11 Feb 2020

Taking it beyond the family: Philanthropy and family businesses

Claire Adler

Giving money away is not as easy as it sounds. Philanthropy can sometimes be fraught with political and reputational issues, as families from the Sackler’s to the Arnault’s have discovered in recent months.

In the UK, only 26 of FTSE 100 firms donate over 1% of pre-tax profits, according to the Chronicle of Philanthropy. While businesses and individuals are talking in increasingly self-righteous tones about sustainability, environmental impact and corporate social responsibility, is one per cent enough?

 

Learning to give

“Many families who successfully retain their wealth do so by the learning process of giving some of it away,” says family business expert adviser Rupert Phelps, partner at Smith and Williamson.

 

“In addition to promoting family unity, collaboration between family members reinforces the transmission of ideals and culture. So I would argue that philanthropy is not an option, because it can be a superb tool for uniting families acting as the glue among them, binding and challenging them and transmitting what the family holds to be precious, its values and potentially its identity.”

 

In our own research into philanthropy, we’ve seen that many donors are bringing their family into the decision-making process. Family members and colleagues were the two groups our clients consult most when planning their philanthropic efforts, at 37 per cent and 51 per cent respectively.

 

Sometimes, companies commit to a cause that relates to their own family. The LeVian family, owners of New York headquartered celebrity jewellers Le Vian, have a board mandate to donate at least 10% of their pre-tax profits to charity, although in 2018 they donated almost 20% to charity, according to CEO Eddie LeVian.

 

Having lost a number of family members to childhood illness, LeVian focuses its philanthropy around medical charities including St Judes Children’s Research Hospital, the American jewellery industry’s main charity Jewelers for Children and the Rafa Foundation – set up by the LeVian family in after nephew Rafael Etessami tragically passed away in his early 30s.

 

"A common challenge family businesses face is a generation gap in which the older generation who earned the wealth, thinks differently to millennials who find different causes compelling."

 

“We have come to know many successful family businesses over the years and we now routinely share our passion for philanthropy by helping our friends and associates organise their own philanthropy more efficiently. We do this by showing them how to establish their own foundations and regularly set aside funds to be allocated at a certain point in the year.” says Le Vian CEO Eddie LeVian.

 

Corporate social responsibility can often blend cleverly with enhancing a brand’s perception. British watch brand Bremont, owned by brothers Nick and Giles English, donated an undisclosed sum to Bletchley Park Trust. In a win-win collaboration, Bremont have produced the Codebreaker watch, which incorporates wood from an Enigma coding machine rotor and paper taken from punch cards used by the codebreakers.

 

The potential pitfalls of philanthropic giving

In the early 1800s, a French orphan named Thierry Hermès, who had lost his family to disease and war, proved to be so skilled with leather that his main clients were royal families. He would probably be pleased to know that six generations later, his great- great- great- grandchildren were named among the most prolific givers in France through the Fondation d’Entreprise Hermès; France’s most generous foundation based on its budget-to-revenue ratio.

 

Still, not all philanthropy results in admiration. In France, in 2019, when news broke that Nôtre Dame was being ravaged by fire, France’s three richest families (led by Francois-Henri Pinault of Gucci-owners Kering, Bernard Arnault of Louis Vuitton-owners LVMH and the Bettencourt Meyers family of L’Oreal) pledged a combined 500 million euros. It began with Pinault of Kering pledging 100 million euros, only to be outdone by his arch rival Bernard Arnault of LVMH under 24 hours later with a pledge of 200 million euros.

 

While Nôtre Dame is unquestionably a worthy cause, especially in France, the donors’ motives around self-promotion and tax breaks were immediately questioned and lobbyists for charities championing the homeless and refugees went into overdrive.

 

The billionaire Sackler family, owners of Purdue Pharma, which has now filed for bankruptcy, was once best known for its global philanthropy, but this past July after some of its members’ alleged role in the opioid crisis became clear, the Louvre Museum in Paris taped over the name of the family on its walls.

 

All this, against a backdrop of two-thirds of consumers saying they would avoid buying from brands based on how they stand on controversial issues, according to McKinsey.

 

Bridging the generation gap

According to one family business adviser, a common challenge family businesses face is a generation gap in which the older generation who earned the wealth, thinks differently to millennials who find different causes compelling.

 

Agreeing a family policy on philanthropy is the first crucial step, he says, adding that in general, family businesses are much more generous and committed to philanthropy than their publicly listed counterparts, because they are aware of their privilege and want to operate in accordance with their values by giving back to society.

 

The desire to do good isn’t going anywhere and for family businesses, this desire is still tightly tied to a family’s identity. While there will always be risks around giving and challenges around succession, families and family businesses are still going to be key sources of philanthropic activity in the years to come.

 

Claire Adler is founder of Claire Adler | The Luxury Public Relations and Writing Consultancy. Articles she has written have appeared in the Financial Times, Vanity Fair, The New York Times, The Spectator and more.

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