TEACHING NOTE FOR JOHN AND MARCIA GOLDMAN FOUNDATION

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1 TEACHING NOTE: SI-112 TN DATE: 06/01/13 TEACHING NOTE FOR JOHN AND MARCIA GOLDMAN FOUNDATION John Goldman is a sixth generation San Franciscan and a descendant of Levi Strauss, the entrepreneur who started the apparel company that bore his name. For generations, philanthropy has been an important part of the Goldman family s lives and for John and Marcia Goldman, this was no exception. John and Marcia Goldman wanted to continue the tradition of philanthropy and community service with their own children but also wanted to help other young people develop philanthropic values. In 2003, they established the South Peninsula Jewish Community Teen Foundation as part of the Jewish Community Federation s Imprint Endowment Fund. The program allowed Bay Area Jewish teens to learn how to run their own charitable foundation from developing mission statements and raising money to distributing funds. By 2009, the program had expanded from one chapter in the South Peninsula to four chapters each with 23 teens participating. Over its initial five years, the South Peninsula Jewish Community Teen Foundation program had raised and distributed over $178,000, and together the four teen foundations had distributed $450,051. Key Facts Philanthropic Organizations: John and Marcia Goldman established a private family foundation, the John and Marcia Goldman Foundation, in They also established the Serrano Foundation, a supporting organization of the Jewish Community Federation, as well as the John and Marcia Goldman Philanthropic Fund, a donor-advised fund of the Jewish Community Foundation. Imprint Giving Program: Part of both the Jewish Community Endowment Fund and the Jewish Federation, the Imprint Program was a way for people with specialized interests to set up a restricted fund, similar to a mini-endowment, with a gift of $100,000 or more to support particular programs that were also aligned with the values and strategy of the Jewish Community Foundation. Copyright 2013 by the Board of Trustees of the Leland Stanford Junior University. This note was prepared by Lecturer Laura Arrillaga-Andreessen for the sole purpose of aiding classroom instructors in the use of John and Marcia Goldman Foundation, GSB No.SI-112. It provides analysis and questions that are intended to present alternative approaches to deepening students comprehension of the business issues presented in the case and to energize classroom discussion.

2 Teaching Note for John and Marcia Goldman Foundation SI-112 TN p. 2 Teen Philanthropy Initiative: In 2003, as part of the Imprint Program, the Goldmans launched the Teen Philanthropy Initiative with the South Peninsula as their first chapter. Their goal was to give Bay Area Jewish Teens an opportunity to learn how to run their own charitable foundation and to become strategic grantmakers. Teens raised funds, which were matched by the Goldmans and then granted them to organizations that were aligned with their selected grantmaking focus. The Goldmans funded the program for two years to support the operating costs (staff, meetings and application costs) and then, due to its tremendous success, decided to endow the program. Project Give: After seeing the success of the Teen Philanthropy Initiative, the Goldmans established Project Give at the Eastside College Preparatory School in East Palo Alto to enable students of diverse ethnicities and lower-income families to give away $10,000 and develop a practice of thoughtful and strategic giving. Key Players: John and Marcia Goldman, philanthropists; Sue Schwartzman, head of the Teen Philanthropy Initiative. Position in Course This case study is intended for use in a course on living donor grantmaking and strategy. The teaching objective is to illustrate practices of individual philanthropy and social innovation as well as demonstrate the process for developing a new philanthropic initiative. The case highlights the importance of passing inter-generational giving values and developing a deeper understanding of strategic philanthropic practice throughout a lifetime. In particular, the case highlights different types of individual giving vehicles and the value of objectively evaluating new philanthropic programs while continuing to develop them. Supplementary Readings Arrillaga-Andreessen, Laura. Chapter 8: Family Matters Gifts that Keep on Giving. Giving 2.0: Transform Your Giving and Our World. San Francisco: Jossey-Bass, Print. Arrillaga-Andreessen, Laura. Philanthropy in America: An Historical and Strategic Overview. Case Study. Stanford Graduate School of Business. Case No. SI-66. (2004). Web. Esposita, Virginia. Splendid Legacy: The Guide to Creating Your Family Foundation. Washington D.C.: National Center for Family Philanthropy, Print. Hausner, Lee and Douglas Freeman. The Legacy Family: The Definitive Guide to Creating a Successful Multigenerational Family. New York: Palgrave Macmillan, Print. More Youth Become Engaged in Philanthropy. Marketplace, Your Money. American Public Media. 17 Jan Radio. Souccar, Miriam. Philanthro-Teens Delving into Nonprofit World. Crain s New York Business. 30 Jan Web.

3 Teaching Note for John and Marcia Goldman Foundation SI-112 TN p. 3 Assignment Questions 1. The Teen Philanthropy Program experienced great success, high teen engagement and significant results during its first few years. Identify the key elements of the Teen Philanthropy Program design that enabled it to be successful. What additional program elements would you create to further improve the Teen Philanthropy Program s effectiveness? a. Timing for Class: minutes for class discussion and brainstorming, including identifying the key program elements and then brainstorming new ideas that could further improve the program. 2. How can the Teen Philanthropy Program further engage its alumni to continue to expand its programs reach and impact? a. Timing for Class: 8-10 minutes for class discussion. 3. All philanthropic individuals and institutions face the challenge of balancing personal passions with community needs. Analyze how the Goldmans designed the Teen Philanthropy Program so as to incorporate both their personal passions and the needs of the community. a. Timing for Class: 8-10 minutes for class discussion. 4. What giving vehicles did John and Marcia Goldman use for their family philanthropy? And what are the costs and benefits of each one? Please note: This study question may be assigned along with required reading in Giving 2.0: Transform Your Giving and Our World (Jossey Bass, 2011) including Chapter 8: Family Matters and Appendix II: Vehicles for Giving. a. Timing for Class: 15 minutes for class discussion and professor instruction. Analysis 1. The Teen Philanthropy Program experienced great success, high teen engagement and significant results during its first few years. Identify the key elements of the Teen Philanthropy Program design that enabled it to be successful. What additional program elements would you create to further improve the Teen Philanthropy Program s effectiveness? Key elements of the current Teen Philanthropy Program s design include: Leadership by an experienced philanthropic community leader. Sue Schwartzman had started a similar smaller program for the seventh-grade students at local Jewish day schools in Palo Alto, the East Bay and Foster City and thus had the relevant experience needed to help launch a new program for high school students in similar regions. The ability for teens to raise money from any source they wanted. Most teens sent solicitation letters to family and friends during the school year.

4 Teaching Note for John and Marcia Goldman Foundation SI-112 TN p. 4 Time commitment. Teen members met every month for four hours and attended an annual retreat. Meetings included reading Jewish texts about giving, listening to presentation by potential grantees and participating in team-building exercises. Teen ownership of the operating principles of their foundation. Each chapter came up with its own mission statements and requests for proposals (RFPs) that they sent to prospective grantees. The participants evaluated the grant proposals, engaged in final communications with finalists and chose the grantees to which funds were disbursed. Continuity of leadership. Several of the teens who had participated in the program in past years agreed to take on leadership roles during their second year of participation. The application process. In order to get involved, teens had to complete an application made through the Jewish Community Endowment Fund expressing their passion and desire to give back to the broader community. Objective distance between the Goldmans and the program. John Goldman believed in empowering those who were running the program by limiting his direct program involvement. He felt that this was critical to maintaining objectivity and independently assessing whether or not a program was successful. Answers for this question will vary, but here are some ideas for additional program elements to improve the Teen Philanthropy Program s effectiveness: Presentations by other community philanthropists. Participants could benefit from hearing the personal stories and lessons learned from other community philanthropists (of varying ages). These philanthropists could inspire and educate the teens by sharing stories about their personal giving journeys and tips for making their giving matter more, both to themselves and to those they aim to help. Evaluation of the previous year s grant. It is important for young philanthropists to understand that involvement and impact does not end when the gift has been made. On the contrary, it is critical to evaluate the impact of the gift after it has been implemented to learn how to improve future giving decisions. As many of the teens participated for two years, returning members often took on leadership positions and could help lead the group in an evaluation of the previous year s grant to understand its impact a year after the gift was made. Annual program evaluation. To continue to deliver the intended outcomes as the number of participants and sites grows, it is important for the program leaders (Schwartzman, the Goldmans and the Jewish Federation) to understand what is working well at each site, what areas are in need of improvement and how the program is evolving from year to year. With an expanding set of data points, program leaders could gather a lot of rich data from annual program evaluations, enabling the program to grow stronger and more effective every year.

5 Teaching Note for John and Marcia Goldman Foundation SI-112 TN p. 5 Knowledge management system development. With evaluation of grants and the program itself in place, the Teen Philanthropy Program would be well positioned to develop a knowledge management system that could capture the lessons learned from year to year and inform modifications and enhancements when appropriate. Involving the teens in the knowledge management process would help teach them the value of continuous learning and evolution in their philanthropy. Involve participants families. At the end of each grantmaking year, a grant award celebration could bring together families and a grantee representative at an event during which the teens would give a final presentation, sharing how and why this grantee was selected. A social celebration could follow the presentation, enabling the families to connect and celebrate a commitment to giving values. (Including younger siblings would help to inspire them to participate in the future.) Add a volunteer experience with the selected grantee. Teens could volunteer with the selected grantee organization to learn that philanthropy is about more than giving money; it is also about giving time and expertise. Develop a How To Guide so that others can replicate the program. Aligned with the Goldmans and Jewish Federation s desire to develop giving values in Jewish teens after their bar or bat mitzvahs, program leaders could develop a guide for philanthropists in other parts of the country on how to start their own chapters of the Teen Philanthropy Program. Additionally, the Jewish Federation could be a key facilitator for the distribution and proliferation of the program through its numerous regional chapters across the country. 2. How could the Teen Philanthropy Program further engage its alumni to continue to expand its programs reach and impact? Answers for this question will vary, but here are some ideas for ways to continue to engage alumni of the Teen Philanthropy Program: Alumni could actively recruit in the community. To build the teens leadership skills and broader community awareness for the program, alumni teens could make presentations at informational meetings at their schools, temples and open community events. By sharing the lessons learned from their experiences, they could recruit and engage new participants. Alumni could stay involved and aware through social media. The Teen Philanthropy Program could start a social networking page (e.g. Facebook) as well as develop a Twitter handle. It could invite alumni to stay connected to the program by joining and/or following the program through these dedicated social media platforms. On the social networking page, active participants and alumni could post updates on their philanthropic activities as well as questions and answers to related giving issues. The program could host annual regional alumni mixers. To keep alumni engaged in the program (and fuel the flames of their giving passions), the Teen Philanthropy Program

6 Teaching Note for John and Marcia Goldman Foundation SI-112 TN p. 6 could host regional annual events at which all alumni and active participants could hear about the program s progress and share updates on their current philanthropic activities. How-to guide for alumni to start their own giving circle at their respective universities. With many graduates of the Teen Philanthropy Program heading off to college after they complete the program, its leaders could develop a guide for alumni on how to use or start a giving circle on their college campus with suggestions on ways to engage a new and broader group of peers in strategic philanthropy. This would enable the alumni to build upon their foundation of philanthropic values, share what they have learned and continue their philanthropic journeys in a new, exciting way. National Teen Philanthropy Program event. As the Teen Philanthropy Program continues to spread across the nation, it could become a signature program associated with the Jewish Federation nationally. The Federation could host an annual event where all past and present program participants could convene in a central location and engage in a day of inspirational, empowering and educational activities to build upon the philanthropic foundation established by the program. 3. All philanthropic individuals and institutions face the challenge of balancing personal passions with community needs. Analyze how the Goldmans designed the Teen Philanthropy Program so as to incorporate both their own personal passions and the needs of the community. Teaching philanthropic values to the next generation. For the Goldmans, philanthropic engagement in the community was a part of both life and family. Passion for philanthropy ran deep in the Goldman family and was assumed to be a value that would be passed down to future generations. While this is something the Goldmans have significant control over during their own lives, they saw the opportunity to share this value with others and create a much broader impact throughout their community by developing a program that engaged other teens and families philanthropically. Recognizing a gap in the market. Jewish teens are first introduced to the values of philanthropy around their thirteenth birthday but are not further engaged in giving until they are much older. The Goldmans recognized this gap in the market and decided that they could fill it through their own philanthropic efforts. While the Goldmans could have given to any number of activities, programs or organizations, they recognized the importance of providing a solution to a problem that others were not addressing. Allowing the teens to choose their foundation s social mission. While the Goldmans could have required that the teens gave only to issues that they personally cared about, they instead supported a program in which the teens themselves researched different global social issues and selected a grantmaking focus based on their collective evaluation of public needs and personal interests. This process not only helped to serve the broader needs of the community more effectively but it also taught the teens the importance of balancing personal passions with public needs, a critical lesson for all philanthropists.

7 Teaching Note for John and Marcia Goldman Foundation SI-112 TN p. 7 Leveraging the power of teen grantmakers and community donations. The Goldmans expanded the impact made by the teen grantmakers and all those who had given to their campaign, by matching the community donations the teens had raised. This significant and generous action encouraged many individuals across the community to support the Teen Philanthropy Program and increased the potential for social impact through the pooling of funds. Separation of Church and State. John Goldman strongly believed in giving his time and expertise but also in maintaining a certain distance, empowering philanthropic leaders to run the programs more independently. Hiring the right person for the job and trusting her to operate the program (with only high-level input) enabled the program leader to focus on the program s primary goals, develop a sense of community ownership for the program and quickly adapt to changes in community needs. 4. What giving vehicles did John and Marcia Goldman use for their family philanthropy? And what were the costs and benefits of each one? Please note: This study question should be assigned along with required reading in Giving 2.0: Transform Your Giving and Our World (Jossey Bass, 2011) including Chapter 8: Family Matters and Appendix II: Vehicles for Giving. John and Marcia Goldman established a private family foundation, the John and Marcia Goldman Foundation, in 1997, as well as establishing the Serrano Foundation, a supporting organization of the Jewish Community Federation and the John and Marcia Goldman Philanthropic Fund, a donor-advised fund of the Jewish Community Foundation. To set up this exercise, the professor may want to start by providing a definition for each giving vehicle and then having the class help identify the costs and benefits of each. Private Endowed Family Foundation. A private foundation is one that uses income from its endowment to make grants or fund programs. o Donors to private foundations receive immediate tax benefits when setting up the foundation but funds can be distributed far into the future (with the foundation making at least a minimum required charitable distribution in the second year after inception). The tax benefit for cash is 30% and the tax benefit for long-term real estate and securities is 20%. o Due diligence and expertise is provided by the donor or hired professional staff. To comply with the federal tax status, a 5% annual payout is required. o With private foundations, donors have legal control over the investments of both corpus and grants. o This giving vehicle requires significant up-front set-up costs due to the required tax and legal counsel. Costs: Set up and possible ongoing management costs, as well as a lower level of tax benefits due to private control.

8 Teaching Note for John and Marcia Goldman Foundation SI-112 TN p. 8 Benefits: Donors retain complete control over the philanthropic operations of the fund including control of financial investments, charitable decisions and administration. Supporting Organization. Typically based in a community foundation, a supporting organization is a public charity that either makes grants to public charities or performs the operations of a public charity. It is similar to a private foundation but must have external leadership from the sponsoring organization. o Donors to supporting organizations give up some control over grantmaking decisions but gain a higher tax benefit due to this distributed control. As neither the donor, donor s family nor dedicated staff run the organization, the Internal Revenue Service provides a tax benefit for cash of 50% and the tax benefit for long-term real estate and securities of 30% due to the additional layer of public oversight. o The due diligence responsibility is distributed across the donor and the sponsoring organization (usually a community foundation). Donors gain administrative and legal support from the sponsoring community foundation and can be connected to a broad donor network connected to the community foundation. o A supporting organization must comply with the sponsor organization s legally required payout rate (5% for community foundations). o Supporting organizations may or may not have investment control, depending on the size of the fund. Costs: Donors give up some control over investment and grantmaking decisions as the sponsoring organization will become the legal operator for the fund and hold the majority of board seats. Benefits: Donors receive the maximum tax benefit rate and can benefit from additional support from the sponsoring organization, such as due diligence, administrative and legal support and a community of fellow donors. Donor-Advised Fund. Donor-advised funds (DAFs) are charitable giving vehicles established within a community foundation or financial institution for purposes of managing and distributing charitable donations on behalf of a family, individual or organization. 1 o Donor-advised funds give more flexibility to donors with respect to grant size, timing and direction but the donor is giving up full legal control and becomes an advisor. The sponsoring public charity gains full legal control of the fund. o Donors to donor-advised funds receive the maximum tax benefit of 50% for cash and 30% for long-term real estate and securities due to the additional layer of oversight. o When housed at a community foundation, the community foundation conducts the due diligence (to varying degrees, but certainly to ensure that all grants are made 1

9 Teaching Note for John and Marcia Goldman Foundation SI-112 TN p. 9 to 501(c)(3) organizations, pools the resources to maximize financial gain, provides a community of fellow donors and supports the donor-advised fund with legal and administrative needs. o When housed at a financial institution, the financial institution may or may not conduct due diligence or provide expertise, depending on the size of the fund. The extent of resource pooling and size of donor community will vary by institution. o A donor-advised fund does not have an annual minimum payout rate. o Donor-advised funds may or may not retain investment control, depending on the fund size. Costs: Donors give up some control over investment and grantmaking decisions as the sponsoring organization will become the legal operator for the fund. Benefits: Donors receive the maximum tax benefit rate and can benefit from additional support from the sponsoring organization, such as due diligence, administrative and legal support, a community of fellow donors and resource pooling. There is no annual minimum payout rate and the level of investment control depends on the size of the fund. Federated Giving Program. Federated giving programs are ongoing fundraising efforts led by a broad umbrella organization (such as the United Way, the Jewish Federation, Catholic charities and similar organizations). This broader organization in turn represents donors in a collective manner and manages the distribution of charitable donations. o Federated giving programs give donors the maximum allowable tax benefit of 50% for cash and 30% for long-term real estate and securities due to the additional layer of oversight, but the donor generally gives up much of their control over the funds. o With federated giving programs, the umbrella organization supports donors with due diligence, grantmaking expertise, legal and administrative support as well as resource pooling. Sometimes a donor community is developed and celebrated, but this varies from one organization to the next. o Donors do not have investment control with a federated giving program and payout rates are irrelevant. Costs: Donors generally give up control over grantmaking decisions, as they are investing in the overall mission of the umbrella organization. Benefits: Donors receive the maximum tax benefit rate and benefit from the power of pooling capital with others to support the overall mission of the umbrella organization. Teaching Approach The John and Marcia Goldman Foundation case study is appropriate for a 45-minute teaching module including both a lecture and a discussion.

10 Teaching Note for John and Marcia Goldman Foundation SI-112 TN p. 10 Key themes for discussion include: Program and social innovation Family foundations Teaching giving values Grantor-grantee relationship Program development Individual giving vehicles Please see the Giving 2.0 website (giving2.com) for Stanford Graduate School of Business Lecturer Laura Arrillaga-Andreessen s complete portfolio of philanthropy Stanford Graduate School of Business case studies, teaching notes, frameworks and learning resources that she has created since 2000.