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Debating the motivations behind institutional philanthropy

By Minkee Sohn | 6 May 2014

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Rob Reich, program director of Stanford’s Ethics in Society Program; and Jeff Raikes, CEO of the multibillion-dollar Bill & Melinda Gates Foundation.

Rob Reich, program director of Stanford’s Ethics in Society Program; and Jeff Raikes, CEO of the multibillion-dollar Bill & Melinda Gates Foundation. (Photo courtesy of Charlie Russo)

CORRECTION (5/6/14, 5 p.m. PT): This article has been amended from an earlier version to make clear that Rob Reich’s statements about corporate philanthropy conflicting with a corporation’s profit-driven goals reflect the views expressed by Milton Friedman in a famed article — not the views of Reich.

The former director of Stanford’s Center on Ethics said that anonymous corporate philanthropy is an “unrealistic” goal.

“I think most corporations want credit for their philanthropy,” said Deborah Rhode, now a Stanford law professor. “My own view is that we should be pragmatic about the role that reputation plays in driving corporate philanthropy. That’s the motivating factor for a lot of corporations and there’s nothing wrong with that.”

On April 7, institutional philanthropy was the center of an onstage conversation at Stanford University between Jeff Raikes, CEO of the multibillion-dollar Bill & Melinda Gates Foundation, and Rob Reich, program director of Stanford’s Ethics in Society Program.

Institutional philanthropy includes corporate and personal foundations and giving programs.

Speaking with Reich before an overflowing audience at Stanford’s Cubberley Auditorium, Raikes discussed the Gates Foundation’s efforts to create social impact through philanthropy. Raikes highlighted the Gates Foundation’s creation and deployment of a Meningitis A vaccine across the belt of Sub-Saharan Africa.

“There was a market failure [in Africa],” Raikes said. “We used the concept of catalytic philanthropy to create something that has huge social impact.”

Companies pursuing philanthropic efforts could be seen as pursuing their self-interest, Raikes said.

For Americans in poverty “who had the opportunity to learn the tools of information work, [Microsoft] made software programs that would give them an opportunity,” Raikes said. “And that certainly is a good contribution to a population that is disadvantaged, [though] people could say ‘but there was a self-interest there.’”

Rhode emphasized in an interview that corporations engaging in philanthropy have “a reputational concern.”

“They want to be seen as companies that are socially responsible,” Rhode said, “and that care about their communities.”

Corporate philanthropy conflicts with a corporation’s profit-driven goals, Reich said in a later interview, citing Milton Friedman’s perspectives in “The Social Responsibility of a Business is to Make a Profit?’”

“I think it’s an open question whether it should exist,” Reich continued, explaining Friedman’s view. “… Setting up a corporate foundation to do good in the world is stealing from investors who are otherwise interested in you maximizing your profit, in that you decided to have a nice little social mission that the investor had no say in determining.”

During the April 7 event, Reich asked Raikes to address criticism of the Gates Foundation’s decision to play a role in education. Some scholars of higher education criticize this decision as an example of wealthy individuals using financial power to bypass democratic institutions.

Raikes argued that ambiguity often surrounds complex philanthropic efforts.

“The bigger the problem you’re trying to solve, and the more important it is,” Raikes said, “the more likely you are to have an ambiguous solution.”

During the interview, Reich maintained that institutional philanthropy could undermine the democratic system.

“A significant amount of philanthropy, especially amongst some of the biggest foundations, involves deliberate attempts to shape public policy to the views of the donor,” Reich said. “Political influence comes to depend on the size of your wallet. And then I think you’re not living in a democracy anymore.”

Philanthropy can also create feelings of indebtedness and dependency, Reich said. He highlighted a hypothetical example of philanthropy’s power dynamics at Stanford.

Reich said, “The Arrillaga family comes onto campus and talks to you, and says … ‘It’s really nice to meet you … just thought after hearing about you it’d be great if you did X, Y and Z.’ You look around the campus, and you see how many buildings are named after Arrillaga, and you think what an important person he likely is at the university, and you think, ‘Gee, it probably would be wise for me to work with him.’”

Public philanthropic efforts heavily bolster an individual’s influence, Reich said.

“Another person could come on campus with the same amount of knowledge about you, and say … ‘I think you should do X, Y or Z,’” Reich said. “And you’d say, ‘Who are you to tell me that?’”

Anonymous giving could mitigate possible issues of indebtedness and dependency.

“If what the person is receiving is actually something they’re entitled to — that justice demands they receive —then a feeling of indebtedness to a person or a corporation should be no part of their entitlement,” Reich said. “In that respect, anonymous giving could be better.”

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