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Gateses Have 2 Years To Decide If They Can Share Foundation

Sophie Alexander, Ben Steverman and Anders Melin Bloomberg News

WWR Article Summary (tl;dr)  After an announcement this week that they would be committing another $15 billion to the endowment, the ex-couple also laid bare that they may not be able to work together in the future — raising the possibility that Melinda Gates may exit.

Bloomberg

Bill Gates and Melinda French Gates’ divorce is shaping up to have a more profound impact on their $50 billion foundation than they previously had projected.

The ex-couple insisted when they announced their split in May that little would change at the sprawling philanthropy. Yet Wednesday brought a remarkable turn of events: Along with committing another $15 billion to the endowment and announcing a plan for new trustees, the pair also laid bare that they may not be able to work together in the future — raising the possibility French Gates will exit.

“Gates and  French Gates are fully committed to continuing to work constructively together at the foundation,” the organization said in a statement. “However, they have also agreed to an additional step to ensure the continuity of the foundation’s work: if after two years either decides they cannot continue to work together as co-chairs, French Gates will resign her position as co-chair and trustee.”

If she departs, French Gates, 56, will receive money from Gates for her philanthropic work that’s separate from the foundation’s endowment, according to the statement. It didn’t specify an amount.

It’s been a rocky couple of months for the Gateses since the divorce announcement, including reports of infidelity and long-simmering tensions between the two. Now the prospect of a split at the foundation — which either side can decide — gives the Microsoft Corp. co-founder the upper hand in the future of the philanthropic engine that they built together over the better part of their 27-year marriage.

“It makes an already volatile situation even more volatile,” said Benjamin Soskis, senior research associate at the Center on Nonprofits and Philanthropy at the Urban Institute. “The hint that Melinda French Gates has basically created an escape hatch for herself creates a level of uncertainty about the governance structure that’s going to persist until that’s resolved.”

Even if French Gates doesn’t leave, the other changes coming to the foundation are significant.

The new trustees, to be announced in January, will represent a shift from the board’s longtime set-up of having only a handful of members made up of friends and family. At the time of the divorce announcement, the trustees were Gates, French Gates and Warren Buffett. The Berkshire Hathaway Inc. billionaire said last month that he was stepping down.

By comparison, the Ford Foundation, which is roughly a fifth as large as the Gates Foundation, has 15 members on its board. The Rockefeller Foundation, at a 10th of the size, has no fewer than 12 at any time.

If the foundation begins operating with less power focused in the namesake founders’ hands, “that would be an enormous change for how the foundation is run,” said Soskis, whose organization has received funding from the Gates Foundation. “A lot of that will depend on how well Bill and Melinda are able to function as co-parents, in a way.”

The trustee search process will be led by Mark Suzman, the foundation’s chief executive officer, and Connie Collingsworth, the operating and legal chief, according to the statement. They will develop recommendations for the number of trustees and the selection process, and provide advice on the new members’ oversight roles.

While Suzman is CEO, it’s ultimately the trustees who set the course for philanthropic foundations. The divorce announcement sparked a conversation in the philanthropic world about the small size of the Gates Foundation’s board and that it was made up only of its living donors, who can have an outsize role in determining where their money goes. That’s not always for the best, critics argue.

“The idea that rich people know best about social welfare is just ludicrous,” said Linsey McGoey, a professor of sociology and director of the Center for Research in Economic Sociology and Innovation at the University of Essex and author of a book about the Gates Foundation, “No Such Thing as a Free Gift.”

The search also brings the opportunity to add diversity to the board of trustees. In the statement, the foundation said the Gateses “expect to appoint individuals who will further enhance the diversity, experience, and expertise of the foundation’s leadership.”

“If they expand the board of trustees and bring on 10 old white men, I’m not going to be happy about that,” said Edgar Villanueva, founder of the Decolonizing Wealth Project.

The additional $15 billion that Gates, 65, and French Gates pledged also means the foundation will have to pick up its pace of giving. Foundations are required by the Internal Revenue Service to annually give away 5% of their endowment, which for the Gates Foundation stood at roughly $50 billion before Wednesday’s announcement of the additional commitment.

The Gateses also previously set a deadline for the organization that requires it to spend all money within 20 years of their deaths.

“The amount of money that needs to get out the door in the next couple decades is huge,” said Soskis. “This is setting up the stage of what is likely to be one of the largest allocations of philanthropic funds in history.”

French Gates has played a major role in the foundation over the years, making her potential departure as a trustee more significant than Buffett’s departure. Buffett himself has said he played an “inactive role” at the foundation.

“Bill and Melinda both were very active in day to day activities at the foundation — they were often on campus working from their offices, meeting with program leaders, talking about issues,” said Greg Ratliff, who worked at the Gates Foundation for 10 years and is now senior vice president of Rockefeller Philanthropy Advisors.

There have been power struggles between Gates and French Gates in the past, which the latter details in her book “The Moment of Lift.”

“The first time Bill and I sat down to write our Annual Letter together, I thought we were going to kill each other,” she wrote in the book, published in 2019. “We both got angry.”

Since the divorce was announced, French Gates has received stock worth more than $3 billion from the Gateses’ Cascade Investment, the entity that manages the duo’s combined fortune. At the time, it stood at $145 billion, according to the Bloomberg Billionaires Index.

Over the past decade, French Gates has been focused on gender equality and started her own philanthropy operation, Pivotal Ventures, that is largely devoted to the issue. The Gates Foundation made a $2.1 billion commitment to advance gender equality in June.

Now that there’s a chance she’ll leave the foundation, there’s the question of how she’d continue her independent philanthropic work. She could start her own foundation or ramp up her work at Pivotal.

In any case, the foundation she helped build will remain one of the world’s biggest charitable entities.

“The Gates Foundation’s years as a powerful philanthropic organization are not behind it,” Soskis said. ___ Distributed by Tribune Content Agency, LLC.

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