The Limits of Philanthropy

We encourage families to donate time, talent, and treasure to charitable organizations, with the understanding that philanthropy is not a substitute for family governance.

Philanthropy by people who have spent their lives creating wealth represents their giving back and, often, a shift from a short-term focus—on the next client, product, or deal—to a long-term perspective. A lovely saying sums this up: “Old men plant trees.” They plant trees not so they can climb them or sit under them, but because they want future generations to be able to do so.

While philanthropy by people who did not create wealth is preferable to squandering it, the belief that philanthropy can teach children financial responsibility or business acumen can be flawed, for two reasons:

  • The charitable organization needs the donor more than vice versa. Although charitable organizations and donors serve genuine mutual needs, the relationship reinforces the position conferred by wealth. Compared with the need to earn a living, charitable giving imparts few lessons in coping with rejection, disappointment, and failure or in persistence.
  • Focusing on philanthropy can imply that business is tainted. By asking philanthropy to convey financial lessons, parents may signal that work in a for-profit business is somehow less useful or worthy than nonprofit work. In fact, businesses also enrich the lives of millions of people.

Like all endeavors, charitable giving should be undertaken with high hopes and realistic expectations. Encouraging children to pursue careers—or to engage seriously in family governance—sets different goals and expectations than having them engage only in philanthropy and volunteer work.

Family governance can, together with philanthropy, help family members to develop financial responsibility, business acumen, and a long-term view—qualities that will help the family to remain prosperous, and engaged in philanthropy, for generations.