This week, in an interview with CNN, Elon Musk was challenged by UN World Food Programme Executive Director David Beasley to "step up now, on a one-time basis" to help solve world hunger. He said "$6 billion to help 42 million people who are literally going to die if we don't reach them. It's not complicated."
Actually, it is complicated. Elon Musk’s wealth is extremely illiquid, the vast majority of it being in Tesla and Space-X stock. So cash to make donations is in short supply. He could, of course, sell stock – and indeed, this week he asked the Twitterverse if he should sell 10% of his Tesla stock, and it said yes. There are a huge number of legal and ethical questions raised by both the tweeting and the stock sale itself – an excellent overview of those questions can be found on Bloomberg Opinion here - https://www.bloomberg.com/opinion/articles/2021-11-08/elon-musk-did-some-tweets.From a philanthropic point of view, however, one important question is – could charitable structuring help?Should he donate the shares to the Musk Foundation or another charitable vehicle? That would certainly be a more tax-efficient way to give (although the point of selling the stock outright seems to have been related specifically to generating taxable income, not avoiding it).
But - the Musk Foundation’s website says only that
“Grants are made in support of:
- Renewable energy research and advocacy - Human space exploration research and advocacy - Pediatric research - Science and engineering education - Development of safe artificial intelligence to benefit humanity.”
Does this in fact mean that a grant to urgently help 42 million starving people could not be made from this foundation? Possibly – the constitutional documents of the entity are crucial in governing what its assets may be used for.
Governing documentation and the ways that philanthropists can exert control over charitable organizations are just one of the topics that we cover in the Henley Family Office Program’s module on Philanthropy. When Ultra High Net Worth families think about their legacy, philanthropic giving ranks very high on the list of priorities, and anyone working in or with a family office is likely to encounter philanthropy in some shape or form.
Our lecturer, Jennifer Emms of Maurice Turnor Gardner, discusses the many facets of philanthropy from a family office viewpoint. She helps by outlining the spectrum of philanthropy – on a scale from least commitment to most commitment, it covers:
Impact investing
Ad-hoc volunteering
Pooled giving
Donor-advised funds
Individual/corporate grant-making
Bespoke charitable entities.
Each of these types of giving has unique attributes and benefits. One of the impacts they all share, however, is their benefit to the next generation. Jennifer discusses how different types of charitable activity, tailored for the age of the child, can bring various benefits. For example, they can teach children about the family’s values and legacy, about investment, and about caring for others. They can help to develop boardroom skills at a much earlier age than would be possible in a corporation. And they can help intergenerational communication, as the different generations discuss how they would like to see the family’s philanthropic assets used.
The module also covers the various considerations that go into making choices around philanthropic vehicles, such as Tax, Jurisdiction, Grant-making or Operational nature, who will be on the Board, Location of the administration, Regulatory issues, Revocability and Reputational Risk.
Many of the themes in this module intersect with other modules in the Program, themes such as fiduciary duty, trusts, inter-generational harmony and communication, succession, and the significance of human emotions. The family office program covers key management concepts involved in running a well-managed family office, and other modules which feature these key themes include Estate Planning, Governance, Structuring and Set-up and more.
The program’s structure is in three parts: introduction to the core background concepts, which include tax and trust structures; asset-related management, which includes portfolio management, operations, technology and administration; and finally non-financial subjects such as HR, concierge services, NextGen education and Risk Planning. The Philanthropy module also fits into this section. Each module includes preparatory and deeper dive reading plus one to three lectures by experienced insiders from the family office industry. Our lecturers come from around the world and share their expert insights into key issues and best practices.
Participants in the program are invited to join webinars covering topics that relate both to the course and to relevant current events – for example, we have recently covered the rise of NFTs and SPACs, and the Archegos family office affair and its fallout for the financial services industry.
