- Philanthropies are growing more dependent on a small number of billionaire donors.
- The Giving Pledge debuted 10 years ago to encourage the world’s richest people to boost their altruism, but their giving hasn’t kept pace with their growing wealth.
- Reforms boosting payouts would fix some problems caused by having a few wealthy donors.
Philanthropies are growing more dependent on an ever smaller number of wealthier donors who exert increasing control over how funds are used.
Ten years ago, Bill and Melinda Gates and Warren Buffett announced the Giving Pledge, which asked some of the world’s wealthiest people to donate at least half of their net worth to philanthropy. While many of the billionaires have contributed substantial sums, their wealth has grown even faster, outstripping their capacity to give it away, according to Gilded Giving 2020, a report authored by Chuck Collins and Helen Flannery. At the same time, donations from the struggling middle class have fallen, leaving charities increasingly beholden to a small segment of society.
“The risk to democracy is that billionaire-dominated philanthropy becomes an extension of private power and influence,” Chuck Collins, a senior scholar at the Institute for Policy Studies, told Karma. “These are already people who have enormous clout in our elections, legislation, and media ownership, and now they are dominating the giving sector.”
On Aug. 4, 2010, 40 U.S. billionaires publicly committed to take part in the Giving Pledge, a number that has grown to 210 individuals and couples worldwide in 10 years. Of the 62 living American pledgers who were billionaires in 2010, their combined wealth has surged 95% since 2010 to $734 billion as of July 18, the authors said. The U.S. pledgers who were billionaires when COVID-19 hit in March have seen their wealth increase 28% in four months.
“These billionaires started with a generous intention to give away half their wealth,” Collins said. “Ten years later, their wealth has doubled.”
There are two main problems with the Giving Pledge, according to the report. Pledgers need to accelerate their giving to keep up with their asset growth, and the majority of the funds being promised will end up in family foundations and donor-advised funds that could exist forever.
“Wealth inequality is distorting the charity giving sector because low-and-middle-income people are economically squeezed and giving less,” Collins said. “Wealth gains are surging to the richest 0.1% and they are giving more.”
The nonprofit sector is becoming increasingly dependent on the wealthy because the number of donations is shrinking. The percentage of American households giving to charity has dropped from 66.2% in 2000 to 53.1% in 2016, the most recent year for data.
“Low-and-middle-income givers donate directly to on-the-ground charities addressing urgent needs,” Collins said. “The giving priorities of wealthy donors are different. They are more inclined to give to large institutions, such as universities and hospitals and arts organizations that are equipped to solicit big gifts and honor donors with naming rights and other perks.”
The authors of the study are calling for a Charity Reform Agenda that would help charities resist pressure from rich donors, avert abuse of the tax system, encourage giving from a wider swath of society and make sure the dollars get to the organizations that need them most.
If Congress were to pass an Emergency Charity Stimulus as part of the next relief bill, they would inject more than $200 billion into nonprofits providing COVID-19 relief. It would include a three-year mandate that would require private foundations to boost payouts from 5% to 10%, and a short-term 10% payout obligation for Donor Advised Funds, giving much-needed funds to front-line charities.
“There is a growing appetite in Congress for an Emergency Charity Stimulus to discourage the warehousing of wealth during the pandemic and mandate foundations payout at a higher rate for three years,” Collins said. “Congress is hitting trillion fatigue as they debate the next stimulus bill. But here is $200 billion that private charities could move to the nonprofit sector without additional cost to the taxpayer.”