• Rachel Branaman

When charity comes at a cost to the public good: What we get wrong when we talk about mega-giving

Mega giving is a consistent and continuing American giving tradition, ultimately making mega-foundations more powerful now than they were 100 years ago, due to their greater number and the societal context in which they operate. The public is more reliant on the nonprofit sector to meet critical needs as government budgets continue to whittle away at social service programs over the past several decades.


Mega gifts began in the early 20th century when foundations like Russell Sage (1907), Carnegie Corporation (1911), and Rockefeller (1913) were set up with open-ended missions, governed by a self-perpetuating board of trustees, legally and financially structured to last forever, and held no accountability to the public. This model encourages us to celebrate charitable giving and positive attributes to early philanthropists and foundations while failing to acknowledge the historical criticisms of robber barons and early capitalists who earned their financial gains from the unjust labor of Black and Brown workers, who used charitable giving as a “glorified tax break,” and moved America toward a plutocracy with policies and priorities shaped by its wealthiest citizens.


What many fail to acknowledge is that much of the money being donated through mega gifts is taxpayers money (due to significant tax benefits) which is why it should be spent in accordance with the taxpayers’ greatest needs rather than allowing mega-wealthy people to spend it in ways they wish, particularly as those ways usually directly benefit them and increase their personal wealth.


U.S. charitable giving topped $400B for the first time in 2017, more than the gross domestic product of Ireland. When you look at today’s donor giving data, an estimated 53% of all giving is from high-net-worth households, meaning more than half of all giving comes from 10% of households. That’s an increase from 40% just 10 years ago (GivingUSA 2021 data). A deeper dive finds that foundation giving increased by 15.5% because individuals placed large gifts into their own foundations. Specifically, $3B came from just two families: $1B from Michael and Susan Dell to the Dell Foundation and $2B from Mark Zuckerberg and Dr. Priscilla Chan to the Chan Zuckerberg Initiative.


As we track mega gifts that “aim to solve the world’s problems” over the past 100 years, we can identify inherent issues in mega giving:


Andrew Carnegie gave away $60M in 1900, equal to $1.95B in today’s dollars. A portion of his charitable giving built a network of 1,689 public libraries across the country.


Andrew Carnegie’s libraries were an insult to communities who were content to fund their own public works, an attempt at social control to tame the “unruly lower classes,” and willful ignorance of the needs of employees who thought the wealth would be better spent on improving working conditions for employees rather than on library buildings across the country. Carnegie’s response to those criticisms was: “If I had raised your wages, you would have spent that money by building a better cut of meat or more drink for your dinner. But what you needed, though you didn’t know it, was my libraries and concert halls.”


John Rockefeller gave away $530,853,632 according to a 1937 article from The New York Times. The vast majority of which went to four foundations established by him: Rockefeller Institute for Medical Research, the Rockefeller Foundation, the Laura Spelman Rockefeller Memorial, and the General Education Board. Significant megagifts included $22M for war work from 1914 to 1919.


In response to John D. Rockefeller’s philanthropy moving to a $100M Rockefeller Foundation with an open-ended objective to “benefit mankind,” former President Theodore Roosevelt stated, “Of course, no amount of charities in spending such fortunes can compensate in any way for the misconduct in acquiring them.” Much like today’s billionaires, Rockefeller was advised that “your fortune is rolling up, rolling up like an avalanche. You must keep up with it! You must distribute it faster than it grows! If you do not, it will crush you and your children and your children’s children.” There is a clear throughline from John D. Rockefeller to Bill Gates and Jeff Bezos.


Jeff Bezos committed to donating $100M to Feeding America to help those facing food insecurity due to the COVID-19 pandemic in April 2020. He also recently donated $10 billion to launch the Bezos Earth Fund to manage climate change.


Jeff Bezos, like the robber barons before him, has systemically harmed Amazon’s employees and placed delivery speed over workers’ needs. An investigative report found Amazon systematically shortchanged workers on their paychecks forcing employees like Tara Jones, a mom with a baby, to write directly to Jeff Bezos about being behind on bills because the pay team shorted her $90 on a check. The investigation found “for at least a year and a half- including during periods of record profit- Amazon had been shortchanging new parents, patients dealing with medical crises, and other vulnerable workers on leave.”


This is not the first time Amazon employees have been mistreated, Amazon warehouse employees must endure difficult working conditions where they do not feel like they have enough time to use the bathroom. Long-term employees are also devalued due to Bezos’ theory that employees expect raises but at the same become complacent and don’t work as hard. His solution was to replace workers before their productivity further deteriorated and pay increased, encouraging workers to leave so he could keep efficiency high and wages low. “After three years on the job, hourly workers no longer received automatic raises, and the company offered bonuses to people who quit. It also offered limited upward mobility for hourly workers, preferring to hire managers from the outside.”


It is particularly ironic that Jeff Bezos started a climate fund as Amazon’s carbon footprint through the web is significant. Amazon Web Services (AWS) uses lots of dirty energy to power its services using renewable energy credits to continue to use fossil fuels while claiming their data centers are powered 50% by renewable energies. AWS also touts its services to the oil and gas industry, selling cloud services to “accelerate and optimize exploration, drilling, and production.” Furthermore, while AWS has increased its operations by 59% over the last two years, it hasn’t added any new renewable energy, although they claim they are still committed to 100% renewable energy despite not having a plan in place to reach that goal.


Bill Gates's $50 billion charitable enterprise over the last two decades has been subject to little government oversight or public scrutiny. The largest donations include $1.6B to the United Negro College Fund (UNCF) for the Gates Millennium Scholar Program started in 1999. He also gave $957M for general support to GAVI Alliance to meet their goals in vaccine delivery and a further $750M to immunize children in 74 countries.


Warren Buffett donated $2.9B in stock to four different family foundations (Susan Thompson Buffett Foundation, Howard G. Buffett Foundation, Sherwood Foundation, and NoVo Foundation) and the Bill & Melinda Gates Foundation.


Bill Gates has used his philanthropy to gather political power, essentially allowing an unelected billionaire the ability to shape public policy through charity. While his donations appear to help individuals dealing with poverty, in reality, the direct recipients of his charity are the world’s wealthiest organizations and companies who claim to “help the needy.” An investigation by The Nation uncovered close to $2B in tax-deductible charitable donations to private companies including GlaxoSmithKline, Unilever, IBM, and NBC Universal Media who develop new drugs, improve sanitation in the Global South, and publicize this “charitable” work by influencing media companies to generate favorable headlines.


The Nation also uncovered hundreds of millions of dollars the Gates Foundation donated to 13 companies in which the foundation held stocks or bonds which causes us to question what seems like an obvious conflict of interest. One private company grant included a $19M donation to a Mastercard affiliate in 2014 to “increase usage of digital financial products by poor adults” in Kenya. The credit card company was able to cultivate new clients from the Global South while being subsidized by the Gates Foundation. Furthermore, this donation to Mastercard likely directly benefited Gates Foundation as their endowment had substantial financial investments in Mastercard through its holdings in Warren Buffett’s company, Berkshire Hathaway. Moreover, Bill Gates has long been on Berkshire’s board of directors and Buffett has directly donated to Gates Foundation while both Bill Gates and the foundation hold billions of dollars of equity stake in Berkshire.


James Love, director of Knowledge Ecology International notes that “Gates is sort of the right-wing of the public-health movement. He’s always trying to push things in a pro-corporate director. He’s a big defender of the big drug companies. He’s undermining a lot of things that are really necessary to make drugs affordable to people that are really poor. It’s weird because [Gates] gives so much money to [fight] poverty, and yet he’s the biggest obstacle on a lot of reforms.”


Mark Zuckerberg and Dr. Priscilla Chan donated $100M to improve public schools in Newark, NJ. Other significant charitable gifts included $25M toward a startup training African developers, $50M to create an app to help those in India access education, and $30M to help kids learn to read by technology.


We rarely hear criticism of failed philanthropic endeavors such as the Foundation for Newark’s Future, a foundation set up to reform Newark Public Schools with the support of politicians Chris Christie and Cory Booker. Mark Zuckerberg donated $100M to the cause and other philanthropists matched that bringing the total donation to $200M, which was required to be spent down over five years. At the time, fewer than 40% of students read at grade level and the high school graduation rate hovered at 60%, which is 19% lower than the national average. Of those who graduated, 90% needed to take remedial classes before entering community college.


Rather than donating the money directly to the city, the school system, or organizations already implementing educational reform, much of the $200M went toward buying out contracts of underperforming teachers. $60M was funneled into charter schools and $20M+ went to consultants who did not fully understand local issues and were unable to devise good solutions. Prior to making the donation, Zuckerberg suggested Newark close underperforming schools, increase the number of charter schools, and implement a student performance-based pay system for teachers where the best teachers receive bonuses of up to 50% of their salary, an impossible incentive to sustain after the funding ran out.


Despite not completing college nor having the qualifications or work experience in educational reform, Zuckerberg has pushed for charter schools based on an understanding of educational reform from his wife’s upbringing and public-school education partnered with her year of work with Teach for America. He has had far-reaching effects on public policy, more so than Newark residents, who were enraged they did not have power over their children’s education and destiny. The anger at outsiders and politicians meddling in an already broken school system seems “colonial” and imposed on rather than in cooperation with the people.


Michael Bloomberg, former mayor of New York City, gave $1.8B to Johns Hopkins University to support undergraduate financial aid at the university and was the largest-ever single gift to a U.S. university or college. In 2020, Bloomberg announced a gift of $100M to four historically Black medical schools to improve the health and wealth of Black communities.


Much like Bill Gates, Michael Bloomberg has used his charitable endeavors to gather political power in a quest for the Democratic presidential nomination. While Gates is content to impact public policy from the shadows, Bloomberg has used a tactical philanthropy model to influence the decisionmaking of institutions who are traditional power brokers and opinion makers in Democratic politics. In advance of his presidential bid, Bloomberg outspent every other billionaire philanthropist in 2019 giving away $3.3B, nearly five times more than he did in 2017. His mega giving has had little impact on his overall wealth, as Bloomberg remains one of the richest men in the world with more than $50B dollars.


Bloomberg used his wealth to sideline potential opponents and when community organizations threaten to contend with him or his programs, he wrote checks to quiet opposition. What’s more, Bloomberg rose in the presidential primary when experienced public servants ended their campaigns due to lack of funds, including every single non-white person who was a serious contender for the nomination.

 

What we don’t hear about when we talk about mega-giving is Black and Brown philanthropists who tend to be self-made entrepreneurs who returned their wealth to the communities from which they came, in support of other under-resourced communities or educational opportunities for future generations.


Madame C.J. Walker was the first Black woman millionaire in the U.S. and donated generously to educational causes and Black charities, funding scholarships for women at Tuskegee Institute and donating to the NAACP, the Black YMCA, and other organizations.


Jimmy Iovine, record executive, and Dr. Dre, hip-hop legend, made a $70M gift to the University of Southern California to establish the USC Academy for Arts, Technology, and the Business of Innovation for undergraduate students whose interests span fields such as marketing, business entrepreneurship, computer science, engineering, audio and visual design, and the arts.


Beyonce has kept most of her philanthropic giving quiet but the Huffington Post reported in 2014 she had given $7M to the Knowles-Temenos Place Apartments in Houston, TX in response to the devastating aftermath of Hurricane Katrina. In 2016, she and Jay Z donated $1.5M to the Black Lives Matter movement and other civil rights organizations. And in 2020, through her BeyGOOD Foundation, she partnered with the NAACP to donate $1M in funds to help Black-owned small businesses during the pandemic.


Robert Smith gave $40M to pay off the student loan debt of Morehouse College’s (HBCU) 2019 graduating class, following his $1.5M gift to the school.


Oprah Winfrey donated $40M to the creation of the Oprah Winfrey Leadership Academy, a South African boarding school for teenage girls in 2002 and an estimated $100M for continued support in the ensuing years.


While the concept of mega giving is inherently problematic, it is not a mistake that the examples of mega giving gone wrong are of women, particularly women of color who prioritize giving to Black, Brown, immigrant, and other non-dominant communities, illustrating how implicit bias seeps into the nonprofit mindset.


In the early aughts, Oprah was criticized for the “extravagance” of her South African school. Criticisms ranged from questioning the value of high thread-count sheets for dormitory beds, a beauty salon, an indoor and outdoor theatre, and a yoga classroom. Critics questioned whether the $40 million spent might have benefitted a far greater number of students if there was less emphasis on luxurious surroundings and more emphasis on practicality. This criticism begins with the premise that students from poor countries or those impacted by HIV/AIDS do not deserve nice or “luxurious” items– it is predicated on the belief that recipients should be happy to receive access to basic education. Oprah was also criticized for not building her school in the U.S., although our country already has a school system where children are guaranteed a free education. What we do not hear about is how, to date, the school has graduated more than 750 girls who successfully passed the South African Matrics Level Examinations (the school has a 100% passage rate). Furthermore, the school’s graduates have already gone on to university education and civil service employment.


Fundraisers are quick to criticize mega giving, citing it is an unsustainable modern innovation that creates an unrealistic expectation by nonprofit staff and board leadership to think they too can access a mega gift to support their organizations. What this criticism fails to consider is that mega gifts are not going to grassroots, social services, or social justice organizations. The vast majority of mega gifts are used as a tool to multiply ultra-wealthy people’s fortunes while supporting corporations and institutions that enable donors to impact public policy to benefit themselves, their businesses, as well as other ultra-wealthy individuals and institutions.

 

It is disheartening to realize the nonprofit and fundraising systems we continue to work within are fundamentally flawed and that the roots of American philanthropy are deeply entwined in income inequality, a failure of public accountability, and a lack of transparency. While we cannot change these systems overnight, we can start to dismantle the inequity of mega giving and mega philanthropy by:


Making the ultra-wealthy pay their equal share of taxes. Multibillionaires see tax savings of at least 40% when you factor in the tax benefits that charity offers to the super-rich including avoidance of capital gains tax (15%) and estate taxes (40% on everything over $11.58M). These billions of dollars put money back into the U.S. Treasury to use for social safety net programs, build bridges, or do medical research rather than allowing superrich philanthropists to fund specialized issues. This may include:

  • Capping the lifetime amount of wealth that can be given to a charity in exchange for a tax deduction.

  • Applying a wealth tax that would take a percentage of a billionaire’s assets each year, limiting the accumulation of wealth and dynastic wealth.

  • Prohibiting endowments from investing in real estate that does not directly benefit the nonprofit’s mission.

  • Implementing a cap on the size of foundation assets and endowments.

  • Limiting the lifespans of charitable foundations and mandating the presence of a third-party officer to serve on the governing board if their assets exceed a specific amount.

Creating uniform standards and stricter state and federal government regulation on private philanthropies. This looks like:

  • Eliminating charitable giving to groups that push for industry-friendly government policies and regulations that directly benefit billionaires and their businesses.

  • Stopping a foundation’s ability to invest in companies that conflict with its charitable mission (e.g., prisons, fast food, the arms industry, pharmaceutical companies, fossil fuels, chocolate companies that depend on child labor, etc.)

  • Tightening standards to end self-dealing which allows individuals to make charitable contributions from themselves or their foundation to companies that directly or indirectly benefit them, their business, or their industry.

Providing funding to support appropriate oversight of the largest foundations (about 100,000 private foundations have close to $1T in assets and foundations generally pay a tax rate of 1-2%). This may mean:

  • Empowering the IRS to provide appropriate oversight through audits of the largest foundations.

  • Encouraging state attorneys general to exercise oversight of private foundations (for example, the New York attorney general’s office investigation of Donald Trump’s private foundation).

Limiting the use of “venture philanthropy” to advance public-private partnerships

  • Disallowing tax write-offs for charitable contributions to for-profit companies who claim to use the money to advance charitable missions.




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