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Worries about for-profit and policy-making philanthropy

Circle of money

First off, you should know that philanthropy in the United States is a growth market.

As the New York Times noted recently in an analysis piece on philanthropists using their foundations to push policy changes:

Over the past 30 years, as the gap between wealthy and poor grew ever wider, total philanthropic giving almost tripled….

This was one of a number of articles this week that looked at how philanthropists are increasingly putting their tax-sheltered money behind for-profit or personal ventures — sometimes aimed at achieving a social good and sometimes not.

The New York Times led the examination starting with an excellent article by Stephanie Strom (published on Thanksgiving Day) entitled To advance their cause foundations buy stocks.

Strom opened her article with an example of the Bill & Melinda Gates Foundation investing in a biotech company that works on vaccines — a portfolio management strategy known as “program-related investing”:

A growing number of foundations are using such investments, known as P.R.I.’s, to connect with profit-making ventures that advance their missions. But as they become more popular, some officials in the nonprofit field worry that this and other newer mechanisms are blurring the lines between profit-making businesses and charitable work.

Strom quotes Jeff Raikes, CEO at the Gates Foundation, as saying the idea is to make sure their investments serve the same goals — improving health, fighting poverty — as their philanthropy.

This is an interesting about-face for the Gates Foundation, which in response to a high-profile critique in 2007 by the Los Angeles Times had taken the position that its stock investments would be based solely on their financial attributes and were not selected with respect to the philanthopy’s humanitarian missions.

The Gates Foundation was criticized then for investing in oil companies engaged in abusive and unhealthy practices in Nigeria and, in another example as reported by the Seattle Times, for investing in Monsanto, a firm that many criticize for distorting agricultural development policies overseas to favor its products.

But the worry about blurring philanthropy and business interests at the Gates Foundation pales in comparison to this tale, also in the New York Times, about billionaire Robert Lauder and his use of philanthropy to serve his personal interests and shelter his billions from taxation.

As the inimitable Felix Salmon of Reuters puts it in his article The problematic charitable-donation deduction tax:

The government will spend $47 million so that Ronald Lauder can transfer a painting from his own ownership to that of a museum he controls. The painting doesn’t even need to be moved into the museum: it’s there already, and has been there since the day the museum opened. As far as the public and the art world are concerned, nothing will have changed — but as far as Lauder is concerned, he has a “reduce your tax bill by $47 million any time you need to” card just sitting in his back pocket

As the New York Times’ article notes, the tax breaks and philanthropic schemes used by Lauder are opposed by other philanthropists like Bill Gates and Warren Buffett. So let’s keep that in mind: Not all of the super-rich are in the same camp or just looking for tax shelters.

And as Charles Bronfman and Jeffrey Solomon argue in this Wall Street Journal article, there isn’t necessarily anything wrong with applying for-profit business perspectives to philanthropy. In fact, the humanitarian sector could use a good dose of bottom-line thinking, they say:

Effective philanthropy is the intersection between one’s do-good soul and be-sound mind. If your acts of philanthropy come only from your soul, you may be throwing your money into a stream of under-performing organizations that mean well. We all know what the road to Hell is paved with.

Yes, it’s those damned good intentions.

There’s a trend these days to denigrate charity, or good intentions, in philanthropy and celebrate “business-like” thinking. But do we really want World Vision to start thinking like Goldman Sachs?

What all these articles over this past week indicate is that philanthropy is growing in both size and influence. It’s changing in some fundamental way that may be for the better. But it will also perhaps require more scrutiny and a re-examination of some fundamental assumptions.


About Author

Tom Paulson

Tom Paulson is founder and lead journalist at Humanosphere. Prior to operating this online news site, he reported on science,  medicine, health policy, aid and development for the Seattle Post-Intelligencer. Contact him at tom[at] or follow him on Twitter @tompaulson.