How Generous Is the Bill Gates Foundation?
Stay up to date with the latest headlines via email.
If you gave a friend five dollars, and at the same time picked his pocket of five dollars, neither one of you would be much worse off -- but you wouldn't be much better off either. The largest foundation in the world, the Bill and Melinda Gates Foundation, is doing just that, only on a multi-billion-dollar scale, and at the expense of millions of people living in the poorest parts of the world.
The Los Angeles Times recently published a carefully researched article about the conflicts that exist within the Gates Foundation between the companies that the foundation invests in and the grants that it makes, particularly in Africa. For instance, the article explains that Gates is investing in an Italian oil company, Eni, that spews pollution, and "250 toxic chemicals in [its] fumes and soot have long been linked to respiratory disease and cancer." This is the same part of the world where the Gates Foundation grants millions of dollars on vaccinations to immunize children against deadly diseases like polio and measles.
Given its size and visibility it is easy to criticize how the Gates Foundation works. This is, however, more than incidental criticism of a very big target. It is a morality tale, for philanthropy can operate more responsibly and morally, but only if the most powerful among us choose to think differently about how they work.
We've all heard the Hippocratic oath: Doctors should first do no harm. Foundations have the same obligation; they should aim to do no harm to their individual grantees. With the anticipated contributions from Warren Buffet, the Gates Foundation's endowment will near $70 billion in the next few years. The second largest foundation in the world is the Ford Foundation with an endowment of $12.5 billion.
To put this in further perspective, if The Gates Foundation were a country, it would rank number 56 out of 177, according to World Bank statistics from 2005, comfortably sandwiched between Kuwait and Bangladesh. Its endowment is certainly larger than the economies of almost all of the countries in which it works. Given its size, visibility and ambitions, just doing no harm to individual grantees would be nice, but it isn't enough. The Gates Foundation has to do no harm to whole communities and countries. Investing millions of dollars in companies like British Petroleum that pollutes the air and land, and Abbott Laboratories that makes AIDS vaccinations that are unaffordable for Africans is diametrically opposed to the foundation's programmatic goals of improving health outcomes of residents of these same countries.
Bill Gates built a business empire by focusing on products and profits. He has built a foundation empire by focusing on programs and profits -- but what's good for his personal finances or for Microsoft isn't necessarily good for the people of Africa. The key point is that the endowment that fuels the Foundation is no longer the Gates family's personal money. These are tax-exempt funds and through the creation of the entity of the Gates Foundation itself, their investment and use has a very public purpose that deserves better stewardship.
When the Times news story revealed that the investments of the Gates Foundation are neutralizing the positive benefits of the grants, the foundation's initial response was to agree to review their investment policies. The Foundation then quickly changed course. According to Patty Stonisfer the Foundation's CEO, in a letter to the editor of the LA Times, " It would be naive to think that changing the foundation's investment policy could stop the human suffering blamed on the practices of companies in which it invests billions of dollars."
This is disappointing and disingenuous reasoning on many levels.
Stonesifer implies that Gates is like any other individual investor. Again, some perspective on the size of the endowment of the foundation is in order. I might invest $1,000 or even $5,000 in Abbott Laboratories. The Gates Foundation invests $159 million -- which one of us has more say in how Abbott operates?
Even if the foundation is not inclined toward being an active shareholder pressing for lower drug prices by Big Pharma or less pollution by the many oil and gas companies it invests in, which is their right, by investing in these companies it is tacitly agreeing with their policies and practices. So, why does Gates invest in those companies at all? To make a profit! But there's a catch. The Gates Foundation isn't Microsoft, just in the business of making money. Foundations that are the size of Kuwait should be in the business of making the world a safer, cleaner, healthier place to live -- that's why their money has gone into the foundation's coffers and not the public's coffers at the IRS.
On its Web site, the COO of the Foundation, Cheryl Scott, writes, in essence, that the foundation has focused its grant-making on very specific issues, focusing its energy on ensuring that those good grants aren't counteracted by bad investments would be distracting, she writes. Considering specific investment criteria would be "complex" and should be left to others to do.
This is specious and cowardly. Given the Foundation's resources and ability to hire anyone from anywhere with the necessary expertise to review their investments, it is mind-boggling to believe that finding socially conscious companies to invest in -- or to at least avoid companies that are specifically and actively counteracting their grant-making efforts, would be too difficult or distracting for them. Even if the criteria aren't perfect initially, at least trying to develop some guidelines that don't cancel out the intended good works of the Foundation's grants is a process worth investing in.
Overall, this behavior by Gates is a stark illustration of the lack of accountability by foundations in general. Foundations have very few obligations but to spend 5 percent of their assets on average annually. As long as they don't give it to specific political candidates, they can give to just about any nonprofit or for profit organization, or any individual.
Currently, a foundation the size of a small country is run entirely by three people, Bills Jr. and Sr. and Melinda Gates -- soon Warren Buffet will become a director as well. Unlike public companies, private foundations are not obliged to have any outside directors to help set policy, oversee investment strategies and choose grantees. Their only constituents are grantees -- and no less powerful group of people or organizations exist than those that depend on a foundation for funds.
Out of the approximately 75,000 private foundations, only a small handful, the very largest, are run like businesses with professional staffs and the economic muscle to shape services, policies and communities. There should be an expectation that these influential entities will operate in more transparent ways. Foundations should have at least two outside people with no family or economic ties to the foundation on the board of directors. Foundations should also make their investment criteria transparent and posted on their websites. Foundations should voluntarily adopt these practices in keeping with their public trusts; they owe us and the people they serve around the world the respect that privilege conveys.