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Chapter 3: High-net-worth individuals and philanthropic foundations
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Chapter 3: High-net-worth individuals and philanthropic foundationsDr Christopher BakerCentre for Social Impact, Swinburne University of Technology Wealth, foundations and philanthropyIn the public eye philanthropy is often seen as the preserve of the very wealthy. Giving and volunteering, however, are not confined to those possessing great wealth. The Giving Australia 2005 report found that in the prior year 87% of adult Australians had made a charitable gift and 43% had volunteered (ACOSS 2005). To include the great diversity of people who give and donate, ‘philanthropy’ is increasingly defined by practitioners and researchers in the sector as the giving of money, time and talent to chosen causes or organisations for the benefit of others. This inclusive sentiment is well-captured in the definition of philanthropy adopted by Philanthropy Australia, the peak body for philanthropy in Australia: ‘the planned and structured giving of time, information, goods and services, voice and influence, as well as money, to improve the wellbeing of humanity and the community’ (Philanthropy Australia 2012, 26). This wider definition also reflects the variety of ways in which donations of time, talent and treasure (Timmons 2013) are undertaken by groups, communities and organisations, as well as individuals in the name of philanthropy (Zunz 2011). While philanthropy is by no means the preserve of the wealthy, individuals and families of wealth continue to be major contributors. High-net-worth-individuals (HNWIs) are individuals with investable financial assets (excluding their primary residence and collectables) in excess of US$1 million and ultra-high-net-worth-individuals (UHNWIs) are generally regarded as those with investable financial assets in excess of US$30 million. The focus of this review is on HNWIs and families, and the foundation structures commonly employed as giving vehicles appropriate to the prevailing taxation regime. In an era of growing income and wealth disparity, when an increasingly disproportionate share of assets is accruing to HNWIs (Elliott 2015; OECD 2011), wealthy individuals and families have become increasingly important to the development of philanthropy on account of their growing ability to contribute. In broad terms, however, while wealth increases the capacity of individuals to give it does not necessarily result in an increase in their propensity to give. Even in the United States (US), where philanthropy is akin to an expectation of the wealthy, the growth of HNWI giving is due less to the majority who are generous than to the few among them who are exceptionally generous (Auten and Rudney 1987). Those who do choose to give very generously are often high achievers with a strong attraction to making an impact in whatever field they engage (Liu and Baker 2014a; Scaife, McDonald and Smyllie 2011) and this ‘hyperagency’ often extends into the philanthropic arena (Schervish 2006; Shaw et al. 2013). Structured giving vehicles which are well positioned to take advantage of whatever taxation incentives are in place in a particular jurisdiction are generally described as foundations. In Australia they are often referred to as trusts. CritiqueThe provision of taxation advantages for giving by the wealthy, and of financial regimes that enable the creation of taxation-advantaged structures to ensure that wealthy donors control ‘gifted’ wealth and direct their social spending, is not without its critics. Some philanthropy practitioners point out that wealth created by the exploitation of workers, consumers or the environment serves to entrench inequality and to contribute to human misery (Spierings 2013). Others observe that there is invariably a power imbalance in relationships when one party holds the purse strings (Burkeman 1999; Orosz 2000). Warren Buffett’s brother Peter argues that philanthropy is fundamentally directed towards entrenching the status quo. In a reference back to the robber barons, who were central in establishing US foundation philanthropy, Buffett noted: ‘As more lives and communities are destroyed by the system that creates vast amounts of wealth for the few, the more heroic it sounds to “give back.” It’s what I would call “conscience laundering”— feeling better about accumulating more than any one person could possibly need to live on by sprinkling a little around as an act of charity’ (Buffett 2013, 3). Similar critical perspectives on the ways in which philanthropy can reinforce social and economic inequalities, and enhance the status of the privileged, can be found in the academic literature (Eikenberry 2005a; Hay and Muller 2014; Liu and Baker 2014a; Livingstone 2013; Ostrander 1989; Ostrower 1995). These critical perspectives highlight the ways in which the wealthy can utilise their celebrity-like status (Shaw et al. 2013) in pursuing philanthropy as a means to convert wealth into recognition, prestige and reputation, which in turn enables the philanthropist to accrue even greater wealth (Morvaridi 2012) and influence. Concerns over notions of donor control are neither new nor obsolete. Ostrander (1989) argued that philanthropic conceptions of people in poverty serve to contrast a ‘dependency model’ of government programs with the ‘independency model’ of private philanthropy, which function to justify the control of the donor over the recipients, without consulting the individuals or communities concerned (Ostrander 1989). Similarly, Odendahl (1989) argued that, by virtue of their wealth, within nonprofit organisations (NPOs) major donors tend to exert disproportionate power. In the current era many philanthropists contributing large sums to charitable causes like to play a highly active role in determining where and how those philanthropic funds are to be deployed. The assumption that a person who has been successful in a particular field of business endeavour has the insights, the skills and the right to exercise such control has not gone unchallenged (Liu and Baker 2014a, 2014b; Ostrower 2007; Thorup 2013). With the growth of billionaire philanthropy it is also worth reflecting on Ostrower’s (1995) findings where philanthropy is embedded in elite culture, such as in New York in the 1990s, wealthy donors generally focus on their peers as the primary audience for their philanthropy (Ostrower 1995). Debate on the extent to which major donors can have ‘too much money and too much power’ continues to take place (Eisenberg 2013).
HNWIs and givingThe relationship between wealth and philanthropy is a topic of growing interest among wealth advisers, yielding a range of reports that focus on HNWIs and on UHNWIs—those with investable assets in excess of US$30 million (Capgemini and RBC Wealth Management 2013, 2014, 2015; Credit Suisse 2013, 2014; 2014). The effective impact of their philanthropy is also an increasing focus of attention. The World Wealth Report 2014 edition states that the desire to achieve social impact, or ‘making a positive impact on society through thoughtful investments of time, money, or expertise’ (Capgemini and RBC Wealth Management 2014, 26), is positively associated with the level of an individual’s wealth. This finding aligns with a recent study (Sadeh, Tonin and Vlassopoulos 2014) which concludes that the ‘clearly dominant’ motive of wealthy individuals and families who make a public commitment to the Giving Pledge—to give at least half their wealth to philanthropic causes—is the positive impact of their philanthropic activities. Similarly, the most consistent motivator for HNWI donors reported across the finding of the High-Net-Worth Philanthropy study series is the difference that giving can make (Rooney et al. 2014). The series of High-Net-Worth Philanthropy studies undertaken by the Lilly School of Philanthropy at Indiana University offers relevant data for the US. The Lilly School’s 2014 U.S. Trust Study of High-Net-Worth Philanthropy examines the giving and volunteering patterns, priorities and attitudes of the wealthiest households in the US. The findings of the most recent study covering the year 2013 (Rooney et al. 2014) classify observed patterns under the headings of: giving, volunteering and motivation: Giving:
98.4% of high-net-worth households donated to charity (compared to 65% of the US general population), and the average dollar amount given to charity by wealthy donors increased 28% to US$68,580 in 2013, while average giving as a percentage of household income decreased from 8.7% in 2011 to 7.8% in 2013. Volunteering: 75% of respondents volunteered with at least one NPO, and among those who volunteered, 34% did so for more than 200 hours over the course of 2013. Wealthy US households cited the following as their top motivators for giving: 74% = ‘believing that their gift can make a difference’ 73% = ‘personal satisfaction’ 66% = ‘supporting the same causes annually’ 63% = ‘giving back to the community’, and 62% = ‘serving on a nonprofit organisation’s board or volunteering for a nonprofit’. Only 34% of donors cited tax advantages among their chief motivations for giving. In the case of the United Kingdom (UK), interviews with 82 HNWI donors by Breeze and Lloyd (2013) found that: almost all of those who give substantial amounts of money also give substantial amounts of their time unstable financial markets cause many donors to not feel financially secure, despite being objectively wealthy, and this sense of insecurity functions as a barrier to giving HNWI donors need reassurance and proof that charities can and will make the best use of their donations, and philanthropists were insulted by the suggestions they were ‘tax dodgers’ contained in government proposals in the 2012 Budget to cap charity tax relief. While those who give will inevitably retain less of their money than those who do not, taxation is often a consideration. Many HNWIs who do choose to contribute some of their financial assets for philanthropic purposes do so through the use of structured giving vehicles. In part this is driven by a tendency among some Western countries to structure their tax regimes so as to stimulate charitable giving by those with the greatest capacity to give (Roodman and Standley 2006), notably by providing the wealthy with tax incentives. In a recent report on foundation giving in the UK, Giving Trends: Top 300 Foundations 2014 Report, the authors (Pharaoh, Jenkin and Goddard 2015) note that taxation of donations in the UK and the US are quite different in detail, with the US having a far simpler system, and one biased towards higher incomes. The modification of taxation rules and eligible entities to enable other than the very wealthy to participate in foundation giving in the US has seen the rise of ‘Donor-Advised Funds’ (DAFs). A DAF is a fund within a larger charitable organisation that operates like a ‘mini-foundation’ on behalf of a donor who is able to advise on grants without having to set up a separate foundation. There is US$45 billion of assets in DAFs in the US, accounting for 6% of all individual giving in that country (Pharaoh, Jenkin and Goddard 2015, 13). Foundations and dataBetter data on philanthropy is increasingly vital. It helps provide a realistic context for assessing the feasibility of growing political aspirations for the potential role of private philanthropy in public welfare provision. We also need to know whether philanthropy is growing at a time of increasing private wealth, but continuing social inequality (Pharaoh, Jenkin and Goddard 2015, 1). In the US a long history of data gathering and reporting through the Giving USA Foundation has been supplemented by the work of the Foundation Center, which has been instrumental in increasing the range and depth of data bearing on private foundations. Much of the Foundation Center’s work focuses on building and maintaining a comprehensive and publicly-accessible database on US grantmakers and their grant activities. One of its key initiatives is ‘Glasspockets’, in which the Foundation Center champions philanthropic transparency, and provides the data and resources which foundations need to understand the value of transparency, be more open in their own communications, and help shed more light on how private wealth is serving the public good. The Foundation Center consolidates and analyses data itself to provide clearer insights into the practice of giving. One of the outputs that showcases the work of the Foundation Center is the annual report Key Facts on US Foundations. The 2014 edition (Foundation Center 2014) reports that in 2012 the US had:
86,192 foundations US$715 billion in total assets, and US$52 billion in giving. As such, foundation giving made up 16% of total private giving in the US in 2012. Community foundations made up just 1% of the number of foundations while contributing 10% of total foundation giving. The Foundation Center’s drive for greater transparency among foundations is extending its reach and impact globally. The China Foundation Center (CFC), established in 2010, was modelled on the US Foundation Center (WINGS 2014). The CFC is, however, an autonomous organisation which has launched pioneering initiatives on its own account, including a world-first Foundation Transparency Index which ranks over 2,700 Chinese foundations against a checklist of 60 ‘transparency indicators’ of its own devising. The reach of the Foundation Center model is also being felt in Australia, where the President of the Foundation Center, Bradford Smith, was a keynote speaker at the Philanthropy Australia 2014 National Conference (Seibert 2014). In his presentations Smith highlighted the importance of data-development and data-sharing for effective philanthropy, and the need to meet public expectations of greater transparency as the best means ‘to protect the freedom that philanthropy needs’ to pursue its mission (Smith 2010). Similar efforts are getting under way in Canada and the UK. In 2014 Imagine Canada and Philanthropic Foundations Canada produced the inaugural report on the work of foundations in Canada. Assets & Giving Trends of Canada’s Grantmaking Foundations (Imagine Canada and Philanthropic Foundations Canada 2014) estimates there are some 10,500 foundations in Canada, and profiles the assets and giving trends of the 150 largest grantmaking foundations and 10 largest community foundations. The reported data include:
a ‘significant increase’ in the number of foundations in Canada over the past decade the largest 150 grantmaking foundations held Can$18.7 billion in total assets (2012) Can$966 million in gifts the top 10 community foundations held Can$2.8 billion in assets (2012), and Can$147 million in gifts. In another first, 2015 saw the initial edition of a briefing series on Foundation Giving Trends in the UK, generated by the Association of Charitable Foundations with research conducted by Cass Business School (Pharaoh, Jenkin and Goddard 2015). The Giving Trends: Top 300 Foundations 2014 report focuses on the top 300 UK foundations, which account for 90% of the value of the estimated 10,000 foundations in the UK. The report includes that foundations in the UK: give £2.4 billion—14% of all private giving get 44% of their income from gifts and 42% from investment, and experienced a fall in income but a growth in grantmaking. Family Foundation Giving Trends reports annually on the giving of the largest 100 UK family foundations. The sixth edition (Pharaoh, Goddard and Jenkin 2014) observes that family foundations contribute 59% of all foundation giving in the UK. The series also provides a comparison with family foundations in the US. In both the UK and the US there are a small number of extremely large private foundations that dominate the landscape (e.g. the Wellcome Trust in the UK; the Bill & Melinda Gates Foundation in the US). Up until very recently there has not been a private foundation in Australia that could be considered large in an international context. That changed in 2014 when it was revealed on the death of Paul Ramsay, founder of Ramsay Health Care, that he had bequeathed the bulk of his estate (estimated by at some A$3.4 billion) to his eponymous foundation (ProBono News 2014), a sum well in excess of endowments held by other private charitable foundations in Australia. Gina Anderson’s 2013 report for the Centre for Social Impact, Where the Money Goes: Private Wealth for Public Good (Anderson 2013), is the first of its kind in Australia to report on grantmaking among Australian trusts and foundations. As Anderson observes in the report, however, the lack of mandatory reporting for philanthropic foundations in Australia limits the capacity to report on the scale, focus and historical trends among Australian foundations. Her report is confined to the work of a limited number of philanthropic foundations which agreed to make their grants public on the principle of best practice reporting. Directory: wp-content -> uploads -> 2016 2016 -> 2017 afoCo Landmark Scholarship Program 2016 -> Instructions for the Preparation of Camera-Ready Contributions to the Conference Proceedings 2016 -> Step student Scholarships for Year 10-13 2016 -> The united church of canada 2016 -> Idan raichel biography – May 2016 Brief Producer, keyboardist, Lyricist, composer and Performer Idan Raichel 2016 -> An introduction to centre’s interventions expanding access to justice 2016 -> Sanchar Shakti 2016 -> Unit analysis should help here. We want number of bananas 2016 -> The Autobiography of Elder Joseph Bates 2016 -> The Great Heat and the Rhode Island Deep Water Bay Scallop (Argopecten irradians) Fishery 1875-1905 Download 4.28 Mb. Share with your friends:
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