Facebook founder Mark Zuckerberg’s tax-dodging philanthropy adds fuel to firestorm of scepticism
Hong Kong’s admiration of wealth creation fading as creators give way to heirs
It used to be rather simple and maybe it still is in Hong Kong but elsewhere there is something of a backlash against very rich people and their companies making donations designed to give something back to the community but that end up being criticised as ego trips for the donors.
What may be described as a philanthropy firestorm was fuelled last week when Facebook founder Mark Zuckerberg and his wife Priscilla Chan announced they would be giving a breathtaking 99 per cent of their lifetime’s wealth to charity.
The manner of the announcement, made, of course, on Facebook, generated a level of abuse that might not be expected for a charitable act. It came by way of a 2,234-word letter to their newborn daughter, Maxima; an interesting choice of name that she will have to live with. The letter discussed the challenges facing her generation; frankly, its unoriginal thinking would have been largely ignored were it not for the letter’s provenance.
However most of the critical focus was on the manner of the giving. This money will not go to a charity but to a limited liability corporation free to make investments at will and able not to distribute its funds on an annual basis, something charities are obliged to do. Zuckerberg’s defenders argue that this is a shrewd way of giving that not only allows more risky investments for noble ends but may also provide the means to grow its assets more successfully than a typical charity.
What the new company will not do is exactly what Facebook is notorious for not doing, i.e. paying taxes. Facebook has an international reputation for its dexterity in avoiding tax liability. However taxes are the means of funding the public purse and despite widespread criticism of how the proceeds are dispersed the simple fact of the matter is that taxation provides the means to equip the community with its essential services and security.
This is why Warren Buffett, a highly active charity donor, advocates the need for the very rich to pay their fair share of taxes while also giving away a significant proportion of their wealth.
The super rich usually prefer charitable work that involves donating money for buildings bearing their names. This is certainly how things are done in Hong Kong but in the United States there has been a backlash over this kind of thing. This was vividly demonstrated when media mogul David Geffen’s US$100 million gift to New York’s Lincoln Centre turned into farce. The cash was paid for major renovations to the Avery Fisher Hall, named after its original donor, however the deal involved the renaming of the hall as the David Geffen Hall. In compensation for the loss of their name the Fisher family were then paid US$15 million. Unsurprisingly this use of charitable funds invited considerable comment.
Comment reached a rather more acrimonious level at the Upstate New York Paul Smith’s College where Joan Weill, wife of the former Citi-group CEO Stanford Weill, offered the college $20m on condition that it changed its name to her own. The row that followed led to withdrawal of the offer.
In large part the controversy arising over gifts of this kind is part of the backlash against the power of the rich, particularly in North America and Europe.
Closer to home there is a deeply ingrained Chinese tradition for charitable donation, which matches that of other cultures where giving is regarded as a duty and a blessing. This tradition is most evident among immigrant communities which, by their very nature, are dynamic and where transformation is faster than among long-established communities. The proximity of previous poverty and sudden wealth makes the new rich far more conscious of their good fortune and more likely to incline towards charitable thinking. Hong Kong has seen the benefits of this fortunate combination.
However the mood is changing even here, where wealth creation has been widely admired and the rich are revered. But this view is fading as the original wealth creators give way to their heirs, who by accident of birth are now taking over these influential corporate roles.
Moreover there is a growing feeling that it will no longer be possible for anyone with an agile mind and a solid work ethic to get rich in the way that a previous generation got rich. Doors that were once open now appear to be shut and a perception is growing of collusion between the rich and the governing class to shut out new entrants.
The consequences of this feeling may be ameliorated by charitable donations but once the mood turns sour this too will be viewed with suspicion. What’s happening in other countries today may well happen here tomorrow; maybe there are some things money can’t buy.
Stephen Vines runs food companies in the food sector and moonlights as a journalist and a broadcaster