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BusinessWeek: October 25, 1999 |
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Social Issues: Philanthropy
The Art of Giving--When Your Resources Are Vast
Gates has already established one of the world's largest foundations. Helping to oversee it is his wife Melinda French Gates. Buffett, on the other hand, has promised that his fortune will end up in the Buffett Foundation--but not until after his death. Heading up Buffett's charitable organization is the mogul's former son-in-law, Allen Greenberg. The Gateses fund education and health care; Buffett champions population control. The styles are different, but both foundations are well worth watching. By the time they're fully endowed, they're apt to be among the most powerful charities in history. SELFLESS IN SEATTLE Melinda Gates is tackling world--and local--problems Charlotte Guyman bumped into her best friend, Melinda French Gates, and her husband, Bill, at a neighborhood Indian restaurant just outside Seattle a year or two back. After the usual pleasantries, Guyman and her family made their way to a nearby table. A minute or two later, Melinda surprised Guyman's two kids with handmade crossword puzzles, complete with clues, drawn on the back of restaurant place mats. "She just thought they'd find it fun," says Guyman, who first met Melinda Gates roughly ten years earlier, when they were both still working at Microsoft Corp. These days the lesser-known Gates, 35, is doing more for children than just creating crossword puzzles. The wife of the world's richest man sits atop the world's second-richest and potentially most powerful philanthropic organization: the Bill & Melinda Gates Foundation. With more than $17 billion in the foundation's bank, she is targeting causes that mirror her own passions: improving health care and education for children around the world. "Melinda exults in being in a position to help," says William H. Gates Sr., her father-in-law and co-chair of the foundation. And she shapes the final product in a way that is "close to her vision of the way society should be," he says. LAUNCH. Melinda, along with her husband, has set an overriding goal for the foundation: to help bridge the gap between the haves and the have-nots. The Gateses, for example, wanted to find a way to help boost the number of minority members going to college. After meeting with the heads of such groups as the United Negro College Fund, they formed the $1 billion Gates Millennium Scholars Program, launched on Sept. 16. The goal: to ensure the best and brightest students can attend any college they qualify for, regardless of cost. At a press conference announcing the program, Melinda recalled how her parents--her father was an aerospace engineer--made sacrifices to send her to college. "If you looked around our house, you'd know it wasn't going to be easy," she recalled. The recent spate of giving by the Gates Foundation, however, does come at an opportune time for her husband. For years, William H. Gates III was under fire for not giving more to charities, particularly as his wealth rose to staggering levels. Now, with Microsoft locked in a bitter battle with the government in an antitrust lawsuit, the Gateses are finally showing their largesse, offering the public a kinder, gentler image of the aggressive founder of Microsoft. Whatever the impetus, the foundation is giving money away these days at a furious pace--requiring a big commitment on Melinda's part. An intensely private woman, she works at the Seattle foundation at least a day a week, spending the rest of her time with her two small children, Jennifer, 3, and Rory, 4 months. (She declined to be interviewed for this story.) She leaves the day-to-day task of managing the organization to the co-chairs: Bill Gates Sr. and Patti Stonesifer, a longtime friend and Microsoft co-worker. Melinda's involvement often comes in the beginning and end of the process. She and her husband will select a field where they think they can make a difference and will ask the foundation to come up with options. The couple then sifts through the final two or three proposals and makes a decision. The foundation is already one of the major contributors to vaccine programs around the world. That came about after Melinda and Bill read an article in The New York Times about the lack of vaccinations in developing countries, which confirmed what the couple had seen for themselves during their travels overseas. Gates Sr. spent nearly a year researching the issue. As a result, in the past 10 months, the foundation has given away more than $175 million to help support such projects as the creation of a malaria vaccine, an AIDS vaccine, and a program to speed the distribution of vaccines to children in the world's developing countries. LARGE SCALE. More recently, the foundation is exploring ways to make donations to improve education for children in grade school through high school. "Bill and Melinda are looking at ways that they can make an immediate and complete impact on something.... They want to make a difference," says Stonesifer. Not all of the foundation's philanthropic work is on such a large scale. On a regular basis, the foundation gives to small, local groups such as Books for Kids or Northwest's Child, reflecting Melinda's desire to help improve educational prospects for struggling kids. In some cases, the donations are the direct result of the experiences and interests of the Gates family. The foundation has given $12 million to the University of Washington's law school, for example, where Bill Gates's father got his law degree, and $20 million to Duke University, where Melinda studied and where she now serves as trustee. And a local school in Seattle where Melinda volunteered her time for years has recently received a grant of $200,000 to help refurbish its facilities. Melinda's interests and beliefs were influenced by growing up with two brothers and a sister in a North Dallas suburb in the 1960s and 1970s. The Frenches taught their kids that no door was closed to them, provided they worked hard. Raised a Roman Catholic and educated at a girls' Catholic high school, Melinda was encouraged to pursue her love of science and math. She graduated in 1982 as valedictorian of her class and then spent five years at Duke, where she earned undergraduate degrees in computer science and engineering, as well as an MBA. Arriving at Microsoft in 1987, she spent the next nine years working as a product manager. Those early experiences clearly have helped shape Melinda's and the foundation's giving. For example, while the foundation donates to a few family planning groups, including Planned Parenthood Federation of America Inc., those initiatives are a small part of the foundation's overall donations. Furthermore, the funds are earmarked for very specific purposes, such as a teenage hot line and Web site, projects that have nothing to do with providing abortions. "Obviously I can't speak for what Melinda Gates believes," says Gloria Feldt, president of Planned Parenthood. "But I do know that she is a practicing Catholic and there is a desire on her part to respect the teachings of the Church." SMARTS. The foundation is not the only outside claim on Melinda Gates's time. Besides her work as a Duke trustee, she is also co-chair of a Washington State commission on early learning. She has even joined the board of a hot Internet startup, drugstore.com, at the request of CEO Peter M. Neupert, who also worked with her at Microsoft. He says he wanted her not because of her husband but because of her smarts and decision-making skills. If anything, Gates is cautious about becoming overextended, and she studiously limits her brushes with publicity. She has made it clear that her first priority is her family, and that means protecting family privacy. Since marrying Gates in 1994, she has turned down all interview requests from the media. Her efforts to make the home front as "normal" as possible are what her husband praises the most. "One thing Melinda has been great about is thinking how we can maintain some privacy for our family--particularly her and our children," says Gates. "Since retiring from Microsoft, Melinda has made it clear she is not a public person. We have to be black and white on this." Although Melinda is clearly busy with her family and foundation alike, she nevertheless manages to squeeze in some hobbies. Jogging, climbing Mt. Rainier, and enjoying "girls' nights" out once a month with former Microsoft colleagues are wedged into her busy schedule. And if you're a really close pal, there may even be a crossword puzzle designed just for you. By Michael Moeller in Seattle CHARITY, THE BUFFETT WAY The billionaire investor has a unique approach to giving Warren E. Buffett, the legendary investor, built one of America's great fortunes by defying convention. His plans for giving his money away are, if anything, even more contrarian. To date, the Buffett Foundation has received only a sliver of Buffett's wealth and yet already it ranks among the staunchest benefactors of politically beleaguered not-for-profit abortion providers. What's more, if all goes as Buffett envisions, virtually his entire net worth--$30 billion at present--one day will go not to his three children but to his former son-in-law, Allen Greenberg. Yes, that's former son-in-law. Greenberg and Susan A. Buffett, Warren's only daughter, were divorced in 1995 after 12 years of marriage. Greenberg, 42, will come into the Buffett billions not as a personal heir but as executive director of the Buffett Foundation. Even so, America's third-richest man surely must rank among history's most forgiving fathers-in-law. "I've given no thought at all to replacing Allen since he and my daughter divorced," says Buffett, chairman of Berkshire Hathaway Inc. "I think he is the best person in the U.S. to run the foundation." Like his good friend William H. Gates III, Buffett believes that his money ultimately should benefit society rather than enrich his relatives. But unlike the Microsoft Corp. mogul, Buffett, 69, is in no hurry to start giving away big chunks of his fortune, which is almost entirely tied up in Berkshire stock. He owns 35.6% of the company, while his wife, Susan T. Buffett, owns 2.8%. The Buffetts have funded their foundation mainly out of an innovative shareholder-directed corporate giving program that Berkshire established in 1981. The company contributed $7.7 million to the Buffett Foundation in 1998. With just $22 million in assets, the Buffett Foundation ranked 1,715th among U.S. foundations in 1998, according to the Foundation Center, a nonprofit group that monitors philanthropy. However, the Buffett family's entire stake in Berkshire will likely pass to the foundation upon Warren's death or that of his wife, whichever occurs last. At today's valuations, the Buffett Foundation would be the best-endowed foundation in the country, outranking Gates, Packard, Ford, and Lilly. The Buffett Foundation was set up in 1964 but had no director until Greenberg took the job in 1987 at the invitation of his father-in-law. Greenberg was born and raised in New York City, where his father owned a newspaper-distribution business. After graduating from New York University Law School, he embarked on a career in public-interest law and worked as a legislative aid to Representative Charles Schumer (D-N.Y.), who is now a senator. Greenberg and Susie Buffett met in Washington, and married in 1983. The marriage delighted Susie's parents, who took to calling the earnest, mild-mannered Greenberg "Allen-the-perfect-son-in-law." Aside from a part-time secretary, Greenberg remains the foundation's only employee (at a salary of $120,000) and works out of an office a dozen floors below Buffett's own top-floor digs in an Omaha mid-rise. Buffett rarely involves himself in funding decisions, but Greenberg does collaborate closely with his former mother-in law, who is the foundation's president. Further complicating the decidedly odd family dynamic, Mrs. Buffett lives in San Francisco, having left Omaha when she and Warren separated in 1977. By all accounts, she and her husband remain on excellent terms and have no plans to divorce. The Buffett Foundation has had an impact on society that rivals that of much larger organizations, mainly because it concentrates its giving in two closely related fields: population control and reproductive health. This emphasis is rooted in the deeply held beliefs of Mr. and Mrs. Buffett, neither of whom is inclined to air their views in public. "Certainly I consider population and reproductive rights to be important issues . . . but I don't want to comment on the question or become a spokesman," Buffett said in 1997. "It would change my life too much." LOCAL LEVEL. The Buffett Foundation is unusual in that it does not parcel money out to grant applicants. Instead, it prefers to seek out worthy recipients on its own. In his 12 years on the job, Greenberg has won a reputation as a vigilant and decisive administrator. "It's amazing how much Allen knows," says Gloria Feldt, president of Planned Parenthood Federation of America. "He really has mastered the operational details in a way that most funders never do." Of the $17.6 million that the Buffett Foundation donated in the fiscal year ended June 30, nearly $3.8 million went to Planned Parenthood. This ranked the foundation among the federation's top three contributors. But what truly sets the Buffett Foundation apart is that it involves itself directly at the clinic level by making project grants to local affiliates across the country--17 of them this year alone. Over the years, Buffett money has enabled dozens of Planned Parenthood clinics to add abortion to their panoply of services. International Projects Assistance Services (IPAS) is even more dependent on Buffett support. Based in Carrboro, N.C., IPAS manufactures a handheld suction pump used in developing countries to initiate abortions and to save the lives of women bleeding from botched, self-performed procedures. The Buffett Foundation has backed IPAS for years, but it recently agreed to step up its giving dramatically. Its 1999 contribution of $2.5 million is part of a five-year, $20 million commitment that will enable IPAS to double its capacity. In an interview with BUSINESS WEEK, Buffett indicated a new willingness to make a large, direct gift to the foundation before his death. "If my wife and Allen had projects they felt were tenable right now, I would consider it," Buffett says. Indeed, the foundation's annual giving has risen of late to a level that may soon force the issue. The $17.6 million in donations made in fiscal 1999 represented a 41% increase over the previous year. If Greenberg maintains this pace, the existing endowment might well be exhausted within a year. But even if Buffett were persuaded to ratchet up his annual giving above the $25 million or even the $100 million mark, the time will come when Greenberg will have to operate on an incomparably larger scale. By law, a foundation is required to give away at least 5% of its endowment every year. Even if the Buffetts were to leave an estate no larger than it is today, Greenberg would have to distribute a staggering $1.8 billion a year. Greenberg would not be quoted for this article, but has told friends that he tries not to dwell on the future lest he become "paralyzed with fear." No one seems to doubt Greenberg's passion or resolve. "Allen has a real commitment to doing Warren's work," says Peter Donaldson, who worked with Greenberg on a major family-planning project in Vietnam and now is president of the Population Reference Bureau. But he will have to prove that running a one-person shop has prepared him for the rigors of building a large organization, and that he possesses the ingenuity necessary to expand the scope of the foundation's giving while remaining true to the beliefs of the Buffetts. Greenberg is probably also going to have to develop a thick skin. Aside from the few anti-abortion protesters that picket Berkshire's annual meeting every year, the Buffetts have succeeded in remaining above the political strife that envelops the abortion issue. But Warren believes that the process of disbursing his fortune will generate a lot more heat than making it did. "It's going to take guts," Buffett says. "They don't necessarily look that way, but you couldn't pick two people who have more guts than my wife and Allen." By Anthony Bianco in Omaha Return to top | |
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 TABLE Gates's Gifts With $17 billion at her disposal, Melinda Gates now helps guide one of the world's largest philanthropies, targeting education and health programs for the poor. A sampling: GATES LIBRARY INITIATIVE $200 million gift to wire libraries for the Internet in low-income communities THE BILL & MELINDA GATES VACCINE PROGRAM $100 million to speed up the vaccination of needy children around the world THE MATERNAL MORTALITY REDUCTION PROGRAM $50 million grant to Columbia University's School of Public Health to prevent pregnancy-related deaths in the developing world THE MALARIA VACCINE INITIATIVE $50 million to research and develop a malaria vaccine THE INTERNATIONAL AIDS VACCINE INITIATIVE $25 million in funding for an AIDS vaccine DATA: THE BILL & MELINDA GATES FOUNDATION Return to top TABLE Family Matters With just $22 million in assets, the Buffett foundation is tiny. But thanks to carefully targeted grants like those below from last year, it has had an outsize influence in its chosen sphere of family planning and population control. PLANNED PARENTHOOD* $3.76 million to fund family-planning clinics INTERNATIONAL PROJECTS ASSISTANCE SERVICES $2.5 million to distribute abortion devices in Third World countries POPULATION COUNCIL $2.43 million for research on population issues PATHFINDER INTERNATIONAL $1.24 million to fund family-planning programs abroad, mainly in Vietnam NATIONAL ABORTION RIGHTS ACTION LEAGUE $1 million to finance pro-choice lobbying group *Includes a $648,089 donation to the Planned Parenthood Federation and grants to 17 affiliates around the U.S. DATA: THE BUFFETT FOUNDATION Return to top |
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