2003 book, Leading with Values, the late Rushworth Kidder, founder of the Institute for Global Ethics and a long-time board member of the Charles Stewart Mott Foundation, noted the following:
"[nonprofits] have an obligation to do the right things -- often wrenching choices among competing priorities, and having to ask what choice best fits their mission -- they must develop methodologies for analyzing and resolving right-versus-right dilemmas."
Family foundation governance is rife with examples of right-versus-right dilemmas – as just one example, there are very good reasons for taking an inclusive approach to governance, but there are also very good reasons for being more selective in your approach. So how do you decide?
Here we feature guidance and advice from Michael Rion, excerpted from the fun and informative (and, alas, out-of-print) guide he wrote for the Council on Foundations titled, Responsible Family Philanthropy: A Resource Book on Ethical Decisionmaking for Family Foundations.
Michael will be NCFP’s featured August 13th webinar speaker on the topic of “Passing the “mirror test”: Ethics and family philanthropy,” and is also the author of a chapter of the same name for the forthcoming edition of our revised guide, Splendid Legacy: The Guide to Creating Your Family Foundation. We hope the following advice and perspectives are helpful, and we hope you can join us for what is sure to be a fun and provocative discussion on August 13th!
How do we include successor generations on the board?
In some family foundations, there are eager and willing members of the second, third and even fourth generations who can serve as trustees. In these cases, responsible philanthropy and ethical treatment of family members means developing specific criteria for trustees and applying these criteria objectively in inviting new trustees. Criteria might include such factors as experience and maturity, diversity of perspective on the board, including each branch of an extended family, etc. Open discussion among the current trustees about nominations and selections is also important.
Other families experience difficulty in "recruiting" new trustees from younger generations. Members of these generations may have no interest or simply be too busy with their own priorities. Ways to encourage interest include keeping the extended family informed of foundation activities on a regular basis, inviting younger family members to visit board meetings or to get involved in particular projects to see the work of the foundation, seeking advice from other family members about the foundation's priorities, etc. In some cases, founders establish their foundation in large measure to provide a vehicle for encouraging their children to get involved in philanthropic purposes.
How should we choose trustees when there is a vacancy?
Apart from some minimal requirements of state law (e.g., mental competency), there are no legal mandates about the process of choosing trustees. In some cases, especially in small foundations with very few family members, succession may be directed in the by-laws and/or by custom so that, for example, direct descendants are "in line" as the successor trustees.
When trustees have some discretion in appointing new trustees, the most responsible approach is to establish some clear guidelines both for the process and for the choice of individuals. Objective criteria, rather than personal dislikes, will help ensure a board that fulfills both its family and its public obligations. Many family foundations document their procedures and criteria in writing as guidelines to supplement the broader language of the by-laws (which may only indicate the number of trustees, for example).
Should we have non-family trustees?
There is no legal obligation to include non-family members as trustees. Experience in the field is widely varied. Many foundations include only family members who are blood relatives, and others include family members by marriage. Many others will have one "outside" trustee, typically an old family friend and/or someone with legal or accounting experience.
Still others include as a matter of policy one or more trustee slots for non-family members and seek candidates who will add expertise and perspective to the Board's deliberation. In some cases, the number of outside trustee positions is greater than those for family members. And, some foundations with family members only on the board establish formal advisory committees of outside experts in order to gain perspective without changing board membership.
Unless the original terms of the legal documents establishing the foundation prohibit non-family trustees, attention to ethically responsible philanthropy would encourage consideration of adding non-family members either to the board or to an advisory committee. Doing so contributes to wider public accountability of the foundation by enabling family trustees to broaden their perspective in ways that might not otherwise be possible. Indeed, some of those interviewed commented that family trustees "behave better" when non-family members are included in the deliberations.
Is there a role for non-trustee members of the family?
Responsible family philanthropy encompasses not only a sense of public accountability but also a sense of responsibility to other family members who may not be trustees. If the donor clearly intended for the foundation to encourage the extended family to be interested in philanthropy, current trustees should consider how best to communicate foundation policies and actions and to receive appropriate input from other family members. Even if the donor expressed no clear intention in this regard, there may be family members with genuine interest in the work of the foundation who do not serve as trustees. Treating these individuals with respect --including good communication-- is an important ethical responsibility.
At the same time, trustees should be careful not to confuse their foundation role and responsibilities with wider family matters unrelated to the foundation. This includes avoiding inappropriate expenditures (e.g., paying expenses to a family gathering using the foundation update as an "excuse" for the gathering) and making foundation grant decisions on the basis of established, agreed-upon guidelines.
If so, what is their role and how are they selected? Should they be treated any differently from family trustees?
Non-family trustee positions should be clearly defined, regarding both criteria for filling the position and the length, renewability, etc., of terms. Although nothing prevents trustees from simply appointing their closest friends and advisors without regard to other criteria, ethical responsibility considerations would suggest some more objective criteria related to the mission and purpose of the foundation and the rationale for having non-family trustees.
Equally important, family trustees should endeavor to provide good orientation to new non-family trustees and to treat them with full respect as fellow trustees. It is potentially very awkward for a single "outsider" to play a fully active trustee role if one is made to feel that one is merely a "guest" of the family. Responsible foundations will be quite intentional about ensuring that non-family trustees are fully included as equals in board deliberations. Indeed, some trustees have observed that one benefit to the family trustees of a non-family trustee is that their participation reminds the family members that they are acting in their organizationally defined trustee roles in meetings.
Do we need formal policies on trustee selection, orientation, and evaluation?
Although there are no legal requirements, commitment to responsible trusteeship includes ensuring that such policies and procedures appropriate to the size and nature of the board are in place. For many foundations, this may mean nothing more than a mutual understanding between two spouses or siblings that review and evaluation of one another's actions as trustees is appropriate when needed. For foundations who do select new trustees on occasion, clear criteria for selection will help ensure responsibility through time. Orientation to new trustees --whether family members or not--is easily overlooked but quite important to enable the new person to contribute knowledgeably. Evaluation of trustee "performance" can be a delicate matter among family members. However, failing to establish an objective, agreed-upon way to evaluate the board periodically makes it even more difficult to resolve a problem with an individual trustee when it arises.