Entrepreneurship

09 December 2015

Philanthropy 2.0 

In the past, entrepreneurs tried to outdo each other with the size of their yachts – now they compete on the extent of their philanthropy. Facebook CEO Mark Zuckerberg recently made one of the largest-ever philanthropic pledges of $45 billion, aimed at “advancing human potential and promoting equity for all children in the next generation.”

Philanthropy has become fashionable. #Giving Tuesday, an online campaign that started in 2012 as a counterpoint to the consumer frenzies of Black Friday and Cyber Monday, has now spread from the US to Europe.

But increasingly philanthropy means more than just giving money to charitable causes. The #Giving Tuesday campaign encourages good deeds such as donating blood, volunteering, even becoming an organ donor.

Ultra-wealthy individuals like Zuckerberg, and before him Bill Gates, increasingly insist on retaining control over the distribution of their assets, for which, obviously, they have sound reasons. Businesspeople have skills and expertise in areas such as cost control that can improve the impact of philanthropic giving. They are also capable of establishing organisations to support causes for which there is no formal charity.

Less wealthy individuals can set up the increasingly popular "Donor Advised Funds" – tax-efficient structures first introduced in the United States in 1931 and now gaining ground in Europe. Benefactors can donate shares or cash and receive immediate tax benefits; funds hold the donations until they receive advice on disbursements by the founders or their successors. Such funds also offer anonymity, which can suit some wealthy donors.

These trends pose a challenge to traditional charities, which are being urged to embrace business strategies such as rationalization and efficiency improvement to become more attractive to donors – otherwise the funding they have grown accustomed to may dry up.