Giving back

Transformational Philanthropy


Billionaires who won’t leave their fortunes to their kids
Giving back
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I. Bill Gates, Warren Buffett, Mark Zuckerberg, and the new Culture of Philanthropy

Recently, global entrepreneurs and investors are donating their stocks / assets to society, instead of passing down their fortunes to their children.

  • Bill Gates: The founder of Microsoft and the non-profit the Bill & Melinda Gates Foundation, Gates has donated about $35 billion in stocks and cash and is promoting a variety of social initiatives. Bill Gates will donate 95% of his property until he dies. In 2017, he contributed 64 million shares of his own Microsoft (shortened “MS”) stock (about $4.6 billion, 5 trillion Korean Won) to the foundation. His MS stock ownership stood at 2.3% and afterwards decreased to 1.3%.
  • Warren Buffett: The world's most renowned investor, Buffet promised "to donate 99% of his net worth" and has returned nearly $20 billion worth of assets to society so far. He donated to the Bill & Melinda Gates Foundation, rather than creating a foundation under his own name, saying that "I donated to the Gates Foundation because Bill Gates will be better than I at making investments in social problems."
  • Mark Zuckerberg: As a founder of Facebook, Zuckerberg founded a limited liability company (LLC) called the Chan Zuckerberg Initiative–celebrating the birth of their first daughter– with over 99% of his stake in Facebook (about 45 billion dollars, 52 trillion won).

At the same time, Buffet, Gates, and Zuckerberg are investing time and energy in creating a better world beyond philanthropy.

  • After visiting India and Africa in the mid-1990s, Bill Gates realized that "there are tens of thousands of children around the world whose lives can be saved with simple medical care.” He put in tremendous effort and time towards supplying vaccines for the prevention of malaria / polio / pneumonia / tuberculosis / HIV. Additionally, through the Bill & Melinda Gates Foundation, he is working on projects tackling a variety of social issues (hunger, vaccine, human rights, education, technology, agriculture, etc.). With his recent donation of $5 trillion, Gates specifically requested for it to be put towards malaria control work.
  • By establishing "promoting the growth of many African young people by spreading the free internet in Africa" as one of the core businesses of Facebook, Mark Zuckerberg has committed to working towards providing equal opportunities in the world by attempting to launch a satellite over Africa. Furthermore, in order to have a greater positive impact through public service projects, including personalized learning, disease treatment, and strong but equal community building, Zuckerberg directly helps oversee the Chan Zuckerberg Initiative to improve the lives of many people.

How are their donations different from traditional donations? What are the core motivations that drive these men of wealth to donate their wealth and energy? Are these donations actually being used to make the world a better place?

II. Philanthropy of the past and its limitations

In the past, donations were focused on 'sponsoring money for international organizations, welfare institutions, and charities.’ Most donations were used towards activities that provide food and shelter to the needy.

  • Prior to 2000, there was a distinction between "donors / philanthropic organizations" and "organizations receiving money and administering them." In other words, the donors/organizations donated money and became financial backers of relief organizations, but they did not directly engage in solving social problems.
  • More than 80% of the world's donations were made to poverty relief agencies and religious organizations including The Office of the United Nations High Commissioner for Human Rights (OHCHR), UN agencies, international organizations and welfare agencies. With the donations, the organizations mainly focused on providing basic food and shelter, also known as “relief activities,” so that the poor would not die from hunger.
  • In conclusion, in the past, donations were used for 'post-deal actions' rather than the 'development of proactive measures' to solve fundamental problems faced by the world's poor.

However, international organizations and NGOs have not been able to attract many talented people nor operate in a tight and organized system, which diminished their social impact.

  • International organizations and NGOs do not offer the desired salaries or working conditions to attract top talent. For this reason, young and talented people often do not seek work in these environments. As a result, there is a clear lack of creative problem solving ability and initiative in international humanitarian organizations.
  • There are many other ramifications, including the improper use of donated funds. This is because international organizations and NGOs have failed to establish effective processes.

At the same time, since the 1990s, many corporations have set up foundations internally and initiated social contribution activities linked to corporate image enhancement. Unfortunately, these initiatives often do not lead to a major social impact.

  • In the late 1990s, as the concept of corporate social responsibility (CSR) spread, many companies used a portion of their in-house funds for social activities and campaigns.
  • However, most of the CSR activities were focused on social contribution activities that helped improve corporate image, rather than focusing on devising effective solutions to serious social problems. Many companies concluded that food and shelter support projects for the poor are 'easy to implement' and 'have a big effect on improving the investment image'. They focused on funding relief activities and obtaining the necessary video footage to help promote their public image in campaigns to disseminate and enhance their corporate image.
  • Moreover, it is extremely rare for founders to actively sponsor creative activities focused on solving social problems by forming funds with their own money and private holdings, instead of using in-house reserves.

In the early 2000s, CSR activities were concentrated on side projects that were separate from the company's core businesses. These activities, centered on strengthening corporate image, did not lead to a major social impact.

In conclusion, past donations have [1] treated the symptom, not the problem. They significantly contributed to securing the basic livelihoods of the poor, but have not contributed to addressing the core problems that lead to extreme poverty and the loss of human lives.

  • Past donations were focused on providing food and water supplies, but not on solving various social problems such as fighting diseases, strengthening immunity, solving social inequalities, and guaranteeing human rights.
  • In the case of poverty eradication, efforts were focused on providing relief supplies through 'post-treatment.’ However, there is a lack of effort in devising 'proactive responses' like providing vocational education and jobs to support the independence of the poor.
  • Efforts to provide vocational education and jobs to marginalized communities have largely been ignored. Instead, past donations were limited to minimizing social harm, and they ignored underlying problems.

Past donations were limited to the role of minimizing social harm and side effects, not solving social problems.

III. Three principles of philanthropy led by US entrepreneurs and investors

However, recent donations from prominent entrepreneurs / investors in the US have shown the potential to overcome the past limitations.

  • They contribute their time, passion, energy, and problem-solving power to solving specific social issues, on top of donating 90% of their own wealth, collectively worth trillions of dollars.
  • As a result, donations are linked not only to relief activities but also to the various problems of the poor (illness, immunity, education, human rights, etc.). Their donations go towards finding effective solutions to core humanitarian issues and poverty.
  • Efforts to solve social problems by global entrepreneurs / investors have [2] garnered the world's attention and positively influenced younger generations, resulting in numerous social ventures and an influx of young people into the social sector.

The first principle is that the donors are not simply donating money to relief organizations, but also making sure that these funds are used in ways that directly tackle social problems.

  • The first type of giving is monetary donation. They donate their collected assets (cash, stocks, etc.) to foundations / charities and use them to enact positive social change. A key thing to note is that the [3] new breed of donors focus their attention on ensuring their donations are not used to sustain ineffective public corporations that allocate donations inefficiently and have little impact. For example, the Bill & Melinda Gates Foundation has specifically defined 20 social issues they want to focus on. They are also investing in various social ventures as well as public organizations. In fact, many social ventures in the US are offering socially-oriented services that receive funding from the Bill Gates Foundation (e.g., the Khan Academy, which offers free math education around the world)

The second principle is that corporate social responsibility initiatives are becoming one of the top priority projects for companies, rather than just a peripheral activity.

  • The second type of donation is that "service itself is a donation". One of Facebook's agendas is to provide satellite free-to-air internet to Africa. Elon Musk's business agenda is to address the social problem of global warming by developing cars that do not emit carbon. One of Uber's agendas is to expand vehicle sharing and reduce the number of cars on the planet and reduce both traffic problems and global warming. These companies are incorporating social values into the companies’ main business models.

The final principle is that big donors are actively setting themselves as examples for younger generations. They invest a lot of their time into younger generations, and that could have a positive impact long into the future.

  • The third type of donation is "time". For example, many well-known founders / managers are spending a lot of time sharing their experiences / know-how / spirit with younger generations by giving lectures at universities in the United States. For example, the CEO of LinkedIN spent about three hours in a class of 15 students at Stanford University sharing the values he strives to convey to his customers. The purpose of his visit was not to promote the company, but to help students grow into active and contributing members of society.

Recent donations from US entrepreneurs / investors have created a [4] virtuous cycle in society and are targeted at directly tackling core social problems.

  • There is a rapid increase in social ventures and nonprofit organizations that focus on solving diverse social problems, as American businessmen / investors have begun to direct their capital into investments that have social returns.
  • As a result of socially responsible / impact investments, well-funded social enterprises are able to attract the top talent they need (with appropriate levels of compensation and benefit) to carry out their mission.
  • A range of high technology solutions and services are being provided to low income individuals. Moreover, these services lead to seed money and job training for the needy, improving the lives of low income households.

IV. The state of philanthropy in Korea

Korea has been labeled as a "donation-backwards country" and is still stuck in the past when it comes to philanthropic culture.

  • According to the World Giving Index (WGI), the United States ranks number one in terms of donations. It raised $358.3 billion in 2014, of which: 72% was donated by private properties; 23% was done through foundations; and 5% by corporations.
  • Korea ranks 50th on the WGI – 25th out of OECD countries based on contribution participation rate. The donation amount relative to GDP is 0.87%, which is less than half of that of the US (2%).
  • In the United States, cumulative donations of 1 million dollars (1.2 billion KRW) or more from donors totals 14.1 billion dollars (17 trillion KRW). In Korea, the “honor society”, a donor group whose members individually donate over 100 million KRW, donated a cumulative amount of only about 100 billion KRW.
  • Heads of big corporations in Korea often do make large donations but only as a gesture of apology when they are faced with criminal investigation or held in detention. There are very few leaders and role models in the business world who are dedicated to creating social impact.

However, there are signs of change in our country. There are more young people working in social enterprises, and various new initiatives are underway.

  • Beginning the social venture ecosystem revolution: There has been an increase in the number of organizations that support and invest in social ventures, leading to an increase in the number of social enterprises and the number of employees. The social venture valley is being formed around the Seongsu-dong area.
  • An increase in social enterprise success stories: Marymond, for example, the social venture, donated 50% of its operating profits and redesigned flowers drawn by grandmothers for their products. They have achieved annual sales of more than 3 billion KRW, creating success stories.
  • Increasing donations from successful entrepreneurs: The first generation of five Korean venture company leaders (Bum-su Kim, Cacao founder, Jeong-ju Kim, Nexon founder, Taek-jin Kim, NCsoft founder, Jae-woong Lee, Daum founder, and Haejin Lee, Naver founder) established the LLC "C program," which works to identify- incubate – and invest in social enterprises.

Although it is not yet like the social enterprise ecosystem of first-world countries like the United States in terms of scale and diversity, philanthropy and social investment in Korea are at an important turning point of unique growth.

  • Limitations: Limitations exist in terms of total donations; the number of social enterprises; the amount of investment in social enterprises; the number of workers in social enterprise; and the salary per capita.
  • Opportunities: With the mission to 'make a positive change in society', young people who choose to challenge themselves in difficult situations are gathering in Seongsudong area.

How do recent donations from US entrepreneurs / investors differ from past donations? What is the current status of donations and social enterprise activities in Korea? What kind of effort is needed to raise the level of donations in Korea and diversify social contribution activities?

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