|Gates Foundation to Get Bulk of Buffett's Fortune
The Washington Post | June 26, 2006; Page A01
Investment guru Warren Buffett, whose stake in the company he founded is worth $44 billion, disclosed plans yesterday to give nearly all of it away, mostly to the world's largest charitable organization, the Bill & Melinda Gates Foundation.
That revelation in Fortune magazine comes on the heels of Microsoft
Corp. co-founder Bill Gates's announcement earlier this month that he would
transition from running his company to running his foundation -- and marks
a golden age for philanthropic giving akin to that of a century ago, when
industrialists such as Andrew Carnegie, John D. Rockefeller and Andrew
W. Mellon gave vast amounts of their wealth to the arts and society.
Buffett, the world's second-richest person, committed to give away his shares in his company, Berkshire Hathaway, to five foundations over time. The bulk of the shares, representing 83 percent of his pledged gift, will go to the Gates Foundation. This year, Buffett's donation to the education- and global-health-focused foundation will be worth about $1.5 billion.
"The amount that Buffett is giving is record-breaking," said Stacy Palmer, editor of the Chronicle of Philanthropy, a District-based newspaper covering the nonprofit world. "The fact that he's giving to the Gateses is unprecedented," she said, because most families have donated to causes in their own name.
Buffett's donation exceeds the amount given by the great philanthropists of the past; Carnegie's givings totaled about $380 million -- $7.6 billion in today's dollars.
Buffett's gift could more than double the size of the Gates Foundation, which already commands a $30 billion endowment. Bill Gates, the only person whose wealth outstrips Buffett's, and his wife, Melinda, have given $25.9 billion to their foundation. Bill Gates and Buffett are close friends.
The Gates Foundation got its start in 1994 and has focused much of its efforts on global health, backing the development, testing, manufacturing and delivery of vaccines for diseases such as malaria, tuberculosis and acute diarrhea that kill millions of children in developing countries every year. Without the $5.88 billion the foundation has given to global health projects, experts have said, many drug companies would have had no financial incentive to devote resources to those vaccines.
It puts about half its money into global health; the bulk of the other half is spent on education initiatives, including increasing U.S. students' high school graduation rates and upgrading technology access in schools and public libraries.
Gates, who for three decades built Microsoft into a dominant computing giant, is heading his foundation's efforts in part to see some of those projects through to completion, experts have said.
"We are awed by our friend Warren Buffett's decision to use his fortune to address the world's most challenging inequities," Bill and Melinda Gates said in a statement released yesterday. "The impact of Warren's generosity will not be fully understood for decades. As we move forward with the work, we do so with a profound sense of responsibility. Working with Warren and with our partners around the world, we have a tremendous opportunity to make a positive difference in people's lives."
Buffett and Bill and Melinda Gates are scheduled to hold a news conference today on the donation.
Giving away massive amounts of money comes with its own challenges, experts said yesterday, and such large gifts could attract the attention of Congress because foundations aren't regulated.
"We haven't seen that kind of influence all in one pot," Palmer said.Buffett will take a seat on the Gates Foundation's board of directors, but unlike Gates, he said he has no plans to be actively involved in the operations of the Gates foundation, or the other four philanthropic groups he is funding -- one of which is in the name of his wife, Susan Thompson Buffett, and the other three of which are run by his children.
"The feedback on philanthropy is very slow, and that would bother me. I'd have to be too involved with a lot of people I wouldn't want to be involved with and have to listen to more opinions than I would enjoy," Buffett told Carol J. Loomis, a top editor at Fortune, a longtime friend of Buffett's and a board member of the Susan Thompson Buffett Foundation.
Buffett has attracted a cultlike following owing to his steady investing prowess. About 20,000 investors go to Omaha every year for the annual meeting of Berkshire Hathaway Inc., a holding company with sizable stakes in companies including Benjamin Moore & Co., Geico Corp., International Dairy Queen Inc., and The Washington Post Co. Class A shares in Berkshire have increased in value an average of more than 20 percent a year for the past 20 years.
The company's operations will not be affected by the gradual change in share ownership, said Buffett, who said in the magazine interview that he feels in good health and plans to continue running the company.
Officials from Berkshire Hathaway could not be reached for comment. Melinda Gates and Buffett are on the board of The Washington Post Co.
Until now, Buffett has given little to philanthropy, amassing the wealth and leaving the work of philanthropy to others so his money could compound at a higher rate, he told Fortune. He said he had always planned to have his wife oversee his charitable giving after his death. But after she died -- and because he saw an opportunity to invest in an existing, well-respected foundation run by two "ungodly bright" people -- he changed plans to start giving it away this year, he told the magazine.
"Neither Susie nor I ever thought we should pass huge amounts of money along to our children," said Buffett, who said he plans to give away his remaining stock holdings after his death but that he has "quite a bit of cash" he still plans to leave to those close to him. "Our children are great," he told Fortune. "But I would argue that when your kids have all the advantages anyway, in terms of how they grow up and the opportunities they have for education, including what they learn at home -- I would say it's neither right nor rational to be flooding them with money."