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Giving Or Grandstanding?

By Mark Hrywna - September 1, 2010

A pledge by some of America’s wealthiest families to give away half their fortunes could help to encourage other super-rich, as well as the not-so-rich, to give away more of their wealth. The influx of massive gifts also could present unique challenges to the nonprofit sector, according to scholars.

Warren Buffett, chairman and CEO of Berkshire Hathaway, and Microsoft founder Bill Gates and his wife Melinda in June publicly announced their intention to give half of their fortunes to charity, asking others in the super wealthy set to join them in "The Giving Pledge." Last month, they announced 40 have signed on and Buffett plans to enlist them to go out and get more pledges. Many of the 40 already are prominent in philanthropy, including New York City Mayor Michael Bloomberg, eBay founders Pierre and Pam Omidyar, Ted Turner and T. Boone Pickens.

Those who sign The Giving Pledge, www.givingpledge.com, will make the statement publicly, with a letter explaining their decision. Buffett stressed that it’s far more important, and impactful, that they tell people what they’re doing. In the case of Oracle founder Larry Ellison, he indicated in his letter that heÕd already put 95 percent of his wealth into a trust for charitable giving, but never publicly discussed it or made any announcements.

Elizabeth Boris, director of the Center on Nonprofits and Philanthropy at the Urban Institute in Washington, D.C., said the initiative could raise the visibility for donors to consider giving away a major proportion of their wealth and provide a "peer learning" environment of sorts. "I’m not sure there’s going to be a major, immediate impact on the sector because most of these people were going to give away their fortune anyway," Boris said. "I still think it’s a valuable thing to have folks say, ‘This is what we’re doing.’ It creates a climate that encourages giving," she said.

Patrick Rooney, Ph.D., executive director of the Center on Philanthropy at Indiana University, hopes the pledge creates a multiplier effect, with others giving more than planned or even all their wealth, as Gates and Buffet set examples for not only the ultra-rich but for all Americans. "It does set a wonderful role model; they’re walking the walk, not just talking the talk," he said. In the case of Gates, he’s also doing it at a fairly young age. Earlier philanthropists such as the Carnegies, Rockefellers and Fords gave away their fortunes at or near death.

While Andrew Carnegie and other leading philanthropists of the early 20th century were about giving to others, today’s philanthropists are much more about giving with others, according to Kristin Lindsey, chief operating office and executive vice president at the Council on Foundations (COF) in Arlington, Va.

During the past 15 years, when people like Microsoft co-founder Paul Allen, Gates and the Omidyars were generating a lot of their wealth, they established their philanthropy at that time, igniting a lot of change, she said. "They drove a lot of new people to giving, as something they should do, thinking hard about how they are going to achieve change through their giving. This takes it up to another scale."

The Giving Pledge is nothing less than a game changer for philanthropy, a watershed moment, said Lindsey. "If you look at philanthropy over the last couple of decades, it’s been a growth industry. These gifts will change the landscape of what philanthropy looks like," she said.

Charities will have to think about their strategies for fundraising, particularly the tactics and strategies involved in fundraising from high-net worth households, Rooney said. Charities will have to be better versed on how to handle and steward these mega gifts, from a donor intent perspective, as well as do a better job with planned giving. "It’s a different situation when it’s going to family foundations versus large grants to large institutions," he said, adding that charities will have to be prepared to answer those questions and address those concerns.

This is the way that great wealth often gets given away — a huge dollop of money to a huge institution, that way they can decide on a strategy, get professionals to help determine who gets money, be strategic and give in smaller chunks. That’s the value of a foundation," said Boris.

"There are a lot of problems faced by society that won’t go away overnight, if ever," Rooney said. "The kinds of organizations that work for structural reforms might be different than those organizations that seek to ameliorate problems. Organizations might be different than the kinds of organizations you need to create the infrastructure to totally address these issues," he said.Buffett targeted 70 to 80 billionaires on the Forbes 400 list of the wealthiest people in America, in most cases with a reason to believe they already had an interest in philanthropy. Of those who have not signed the pledge, Buffett said some lectured him about their "great dissatisfaction about government," a few had a "dynastic idea about wealth," inheriting a fortune themselves and sticking to an intergenerational compact within the family, and others simply might have had a plane to catch and couldn’t talk. While several were unavailable, he said: "We don’t give up on them."

About 10 percent of all those on the Forbes list have signed the pledge. The net worth of the 40 who have already committed their fortunes exceeds $250 billion, according to last year’s figures, while the entire lists boasts a net worth of some $1.2 trillion. Buffett said those who’ve pledged so far are about average on the list but in a few cases they’ve intensified their interest in philanthropy, agreeing to ratchet up their giving to 50 percent to increasing their percentage in the coming years.

Buffett plans to host an annual dinner with the pledge signers so they can learn more about philanthropy from each other. That’s in addition to several other get-togethers around the country where the 40 signatories will invite others to join them in groups of 15 to 20. There’s no specific ask occurring at these dinners, he stressed, just discussion about charitable philosophy. "Once somebody opens up and starts talking, the entire group jumps in and they start talking about things I don’t think they typically talk about, at least publicly," he said.

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