Family Philanthropy

Family foundations—whether small or large, staffed or board managed—can use these voluntary Stewardship Principles to guide and strengthen their board governance, grantmaking and management.

Through their philanthropy, families aspire to achieve a lasting and positive impact on society. Families' resources extend well beyond money to include leadership and reputation, time and talent, passion and commitment.

Families strive to be responsible stewards of their foundation resources, to uphold the public trust and to practice their philanthropy in ways that reflect fundamental values, including honesty, integrity, fairness and trust. As private entities operating for public purposes, family foundations must comply with federal, state and local law--but most endeavor to go further.

These Stewardship Principles and Practice Options to Strengthen Performance describe how family foundations can reflect these fundamental values in their board governance, management and grantmaking.

How to use the Principles

The Stewardship Principles and the Practice Options to Strengthen Performance are goals toward which to strive. They correspond to an array of philosophical and practical issues faced by all family foundations. With this document as a framework, family foundation boards and staff can discuss issues before they arise, enabling them to proactively develop thoughtful policy and practice that improves over time.

Family foundations can take many forms. Thus, the Practice Options to Strengthen Performance are not checklists. The degree to which a foundation can adopt individual practices will depend upon such things as:

This is not a static undertaking. As the foundation evolves, so too should the choice of Practice Options to Strengthen Performance. The most significant, ongoing reward will accrue to those foundations that employ these principles with consideration, thoughtfulness and commitment, and with the consistent evaluation and appropriate revision.

Visit the Council’s store to get your copy of one of these recent publications to guide you in your foundation’s stewardship:

• Principled Giving: An Introduction to Family Foundation Stewardship
• Built on Principle: A Guide to Family Foundation Stewardship
• Principled Planning: A Guide for Family Foundation Retreats. This workbook is also available as a spiral bound book from the store.

Adopted by the Committee on Family Foundations, September 2004

Download a PDF version of the Stewardship Principles

Governance

I. We have a governing board that establishes the mission, guides the operations, oversees the effectiveness, and ensures the ethical conduct of the foundation.

Practice Options

II. Authority is vested in the governing board as a whole, and each member is equipped to advance the foundation's mission.

Practice Options

• Identify the desired characteristics of the governing board, including size, composition and member skills and experience; consider diversity and the perspective offered by representatives from outside the family.
• Develop bylaws that specify the term length of governing board members; the number of consecutive and/or total terms members may serve; minimum and maximum ages; roles, responsibilities and fiduciary duties; and selection and removal processes.
• Conduct business regularly to ensure meaningful interaction, including at least one annual in-person meeting (governing board and staff if any).
• Stay on mission; all grants are made within grantmaking guidelines. Exceptions are reviewed by the entire board and do not exceed a maximum dollar cap or percentage of total giving.
• Provide comprehensive orientation and training for governing board members.
• Provide continuing education on all aspects of foundation governance, including legal, fiduciary and grantmaking issues.

III. We consider multiple strategies to further our mission.

Practice Options

• Learn best practice models and compare practices against others in the field.
• Consider a range of financial support options that could include: general operating, project, capital, research, scholarship, endowment, multi-year and challenge grants, and funds to respond to emergency or other unanticipated need.
• Use program and grant evaluation to improve outcomes.
• Share successes, failures and lessons learned from grant and program evaluations internally and externally, as appropriate.
• Collaborate with others who fund similar work.
• Ensure that staff (if any) is well-qualified and receives on-going professional development.
• Promote foundation board and staff personal giving and volunteerism (bearing in mind potential conflicts of interest).
• Provide technical assistance to grantees and other nonprofits.
• Invest in ways that further the mission (e.g., program-related investments, micro-credit loans, socially responsible investing, proxy voting/shareholder resolutions).
• Convene community leaders, nonprofits and/or other funders doing similar work.
• Engage in public policy advocacy as permitted by law.

IV. Our governing board exercises active fiscal oversight.

Practice Options

• Know and ensure compliance with fiduciary duties.
• Ensure that expenses are reasonable and in proportion to amounts spent on grants and technical assistance.
• Expect board members to serve the foundation without compensation, recognizing:
  • that reimbursement of reasonable expenses directly related to board service does not constitute compensation.
  • that board members who perform staff functions may be compensated as staff. Like all staff, these individuals should be reasonably compensated, document time spent, and have a job description, performance objectives and evaluations.
• Confirm that proper due diligence is performed to ensure grantees' fiscal and organizational viability and that grants are used for charitable purposes.
• Ensure that the foundation has a written investment policy adequate for its size and complexity that includes: investment objectives, asset allocation strategy, spending and/or pay-out policy, rationale for selecting and evaluating investment managers/advisors.
• Establish effective internal controls, systems of checks and balances, and formalized record keeping.
• Approve an annual budget and assess the foundation's financial performance relative to the approved budget.
• Conduct an internal review of foundation compliance with legal, regulatory and financial reporting requirements and provide a summary of the review to board members.
• Obtain an external review of the organization's finances (in accordance with asset size) by conducting a financial review, periodic audit or annual audit (for larger foundations).
• Establish an audit committee to oversee accounting, financial reporting, compensation practices and the external audit of the foundation.

Ethics & Accountability

V. We recognize and act upon our obligations to multiple stakeholders: the donor and the donor's family, grantees and grantseekers, the public and governmental bodies.

Practice Options

VI. We respect our nonprofit partners' missions and expertise and strive for relationships based on candor, understanding and fairness.

Practice Options

• Develop transparent grants management processes:
  • create clear and complete guidelines and application procedures (if unsolicited applications are accepted); consider accepting common grant applications.
  • request only information (pre- and post-grant) that will actually be used in decision-making and corresponds appropriately to the size or purpose of the grant.
  • specify the steps and timing of the review process.
  • acknowledge grantseeker inquiries and submissions promptly.
  • use grant agreement letters to outline mutual expectations.
  • explain rationale for declined grants and give constructive feedback when appropriate.
• Conduct site visits when appropriate, guided by the size and purpose of the grant and the impact on the grantee.
• Acknowledge and minimize the effects of the imbalance of power in grantee/grantor relationships.
• Seek feedback(including anonymous) on foundation performance from current and former grantees and denied applicants.
• Respond to and act promptly on complaints.

VII. We welcome public interest and communicate openly.

Practice Options

• Make public (on the Web and/or in print) the foundation's board of directors, mission, guidelines, grant process (including whether unsolicited proposals are accepted), finances, procedures, timetable, grantee list with amounts and purpose, etc.
• Identify and make public a point of contact for the foundation.
• Respond to requests for information promptly and no later than 30 days.
• Prepare and distribute (web or print) an annual report (or letter for small foundations).
• Train board and staff to respond to the media, legislators and other audiences.
• Develop a proactive strategy for reaching out to the media, legislators and other audiences.
  

Family Legacy

VIII. Our governing board respects donor intent and later generations' interests while also considering the demands of a changing world.

Practice Options

- Honoring Intent -

- Recognizing Later Generations' Interests -

• Encourage board members with interests outside the program or geographic guidelines to support them through personal giving.
• If not counter-indicated in the establishing documents (e.g., trusts), consider explicitly adding the flexibility to change focus areas.
• If competing interests hinder the foundation's mission or the family's ties, consider engaging a skilled facilitator to find common ground.

IX. We plan for leadership continuity.

Practice Options

• Develop and implement a succession plan (with input from the family's teens and young adults) to identify, educate and prepare the next generation of family members for future board service.
• Inform the broader family of the foundation's work.
• Provide avenues for young family members to learn about and participate in the work of the foundation (or other foundations and/or the nonprofit sector) prior to serving on the board.
• Revisit periodically the intended lifespan of the foundation (perpetual or time-limited).
• Employ alternative governance structures or giving vehicles when family leadership is no longer viable or no longer desired.