Historic donation raises questions of accountability

Warren Buffett’s €30 billion donation to the Bill and Melinda Gates Foundation has not only shocked the world of philanthropy but raised questions of accountability over the power of a single foundation. In June Buffett announced plans to contribute approximately 10 million Berkshire Hathaway Class B shares to the Gates’ foundation, making it the largest single philanthropic donation in history. The foundation will receive 5 per cent of the total donation on an annual basis, beginning in July 2006 and Buffett will also join Bill and Melinda Gates on the foundation’s board of directors. Buffett who had always made public his plans to bequeath his fortune to his deceased wife’s Susan Thompson Buffett Foundation, also announced contributions of additional Berkshire stock valued at approximately €5.25 billion to the Susan Thompson Buffett Foundation and to other foundations headed by his three children, including the Susan A. Buffett Foundation and the Howard G. Buffett Foundation.

The collaboration between the world’s two richest individuals who together are worth, at least prior to Buffett’s donation, a staggering €72 billion, will enable the Gates Foundation to make annual donations in excess of €2.4 billion, and it will now be larger than the next nine largest US foundations combined. Clearly the Gates Foundation will now be able to make an even more significant impact within its key target areas of HIV/AIDS, child health and malaria. However there are potentially a number of other less desirable effects to emerge from this philanthro-merger, including the possibility that the US government might choose to offload some of its public obligations onto private philanthropy, given the scale of the funding now available. As Rick Cohen, Executive Director of Washington’s National Committee for Responsive Philanthropy recently pointed out, “in President Bush's proposed budget for the fiscal year 2007, the administration justified proposed cuts in its small schools programme by citing the availability of funds for the same purpose from the Bill and Melinda Gates Foundation. That made a foundation programme, where the decisions are made by a few administrators and the foundation's two trustees, a potential substitute for a federal government action. The foundation programme was not delivered uniformly nationwide, and unlike the education department programme, there are no mechanisms for complaint or administrative review.” Not only this, for in the administration's 2006 budget, the White House proposed terminating programmes to educate children about the dangers of obesity due to the availability of projects sponsored by Disney and the Nickelodeon channel. Linked therefore to the danger of substituting philanthropic for government funds is the potential lack of accountability towards philanthropic rather than government funding. Just as Microsoft’s Windows operating system has come to dominate the IT industry, so netting Gates and his foundation billions of dollars, could his foundation come to dominate the world of philanthropy, with beneficiary non-profits reluctant to speak out of line for fear of funding cuts? Buffett clearly doesn’t share these fears, stating his confidence in the Gates Foundation's international public health efforts in simple terms. "I think Bill and Melinda Gates will do a better job managing the money than the federal government". They now certainly have the opportunity. For just days before Buffett declared his donation, Bill Gates had himself made an equally monumental announcement albeit with less immediate financial impact. He announced that after thirty years at the helm of Microsoft he was to devote himself to a different role, that of full-time philanthropist. The world’s two richest individuals seeking to change the world.

Keeping it in the family

Prior to Buffett’s announcement of his mega-donation the group of foundations established by family members had been widely predicted to receive the bulk of his fortune. All three of his children Susan, Howard and Peter have established foundations, namely the Susan A. Buffett Foundation, Howard G. Buffett Foundation and NoVo Foundation (formerly the Spirit Foundation), which give widely throughout the United States and internationally and each benefited following the death of their mother in 2004, receiving bequests of around €40 million each. Family members also benefit personally. According to filed tax returns, Susan A. Buffett, as her foundation’s Vice-President was paid around €24,000 for her services in 2004, her ex-husband Allen Greenberg received total remuneration of €215,000 for his role as president of the Susan Thompson Buffett Foundation and Peter Buffett and wife Jennifer each received over €30,000 in their respective roles as President and Vice-President of the NoVo Foundation.  It’s not all philanthropy.

Buffett foundations

Susan A. Buffett Foundation

440 Kiewet Plz., Omaha, NE 68131, United States.
Assets: €63 million (2004)
Total Giving: €4.7 million (2004)

Established by daughter Susan A. Buffett, the foundation supports early-childhood education for low-income families, the arts, reproductive health, and Christian organisations. Emphasis is on supporting organisations in Omaha, but other major beneficiaries in 2004 included DATA (Debt Aids Trade Africa) who received a grant of approximately €800,000.

 

NoVo Foundation

(Formerly: The Spirit Foundation )
668 N. 55th St., Omaha, NE 68132, United States.
Assets: €101.5 million (2004)
Total Giving: €8.4 million (2004)

Established by Peter Buffett with a focus on supporting Milwaukee-based organisations. However other internationally-minded donations during 2004 included €390,000 to Human Rights Watch, €275,000 to the Rainforest Action Network, €195,000 each to the International Freedom Center and the Fund for Global Human Rights, and €105,000 to the Landmine Survivors’ Network.

 

Howard G. Buffett Foundation

PO Box 4508, Decatur, IL 62525, United States.
Total assets: €102 million (2005)
Total Giving: €4.7 million (2005)

Third of Warren Buffett’s children’s foundations. Total donations rose by €2 million between 2004 and 2005. Also the most internationally minded with a large number of donations directed towards South African organisations, including the Nature Conservation Trust (€1.6 million), Friends of Peace Parks (€117,000) and theAfrica Foundation (€40,000).

 

The Susan Thompson Buffett Foundation

(Formerly:The Buffett Foundation )
222 Kiewit Plz., Omaha, NE 68131, United States
scholarships@stbfoundation.org
Assets: €250 million (2005)
Total Giving: €46.8 million (2005)

Currently the wealthiest of the family’s foundations, established by Warren Buffett’s deceased wife. Awards scholarships and fellowships as well as providing grants to a large range of US and a few international organisations, including the Willows Foundation in Turket (€2.3 million), the World Food Programme in Italy (€800,000), Marie Stopes International in the UK (€571,000); and Grupo de Informacion en Reproduccion Elegida in Mexico (€196,000).

 

Rebecca Susan Buffett Foundation
548 Hyacinth Pl., Highland Park, IL 60035, United States.
Assets: €6.3 million (2004)
Total Giving: €1.05 million (2004)

Established by Warren Buffett’s cousin, the foundation, like the others of the family group, holds shares in Berkshire Hathaway. Major beneficiaries in 2004 included the RSF Global Community Foundation (€400,000), Thresholds Psychiatric Rehab Centers (€250,000), and the Pontifical Council ‘Cor Unum’ (€125,000). Father Fred (Warren’s uncle) and his wife Katie provided funding for the construction of the Katherine and Fred Buffett Forest Learning Center at Fontenelle Forest in Bellevue.

Extracted from Philanthropy in Europe – Issue 24