Governing From Afar

Family funds face hurdles as trustees move away

Last year, Amy Bishop, 22, joined the board of the A. Lindsay and Olive B. O’Connor Foundation, part of the fourth generation of her family to help guide the institution.

But as the foundation — started by her great-great-uncle, a state Supreme Court judge and an early investor in IBM, and his wife — draws Ms. Bishop’s generation into its fold, it faces a challenge common to a number of families today: Many of its members are geographically scattered.

Ms. Bishop lives in Boston, but the foundation, which holds approximately $60-million in assets, is located in Hobart, N.Y. One of her cousins lives in Philadelphia, another in New York — and both also serve on the family foundation’s board. Her younger sister, who will join the board after she turns 21, recently joined her in Boston to attend college.

Ms. Bishop’s generation is the first of her family to move away from the Hobart area, she says, and as a result gathering the foundation’s trustees for board meetings to conduct its grant making has proved tough.

Some of the foundation’s work is conducted through conference calls, she says, but it is considering paying trustees to attend twice-yearly board meetings.

“We meet on a Friday,” she notes, “so that means trustees have to sacrifice a day of work.”

Paying board members, however, might cause a change in how the public perceives the family grant maker — and the trustees may feel the money would be best spent on supporting charities, says Ms. Bishop. The foundation is also considering changing meeting locations from Hobart to places easily reachable by plane.

Far-Flung Locales

Today’s family foundations — particularly those established by the World War II generation and now run by younger relatives — are dealing with similar logistical issues as family members settle in far-flung locales, says Virginia M. Esposito, president of the National Center for Family Philanthropy, a research organization in Washington.

While it is relatively simple to come up with ways to bridge geographic distances — especially as technology makes the work of foundations less cumbersome — it is far more vexing to manage the ways in which a family’s dispersal can influence its foundation’s grant-making mission.

Many family foundations are created to last in perpetuity and usually craft a mission based on the values and preferences of the original donors and trustees. But when family members move away from the town or region where their foundation was established, they can grow estranged from the city or town the foundation’s grant making was intended to benefit.

In addition, as family members scatter, they may become alienated from one another and might develop varying grant-making philosophies, styles, and interests.

Sometimes the disputes grow so fractious, Ms. Esposito says, that foundations decide to split up their assets or to spend them all.

But most foundations simply look for new approaches as family members spread to new places.

Some grant makers narrow a foundation’s mission or the geographic regions in which it makes grants, while others broaden those areas so that trustees can support causes they care about in their own communities.

And in many cases, family members set up funds at community foundations in the city or town where the creator of a foundation lived, says Ms. Esposito. Relatives who have moved far away often rely on the staff members of community foundations or other area nonprofit organizations for information about local needs.

What’s More Important

Jane Leighty Justis, executive director of the Leighty Foundation, a Colorado Springs grant maker that gave away $350,000 last year, says the bottom line is that family foundations must decide what’s more important over time — to keep supporting the same causes the foundation’s founders did, or to use the foundation as an opportunity for family members to work together, but to support their own interests. “To try to evenly balance both,” she says, “is a killer.”

The Leighty Foundation was established in 1985 by H.D. (Ike) Leighty. He created the foundation with proceeds from the sale of his business, Engineered Products Company, in Waterloo, Iowa, to its employees.

Mr. Leighty, now 90, still lives in Waterloo. His son, William, lives in Alaska, and his daughter, Ms. Justis, runs the foundation from her home in Colorado.

To bridge the geographic distance, the foundation has developed a two-tiered system for giving among its family members that allows them to support organizations of their own choice.

The elder Mr. Leighty gets 30 percent of the money awarded each year to give to any cause he chooses, while his two children each get 10 percent to donate as they please.

The other 50 percent of the overall grant money is earmarked for proposals the family foundation’s trustees have solicited from the regions where they live and must be approved by the entire foundation board.

Ms. Justis says one benefit gained from the two-tiered system is that it allows the family members to support charities with different missions — and lets them learn from one another’s giving. For instance, she gives money to programs promoting volunteering and philanthropy, while her brother supports environmental groups and education.

“We’ve gotten much more sensitive to environmental issues, while my brother looks for environmental groups that use volunteers well,” she says.

Although members of the family’s next generation have expressed interest in joining the foundation’s board, “the downside is that we can’t keep doing this forever,” says Ms. Justis of the foundation’s two-tiered giving system. “If you get to the seventh generation, you’ll have so many small parts, I don’t think you can keep family members communicating around this.” In that case, she says, “it may be better to close the foundation or give its assets to a community foundation in the areas where we live.”

Because family members were aware that they — and, thus, the foundation — would change over time, Ms. Justis says, they asked their father in 1998 to write down his intentions for the foundation’s giving. He laid down an approach for dealing with any future conflicts over the family’s giving, whether prompted by geographic or philosophical distance.

“If at some time in the future, the operation and administration of the Foundation should be in danger of splitting the family apart, it would be my intention that the Foundation and the stewardship of its assets be given to an independent agency such as the [Community Foundation of Waterloo/Cedar Falls and Northeast Iowa] to administer,” wrote Mr. Leighty.

Surmounting Challenges

Family foundations that focus their giving on specific geographic areas, says Ms. Esposito, may have a tougher time when their trustees begin to scatter. But that challenge can be surmounted, she says, by educating far-flung board members about the foundation’s hometown, or inviting local residents to join the board.

The Frost Foundation, in Santa Fe, N.M., created in 1959, has four board members who live in New Mexico and one in Louisiana.

Mary Amelia Whited-Howell, the foundation’s president and its founders’ granddaughter, runs the organization from New Mexico with her husband, Philip B. Howell, with the help of a part-time assistant.

The foundation, which was started by Louisiana lumber-company owners, usually provides grants to both New Mexico and Louisiana nonprofit organizations that focus on human services, education, or the environment, giving out about $2-million in its 2005 fiscal year.

Although the foundation usually strives for parity in the amount it gives to each state, Ms. Whited-Howell says, it is currently funneling its support only to charities in Louisiana, in response to Hurricane Katrina.

She visits Louisiana several times a year and says she solicits more grant proposals for the foundation than her cousin, who is the family trustee who lives there. She also relies on other grant makers in the state for information about potential grantees.

Ms. Whited-Howell occasionally arranges tours of each state to keep all board members abreast of what is happening with the foundation’s giving.

She has also held gatherings at her house to allow family members from Louisiana to sit down with the foundation’s grantees in New Mexico — in “party form,” she says, “because it was comfortable for everybody.”

Narrowing the Mission

The Laird Norton Foundation, which was established in Seattle in 1940 by descendents of the owners of a lumber company, benefited from narrowly focusing its mission. At the time it made the change, however, battling geographic dispersion was not its chief concern.

The foundation, which gave out $195,000 in its 2005 fiscal year, has made grants around the country, largely to educational and religious organizations, as well as those dealing with forestry and conservation.

In 1997, however, the foundation decided it wanted to focus on one cause so it could have more impact. It opted to spend four years supporting organizations working to set standards to help maintain forests.

While the foundation’s trustees didn’t make the decision because they were spread out geographically, they found the new approach was a benefit. They learned so much about the issue that they didn’t need to visit grant applicants as frequently as they did with the older approach, and as their knowledge about the topic grew, the quality of debates at board meetings improved, according to William Baran-Mickle, the foundation’s president and a fifth-generation Laird relative.

Heartened by its new focus, Mr. Baran-Mickle says, the trustees decided again last year to narrow the foundation’s mission even further, zeroing in on supporting the maintenance of watersheds, and vowing to focus only on groups in the Pacific Northwest.

The foundation holds board meetings three times a year and rarely requires all trustees to participate on visits to grant applicants. “We want as much money to go toward grants as possible,” says Mr. Baran-Mickle. “If we fly people around, we start to lose that amount.”

Keeping Giving Local

The Durfee Foundation, established in Los Angeles in 1960 by the owners of Avery Dennison, a business-supplies company, gave out more than $1-million in its 2005 fiscal year. It has been able to maintain a geographic focus to its giving, even though its board members have dispersed to several areas of the United States.

Currently only two out of six trustees live in Los Angeles.

“One of the questions that we’ve talked about in retreats we have every other summer has been geographic focus,” says Carrie Avery, granddaughter of Durfee’s founders, who serves as foundation president from her home in the San Francisco Bay Area, although the foundation still maintains an office in Los Angeles, too. Durfee’s trustees, she says, “realized it was good to focus on Los Angeles County for both historical and need reasons.”

However, Durfee allows its trustees to follow their personal interests. The foundation’s broad mission is to promote individual leadership endeavors that benefit society; after trustees serve on the board for one year, they are eligible to award grants and start grant-making programs that reflect their special interests — as long as they are focused on Los Angeles.

To gather trustees together for board meetings three times a year, Ms. Avery says, “We really try to schedule things far in advance. If we know someone is coming to the West Coast — say, for a wedding — we try to take advantage of that opportunity to get people out.” In addition, she says, “All trustees do not do all site visits. The ones who do them usually have a particular project they want to see in Los Angeles.”

Seeking an Outsider’s View

Modern technology has allowed some board members, such as those at the Durfee Foundation, to communicate through e-mail or their foundations’ Web sites.

Although the O’Connor Foundation has no Web site or e-mail access for its trustees, Ms. Bishop says that the organization soon plans to step up its use of technology, since now grant proposals must be scanned and put on CD’s that are sent to each trustee.

But technology can only go so far in bridging distance. Ms. Esposito of the National Center for Family Philanthropy advises foundations whose trustees are starting to scatter to give some thought “to a process or retreat that will help them look at their foundation’s mission and governance, and determine where they are now, what is working or not, what options they have and what other families are doing.”

She adds that because geographic dispersion is linked to both family and personal history, “it’s intensely felt.” Sometimes an outsider can help to bridge gaps.

“I always suggest that foundations get a consultant or another philanthropic family who can come and help focus the discussion on what is most important to family members,” Ms. Esposito says.

Ultimately, she adds, “excellence in giving is what will honor the donor the most. It’s not a matter of having to follow donor intent or not — there will be a lot of ways to honor the donor. Just be open to the process, and consider a variety of options.”

She also notes that if a family foundation closes down because its trustees are too far-flung to function as a board, it must consider the charities that have come to rely on its support.

“If the family moves out it should, out of respect, begin to let groups know a couple of years in advance and think about grants that provide some transition support,” she says.

Ms. Justis says that if her foundation decided to close, “we wouldn’t see it as a failure that we couldn’t keep the foundation together. If we made that decision, we’ll have made it thoughtfully and strategically, and because we thought it was the best decision for our assets and not through default — that people lost interest and weren’t interested in good grant making.”

She adds, “Money is a public trust, so it’s not just there for a family to feel good with. The question we need to ask ourselves is if we can do grant making in an impactful way, with the family interested in it.”