The Washington DC Examiner reported the other day that a Congressional Philanthropy Caucus is being organized in the House, co-chaired by North Carolina Republican Robin Hayes. The Democratic co-chair was not identified, and the newspaper didn't name its source for the story. Some quick poking around just now didn't turn up any denials, and the Chronicle of Philanthropy appears to believe it.
Such a move seems inevitable given the various non-profit and philanthropy related issues that have in recent years been the subject of Congressional bills or hearings, and the general increase in public awareness due to things like the Gates and Buffett philanthropies and some non-profit scandals. And it does seem clear from kludgy messes like last year's federal Pension Reform Act that a lot of Congressmen and Senators are not yet up to speed on what this sector does and how, and a defined caucus ought to help with that learning curve.
Nonetheless I can't help thinking of the prediction Joel Fleshman is going around making (out loud and in his book) about foundations: that if they don't define and adopt a new more-transparent version of the charitable-foundation social contract, Congress will eventually define it for them. I think he's right about that -- our society slowly but continuously becomes less tolerant of secrecy from all its public or civic institutions, including publicly-held companies, and there's no reason to expect foundations to be exempted from that.
And I would apply Fleishman's logic to the not-for-profit tax-exempt sector as a whole: the statute of limitations on permission to be a young industry is not yet defined but it's also not open-ended. In some ways we perform our role in society better than other sectors do and some ways we don't, at all; and we won't be allowed to avoid that fact forever.
Showing posts with label Gates. Show all posts
Showing posts with label Gates. Show all posts
Monday, March 12, 2007
Tuesday, January 30, 2007
The "Slate 60" sounds off
Ten years ago, Slate editor Michael Kinsley was inspired (by something Ted Turner said in an interview) to create the "Slate 60": the philanthropy version of the Forbes 400 annual list of America's richest people. Arguably Kinsley was a bit ahead of his time in 1996, which was before Bill Gates and Warren Buffett and Gordon Moore started famously taking turns doing modern-day Andrew Carnegie impersonations. (For that matter so was Turner, who has a right to feel like he was doing billionaire philanthropy before it was cool.)
Anyway it was a good idea and the ten years worth of lists make for interesting reading; one can see things like the sources of vast new personal fortunes, what subjects and institutions have the attention of the super-rich, and of course the unprecedented new scale of individual philanthropy. (Despite personal wealth in the U.S. being vastly less concentrated today than in Carnegie's time Bill Gates has already given away in real dollars several times as much as either Carnegie or John D. Rockefeller did; and yet all the giving for a year by the entire Slate 60 is a small fraction of total American individual giving which is closing in on $300 billion per year.)
This past November, Slate gathered members of the Slate 60 from its first ten years for a public conversation. I like the NonProfit Times writeup which is both thorough and just a bit cheeky ("With their limos waiting outside, donors gathered at the conference to discuss..." Those would be hybrid limos staffed by salaried drivers receiving family health insurance, I trust?). For example their reporter quoted Bill Gates Sr. scoffing at the dot-commers' notion that philanthropy only just this second became entrepeneurial (he has a point in a generalized sense of that word, not so much if the narrow fiduciary sense of it is meant).
The Chronicle of Philanthropy writeup is drier, though probably does a better job of getting across the key messages of a couple of people like New York Mayor Michael Bloomberg. Slate meanwhile posted video and audio from the conference itself. (The conference also included prominent philanthropists who haven't personally made the Slate 60, such as Bono.)
Anyway it was a good idea and the ten years worth of lists make for interesting reading; one can see things like the sources of vast new personal fortunes, what subjects and institutions have the attention of the super-rich, and of course the unprecedented new scale of individual philanthropy. (Despite personal wealth in the U.S. being vastly less concentrated today than in Carnegie's time Bill Gates has already given away in real dollars several times as much as either Carnegie or John D. Rockefeller did; and yet all the giving for a year by the entire Slate 60 is a small fraction of total American individual giving which is closing in on $300 billion per year.)
This past November, Slate gathered members of the Slate 60 from its first ten years for a public conversation. I like the NonProfit Times writeup which is both thorough and just a bit cheeky ("With their limos waiting outside, donors gathered at the conference to discuss..." Those would be hybrid limos staffed by salaried drivers receiving family health insurance, I trust?). For example their reporter quoted Bill Gates Sr. scoffing at the dot-commers' notion that philanthropy only just this second became entrepeneurial (he has a point in a generalized sense of that word, not so much if the narrow fiduciary sense of it is meant).
The Chronicle of Philanthropy writeup is drier, though probably does a better job of getting across the key messages of a couple of people like New York Mayor Michael Bloomberg. Slate meanwhile posted video and audio from the conference itself. (The conference also included prominent philanthropists who haven't personally made the Slate 60, such as Bono.)
Saturday, January 20, 2007
More on foundation investment practices
The Wall Street Journal followed up yesterday with a small article about foundations which clarified for me that there are really three basic choices for foundations, not two as the L.A. Times portrayed it. (You can't read the Journal article unless you're a subscriber but a Chronicle of Philanthropy note on it is here, and Philanthropy 2173 has links to all the foundations mentioned in it.)
(If you're interested in this subject, go take Lucy Bernholz's online poll found on the right at the Philanthropy 2173 link above.)
The L.A. Times articles about the Gates Foundation talked about either letting mission-related issues influence decisions about buying stock, or deciding that getting the highest returns is all that matters. That's basically the same as the debate about whether Western nations should keep China at arm's length until it improves its human-rights practices, or have normal diplomatic relations so as to encourage change. (When I was in college the topical subject of that foreign-policy debate was South Africa.)
Buying stock in a corporation, though, is different: it's ownership. You get to actually vote on the policies of the thing you own part of, and to speak out loud at annual meetings where the management and all the other owners have to listen to you. Indeed if enough other owners feel the same way that you do about an issue like corporate practices, the company must follow your wishes. That's a whole different caliber of influence than any nation, even the U.S., gets by trading with China -- the U.S. State Department obviously does not get to speak, let alone vote, as a member of the Chinese Politburo or even the country's toothless parliament.
Upon reflection that's the path which seems to me to best leverage the latent power for change of big investment portfolios. So that's why I voted for option 4 on the online poll mentioned above. (I notice that the poll stacks the deck in its structure -- it lists three different flavors of the first strategic option and then just one version of the other two -- so there's little chance that anything but a version of "mission imperatives should change investment choices" will win.)
(If you're interested in this subject, go take Lucy Bernholz's online poll found on the right at the Philanthropy 2173 link above.)
The L.A. Times articles about the Gates Foundation talked about either letting mission-related issues influence decisions about buying stock, or deciding that getting the highest returns is all that matters. That's basically the same as the debate about whether Western nations should keep China at arm's length until it improves its human-rights practices, or have normal diplomatic relations so as to encourage change. (When I was in college the topical subject of that foreign-policy debate was South Africa.)
Buying stock in a corporation, though, is different: it's ownership. You get to actually vote on the policies of the thing you own part of, and to speak out loud at annual meetings where the management and all the other owners have to listen to you. Indeed if enough other owners feel the same way that you do about an issue like corporate practices, the company must follow your wishes. That's a whole different caliber of influence than any nation, even the U.S., gets by trading with China -- the U.S. State Department obviously does not get to speak, let alone vote, as a member of the Chinese Politburo or even the country's toothless parliament.
Upon reflection that's the path which seems to me to best leverage the latent power for change of big investment portfolios. So that's why I voted for option 4 on the online poll mentioned above. (I notice that the poll stacks the deck in its structure -- it lists three different flavors of the first strategic option and then just one version of the other two -- so there's little chance that anything but a version of "mission imperatives should change investment choices" will win.)
Monday, January 15, 2007
A thoughtful response from Gates
Thanks to reader Greg for a tip that the Gates Foundation has replaced the online announcement that replies to the L.A. Times articles. The new essay, still signed by Chief Operating Officer Cheryl Scott, is quite different from the one that was online for only half a day last week though it does still make the good point that Gates has been completely transparent about its investing.
The new essay makes a point of stating that "Bill and Melinda oversee the investment of the foundation's endowment", so it does look like they were annoyed that the previous posting and Scott's newspaper interview made it sound otherwise. It says that they give "guidance" to professional investment managers, which every non-profit watchdog would agree is the appropriate approach for a foundation board.
Perhaps the most-important substantive message of the new essay is that the Gates Foundation is not in the camp that says a foundation should seek only to maximize returns with its endowment. Rather, their reason for mostly declining to rank companies on moral grounds is the real-life complexity and contradictions inherent in that concept. "There are dozens of factors that could be considered...Many of the companies mentioned in the Los Angeles Times articles do a lot of work that some people like, as well as work some people do not like. Some activities might even be viewed positively by some people and negatively by others." They also note that some of the issues which the newspaper brought up as reasons not to invest in a company, such as lending laws or environmental regulation, are outside the foundation's charitable mission.
On the shareholder activism question they basically vote for reserving proxy voting for issues directly related to a company's carrying out its core mission, i.e. good management of the company itself. And they do note the one specific subject on which Bill and Melinda have thus far decided that the issues are clear-cut enough to decide not to invest at all: tobacco.
I don't personally agree with all of the above decisions but also don't find any of them to be out of the bounds of what reasonable people of good will might conclude. It does sound like the newspaper articles have provoked renewed focus on the subject over there, and that the Gates folks understand that its unique status in philanthropy inherently places some special obligations on them.
The new essay makes a point of stating that "Bill and Melinda oversee the investment of the foundation's endowment", so it does look like they were annoyed that the previous posting and Scott's newspaper interview made it sound otherwise. It says that they give "guidance" to professional investment managers, which every non-profit watchdog would agree is the appropriate approach for a foundation board.
Perhaps the most-important substantive message of the new essay is that the Gates Foundation is not in the camp that says a foundation should seek only to maximize returns with its endowment. Rather, their reason for mostly declining to rank companies on moral grounds is the real-life complexity and contradictions inherent in that concept. "There are dozens of factors that could be considered...Many of the companies mentioned in the Los Angeles Times articles do a lot of work that some people like, as well as work some people do not like. Some activities might even be viewed positively by some people and negatively by others." They also note that some of the issues which the newspaper brought up as reasons not to invest in a company, such as lending laws or environmental regulation, are outside the foundation's charitable mission.
On the shareholder activism question they basically vote for reserving proxy voting for issues directly related to a company's carrying out its core mission, i.e. good management of the company itself. And they do note the one specific subject on which Bill and Melinda have thus far decided that the issues are clear-cut enough to decide not to invest at all: tobacco.
I don't personally agree with all of the above decisions but also don't find any of them to be out of the bounds of what reasonable people of good will might conclude. It does sound like the newspaper articles have provoked renewed focus on the subject over there, and that the Gates folks understand that its unique status in philanthropy inherently places some special obligations on them.
Thursday, January 11, 2007
Gates Fnd: she maybe shouldn't have said that out loud
It may be that Gates Foundation COO Cheryl Scott is in hot water today, and the reason can be read between the lines of today's news coverage.
The L.A. Times today has a followup article which is obviously based on that press release that appeared and then disappeared from the foundation website yesterday. The newspaper is spinning that announcement as being about the foundation newly reconsidering its investment practices in reaction to their articles. I didn't get that from what they had posted, particularly, but since I still can't find a copy I'm not sure. They secondhand-quote Scott saying that such internal discussion was already underway long before the recent articles, which is completely plausible to anyone working in major foundations because it's not at all a new subject in that world.
Nobody at Gates is talking to the L.A. Times but Scott on Tuesday did talk to their hometown paper, the Seattle Times. To them she said on the record that the foundation's current method of investing its assets is "not 100 percent effective," and she did apparently say to that paper that the foundation will now newly review its investment practices. She had also in that press release written that the foundation would "formalize the process by which Bill and Melinda Gates analyze and review these issues."
That last part may be what ticked off one or more people named Gates. In effect Scott told the world that Bill and Melinda, personally, have not been paying much attention to or thought about the issue of where the foundation invests its huge endowment. Whether that is or isn't a fair characterization I dunno, but I can hazard a guess as to how well it was received by a guy who quit college at age 20 and built from scratch a huge global business and fortune.
The L.A. Times today has a followup article which is obviously based on that press release that appeared and then disappeared from the foundation website yesterday. The newspaper is spinning that announcement as being about the foundation newly reconsidering its investment practices in reaction to their articles. I didn't get that from what they had posted, particularly, but since I still can't find a copy I'm not sure. They secondhand-quote Scott saying that such internal discussion was already underway long before the recent articles, which is completely plausible to anyone working in major foundations because it's not at all a new subject in that world.
Nobody at Gates is talking to the L.A. Times but Scott on Tuesday did talk to their hometown paper, the Seattle Times. To them she said on the record that the foundation's current method of investing its assets is "not 100 percent effective," and she did apparently say to that paper that the foundation will now newly review its investment practices. She had also in that press release written that the foundation would "formalize the process by which Bill and Melinda Gates analyze and review these issues."
That last part may be what ticked off one or more people named Gates. In effect Scott told the world that Bill and Melinda, personally, have not been paying much attention to or thought about the issue of where the foundation invests its huge endowment. Whether that is or isn't a fair characterization I dunno, but I can hazard a guess as to how well it was received by a guy who quit college at age 20 and built from scratch a huge global business and fortune.
Wednesday, January 10, 2007
Moore learned something, and Gates is being silly
I sat down this evening to write some complimentary things about the Bill & Melinda Gates Foundation based on an "announcement" from the Chief Operating Officer that was posted on their website a few hours ago. Cheryl Scott made, I thought, some good counterpoints to the nasty L.A. Times articles as well as pointing out how notably transparent the foundation is with both its grantmaking and its investing, which is true and they deserve credit for. Broadly Scott pointed out that choosing pure investments is a lot harder in practice than it seems to people who've never tried to do it, which I have no doubt is true, but I won't try to re-create her words. That doesn't make the issue of investing being aligned with mission go away, nor did Scott suggest that it does.
But now that reply has vanished from their website, gone without a trace. I can't find any cached copies of it online either, wish I'd thought to save it -- if anyone sees a copy, a pointer would be welcome here. This was, earlier today, the URL.
I suppose some public relations expert convinced somebody atop that food chain that any public response to the slanted newspaper articles simply dignifies the latter, or maybe somebody whose last name starts with a G didn't like what Scott said? If so then I think they're wrong but it's their party and they can cry if they want to. Seems a shame though, why not be the adults in contrast to the L.A. Times' adolescent cheap shots?
Regardless of that, I spent some time on their website and confirmed that they are more overtly transparent than almost any other foundation around. They not only have their entire list of grants on the web (which a fair number of foundations are now doing including the one I work for) with annual summary statistics, plus all the basic financials (ditto), they also put their full detailed tax return with all schedules up there -- meaning the complete list of their endowment investments. Which in their case is literally thousands of pages (big PDF files) and not a quick or easy read, but the point is, it's there in full. That's a standard of transparency everyone in this sector should aspire to.
Down the West Coast a ways, fellow dot-com billionaire Gordon Moore has by his own admission had some humbling experiences with his big new foundation. Like Warren Buffett and many others he has learned firsthand that doing philanthropy well is not nearly as easy as successful businessfolk often assume, and he says he's found religion with regard to transparency. Benefit Magazine's writeup is fairly long but worth the read.
But now that reply has vanished from their website, gone without a trace. I can't find any cached copies of it online either, wish I'd thought to save it -- if anyone sees a copy, a pointer would be welcome here. This was, earlier today, the URL.
I suppose some public relations expert convinced somebody atop that food chain that any public response to the slanted newspaper articles simply dignifies the latter, or maybe somebody whose last name starts with a G didn't like what Scott said? If so then I think they're wrong but it's their party and they can cry if they want to. Seems a shame though, why not be the adults in contrast to the L.A. Times' adolescent cheap shots?
Regardless of that, I spent some time on their website and confirmed that they are more overtly transparent than almost any other foundation around. They not only have their entire list of grants on the web (which a fair number of foundations are now doing including the one I work for) with annual summary statistics, plus all the basic financials (ditto), they also put their full detailed tax return with all schedules up there -- meaning the complete list of their endowment investments. Which in their case is literally thousands of pages (big PDF files) and not a quick or easy read, but the point is, it's there in full. That's a standard of transparency everyone in this sector should aspire to.
Down the West Coast a ways, fellow dot-com billionaire Gordon Moore has by his own admission had some humbling experiences with his big new foundation. Like Warren Buffett and many others he has learned firsthand that doing philanthropy well is not nearly as easy as successful businessfolk often assume, and he says he's found religion with regard to transparency. Benefit Magazine's writeup is fairly long but worth the read.
Monday, January 08, 2007
Gates learns that being a poster child cuts both ways
The Bill and Melinda Gates Foundation has just been placed squarely in the bulls-eye of what has been a quietly-growing debate in the foundations world about mission-related investing of those big endowments. It's the same set of choices that hit home a while back for universities: is the highest investment duty to maximize returns and hence resources for the non-profit mission, or to accept lower returns (or higher risk) in exchange for the investing itself advancing the mission? Or at least not actively violating it?
The two long articles linked above appeared on the front page of the L.A. Times yesterday and today and are being picked up far and wide by newspapers owned by their parent Tribune Company. Many readers will be appalled to learn how many examples there are of Gates money going into stock of companies which are helping cause the very problems that the foundation is attempting to ameliorate with grants.
I have little doubt that most of the specific facts as presented are correct, and I'm not one of those who thinks that trying to balance investment success and mission purity has to mean "doing neither of them well." However the lead human-interest example of the second story is oddly unconvincing (a middle-class couple who got ripped off by a fast-talking mortgage salesman because they couldn't be bothered to read the loan documents they signed). And the newspaper committed several fairness and logic violations.
For example it is obviously just sensationalism to repeatedly list the Gates Foundation's asset value as $67 billion with a footnote that this figure includes the future expected Warren Buffett contributions (whereas the other endowments they compare Gates to are listed at present value). They mix and match examples which are obviously not comparable on merit. Also when rattling off horrible-sounding corporate behavior that Gates money has helped enable they seem to have completely lost track of that pesky distinction between being charged and being convicted (which some musty historical document or other mentions in passing right before some silliness about freedom of the press).
But for all that the core issue is real and foundations need to deal with it. And being by far the biggest such venture in world history, whatever its correct endowment total right now, means that Gates can't just ignore this kind of question. Hopefully someone who has their ear is explaining that right now to Bill, Melinda and Warren.
The two long articles linked above appeared on the front page of the L.A. Times yesterday and today and are being picked up far and wide by newspapers owned by their parent Tribune Company. Many readers will be appalled to learn how many examples there are of Gates money going into stock of companies which are helping cause the very problems that the foundation is attempting to ameliorate with grants.
I have little doubt that most of the specific facts as presented are correct, and I'm not one of those who thinks that trying to balance investment success and mission purity has to mean "doing neither of them well." However the lead human-interest example of the second story is oddly unconvincing (a middle-class couple who got ripped off by a fast-talking mortgage salesman because they couldn't be bothered to read the loan documents they signed). And the newspaper committed several fairness and logic violations.
For example it is obviously just sensationalism to repeatedly list the Gates Foundation's asset value as $67 billion with a footnote that this figure includes the future expected Warren Buffett contributions (whereas the other endowments they compare Gates to are listed at present value). They mix and match examples which are obviously not comparable on merit. Also when rattling off horrible-sounding corporate behavior that Gates money has helped enable they seem to have completely lost track of that pesky distinction between being charged and being convicted (which some musty historical document or other mentions in passing right before some silliness about freedom of the press).
But for all that the core issue is real and foundations need to deal with it. And being by far the biggest such venture in world history, whatever its correct endowment total right now, means that Gates can't just ignore this kind of question. Hopefully someone who has their ear is explaining that right now to Bill, Melinda and Warren.
Tuesday, December 05, 2006
Spending it down
The Bill and Melinda Gates Foundation recently made a rather startling (at least in charitable-foundation circles) decision: to spend themselves out of existence rather than operate in perpetuity. They will take a while to do it -- they're saying 50 years after the founders' deaths -- but still this makes Gates by far the largest foundation to do that. (And not simply because it's the biggest foundation period: all of the other multi-billion dollar foundations are permanent.)
In a sense this isn't completely surprising, because Warren Buffett's recent decision to give most of his wealth to Gates was on the same basis: that Buffett's funds be eventually spent down not be a permanent endowment. This decision puts Gates on one side of a growing debate within institutionalized philanthropy, which actually traces all the way back to its two American godfathers John D. Rockefeller and Andrew Carnegie. Rockefeller pioneered the concept of endowing large-scale permanent grantmaking, while Carnegie preferred to see his "giving back" completed during his own lifetime.
Each approach has its advocates, but the fact that Rockefeller's concept has predominated is reflected in U.S. law: the "5% rule" for charitable foundations is explicitly based on the idea that most years that will leave the endowment continuing to grow. The high-profile Gates announcement may change that; for starters many lawmakers may not have been particularly aware that permanence isn't actually a universal standard for foundation philanthropy.
The Gates folks also announced that they will accept additional donations, raising the question of whether some more Buffett-scale gifts are in the works there.
In a sense this isn't completely surprising, because Warren Buffett's recent decision to give most of his wealth to Gates was on the same basis: that Buffett's funds be eventually spent down not be a permanent endowment. This decision puts Gates on one side of a growing debate within institutionalized philanthropy, which actually traces all the way back to its two American godfathers John D. Rockefeller and Andrew Carnegie. Rockefeller pioneered the concept of endowing large-scale permanent grantmaking, while Carnegie preferred to see his "giving back" completed during his own lifetime.
Each approach has its advocates, but the fact that Rockefeller's concept has predominated is reflected in U.S. law: the "5% rule" for charitable foundations is explicitly based on the idea that most years that will leave the endowment continuing to grow. The high-profile Gates announcement may change that; for starters many lawmakers may not have been particularly aware that permanence isn't actually a universal standard for foundation philanthropy.
The Gates folks also announced that they will accept additional donations, raising the question of whether some more Buffett-scale gifts are in the works there.
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