Philanthropy is not usually the main reason for establishing a family office.
Estimates of how many family offices are used for philanthropy range from 10% to about 30%. Family foundations are much more common, used by over 70% of families.
But even when the family has a separate vehicle for charitable giving, the family office may be involved — and giving together can benefit the family.
The Herschend family, which operates family entertainment company Herschend Enterprises and invests together through Elmwood Management, its family office, also has a giving entity: the Neighbor Company. Although it is a separate entity from Elmwood, with its own board, it is managed by Elmwood staff.
“Our operating business should be doing its own giving in the communities that it serves, and it is – and has been for a long time,” says Chris Herschend, one of the managing directors of Elmwood. “In 2014, our family set a more aggressive giving goal: 1% of the revenue from our operating business. That level of giving stretched us and challenged us in new ways. Giving today out of current profits and not giving out of an endowment has helped us to see our operating business partly as a giving engine. The relationship between traditional dividends and what we call ‘gividends’ has been a great way to challenge the hold money tends to have on all of our hearts and minds.”
Since the family has about 60 members spanning four generations, they needed a mechanism for making these giving decisions. They created the Neighbor Company, a governance organization through which the family collectively decides where to make donations. The giving itself is done via a donor-advised fund.
“We use our same governance system as we do for investing and the operating company – a board with independent directors and a lot of transparency,” says Austin Herschend, the other managing director of Elmwood and Chris’s cousin. “We have a giving policy statement just like we have an investment policy statement. It doesn’t guide us to specific recipients, but it guides us generally to things we have identified as really important to us. It’s been a fairly wide range of investments: multinational NGOs, small local organizations, environmental issues.”
The experience has been a positive one for the family, thanks to the governance system and processes they have established and the communication that comes with that.
“We don’t want to have to sell the business to enjoy giving and being generous together,” Austin Herschend says. “It’s been a source of strength, a good thing for the family, not a source of conflict and disagreement.”
