Much like a cheery Facebook status update, millions of people immediately clicked the “like” button when they saw the announcement by Mark Zuckerberg that he and his wife, Dr. Priscilla Chan, plan to give 99 percent of their Facebook fortune toward somewhat vague social, environmental and health causes. The announcement, which came in the form of a letter to their newborn daughter, seemed to have had something for everyone, including the social enterprise community, which picked up on this line: “Can we cultivate entrepreneurship so you can build any business and solve any challenge to grow peace and prosperity?”
But after it sunk in that the happy couple would be placing most of their (as of now) $45 billion in Facebook stock into a limited liability company (gasp) that could invest in companies that generate profits (double GASP!), the excitement cooled just a bit. In fact, many might have reached for an “unlike” or at least an “uneasy” button on the Facebook dashboard (if one existed) when they learned from news sources like The New York Times that:
“An L.L.C. can invest in for-profit companies (perhaps these will be characterized as societally responsible companies, but lots of companies claim the mantle of societal responsibility). An L.L.C. can make political donations. It can lobby for changes in the law. He remains completely free to do as he wishes with his money. That’s what America is all about. But as a society, we don’t generally call these types of activities ‘charity.’”
And as reported in DevEx:
“… Zuckerberg and Chan are also positioned to gain from this gift. The vehicle for the $45 billion is an LLC, which will allow Zuckerberg and Chan to transfer their private assets into a family foundation without paying capital gains taxes. The move could also lead to tax benefits of as much as $333 million on the first $1 billion transfer.”
Many critics pounced, with some railing against the notion that we as society have now turned to the mega-rich, instead of government, to cure social ills. Others, including Jessie Spector, executive director, Resource Generation on Huffington Post, took it as another sign of rich protecting rich interests:
“… I’m skeptical of your decision to move the $45 billion to your own privately controlled LLC, because, well, that’s not actually giving anything away. It is still privately controlled by you with no decision-making power by the communities who need the better world you described to your daughter.”
Zuckerberg himself turned to Facebook on Thursday to calm the apparent backlash over the LLC.
“This enables us to pursue our mission by funding non-profit organizations, making private investments and participating in policy debates – in each case with the goal of generating a positive impact in areas of great need. Any net profits from investments will also be used to advance this mission,” Zuckerberg wrote. “What’s most important to us is the flexibility to give to the organizations that will do the best work – regardless of how they’re structured.”
Antony Bugg-Levine told me the day after the announcement that if you’ve been paying attention to the couple’s interplays with philanthropy – from the failed attempt to give New Jersey public schools $100 million to Facebook’s Internet.org effort to bring the Internet to impoverished parts of the world (with Facebook being the gatekeeper) – you shouldn’t be surprised by the fact that they chose an LLC and not a charitable trust or foundation.
“This might be the first time that a mass audience is waking up to the reality that there’s a new kind of philanthropist who doesn’t find the old way of putting money into a trust or foundation appealing,” said Bugg-Levine, CEO of the Nonprofit Finance Fund and one of the foremost doers/thinkers on the intersection of impact investing and philanthropy.
Zuckerberg has been mentored by Bill Gates and has probably learned from eBay founder Pierre Omidyar as well. Both encountered the limitations of placing vast wealth into private foundations, and have set up other socially inclined investment organizations. The Chan Zuckerberg Initiative, as it is called, is the logical next step, Bugg-Levine said.
“It’s a harvest of a lot of plantings that a lot of other people have been cultivating over the last 10 to 15 years; that is, for-profit investing can sit right alongside grant-making,” he said.
No one knows how Chan Zuckerberg will spend the billions. But the clues are already there. They also are investors in the brand newBreakthrough Energy Coalition, a public-private group made up of a short list of tech billionaires who have pledged $7 billion to help countries kick the carbon energy habit. The coalition was unveiled before the climate talks in Paris this week.
What is clear is that the couple is resisting a 100-year-old philanthropic model that was laid down by the Carnegies and the Rockefellers. Bugg-Levine was impressed by the humility of the announcement and the lack of self-righteousness that normally accompanies such decrees. When asked what he would tell the couple if he were advising them, he suggested they make several investments quickly, in order to gain the knowledge in practice and not in theory.
“(Zuckerberg and Chan) said effectively, ‘We’re going to make donations and investments – and we need to start learning now – we need to learn by doing,” he said. “And it’s the doing, not the announcing, we need to judge. It’s all about how well they execute.”
By Scott Anderson