8 January 2007

The Gates Foundation has holdings in many companies that have failed tests of social responsibility

The LA Times has a series skewering the Gates Foundation for what it reports as a "dark cloud over the good works". It sounds like a colossal tax dodge to me, even if the small percentage (5%) of the foundation's worth represent a huge donation to "good works".
AT the end of 2005, the Gates Foundation endowment stood at $35 billion, making it the largest in the world. Then in June 2006, Warren E. Buffett, the world's second-richest man after Bill Gates, pledged to add about $31 billion in installments from his personal fortune. Not counting tens of billions of dollars more that Gates himself has promised, the total is higher than the gross domestic products of 70% of the world's nations.

Like most philanthropies, the Gates Foundation gives away at least 5% of its worth every year, to avoid paying most taxes. In 2005, it granted nearly $1.4 billion. It awards grants mainly in support of global health initiatives, for efforts to improve public education in the United States, and for social welfare programs in the Pacific Northwest.

It invests the other 95% of its worth. This endowment is managed by Bill Gates Investments, which handles Gates' personal fortune. Monica Harrington, a senior policy officer at the foundation, said the investment managers had one goal: returns "that will allow for the continued funding of foundation programs and grant making." Bill and Melinda Gates require the managers to keep a highly diversified portfolio, but make no specific directives.

By comparing these investments with information from for-profit services that analyze corporate behavior for mutual funds, pension managers, government agencies and other foundations, The Times found that the Gates Foundation has holdings in many companies that have failed tests of social responsibility because of environmental lapses, employment discrimination, disregard for worker rights, or unethical practices.

It is not crystal clear from the article that the Gates Foundation only gives 5% of its worth, but there is a side box balance sheet that lists $66 billion in assets and $13 billion in total grants. That equates to approximately 20%, but there are no details provided for over $4 billion in loans that may skew the percentage even lower.

I had a suspicion that the Gates Foundation was more about tax avoidance and positive public relations that it was about charitable contributions. On the other hand, seeding a financial future and gaining more funds to give is prudent strategy. However, investing in companies that profit from and enable global injustice and environmental destruction on a proportionally larger scale would seem to defeat the purpose of charity service.


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