“(Just Like) Starting Over” at the Gates Foundation
Recently, The Wall Street Journal reported that the leadership of the Gates Foundation is considering major governance changes for the philanthropy. Although the foundation has operated with a three-person board since its inception, Bill Gates and Melinda French Gates are now considering enlarging that board and—for the first time—including non-donors as trustees. The multi-billion-dollar Gates Foundation has been criticized regularly for operating with such a small board (originally Bill, Melinda, and Bill Gates Sr. and now Bill, Melinda, and Warren Buffet) but has shown no inclination to adjust its structure until now, when the co-chairs’ planned divorce has apparently raised concerns about “the long-term sustainability and stability of the foundation.”
There will certainly be no shortage of advice from Gates Foundation critics and champions alike about the optimal size and membership of this new board and about how the foundation’s culture and operations should change. Alex Friedman, former chief financial officer of the foundation, and Julie Sunderland, former director of the Bill & Melinda Gates Strategic Investment Fund, have already made their recommendations clear in a piece posted on Project Syndicate. Objecting to the fact that living donors “make all of the foundation’s critical strategic decisions,” their advice reflects a hostility to founder-led and family philanthropy that goes well beyond the Gates Foundation. In their opinion, Gates should have a board where “most members are making independent decisions on strategic matters” and which regards the foundation’s assets “as belonging to the public.”
Friedman and Sunderland are correct that living donors make for special considerations in philanthropy, but their disregard for donor intent is both stunning and ultimately discouraging for prospective donors. The governance turmoil at The Atlantic Philanthropies in 2010 is a stark reminder that even living donors can be frustrated by board-sanctioned mission drift. In response, donor Chuck Feeney called on the board to honor ‘a moral and fiduciary obligation that the interests, values and passions of the living sole donor be given central consideration in spending the fruits of his labor.” The current members of the Gates Foundation board should consider that in designing and populating the philanthropy’s new board.
They should also be prepared to address three questions before beginning the board selection process:
- What is the role you wish to play in the governance of your philanthropy? Will all board decisions be subject to your approval, including grant and investment decisions? Or will you share governance with your board in a structure where all votes are equal?
- If all board decisions are subject to your approval, will other board members fulfill their legal and fiduciary duties? Can they participate effectively in a wide range of decision-making between the extremes of rubber-stamping or overriding a donor's intentions? What do you expect your board members to bring to the table in terms of advice and decision-making?
- If you choose to share governance with your board in a structure where all votes are equal, then what precautions must you take to ensure that your donor intent is honored and not frustrated, both during your lifetime and afterwards?
The challenges facing the leadership of the Gates Foundation are analogous to the challenges facing a donor who is founding a new foundation, and our advice to such a donor is clear. Because they will set the culture of your philanthropy for years to come, your first board must comprise people who truly understand that they are stewards of your mission. They are the board members who will work directly with you, understanding not only what you want to accomplish, but also why and how. Issue expertise and family ties have their place in your decision, but neither should be your primary consideration when choosing those you will entrust with your philanthropic resources. What you are seeking, advises Steve Moore of the Murdock Charitable Trust, are those whose “philosophical DNA is in concert with yours.”
Philanthropy veterans can offer a wide variety of practical suggestions around governance:
- Consider a tiered board structure, where a foundation is governed by both a top tier of members and a second tier of trustees. The members elect the trustees, and they alone are authorized to amend by-laws.
- Consider staggering the ages of board members in order to prolong the period of time in which the board includes trustees who worked directly with the original donor or donors. [The current by-laws of the Gates Foundation mandate the spending of all its assets within 20 years of the death of Bill or Melinda Gates, whichever comes later.]
- Take the time to make the best possible choices. Virginia Esposito, founder of the National Center for Family Philanthropy, once remarked, “It is a donor’s obligation to build the board your foundation deserves.” Be thorough in learning what you need to know.
- Ask the right questions about a candidate’s experience in the nonprofit sector, ability to make the necessary time commitment, views on philanthropy, understanding of the foundation’s mission, board experience, decision-making strategies, comfort questioning conventional wisdom and opinions regarding challenges facing the foundation. And ask direct questions about the candidate’s views on donor intent and the role of living donors at the foundation.
In the end, however, living donors must trust themselves to choose board members who will make the best decisions to steward the foundation’s mission. And trustees must have a sense of what their title suggests—that the donor or donors who chose them have faith in their judgment. As the Gates Foundation begins consideration of what CEO Mark Suzman describes as “prudent planning for the future,” we thank both board and staff for their generous and wide-ranging contributions to philanthropy and look forward to their next chapter.