31 January 2018
In contrast to the somewhat bleak findings by Oxfam recently regarding global wealth inequality, reports and surveys are consistently confirming that philanthropy is growing in importance for UHNWIs around the world and that more money is being donated than ever before. But what reputational risks does this pose for wealthy philanthropists looking to effect meaningful change?
The Coutts’ Million Dollar Donors Report (which tracks donations over £1m in the UK, US and Middle East) has found a dramatic increase in the number of major donations by individuals, foundations or corporations. The total value of donations of £1m or more rose from £1.37bn in 2006/07 to a record high of £1.83bn in 2016. That brings the total donated in the past 10 years to nearly £15bn.
It’s also clear that what we think of as “philanthropy” is evolving. Instead of signing a big cheque each quarter and thinking it’s job done, today’s generation of philanthropists are setting their sights on ambitious “system changes”. That typically requires them entering into dialogue, and perhaps challenging, Governments, politicians and international agencies.
But as philanthropists take centre stage and try to drive this change, we’re seeing greater risks from a reputation and privacy perspective.
Unfortunately, this is set against a backdrop where there is a growing distrust for private wealth – as clearly demonstrated by the Panama Papers and Paradise Papers scandals. This is compounded by lower levels of public trust in charities, following scandals like Kids Company.
We all know that the media will seize on any sniff of hypocrisy - whether it’s the use of charitable structures for tax purposes, donations not going where they should or perhaps instances where a philanthropist’s business life contradicts their philanthropic work. I fear this means philanthropy is ripe for another scandal.
So what can the modern-day philanthropist do – who wants to effect change without compromising their reputation and privacy?
At Schillings we would argue that they need to treat their philanthropic projects with the same rigour they would treat a business deal. Yes, it needs to be driven by emotion and passion – but it requires the same discipline and the same professionalism as any project – because the stakes are just as high.
While philanthropists are embracing this mantra when it comes to maximising returns and measuring impact (as exemplified by the upsurge in impact investing and venture philanthropy), there is still have some way to go when it comes to safeguarding reputation. In order to truly professionalise philanthropy, donors needs to:
- Carefully assess what the reputation risks are before donating; and
- Where appropriate, take pre-emptive steps to mitigate these risks in advance.
No one would invest in a business without basic due diligence first; the same principles should apply to philanthropy. Here are some simple things to think about before investing / donating:
Use your heart and your head
Philanthropy is rightly driven by emotion, but don’t let your heart blind you. Undoubtedly you should pick a cause that you care about passionately, but that doesn’t stop you applying the same rigour and professionalism you would to any investment.
Ask the right questions
It’s vital you do your homework before you donate / align yourself with a charity. This needs to be balanced with not overburdening a charity with too many questions and stopping them doing their day job. Instead, there are some simple questions around leadership, sustainability and impact that will help you assess whether the charity is sound. By way of example:
- How is the CEO supported to achieve the charity’s mission? How is the CEO held to account for outcomes and sustainability?
- Is the Board looking at outcomes and impact or only finances? How do you know? (perhaps check Board minutes?)
- Who is the charity actually trying to help? Do you have well-defined inclusion and exclusion criteria?
- What sort of performance management system does the charity have in place? Who’s looking at what data? What do they do with that data? Do they have the right systems to analyse and track that data?
Set expectations from the outset
Have an honest conversation with your chosen charity. Tell them your expectations. But also ask them what they expect from you. Make sure you’re both on the same page. Perhaps commit your expectations to an informal pledge or even a donor agreement.
Anticipate the potential risks to your reputation
Put yourself in the shoes of a tenacious tabloid journalist or a business rival with a grudge. Does your philanthropic work present any hostages to fortune? For example, will your business life / personal life (and that of your family) contradict your philanthropic work in any way?
Be authentic and transparent
The media and the public love nothing more than building people up and then knocking them down. That is certainly true of the philanthropic work done by high-profile individuals. To minimise this risk, you need to be completely transparent about your philanthropy from the outset. Explain your intentions and explain why this particular cause matters to you. This will help you build credibility and authenticity and make it harder for others to knock you down.