The summer blockbusters from Bill Gates, Melinda French Gates and their foundation just keep coming.
Just seven weeks after the couple announced they were divorcing, Warren Buffett, the Omaha billionaire and chairman and CEO of Berkshire Hathaway, has stepped down as a trustee for the Seattle-based foundation, while pledging that he still plans to give all of his roughly $100 billion fortune to charity.
His departure adds to the uncertainty swirling around one of the world’s largest foundations. Despite its size—around $54 billion in assets and $5 billion in annual grantmaking—the Gates Foundation had only three trustees: Bill Gates, Melinda French Gates and Buffett himself.
Buffett’s decision also comes amidst a series of disturbing revelations and accusations against Bill Gates. Reports indicate the Microsoft co-founder had numerous meetings with convicted pedophile Jeffrey Epstein, ignored sexual harassment claims against his longtime money manager and romantically pursued several Microsoft and foundation staff, in addition to having a relationship with one Microsoft employee. (Spokespersons for Gates have contested various elements of these reports.)
Announced halfway through a three-page letter on his philanthropic giving, Buffett’s resignation opens a whole new range of questions about the future of the Gates Foundation, a topic that Inside Philanthropy founder and editor David Callahan explored several weeks ago. As we await additional information, here are several possibilities for why Buffett chose to step down, why now, and what it means for the foundation.
Should we take him at his word?
Most press reports state Buffett did not say why he was stepping down. His letter does include several possible reasons, though none are explicitly linked to his decision. First of all, in the same sentence that he announces his resignation, he notes he’s done the same at “all corporate boards other than Berkshire’s.” In other words, he’s reducing his commitments, and his leadership position at Gates is yet another he’s decided to delegate or relinquish.
Second, Buffett suggests he’s not needed. He writes that he has been an “inactive” trustee at the foundation, that he has always given very little of his personal time to philanthropy, and that his “physical participation is in no way needed” for the foundation to achieve its goals. He’s saying we won’t even miss him now that he’s gone.
Buffett’s stated reasons do not feel quite adequate, given what the foundation is currently facing. Note that Buffett does not once mention his friends’ divorce in the three-page letter, an omission that speaks loudly.
Avoiding the impression of influence?
Far more than a simple resignation, Buffett’s letter is a reflection on philanthropy. It was released to coincide with his annual contribution of shares to the five foundations he supports—worth $4.1 billion this year—and it marks the halfway point of his pledge to give away all his Berkshire Hathaway shares.
But it also seems aimed at responding to a recent ProPublica report, “The Secret IRS Files.” As my colleague Philip Rojc has discussed, the investigation found that many uber-wealthy Americans have paid little or no taxes for years. Buffett, in particular, stands out for paying less than 10 cents for every $100 he added to his fortune between 2014 and 2018, according to the report.
ProPublica’s tax revelations have once again subjected philanthropy to criticism, both as a means of reducing tax burden and for drumming up good publicity for the biggest winners in a vastly unequal economy. Again, this strikes close to home for the Gates Foundation and its trustees. Bill Gates, for one, had an infamously poor reputation prior to launching his foundation.
While never mentioning the ProPublica investigation, Buffett notes that “philanthropic contributions can generate significant tax deductions for the donor. That benefit, however, is far from automatic.” (His emphasis.) Since his level of taxable income is relatively small next to his vast wealth, he says he receives only 40 cents of tax savings per $1,000 given.
It’s possible that Buffett may have decided to relinquish his position at the Gates Foundation—which apparently came without much involvement—to avoid the appearance of influence over the way the money is spent. He may have chosen to step down to try to demonstrate that his philanthropy does not buy him power, even over the actions of a foundation he has helped build to its current gargantuan size.
Leaving an uncomfortable position?
The announcement of Bill and Melinda’s divorce was paired with an assurance that they would jointly direct the foundation’s ongoing work. Yet, as any child of divorced parents can attest, the split put Buffett in an awkward position. As the foundation’s only other trustee, he was left as a potential tie breaker if the pair clashed over the institution’s future.
The subsequent stream of disturbing reports about Bill Gates suggests that the couple’s rupture could be less than amicable. While it’s impossible to know his thinking, Buffett may have determined that this role as middleman was too unpleasant, even untenable.
Moving toward an independent board?
After Buffett’s announcement, Mark Suzman, the Gates Foundation’s chief executive officer, sent an email to all foundation employees thanking Buffett and addressing what has become only the latest revelation to stir unease in the ranks.
“I know Warren’s departure raises questions about the foundation’s governance,” Suzman wrote. “As I have mentioned previously, I have been actively discussing with him, Bill and Melinda approaches to strengthen our governance to provide long-term stability and sustainability for the foundation’s governance and decision-making in light of the recent announcement of Bill and Melinda’s divorce. I plan to share additional information in July.”
Many in philanthropy have long hoped that the Gates Foundation would shift to an independent board structure to ensure a stable future for the institution, not to mention bring diversity of thought and representation to who’s calling the shots. Most institutions of comparable size have boards with a dozen-plus members. Suzman’s words offer some encouragement to those harboring that wish, but it seems we’ll all have to wait for the next summer release to find out if it matches the preview.
Not all the signs are promising. Benjamin Soskis, a historian of philanthropy who works at the Urban Institute, noted in a Twitter thread that Buffett made “no mention of [a] need to expand [the] board or his stepping down as trustee as [an] opportunity to do so.”
Whatever unfolds, Suzman, whom Buffett singled out as “an outstanding recent selection who has my full support,” will be a person to watch. While Bill and Melinda are still the final decision makers, he’s shown signs of apparent independence. After Bill’s comments early this summer in favor of protecting the intellectual property for vaccines drew widespread criticism, Suzman released a statement that pushed back, if lightly, on his boss’s remarks. “No barriers should stand in the way of equitable access to vaccines, including intellectual property, which is why we are supportive of a narrow waiver during the pandemic,” Suzman wrote.
Many questions remain
This is mostly speculation. Buffett’s motivations may differ from those outlined above, most likely, involve a combination thereof. The other obvious factor here is age. The Oracle of Omaha is now 90 years old. His letter assures his shareholders that he has no intention of stepping down from Berkshire Hathaway, though he adds: “But I’m clearly playing in a game that, for me, has moved past the fourth quarter into overtime.”
Whatever its cause, this situation serves to underline just how few hands hold power at one of the world’s largest philanthropies. Rob Reich, a Stanford political science professor and author of Just Giving, which argues philanthropy poses a threat to democracy, suggested in a Twitter thread that Buffett’s decision should remind the public to pay more attention to the policies that determine who holds the reins at foundations.
He noted that more than 100 years ago, when John D. Rockefeller’s philanthropy was getting off the ground, Congress debated requiring more public participation in calling the shots. One critic at the time said that otherwise, foundations would be “repugnant to the whole idea of a democratic society.”
“Much of the public discussion about philanthropy revolves around what I’d call moral advice to a donor,” Reich wrote on Twitter. “But even more important, I would argue, are Qs about the very governance of philanthropy.”
For all the philanthropic reform proposals currently being floated, governance has gotten relatively little attention. Perhaps the ongoing Gates Foundation drama will change that. It seems unlikely, but then again, this summer has been full of surprises.