Family Wealth: — Keeping It in the Family — How Family Members and Their Advisers Preserve Human, Intellectual, and Financial Assets for Generations, Revised and Expanded Edition

Chapter 14. Peer Review

When an individual creates a long-term trust or charitable organization, he rarely considers that such an organism is subject to the same entropy or gradual decay and eventual depletion of its energy as are all other living things. This reality is only discovered when later generations of beneficiaries find they are dealing with atrophied trustees or when the purposes of the charitable organization are no longer being fulfilled. Necessarily, the law provides remedies in cases of serious misfeasance and neglect, but the law offers no positive program to overcome or even to reduce the effects of entropy. I often wonder whether the grantors of long-term trusts and founders of perpetual charitable organizations would have permitted these organisms to have been born at all had they fully understood how unlikely it is that their desires would be fully met. After watching the action of entropy on trusts and charitable organizations, I decided to try to find a method of governance that might counteract or at least substantially retard its effect. To this end I studied various systems of governance used by family and nonprofit organizations to see if I could find a model that worked. My search ultimately led to the system of accreditation used by educational institutions called peer review.

In this process, an institution voluntarily submits all aspects of itself to a rigorous review by its peer organizations. In the academic context such a review can lead to a negative ...