The Real World of Philanthropic Implementation

The Real World of Philanthropic Implementation

A couple of weeks ago, I blogged about the largest charitable gifts made or pledged during 2013. Topping the list was a pledge made to the Silicon Valley Community Foundation of 18 million shares of Facebook stock by young Mark Zuckerberg and his wife Priscilla Chan. This pledge was worth just shy of $1 billion and was in addition to a similar pledge they made the year before worth about a half billion dollars. This topic sparked a discussion with a client of mine who has been involved with some pretty substantial charitable giving of his own over the years including the funding of a couple of family foundations. His reaction was one of incredulity – “How could he have given that much money to a community foundation?” To be frank, I had a similar reaction because, as much as I love the concept of community foundations (CF’s), the sheer size of the gift would make me worry whether the foundation has the chops to actually administer it. It certainly is a whopper particularly when coupled with the prior year pledge. I am sure that the leaders of the Silicon Valley Community Foundation are very pleased – given any yardstick, their year-to-year growth from contributions/pledges is quite substantial!
However, gifts of this size, particularly when fully funded, will absolutely strain the current resources of any CF and should spark questions – does the CF have the ability to attract and retain top notch personnel to administer the gifts? Is its board savvy enough to oversee the investment process and manager selection of world class investment advisors? Is the current technology utilized by the CF to internally account for the assets and the gifts adequate or can it be upgraded quickly? When an organization like the Silicon Valley Community Foundation effectively doubles in size over a two year period because of such gifts, the answer about long term adaptation is probably positive. Perhaps more important is where the organization is right now and where it will be in the short term – are its current leaders dynamic enough to guide it through such explosive growth? Is its current middle management up to the task of implementing adequate systems and controls and managing the required increased staff for day-to-day operations? Will they be able to make the transition from a substantially smaller operation to a substantially larger one smoothly and seamlessly? I would assume (and hope) that Zuckerberg asked these questions and more and received satisfactory answers before making his commitment.
So we get back to our current musings – why did Zuckerberg choose an existing CF for his substantial contribution rather than forming his own private foundation (PF)? Maybe the answer can be found in the Warren Buffett mold. As is pretty common knowledge, Buffett has pledged to give away 85% of his holdings in Berkshire Hathaway to five foundations, the largest percentage going to the Bill and Melinda Gates Foundation. In Buffett’s mind, why should you build your own infrastructure when another exists that can do the job perfectly well? Buffett went the private route; Zuckerberg went the public route. Conventional wisdom may argue against this choice but, assuming that the goals of the Silicon Valley Community Foundation are aligned with his personal goals, Zuckerberg’s choice may be entirely appropriate.
Bottom line, it’s all about implementation – which vehicle or strategy is going to meet your philanthropic, financial and tax goals most efficiently and effectively – and in many cases, the conventional wisdom may not be right for you.