I sensed a disturbance in the fundraising force at about noon today, when I got three emails from clients asking about how to apply for Mark Zuckerberg’s foundation. I’m usually on top of such things, but I had been briefly driving when the announcement was made public. As a consulting firm that manages grant writing (among other things), I’m used to these emails. Someone’s giving away a few billion all of a sudden, and a pool that size seems big enough for everyone to swim in.
But it wasn’t more than a few hours later that the criticism started to pour in. The Zuckerbergs have set up an LLC to manage their charitable contributions, where traditionally, billionaires have established a private foundation, a type of 501(c)(3). The bloggers were a-twittering. The newscasters were chiding. And a bunch of people doing really good work in the world were, once again, hopeful. All the while, the big points were misunderstood.
Here’s what you need to know about the distinction, so you can make the call on your own:
1) No matter how Mark set up his charitable fund, he was going to have tax benefits. We work with private foundations on a daily basis. A majority of the family foundations that we work with are set up to do good while benefiting from the tax incentives. An LLC may be unconventional where charitable work is concerned, but the tax argument is a silly one. Because the amount is so large, the implications seem enormous, but if you had an extra few dollars, you have the very same ability.
2) LLC’s definitely lack the accountability that private foundations have. Private foundations are mandated to file tax documents, called 990s, reporting on their financials and their activities each year. Mark will not need to file these same types of reports. Even if he does develop his own type of reporting for transparency’s sake, we will not have the opportunity to compare apples-to-apples.
3) Social entrepreneurship is not new. There are many, many LLC’s out there doing good work in the world. Social entrepreneurship (or using business wisdom to do social good) is growing in popularity over the last few decades. The model is responsible for huge advances in public health and renewable energy, for example. Mark’s idea is not that crazy; it’s just getting more attention because of the huge dollar amount and the celebrity figure involved.
4) Private foundations are already doing almost whatever they want. Even though foundations need to file 990s, their activities outside of their financial management are pretty much up to the whimsy of their founders and board members. For example, I once came across a foundation interested in supporting youth kickboxing, a regional opera house, and bee keeping. So if we’re worried Mark will do something odd, being a private charity would hardly have changed that.
5) Sometimes the most good will be accomplished by the nimble giver. Lots of social good is being accomplished in ways that are not good fits for the traditional model of writing grants. For-profit social entrepreneurship, for example, is not an easy fit for foundation funding. Even nonprofits who easily fit the bill can wait six months to a year to hear back. For great social impact, quick intervention will be necessary. When Ebola broke out, funneling money into vaccine development and sanitation tools at nonprofits would have been more effective than sending it to a regional Red Cross. Leaner models will be faster moving models, and sometimes that means bypassing the infrastructure in place.
So Mark and Priscilla, we’re excited to see what you’re capable of and how much you accomplish. Don’t let us down!