Research Report #28 April 2016 Development of Family Foundations in the United States and China: Case Studies of Four Family Foundations Carolyn Isles Shuang Lu Chien-Chung Huang Huamin Research Center, School of Social Work Rutgers University In the recent decades, the amount and size of family foundations have increased substantial- ly in the United States and China. Yet little research has examined this phenomenon and its impact on social development, particularly in China. In this study, we use the Context, Input, Process, and Product (CIPP) evaluation model to examine the status and roles of family foundations in the U.S. and Chinese society. Our case studies of four family foundations (two U.S. and two Chinese) sug- gest that these foundations were established in different contexts. Their input, process, and product vary by their mission, size, and context. Our findings provide policy implications for developing family foundations and maximizing their positive impacts on social development in the U.S., Chi- na, and beyond. Keywords: Family foundation, Philanthropy, CIPP, China, United States 1 Introduction mental trajectory and social impact the U.S. for over 100 years. In 1913, Modern entrepreneurs are accu- (Boris, Vita, & Gaddy, 2015). As in- John D. Rockefeller Senior established mulating wealth earlier in their life- come inequality continues to expand the Rockefeller Foundation to promote times than those of previous genera- in the United States and China (Saez & human wellbeing (Rockefeller Founda- tions. Many of them seek fulfillment Zucman, 2014; Xie & Zhou, 2014), in- tion Archives, 2015). During its early outside of their businesses. While there crease in family foundations, along years, the foundation focused on pub- are a variety of approaches to charita- with their philanthropic giving, may lic health. It supported the Bureau of ble giving, it can be argued that family reduce negative effects of income ine- Social Hygiene to conduct research foundations offer donors more control, quality on vulnerable populations and education regarding birth control, flexibility, and visibility than do other (Acs, 2013; Barchi, et al., 2015). Yet re- sexual hygiene, and maternal wellbe- forms of philanthropic foundations search on family foundation is still ing (Rockefeller Foundation, 2015). The (Boris, Vita, & Gaddy, 2015). As a re- dearth, particularly in China. This Rockefeller Foundation ranks within sult, the United States has seen a sig- study investigates the current status of the top 50 private foundations for giv- nificant increase in the number of pri- family foundations in the U.S. and Chi- ing within the U.S. in 2014 (Foundation vate family foundations in the past na, examines family foundations’ con- Center, n.d.a). David Rockefeller, Jr., a decades. For example, number of fami- text, input, process, and product, and fourth-generation member of the Rock- ly foundations increased by 44% from discusses their social impacts through efeller family, currently serves as the 29,400 in 2001 to 42,300 in 2013 case studies. The findings provide pol- president of the board of trustees. (Foundation Center, n.d.a). The re- icy implications for developing family In contrast, family foundations are spective assets and giving of these foundations, particularly in China and at the early stage in modern China. family foundations increased by 105% other countries where family philan- Although no family foundations were and 92%, from $177 to $363 billion, and thropy is at the early stage. recorded in the Chinese history, family from $13 to $24 billion respectively Definition and Historical De- philanthropy emerged in China long (Foundation Center, n.d.a). velopment of Family Founda- ago. In the year of 1050, Song Dynasty, Mr. Fan Zhongyan established the Fan- Likewise, China’s economy has tion dramatically increased in recent dec- clan Charitable Estate (“Fanshi Although the term “family foun- ades (Cai & Wang, 2002, 2010), and the Yizhuang”), a private, familial charity dation” has been used widely in the release of Foundation Regulations in in his hometown. The Estate was ini- media and research, there is no stand- China in 2014 stimulated an increase in tially funded by Mr. Fan Zhongyan ard definition of family foundation. private foundations within the coun- and received donations from wealthy Nor is there a legal classification for try. The number of foundations has members of the Fan Family. With the term in Internal Revenue Service. increased from 733 in 2004, to 2,198 in farmlands as property, the Estate’s In practice, a family foundation typi- 2010, and to 4,854 in 2015 (China Foun- revenue came from farm rental. The cally refers to a private foundation, dation Center, n.d.). It was estimated Estate’s mission was to provide relief whose funds are derived from mem- that there were 35 family foundations to clan members who were in need bers of one family, and whose family in China in 2014, and their total assets and who live in that area. The provi- members are actively involved in the and philanthropic spending were $1.6 sions included various needs of daily- operation of the foundation billion and $320 million RMB respec- life: food, clothes, marriage expenses, (Foundation Center, n.d.b; Council on tively in 2013 (China Foundation Cen- funeral expenses, education and impe- Foundations, n.d.). Thus, the key factor ter, 2014). rial exam expenses, and housing loans. of a family foundation that separates it These trends reflect the growth of The Estate had a system and rules of from other nonprofits is family mem- wealthy individuals and the growing financial management. To avoid con- bers’ involvement in establishing the sense that through family foundations flict of interest, no clan members were foundation and its governing board. individuals can have a positive effect allowed to rent or sell farmlands to the Throughout the foundation’s life, at on social development (Barchi et al., Estate. The Estate’s manager was an least one family member must main- 2015; Boris, Vita, & Gaddy, 2015). elected male clan member, who had tain a significant role in the govern- However, despite this substantial rise full autonomy to handle the Estate’s ance of the organization (Boris, Vita, & and importance of family foundations business. The manager’s compensation Gaddy, 2015; Foundation Center, over the past decades, little is known was determined by his work effective- n.d.b). about family foundations’ develop- ness, which was evaluated by other Family foundations have existed in clan members. The Estate also moni- 2 tored beneficiaries in certain ways. foundations were created between vidual board members to recommend Those who broke the rules would pay 1990 and 2009, followed by 16% creat- discretionary grants for foundation penalty or lose eligibility for further ed between 1970 and 1989, 14% before funds. assistance. The Fan family’s descend- 1970, and 10% in 2010 and after. A ma- For grant making strategy, most ants continued to amend the rules and jority of them are small- to medium- family foundations (76%) reported that expand the Estate. By the 1200s, the sized. About 70% have less than $10 they are still influenced by their found- Estate’s farmlands reached over 3,000 million in assets, while only 3% of ing members’ values and wishes. Al- acres. It was sustained because of its them have assets of over $200 million. most two-thirds (64%) stated that the financial independency, rational deci- In 2014, 65% of family foundations family’s values and wishes have major sion-making, and democratic supervi- donated less than $500,000; 5% report- influence. Approximately 25% are in- sion. Its success not only benefited the ed giving more than $5 million. Foun- fluenced by community or grantseek- Fan’s clan members, but effectively dations’ assets increase with their age ers’ needs. Very few (2%) reported that assisted the local government with (Boris, Vita, & Gaddy, 2015). The main public spending priorities influenced poverty relief and social stability. Fol- program areas to which family foun- their giving (Boris, Vita, & Gaddy, lowing Fan Zhongyan’s path, govern- dations support include: education 2015). The majority (83%) also sup- ment officials of the Song Dynasty es- (45%), poverty (40%), health (19%), ports general operating grants and tablished similar charitable estates— children and youth (15%), religiously 68% provide multi-year grants. Nearly some assisted family members, some affiliated programs (14%), arts and 40% adhere to the minimum 5% pay- provided relief to local residents (Liao culture (13%), and environment (11%). out rate, 24% pay out up to 6%, and & Li, 1991). In addition, younger foundations focus 15% of the foundations have a 10% Current Status of Family Foun- their giving on certain program areas payout rate and more for the past two dation while older foundations focus on geo- years (2013-2015). In terms of account- graphic-based giving (Boris, Vita, & ability, more than half (57%) of the In the United States, studies of Gaddy, 2015). foundations ask grantees to report out- family foundations often lack method- In terms of boards and govern- comes, among which 45% require a ological rigor. Most are based on a rel- ance, most family foundations’ boards financial report. However, only 34% of atively small number of cases, which are composed of family members. Non the foundations ask grantees to set and may focus on a particular geographic -family members make up fewer than measure program goals (Boris, Vita, & area or use convenience sample rather 25% of board members in more than Gaddy, 2015). than random, representative sample 70% of the foundations. The boards’ With respect to family involve- (Boris, Vita, & Gaddy, 2015). To ad- most common activity is grantmaking ment, almost 90% of respondents dress these limitations, the Urban In- deliberations and decisions, followed agreed that most family members stitute conducted a nationally repre- by investment management, evalua- work well together.