Evil Philanthropy
Sometimes you just can't win
By blackhedd Posted in Culture — Comments (5) / Email this page » / Leave a comment »
As part of its drive to remain a nationally-relevant news organization, the LA Times has published a "hard-hitting" piece on the Bill and Melinda Gates Foundation. The lengthy piece informs us that Gates' philanthropy, the largest in the world (and about to get a lot larger, see below), actually works at cross-purposes. How? By investing in the companies that create the evils its charitable giving seeks to counteract.
Read on...
We all know how philanthropy works. You endow a foundation which enjoys tax-free status as long as it disburses at least 5% of assets per year to support the charitable or public-service programs that appear in its charter. Now the landscape is jam-packed with these operations (since they're what most really successful people do with their money). It's also well known that these organizations tend to lean sharply to the political left, but that's a twice-told tale and not our point here.
The Gates Foundation is special because it's so big- roughly $35 billion in assets. Additionally, Warren Buffett (America's second-wealthiest man) has pledged to donate about $31 billion more to the Gates Foundation, which is managed by the same investment people that handle Bill's personal money. It's a reasonable assumption that by the time these two men die (Gates is 51, Buffett is 76), nearly all of their fortunes (in the vicinity of $100 billion) will be run by the Gates Foundation.
The Gates Foundation concentrates on health-care initiatives, cultural and educational programs, generally in the Third World. They have done admirable work on AIDS and malaria. They're an impressive bunch of people, and they had better stay that way, given how big a percentage of the world's total philanthropic firepower they direct.
So what's the LA Times' interest in all this? Well, they don't think it's a particularly good idea for the Gates Foundation to be invested in companies that, for example, produce energy in Nigeria. How's that? Well, Exhibit A is the Italian petrogiant ENI, which like other oil producers in West Africa, flares (burns off) the natural gas that comes out of their oil wells. (Natural gas is expensive to transport, so it makes more economic sense to just burn it into the air where the oil is produced. Oil producers have been doing this since the dawn of the industry.)
Needless to say, the LA Times reporters gratuitously point out the global warming that this assuredly produces. (Side note: after enjoying the delightful 70-degree weather in New York City yesterday, I'm all in favor of more warming!) More to the point, they tell us that the "soot and toxic chemicals" from the natural gas flares in remote Nigerian villages "reduce[s] immunity to polio and measles." That's the smoking gun. It turns out the Gates Foundation funds programs to vaccinate children against polio and measles.
I know what you're thinking: "Say, what?!" Yes, of course the corporations involved deny that flaring natural gas causes serious health problems in children (much less polio or measles). The article also states that: "No definitive studies have documented the health effects, but many of the 250 toxic chemicals in the fumes and soot have long been linked to respiratory disease and cancer." Thus the evidentiary standards of the LA Times.
The piece includes several more underdocumented sob stories as red meat, and to keep the illusion of causality going. But the real point of the piece comes when they describe the investment policies of the trust side of the Gates Foundation. As part of their drive to produce the annual investment returns that fund that programmatic activities, the Gates trustees invest in the very energy companies that are operating in Nigeria, and supposedly promoting polio and measles by flaring natural gas.
So what to do about this? Well, our journalistic heroes dug into the investment practices at the Gates Foundation. They found that there is a "Chinese wall" in place between the trust and the program sides of the house. The investors, who are professionals, do their best to create optimum returns, and the program managers, also professionals, spend the money as they see fit. The two sides don't interfere with each other. From both a management and a governance point of view, this sounds like a darned good setup to me. In fact, the pattern has worked so well that the Gates Foundation intends to restructure soon into two entities, one for investing and the other for programs, thus formalizing the "Chinese wall."
The LA Times thinks this is a terrible idea, a move in exactly the wrong direction. From the article: "The foundation did not respond to written questions about whether it might change its investment policies." Here we have crossed the line from journalism into advocacy. That the Gates Foundation refuses to answer questions from roving reporters about non-issues is not news. Yet it's the fervent wish of the LA Times that the largest private philanthropy in America avoid investing in businesses that engage in what is called "bad behavior," and to use the blunt instrument of shareholder activism to increase the "social responsibility" of businesses they do invest in.
Oh by the way, according to the article, of the largest 100 public companies in America, 48 of them commit "trangressions against social responsibility." When you have $35 billion to invest, it's a big problem to disqualify nearly half of your potential investment targets before you even start.
It's a funny thing. I've seen a lot of shareholder activism, but the vast majority of it is perpetrated by hedgies and public investors who are trying to correct management behavior that fails to optimize asset values, not the other way around.
At least the LA Times has picked the right target. Global businesses are important enough that social responsibility has long been a critical focus for their directors and managers. That's true today, and it's a very good thing. It's also a good thing that shareholders (which are mostly public investors like pension and mutual funds that operate on your behalf) are taking a more visible role in corporate governance. What's not a good idea is creating public pressure to take unhealthy and inappropriate actions, based on scare stories and faulty analysis. I'm always amazed at how powerful many people think business enterprises are. They live and die based on what their shareholders and their customers want. The Gates Foundation and other major philanthropies have serious people running their investments. Let them do their job.
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Evil Philanthropy 5 Comments (0 topical, 5 editorial, 0 hidden) Post a comment »
I'm sure you're right with the idea that the liberal mindset is never content to let people do what they wish with their own money. But it seems awfully inefficient (not to say petty) to get so worked up over $35 billion, if your goal really is to help the poor. This is most of the wealth accumulated by America's richest man across his entire career (starting from zero), and it's still no more than the Federal government alone spends in five days.
I don't think the liberals want the Gates Foundation to solve poverty. I think they just don't want them to do anything.
I wouldn't matter what the Gates foundation did. They were built on successful capitalism and must therefore be torn down by the socialists at the LATimes.
As an aside, how funny would it be if the Foundation investment arm bought out the Times. I wouldn't amount to a hill of beans in terms of their overall investments, but it could offer us some real research potential in massive strokes and heart attacks.
I meant what I said and I said what I meant. An elephant's faithful 100 percent.
to buy out the LA Times. My guess is that the Gates trustees are too smart to waste money on a dying asset.
David Geffen (a liberal of the lunatic-fringe variety) is probably going to walk away with it, from what I've heard. Then we'll see if the liberals adjust their spin about the "mainstream media in thrall to their right-wing corporate paymasters."
In some Israeli companies. And we all know they're really responsible for all the problems of the world. I'm sure the LA Times could connect them to Polio as well. They should really have a guy like Jimmah Carter vetting their investments to prevent this kind of conflict.
I wonder how much global warming the production and printing of the LA Times is responsible for. And they aren't even producing a product that anybody wants.
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Underlying most arguments against the free market is a lack of belief in freedom itself. - Milton Friedman
even when you are doing more good works than say 75 of the world's smallest governments, you are considered evil if it involves any corporate enterprise.
I think the real problem they have with the Gates foundation is that it's a PRIVATE foundation. They can do whatever they feel is right with their own money. Of course this can't stand! The correct LIBERAL way to help the poor would have been to take the entire $66 billion away from Gates and Buffett with "progressive" tax rates and let the government waste the money help the poor. If the liberals can't control the money, then anything done with it is inherently evil, even if it appears they're doing good works.
This fits in with a progressive taxation blog entry that I'm thinking about, but hasn't quite gelled enough to put into writing.
Socialism doesn't work. It looks nice on paper, but it's been tried and it's failed miserably every time (usually accompanied by widespread death and suffering).
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