5 reasons why the Bill and Melinda Gates divorce is an ‘earthquake’ for philanthropy
The breakup of one of the world’s wealthiest — and most generous — couples is sending shockwaves across the world of philanthropy, with some likening the split to an “earthquake.”
What’s behind the strong response?
Bill and Melinda Gates, who are divorcing after 27 years of marriage, preside over the largest private charitable foundation in the world, one whose giving has been in the spotlight during the pandemic as one of the top funders of vaccine research and distribution.
Though it’s relatively new at just 21 years old, the Bill and Melinda Gates Foundation has made its mark across the globe. It funds a range of health and poverty-related programs, including efforts to eradicate diseases such as malaria, improve HIV treatment, and reduce tobacco-related deaths. It has also funded education programs in the U.S., with varying success.
“If philanthropy is the direction of private assets toward some public influence, then this private decision has huge public ripple effects,” tweeted Rob Reich, a Stanford University professor and author of “Just Giving: Why Philanthropy is Failing Democracy and How it Can Do Better.”
The divorce raises questions not just about the future of the Gates Foundation, but about the future of philanthropy overall, he said.
The high-stakes tone of the public reaction points to one of the main critiques of billionaire philanthropy: It’s too powerful and plays an outsized role in society.
“Just the fact that this divorce causes so much global anxiety is an indication that it’s problematic that a single foundation would have that much power,” said Megan Tompkins-Stange, a University of Michigan public policy professor and author of a book on how foundations, including the Gates Foundation, influence U.S. education policy.
One side effect of that power: Rampant “misinformation” has circulated about what the divorce could mean for the foundation’s grantees, Tompkins-Stange noted on Twitter.
Why is there so much concern among nonprofits about the future of the Gates Foundation? One reason is that many of them rely on large foundations as their “go-to funders,” said Maribel Morey, a historian of philanthropy and co-editor of the philanthropy blog HistPhil. That power dynamic means that “any change to the inner workings of those organizations could lead to anxiety,” Morey said.
In the case of the Gates Foundation, the founders’ couplehood is woven into the identity of the foundation — Melinda Gates has said that she and Bill Gates decided to create a foundation while they were engaged to be married — so the end of that couplehood creates concern about its future, Morey noted.
The Gates Foundation also is not particularly open about its day-to-day operations, Morey said, adding another layer of uneasiness for nonprofits watching from the outside.
“When you have such a low level of transparency, in my opinion, that just nurtures more anxiety by groups of people who feel dependent on that organization for funding,” Morey said.
To her, this moment of scrutiny for the Gates Foundation is an opportunity for civil society to question some established norms about philanthropy. “We cannot continue to exist in a democracy if we’re so dependent on such few sources of elite funding,” Morey said.
The couple, however, says there are no changes on the horizon. In a joint statement, Bill and Melinda Gates said they will continue to work together at the foundation.
“No changes to their roles or the organization are planned,” a press representative for the foundation said in a statement. “They will continue to work together to shape and approve foundation strategies, advocate for the foundation’s issues, and set the organization’s overall direction.”
Here are five numbers that help explain the response to news of the divorce:
Three board members
The Gates Foundation’s board of trustees consists of three people: Bill Gates, Melinda Gates and Berkshire Hathaway BRK.A, +0.46% CEO Warren Buffett, who pledged in 2006 to give most of his fortune to the Gates Foundation.
A foundation’s board sets overall strategy and maintains ultimate control over the organization, so any disruption to it has serious side effects. The foundation’s small board is a reflection of Bill Gates’ tech-entrepreneur background as founder of Microsoft MSFT, +1.09% : It’s common for tech leaders to prize leaner organizations that can theoretically move faster and more efficiently, Tompkins-Stange said.
But that leaves the direction of a powerful foundation in the hands of just three people. The Gates Foundation has said both Bill and Melinda will remain on the board, but experts say the end of the Gates’ personal partnership raises the possibility of changing the makeup of the foundation’s board, perhaps by adding new members.
Some other big players in U.S. philanthropy, such as the Ford Foundation and the Hewlett Foundation, have larger, more diverse boards. Ford and Hewlett — founded by the cofounder of Hewlett-Packard — each have 14 board members.
$49.8 billion endowment
That’s the amount of money the foundation is sitting on, thanks to donations from Bill and Melinda Gates and Buffett. It’s more than some countries’ GDPs, some have pointed out. The Gates Foundation has more than 1,600 employees and deployed $5.1 billion in grants across the globe in 2019. To understand its size, consider that the second-largest foundation in the U.S., the Ford Foundation, has an endowment of $14 billion and made $560 million in grants in 2019.
The vastness of the Gates Foundation means it wields outsized influence, Tompkins-Stange said. “Technically, a private foundation does not have any official means of influencing policy or have any power or control over how we live our lives, but because Gates is so large it has an amplified voice. If it says something, people are likely to listen to it,” Tompkins-Stange told MarketWatch.
“You can vote out an elected official, you can choose not to buy a certain product, but you can’t stop a foundation from doing what it wants to do,” she added. (There are, however, laws against foundations engaging in political lobbying, she noted.)
One foundation — probably not two
Though some have wondered whether the divorce could lead to the Gates Foundation being split up, Tompkins-Stange pointed out that the Gateses don’t own their charitable foundation as they do other marital property that will presumably be divided when the marriage is dissolved. The money the Gateses have contributed to the foundation is there irrevocably and “they can’t take it back out again for their own personal use,” Tompkins-Stange wrote.
However, there are cases in which families dissolve a private foundation and create two new ones, or transfer the assets to another charitable entity, such as a donor-advised fund, according to the California law firm Hanson Crawford Crum.
“Similar to a family business, in the divorce context, the issue of who controls the charitable entities is often a key issue: Who will control the private foundation?” the firm wrote in an article on dividing philanthropy during a divorce.
$1 billion for women
Separate and apart from the Gates Foundation, the Gateses use their resources to pursue their own agendas. Bill Gates, whose net worth is estimated at $129 billion, donated $4.1 million in 2009 to an effort to preserve then-New York mayor Mike Bloomberg’s control over local schools. Both Gateses donate as individuals to political candidates and political action committees.
Melinda Gates pledged in 2019 to spend $1 billion over the next 10 years to advance women and girls in the U.S. That’s a significant sum, given that only 1.6% of total charitable giving goes directly to women and girls’ causes, amounting to $7.1 billion in 2017, according to the Indiana University Lilly School of Philanthropy.
Melinda Gates will distribute that $1 billion through her own LLC, Pivotal Ventures, an investment and “incubation” company she founded in 2015. It will spend the $1 billion by making philanthropic grants and investing in private companies.
Melinda Gates is now a billionaire in her own right following a $2.4 billion stock transfer on the day of the divorce announcement, the Wall Street Journal reported.
With her personal wealth poised to grow even more, some have wondered whether Melinda Gates will follow a path similar to that of MacKenzie Scott, the former wife of Amazon founder Jeff Bezos, who handed out more than $4 billion in 2020, much of it to grassroots nonprofits working on racial inequality.
“I’m deeply uncomfortable with the amount of wealth I have, and I think the majority of it should go back to society,” Melinda Gates said in a January podcast interview.
A former Gates Foundation employee said Melinda Gates takes a “thoughtful and deliberate” approach to philanthropy.
“Bill and Melinda set the tone for the foundation together; she has always been part of the team, and will likely do so going forward,” said Greg Ratliff, senior vice president of advisory services at Rockefeller Philanthropy Advisors, who worked at the Gates Foundation for 10 years.
“At the same time, she has maintained a strong commitment to gender-equity issues including reproductive rights, as well as economic empowerment of women and girls,” Ratliff added. “Now that she may now have additional freedom and time to pursue these issues she has always cared about, I would expect to see more growth in that area.”
20 years
Alongside Buffett, the Gateses co-founded the Giving Pledge, a campaign that encourages billionaires to publicly promise to give away most of their wealth either during their lifetimes or when they die. The Gateses have set a deadline for their own giving: Their foundation has until 20 years after the Gateses die to spend all of its assets.
That style of philanthropy is in contrast to other foundations that are set up to give out money in perpetuity, often long after the founders and their original intentions have faded from memory.
The timeline means the Gateses will have to keep their philanthropy moving relatively quickly — they’ll have to continue to give out billions each year, and will remain a significant global presence in philanthropy for the next several decades.
