Daniel

Daniel Ferrell-Schweppenstedde

Policy Manager

Charities Aid Foundation

The Royal split

30 July 2019

In early June 2019 it was announced by the Duke and Duchess of Cambridge and The Duke and Duchess of Sussex that the latter will leave the Royal Foundation to focus on their own charitable activity .

The announcement followed a structural review of The Royal Foundation.

The motivation for the split was described as twofold: ‘These changes are designed to best complement the work and responsibilities of Their Royal Highnesses as they prepare for their future roles, and to better align their charitable activity with their new households.’

Without knowing the outcomes of the official review, it is impossible to say with certainty all the factors driving this decision. But we can identify some of the potential motivations for the split, how these relate to the work of other family foundations and whether there any wider signals that we can extrapolate for the work of other charities and funders.

To merge or not to merge, to split or not to split

The Royal Foundation – as a registered charity - also acts in the wider environment of charities in the UK (and globally). An oft-repeated challenge from some is that ‘everything has to go to the cause’, i.e. using donations for core costs is a waste of money. (Many characterise this as an unhelpful “overhead myth”). Even when it is not grounded in the reality of how charities are run, fundraisers (for better or for worse) have to take the conversation seriously. Charities reflect this in the communication of their spending externally (even when it is just about transparency and accessibility of information). One could argue that overheads are simply higher by having two organisations instead of one where the charitable work of both families remains integrated.

Another criticism often raised is that there are ‘too many charities’. Whilst there is an obvious counter-argument in that the sector is market-based (charities emerge and close based on the level of support and funding they can secure); creating another charity certainly seems to go against this sentiment. The Royal Foundation split might become a popular example to be used in the future by those who want to push back on the idea that there are too many charities.

There is also a related discussion about mergers, and how this possibility needs to be at least considered by more charities in order to drive consolidation and rationalisation in the sector. NPC has done some recent work in this space highlighting some of the benefits of charity mergers. While views on charity mergers continue to differ widely, one thing that is clear is that an organisational split runs in exactly the opposite direction (although one could imagine a scenario where a merger and a split could result in a similar organisational set-up).

Having a pluralistic charity sector, with a broad range of organisations reflecting the wide variety of motivations and interests of people throughout society is of great value. Perhaps the price for this is proliferation of organisational models and a degree of complexity and from this point of view, telling charities that they should merge or split seems problematic.

There are historic examples of "foundation splits" but it does not seem to be a common phenomena and it seems to be also an under-researched topic.  What, then can we surmise about the justification and potential benefits of the split?

The why – is ‘business as usual’ enough to justify the split?

The Royal Foundation is a philanthropic vehicle of the Royal Family, and is therefore situated in the world of family foundations. From a ‘business as usual’ point of view, the split was probably to be expected. Meghan and Harry are setting up a new household so it is no surprise in many ways that they want to carve out their own unique charitable activity. Setting up a new structure is not a necessity, but it can definitely be seen as a logical step.

This raises questions around the control of foundations by living donors and the issue of ‘founder ego’. One of the (many) criticisms of philanthropy throughout history has been the perception that it can sometimes be  ‘self-indulgent’ – driven more by what the donor wants than by the needs of those they are seeking to help. In that light, it seems fair to ask whether this recent royal foundation split was primarily motivated by a rational and strategic assessment of how to maximise effectiveness, or is it more about giving Meghan and Harry control of their own charitable work as well as giving the new Royal couple greater charitable profile. The latter seems unlikely to be the primary rationale, but it is explicitly mentioned in the official communication so has clearly played a part in the thinking behind the decision.

The how – how does the split relate to achieving impact?

Splitting up activities and resources might reduce economies of scale, which could reduce the overall effectiveness of both royal families’ giving. Could they have achieved the same goal but in a different way, e.g. by separating out causes and branding, but sharing the same back-office functions so that resources are saved? In this case control over vision and mission by living founders might impede getting efficiencies through scale.

One could argue that this issue has been partially mitigated. Both organisations will continue to run common programmes such as the highly successful mental health programme ‘Heads Up’ and ‘United for Wildlife’ tackling the illegal wildlife trade, and there will be transitional support from The Royal Foundation.

One could also argue that having two separate big champions focussing on different topics could increase their overall ability to shine a spotlight on unpopular causes. Two separate entities could be also more successful in drawing in match-funding, bringing in additional resources to the sector by individuals and corporates, offering points of contact for engagement with government, and delivering a more bespoke offer to partners.

Then there is the element of peer review and learning. Meghan and Harry (and potentially staff who move with them) spent time at the Royal Foundation. They can transfer insights but also identify gaps and develop different approaches. There could also be a future feedback loop that would be easily established given the family ties to Kate and William, and this could benefit both organisations.

The list of pros and cons can be expanded, but it illustrates that the question of how to best achieve impact is a complex one.

What do we know about the proliferation of family foundations?

Family foundations make up the lion’s share of giving by foundations in the UK. They account for almost 60% of foundation giving in the country (ACF data from 2014). In America, they make up over 50% of all private foundations. That’s a significant chunk of both markets and it means that ‘much major philanthropy in the UK is a very personal and family affair.’

The way they are set up and operated varies widely – and is primarily a family decision as well. The Garfield Weston Foundation - the second largest in the UK by net assets - has trustees who are descendants of the founder and the Weston family continues to take a highly active and hands-on approach. It is  a clear example of a foundation with the involvement of multiple family members.  

The Sainsbury Family Charitable Trusts on the other hand is ‘the operating office of 17 different independent grant-making trusts’. This includes the Indigo Trust, which has gained prominence for its role in setting up the grant-making open data initiative 360Giving which is driving a much greater focus on transparency in the charity and foundation sector. One could argue that organisational proliferation delivered a huge benefit in this case.

From a family perspective, engaging the next generation in giving might require giving family members their own organisation. This might work best when there is a long-standing tradition of family giving – which is clearly the case when it comes to the Royal Family. Families who are new in this space might prefer to keep the first and second generation under one roof so that family members can learn more about their family’s giving practice before setting up their own foundation. Again, there are many different possible answers as to why organisational proliferation might or might not happen.

Do we have a right to know more about the ‘why’ the split occurred?

Do external people actually have a right to know about something that could be easily considered as an internal family decision? In the case of the Royal Family there is an intricate link between family, public and national interest.  Other families that engage in philanthropic activity might face fewer questions of public accountability. But there is always a public interest in the spending decisions of the member’s of the Royal family, and things like the Sovereign Grant establishes a link to the public purse that gives us all a more obvious direct stake. The renovation costs for Harry and Meghan’s new home, Frogmore House, for example, were widely debated in the media.

The Royals are public figures, so it is unsurprising that many demand  an extra level of transparency and expect greater accountability – even when it comes to their charitable activity, and even when the initial endowment came from private resources of the family.

This leaves us with the question around process. The report which led to the decision to split has not been published, which means that we don’t really know what all the considerations were. Was the move more about donor ego, profile and having two different identities for the Royal couples? Or did they go through a more detailed process looking at impact, resources, giving voice to beneficiaries, collaboration and synergies, as well as other aspects when justifying the split?

Is another yardstick needed?

Having a general rationale for why things are being set up in a certain way is probably a good thing. ‘Intentionality’ for every decision and an ‘explain or change’ approach towards existing and future structures and processes would fit in here. Family foundations often represent cases where existing governance set-ups can’t be explained because they they are just historic artefacts.

One could ask whether this is still good enough for achieving impact when doing 21st century philanthropy – in particular when their work affects vulnerable people, a community or society as a whole. However, at the end of the day it remains a family decision. But can we demand a higher level of scrutiny of a decision that is made by public figures such as the Royal Family? It will be interesting to watch how the situation develops as the two families develop their own distinctive approaches to philanthropy.

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