A. Fine Blog
I have been working with, seeking funding from, giving grants as a colleague to foundations for fifteen years. In that time, I have been witness to myriad gaffes, incredible acts of ego and shortsightedness, frustrations and confounding changes of direction. But never in that whole times have I been as outraged as I am today with the behavior of the Bill and Melinda Gates Foundation.
On January 9th, the Los Angeles Times, after exhaustive research, published a story on the conflicts between some Gates grants for positive social change and their investments to make their endowment grow. For instance, the article explains that Gates is investing in an Italian oil company, Eni, that spews “250 toxic chemicals in the fumes and soot have long been linked to respiratory disease and cancer.” This is the same part of the world where the Gates Foundation grants millions of dollars on vaccinations to immunize children against deadly diseases like polio and measles.
The Gates’ response was to agree to review their investment policies. Yet, yesterday (nice timing on MLK weekend) the Foundation states that their previous statement was misconstrued, they will be not changing their investment policies. According to Patty Stonisfer the Foundation’s CEO, “ It would be naive to think that changing the foundation's investment policy could stop the human suffering blamed on the practices of companies in which it invests billions of dollars, the foundation's CEO Patty Stonesifer, said in responding to last week's investigative series by the Los Angeles Times.” (The letter itself is not posted on the LA Times website.)
This is so appalling on so many levels I feel more like primal screaming than writing. But, let me try to put it into words rather than gutteral sounds. Here are just the primary reasons that this is an appalling explanation:
1. Stonesifer seems to imply that Gates is like any other individual investor. Let’s put this into perspective. The Gates Foundation endowment is currently about $35 billion dollars. Warren Buffet will be donating $31 million to the foundation in the next few years. The resulting $66 million dollar endowment will dwarf, by far, all other foundations (e.g. Ford Foundation, the second largest foundation, has an endowment of $12.5 billion.) According to World Bank statistics from 2005, if The Gates Foundation was a country, it would rank number 56 out of 177, larger than the gross domestic product of almost all of the countries in which it works. What Gates chooses to invest in can have a profound worldwide impact. It is ridiculous to think that how Gates behaves with its investments wouldn’t have a tremendous impact on companies worldwide.
2. On its website, the COO of the Foundation, Cheryl Scott, also clarifies the mistaken interpretation of the words, “we will review our investments” to say that the foundation will do nothing. In essence, her letter says that the foundation has focused its grantmaking on very specific issues, and left the investment strategy to a team of green eyeshades to oversee. Considering specific investment criteria would be “complex” and should be left to others to do. She goes on to write, quite incredibly, that the Gates’ “also believe there would be much room for error and confusion in such judgments, and that divesting from these companies would not have an effect commensurate with the resources we would divert to this activity. The foundation’s not owning a tiny percentage of a company or selling it to another investor would often go unnoticed, and Bill and Melinda would not be comfortable delegating this kind of judgment.”
This is specious and cowardly. Given the Foundation’s resources and ability to hire anyone from anywhere with the necessary expertise to review their investments, it is mind boggling to believe that finding socially conscious companies to invest in - to at least avoid companies that are specifically and actively counteracting their grantmaking efforts, would be too difficult or distracting for them. Even if the criteria aren’t perfect initially, at least try to develop some guidelines that don’t cancel out the intended good works of the Foundation’s grants.
3. Gates is the 800 lb philanthropic gorilla. All other majors foundations are taking their cues from them. For instance, immediately upon the publication of the LA Times articles, the Hewlett and Packard Foundation’s announced that they were reviewing their investment policies. There is more at stake here than even the enormous Gates endowment, but the billions of other dollars invested by foundations that can potentially be put to better use by investing in socially conscious business. At the very least, these foundations could practice the Hippocratic oath and do no harm!
4. This behavior by Gates is a naked illustration of the lack of accountability by foundations in general. Foundations have very few obligations but to spend 5% of their assets on average annually. As long as they don’t give it to specific political candidates, they can give to just about any nonprofit or for profit organization, or any individual. In addition to no accountability on the grantmaking side, the foundation is a self-described “passive investor”. This is an organization with three board members, all family members (plus Warren Buffet soon) and no shareholders. Their only constituents are grantees - and no less powerful group of people or organizations exist than those that depend on a foundation for funds. Think about this another way. A foundation with assets larger than 120 countries, can do just about whatever it wants with tax exempt funds - and no one can do a darn thing about it.
What does it take for the foundation and nonprofit community to finally take a stand on appalling behavior like this?
Tuesday, January 16, 2007
Outrageous Behavior by The Gates Foundation
