Giving Wealth Away

Giving wealth away

By Michael Tan
Inquirer
Last updated 00:46am (Mla time) 06/28/2006

Published on Page A13 of the June 28, 2006 issue of the Philippine Daily Inquirer

FIRST it was news about Bill Gates, the world’s richest man, announcing that he was giving up his job at Microsoft so he could devote his time to his charity, the Bill and Melinda Gates Foundation. That foundation has given billions of dollars in grants, mainly to global health programs to fight diseases such as HIV/AIDS, malaria and tuberculosis.

Yesterday, there was even more earth-shaking news: Warren Buffett, sometimes described as the world’s second richest man, announced that over the next five years, he would be giving away 85 percent of his wealth, in the form of stocks in his investment company, Berkshire. Based on the current prices of the stocks, it is estimated he could give away as much as $37 billion.

Buffett will be giving the shares to five foundations, including the Susan Thompson Buffett Foundation named after his wife. But of the five foundations, the largest recipient will be the Bill and Melinda Gates Foundation.

Family foundations

Our schools, especially those teaching business, should pick up on these recent developments as case studies on philanthropy, social responsibility and business ethics.

Buffett represents a growing number of business people who believe that one shouldn’t aspire for wealth for the sake of wealth itself. Instead, wealth is seen as a means for doing good. These businesspeople also believe profits should be returned back to a society that generated it in the first place.

It’s an intriguing concept, especially coming from the United States with its cut-throat competitive capitalism. But I’ve had to work with some of these foundations and have been quite impressed, particularly with the family foundations. These are different from corporate foundations. For example, there is a Hewlett-Packard corporate foundation, but there are also separate family foundations set up by that company’s founders: the William and Flora Hewlett Foundation as well as the David and Lucile Packard Foundation

The story goes that David and Lucile Packard first processed project proposals in their kitchen, as people would write them to solicit donations for various causes. Over the years, as Hewlett-Packard grew, so too did their personal donations. All over California you’ll find the legacies of their philanthropy, from the Lucile Packard Children’s Hospital in Stanford University to the Monterey Aquarium, to an old movie theater in Palo Alto preserved for its architecture. (If only some Filipino philanthropist had done that for the art-deco Avenue Theater, now being demolished.)

After David and Lucile Packard passed away, they left much of their stocks to the foundation. Today, the foundation has an entire building to house its staff, and gave away $201 million last year to American and international non-profit organizations.

Mega-philanthropy

If Forbes magazine has its listing of the world’s 400 richest people, there’s also the Slate 60, an annual compilation by Slate (Washington Post’s online news and features service) that monitors what has been called mega-philanthropy. The Slate 60 lists America’s largest charitable contributions by individuals.

Leading the list for 2005 was Cordelia Scaife May, who died in January and left behind $404 million to various charities. Second in the Slate 60 list were Bill and Melinda Gates, who gave $320 million to their foundation. Hollywood celebrities have always been conspicuously absent from the Slate 60, with the exception of Oprah Winfrey, who last year donated $51.8 million to her own foundation, which works mainly with programs for women and children.

“Buffett’s billions” will be sure to top the Slate 60 for 2006, and will unlikely be surpassed for many years, but we can expect to continue to see multimillion-dollar donations, with a distinct trend of people donating while they are still alive.

Many of these donations go to universities, something we’re starting to see in the Philippines with the likes of Angelo King and the Gokongwei family. In the United States, the philanthropies have diversified into all kinds of causes. George Soros funds projects to promote more democratic systems, particularly in Eastern Europe. David and Cheryl Duffield, who made their money from PeopleSoft, a software company, donated $93 million last year to their own Maddie’s Fund, named after their miniature Schnauzer, which concentrates on animal welfare projects.

Mega-poverty

Mega-philanthropy accompanies mega-wealth. The global consulting firm Capgemini estimates that in 1996 there were only 4.5 million millionaires throughout the world. Recently it released a new study estimating the number had nearly doubled to about 8.7 million. (If you’re wondering, the million has to be in US dollars.)

There are now so many millionaires that a new term -- “ultra-high income” -- is now used to those whose assets exceed $30 million. I don’t know how we should call billionaires, with Forbes magazine reporting that in 2006, there were 793 of these people, including, I think, two or three in the Philippines.

The more radical will say charity donations can only be a stop-gap measure, but mega-philanthropy does bring out new potentials for dealing with the world’s mega-problems. It’s not surprising that Bill Gates is giving up his job at Microsoft. It’s not just a matter of not needing the money, but of administering the huge funds in the Bill and Melinda Gates Foundation, especially with the influx of Buffett’s donation.

Buffett is intriguing, too, because of his decision to donate the bulk of his wealth to the Bill and Melinda Gates Foundation, which has led to jokes about the world’s second richest man giving all his money to the world’s richest man. Buffett explains that rather than building up the Buffett Foundation, he felt it would be better to just give to the Gates’ foundation, which is already scaled up. Most of the other mega-philanthropists have donated to their own foundations, so it’ll be interesting to see if Buffett sets a new trend.

Let’s see what happens in the Philippines. There is mega-wealth in our country, amid mega-poverty. American philanthropy reminds us that there has to be limits to wealth. Andrew Carnegie, who had migrated from Scotland to the United States in the 19th century, and rose from rags to riches, decided quite early that he would not take a salary of more than $50,000 per year and that income beyond that amount he would spend for “benevolent purposes.”

Of course, $50,000 was a lot of money at that time, but Carnegie’s new take on wealth translated into an early form of mega-philanthropy, mainly donations to educational institutions and libraries. Before he died, Carnegie had given away some $350 million, probably equivalent to Buffett’s billions when we factor in inflation. After he died, he still had $30 million, all of which was bequeathed to charity.