A Tale of Two Huge Gift Givers

McDonald's heiress Joan Kroc and Microsoft's Bill Gates both donated large sums recently -- but took rather different approaches

By Jessi Hempel

By pledging to give his share, estimated to be worth $3 billion, of Microsoft's (MSFT ) one-time dividend to the Bill & Melinda Gates Foundation, Bill Gates is setting the pace for a small but growing league of philanthropists who make up a Billion Dollar Club of sorts. Among these supergivers are McDonald's (MCD ) heiress Joan Kroc, who left a $1.5 billion bequest to the Salvation Army in February, and media tycoon Ted Turner, who pledged a billion dollars to the U.N. in 1997.

Billion-bucks givers increase philanthropy's capacity to have a significant impact on social issues. But as the sum grows larger, so does the necessity for a strategy to manage it, says Kathleen Moore of the Center on Philanthropy & Civil Society. As she explains it, "These are generally folks who wouldn't buy a stock on a hot tip." Philanthropy requires the same savvy but measured approach.


  Consider the contrast between Gates's gift and Kroc's contribution. The Salvation Army had little warning of Kroc's bequest and absorbing the cash has proven a stressful challenge for the charitable group. What's more, Kroc stipulated that the money be used for the construction and partial operation of 30 new community centers. None of the funds could go to the 1,400 aging center already in existence, leaving the group to scramble to devise new fund-raising techniques to fully foot their costs.

It's unclear how successfully the Salvation Army will adjust to the cash influx while still maintaining its double mission: bringing services to the needy and bringing the needy to God.

In contrast, Gates is strategic about implementing his gift. By giving to a foundation rather than directly to organizations, he ensures that an intermediary will distribute the funds to charities that have the capacity to make good use of them. And he has made the donation with no restrictions. His foundation, which has 200 employees, including grantmaking teams for each of its four focus areas (global health, education, libraries, and social issues in the Pacific Northwest), will be able to divvy up the assets according to its mission. It's a mission Gates has had a direct role in shaping since the foundation's inception in 2000.

Gates's largesse may be an early offering in a coming flood of supergifts, as high-profile IPOs give rise to generously funded corporate foundations and an increasing number of aging billionaires leave estates to be settled, says Melissa Berman of Rockefeller Philanthropy Advisors. Perhaps most notable in the latter group is Warren Buffett, who has said that he'll give his entire fortune to charity upon his death. Charitable groups and civic-minded professionals can only hope Buffett, with an estimated net worth of $36 billion, will follow Gates's strategic example.

Hempel is a staff editor for BusinessWeek in New York

Edited by Douglas Harbrecht

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