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Bill and Melinda Gates divorce: Instead of berating tycoons for their philanthropy, ask them for stock

In 2006, Warren Buffett gifted 10 million of his Berkshire Hathaway shares to the Bill & Melinda Gates Foundation. In 2019, the Azim Premji donated $21 billion to the Azim Premji Foundation; part of it in Wipro shares. Both endowments have grown substantially, thanks to rising stock prices.

May 30, 2021 / 01:57 PM IST
Illustration by Suneesh K.

Illustration by Suneesh K.

Circumstances surrounding the divorce of Bill and Melinda Gates have undone a lot of the good work that philanthropists like him have been doing, lending credence to long-standing accusations by some critics that capitalism and charity are uneasy bedfellows. While the Microsoft founder’s personal life should be entirely his business, for some reason it is being conflated with his earlier opposition to Covid-19 vaccines being given immunity from patent protection. In this unfortunate turn of events, several key initiatives like the Giving Pledge or even the Bill & Melinda Gates Foundation have come under the shade.

While using one unfortunate development to tar a lifetime’s work by the man is wrong, it is equally pernicious to extrapolate the event to show how capitalists and the market economy that has driven them to their stupendous riches do not leave any scope for philanthropy.

Indeed, a parallel development, largely unnoticed in the hype surrounding the travails of the Gates family, proves how a market economy may be the best answer to funding the many problems of our world.

Two of the world’s top philanthropists, separated by geography though similar in spirit, have shown how one of the fulcrums of shareholder capitalism can be used to extend their largesse. The two men in question are the American investing legend Warren Buffett and Indian IT czar Azim Premji and the tool they have used is stock.

]December 31, 2020, Buffett had already donated 268.3 million shares, valued at $29.46 billion. This means that Buffett has already donated 95% of his promised pledge to the foundation in terms of value but only about 53.7% of the number of shares he had promised.

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By the time, Buffett is done donating all his 500 million committed shares to the Bill & Melinda Gates Foundation, he would have given more than twice the money he had promised in 2006. That’s obviously because of the rise in the price of the company’s shares.

Closer home, a similar miracle has played out. On March 13, 2019, the Azim Premji Foundation (APF) issued a statement saying that Premji's total donation to the Foundation was $21 billion. The Foundation did not give a break-up of how it arrived at this number. But in our book, Azim Premji: The Man Beyond the Billions, my co-author Varun Sood computed that this comprised $11.83 billion worth of Wipro shares as of that date, $6.69 billion in wealth managed by Premji Invest, and $2.5 billion in cash from dividends and Wipro share sale by the Foundation over the last decade.

At the peak of the dot-com bubble in 2000, Wipro's market cap was a whooping $47 billion and Premji's 82% ownership translated into a personal net worth of $38.5 billion.

More than two decades later, Wipro's market cap now totals $43.34 billion (as of May 28, 2021). Premji has given 67% of Wipro shares to the Foundation, which are now valued at $29.04 billion. Add to that the approximately $7 billion held by Premji Invest and $2.5 billion in cash, and APF's endowment is now $38.54 billion, up a whopping 83% of the amount he originally committed. Once again, it is because of the rise in the Wipro stock price.

Just like in the case of Buffett, Premji's donation to APF will continue to see an increase in value, all thanks to the gift coming in the form of stock rather than as cash. Of course, it is equally possible that if either company’s stock price drops, this value will also decline.

No matter what happens in the future, as long as Berkshire Hathaway under Buffett and his successor Greg Abel, and Wipro under new chairman Rishad Premji, continue to perform well enough, both the Bill & Melinda Gates Foundation and the Azim Premji Foundation which have a similar structure, underpinned by an endowment, will continue to see their corpus rise.

Also read: Rewiring generosity in Covid times
Sundeep Khanna is a senior journalist. Views are personal.
first published: May 30, 2021 07:32 am

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