Philanthrocapitalism

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Philanthrocapitalism or philanthropic capitalism is a way of doing philanthropy, which mirrors the way that business is done in the for-profit world. It may involve venture philanthropy that actively invests in social programs to pursue specific philanthropic goals that would yield return on investment over the long term, or in a more passive form whereby "social investors" benefit from investing in socially-responsible programs. [1]

Contents

History

The term appears as early as February 2006 in The Economist, [2] and was popularized by Matthew Bishop and Michael Green in their 2008 book Philanthrocapitalism: How the Rich Can Save The World. The book was endorsed by Bill Clinton, who wrote in its foreword that this concept drives the Clinton Foundation. [3] The shift in implementing business models in charity is not a new concept – John D. Rockefeller and Andrew Carnegie sought to apply their business strategies in their philanthropy in the 20th century. [4] Since then, a significant increase in charity spending by other organizations such as the Bill & Melinda Gates Foundation and Chan Zuckerberg Initiative, both described as examples of philanthrocapitalism, has been noted. [5] [6] [7]

In December 2015, Mark Zuckerberg and his spouse Priscilla Chan pledged to donate over the decades 99% of their Facebook shares, then valued at $45 billion, to the Chan Zuckerberg Initiative, a newly created LLC with focuses on health and education. [8]

These more modern organizations differ from other groups or organizations since their funds come more from the private capital of an individual rather than donors or profit from physical products. [6] The integration of business models in charity foundations has focused on a symbiotic relationship between social responsibility and the local, national, and international markets. [6] Philanthrocapitalism has been compared and contrasted with altruism due to the similar stated goals of the movements’ advocates. [7]

Criticism

There are many criticisms of philanthrocapitalism beginning with the limited transparency and accountability involved. [3] There are also concerns that private philanthropy erodes support for governmental spending on public services. [3] The main worry with this practice is that collectively, it can lead to tax revenue problems for the government. [5] Donations are still going towards philanthropy, but some public services may not be able to utilize these funds because they may never receive them. [5] Because of this, there is concern from John Cassidy that the wealth of a few may be able to determine what organizations receive the most funding. [5]

Sociology professor Linsey McGoey has written that many current and past philanthropists amassed their fortunes by predatory business practices which enhanced the very social problems their philanthropy is intended to alleviate. [3] Finally there are concerns of the existence of ulterior motives. [3] These ulterior motives can range from business owners avoiding capital-gains taxes by donating their company's excess stock instead of selling it and estate taxes which would be assessed onto their family to collecting tax credits from the government. [3] [5]

Limited liability companies

Some philanthropists have decided to forego the Foundation route in favor of utilizing a limited liability company (LLC) to pursue their philanthropic goals. This allows the organization to avoid three main constrictions on Foundations, such as follows:

The LLC structure allows the philanthropist to keep their initiatives private although there is no requirement that they do. An LLC is allowed to support for-profit companies that they feel support their mission. And the LLC, therefore, permitted to make and keep any profits made on such an investment. Lastly, an LLC can openly support politicians with whom they agree and advocate for policy positions and even author such policy positions elected officials may opt to use. Lastly, the original donor, such as Zuckerberg, retains control over the shares donated. Had he donated shares to a Foundation, they would no longer be his to control. [9] [ citation needed ]

A Partial List of Philanthropic LLCs:

See also

Related Research Articles

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Omidyar Network is a self-styled "philanthropic investment firm," composed of a foundation and an impact investment firm. Established in 2004 by eBay founder Pierre Omidyar and his wife Pam, Omidyar Network has committed over US$1.5 billion to nonprofit organizations and for-profit companies across multiple investment areas. According to the OECD, Omidyar Network's financing for 2019 development increased by 10% to US$58.9 million.

In the United States, a donor-advised fund is a charitable giving vehicle administered by a public charity created to manage charitable donations on behalf of organizations, families, or individuals. To participate in a donor-advised fund, a donating individual or organization opens an account in the fund and deposits cash, securities, or other financial instruments. They surrender ownership of anything they put in the fund, but retain advisory privileges over how their account is invested, and how it distributes money to charities.

<span class="mw-page-title-main">Charities Aid Foundation</span> International charitable organization

The Charities Aid Foundation (CAF) is a registered UK charity that operates in the United Kingdom, the United States of America and Canada. It works with companies, private philanthropists, regular donors, fellow foundations, governments, charities and not-for-profit enterprises to enable them to give more. Its stated purpose is to “accelerate progress in society towards a fair and sustainable future for all.”

Venture philanthropy is a type of impact investment that takes concepts and techniques from venture capital finance and business management and applies them to achieving philanthropic goals. The term was first used in 1969 by John D. Rockefeller III to describe an imaginative and risk-taking approach to philanthropy that may be undertaken by charitable organizations.

<span class="mw-page-title-main">Philanthropreneur</span>

A Philanthropreneur, also known as a Philanthro-capitalist, is a Portmanteau of entrepreneur and Philanthropy. The Wall Street Journal used the term in a 1999 article, while a publication entitled The Philanthropreneur Newsletter existed as far back as 1997. Philanthropreneurship is often considered the start of a new era in Philanthropy, characterized by the development of the Philanthropist's role and the integration of business practices.

Until 1969, the term private foundation was not defined in the United States Internal Revenue Code. Since then, every U.S. charity that qualifies under Section 501(c)(3) of the Internal Revenue Service Code as tax-exempt is a "private foundation" unless it demonstrates to the IRS that it falls into another category such as public charity. Unlike nonprofit corporations classified as a public charity, private foundations in the United States are subject to a 1.39% excise tax or endowment tax on any net investment income.

<span class="mw-page-title-main">New Philanthropy Capital</span>

New Philanthropy Capital (NPC) is a charitable organisation based in London, United Kingdom. It describes itself as "the think tank and consultancy for the social sector." NPC aims to help charities, foundations, philanthropists, impact investors, social enterprises, corporates, and the public sector to maximise social impact in the lives of the people they serve.

The Children's Investment Fund Foundation (UK) (CIFF) is an independent philanthropic organisation with offices in Addis Ababa, Beijing, London, Nairobi and New Delhi. It is a registered charity in England and Wales and in 2021 disbursed $468 million and committed $772 million in charitable investments. With assets of GBP £5.2 billion (USD $6.6 billion), it is the 5th largest global development philanthropy in the world based on annual disbursements. According to OECD published data, it is the world's second largest private funder of reproductive health and environmental protection globally and the largest philanthropy that focuses specifically on improving children's lives. In 2021, CIFF pledged $500 million towards gender equality over five years as part of the generation equality forum.

The Institute for Philanthropy is a not-for-profit organisation which provides information and educational programmes to philanthropists and to charitable organizations. Originally established in 2000 by Hilary Browne-Wilkinson, a former solicitor at University College London, the Institute currently operates from offices in London and New York.

<span class="mw-page-title-main">Philanthropy in the United States</span> Overview article

Philanthropy in the United States is the practice of voluntary, charitable giving by individuals, corporations and foundations to benefit important social needs. Its long history dates back to the early colonial period, when Puritans founded Harvard College and other institutions. Philanthropy has been a major source of funding for various sectors, such as religion, higher education, health care, and the arts. Philanthropy has also been influenced by different social movements, such as abolitionism, women’s rights, civil rights, and environmentalism. Some of the most prominent philanthropists in American history include George Peabody, Andrew Carnegie, John D. Rockefeller, Henry Ford, Herbert Hoover, and Bill Gates.

Good Ventures is a private foundation and philanthropic organization in San Francisco, and the fifth largest foundation in Silicon Valley. It was co-founded by Cari Tuna, a former Wall Street Journal reporter, and her husband Dustin Moskovitz, one of the co-founders of Facebook. Good Ventures adheres to principles of effective altruism and aims to spend most or all of its money before Moskovitz and Tuna die. Good Ventures does not have any full-time staff, and instead distributes grants according to recommendations from Open Philanthropy.

The Center for High Impact Philanthropy (CHIP) is a center at the School of Social Policy and Practice at the University of Pennsylvania in the United States focused on high impact philanthropy, both in the US and internationally. The Center translates the best available evidence in areas such as education and early childhood development, disaster relief, poverty, democracy, and public health into actionable guidance and educational programs for those looking to make a difference with their giving.

Effective altruism (EA) is a 21st-century philosophical and social movement that advocates impartially calculating benefits and prioritizing causes to provide the greatest good. It is motivated by "using evidence and reason to figure out how to benefit others as much as possible, and taking action on that basis". People who pursue the goals of effective altruism, who are sometimes called effective altruists, follow a variety of approaches proposed by the movement, such as donating to selected charities and choosing careers with the aim of maximizing positive impact. The movement has achieved significant popularity outside of academia, spurring the creation of university-based institutes, research centers, advisory organizations and charities, which, collectively, have donated several hundreds of millions of dollars.

The Silicon Valley Community Foundation (SVCF) is a donor-advised community foundation serving the Silicon Valley region. It is the largest charitable foundation in Silicon Valley.

GivingTuesday, often stylized as #GivingTuesday for the purposes of hashtag activism, is the Tuesday after Thanksgiving in the United States. It is touted as a "global generosity movement unleashing the power of people and organizations to transform their communities and the world". An organization of the same name is an independent 501(c)(3) nonprofit that supports the global movement.

<span class="mw-page-title-main">Priscilla Chan</span> American pediatrician and philanthropist (born 1985)

Priscilla Chan is an American pediatrician and a philanthropist. She and her husband, Mark Zuckerberg, a co-founder and CEO of Meta Platforms, established the Chan Zuckerberg Initiative in December 2015 with a pledge to transfer 99 percent of their Facebook shares, then valued at $45 billion. She attended Harvard University and received her medical degree from the University of California, San Francisco.

<span class="mw-page-title-main">Chan Zuckerberg Initiative</span> American Philanthropic organization

The Chan Zuckerberg Initiative (CZI) is an organization established and owned by Facebook founder Mark Zuckerberg and his wife Priscilla Chan with an investment of 99 percent of the couple's wealth from their Facebook shares over their lifetime. The CZI is legally set up as a limited liability company (LLC) that can be seen as a for-profit charity and is an example of philanthrocapitalism. CZI has been deemed likely to be "one of the most well-funded Philanthropies in human history". Chan and Zuckerberg announced its creation on 1 December 2015, to coincide with the birth of their first child. Priscilla Chan has said that her background as a child of immigrant refugees and experience as a teacher and pediatrician for vulnerable children influences how she approaches the philanthropy's work in science, education, immigration reform, housing, criminal justice, and other local issues.

<span class="mw-page-title-main">Linsey McGoey</span> Canadian sociologist

Linsey McGoey is a Canadian sociologist and academic based in England. She is a Professor in the Department of Sociology at the University of Essex. She is known for having written about philanthropy in her book No Such Thing as a Free Gift and co-editing the Routledge International Handbook of Ignorance Studies with Matthias Gross. Her next book, The Unknowers: How Elite Ignorance Rules the World, was published in 2019.

References

  1. ↑ "The birth of philanthrocapitalism - The leading new philanthropists see themselves as social investors". The Economist. 25 February 2006. ISSN   0013-0613 . Retrieved 2020-07-20.
  2. ↑ "Survey: The birth of philanthrocapitalism". The Economist. 378: 9. February 25, 2006.
  3. 1 2 3 4 5 6 Linsey McGoey, No Such Thing as a Free Gift: The Gates Foundation and the Price of Philanthropy, ISBN   1784781193 , 2015
  4. ↑ Birn, Anne-Emanuelle (January 2014). "Philanthrocapitalism, past and present: The Rockefeller Foundation, the Gates Foundation, and the setting(s) of the international/global health agenda". Hypothesis. 12 (1).
  5. 1 2 3 4 5 Cassidy, John (December 2, 2015). "Mark Zuckerberg and the Rise of Philanthrocapitalism". The New Yorker.
  6. 1 2 3 "Philanthrocapitalism, the Gates Foundation and global health – an interview with Linsey McGoey". hinnovic.org. 23 April 2013.
  7. 1 2 McGoey, Linsey (2012). "Philanthrocapitalism and its critics". Poetics. 40 (2): 185–199. doi:10.1016/j.poetic.2012.02.006.
  8. ↑ "Facebook's Mark Zuckerberg to give away 99% of shares". BBC News Online . December 1, 2015. Retrieved January 16, 2016.
  9. ↑ Poon, Susanna (January 8, 2016). "LLC vs. Foundation: Which is the Better Option for Philanthropists? | Family Office Exchange". Family Office Exchange.

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