A Message to Ford Foundation in Gates Spending Approach: Give More Now

Last week Bill Gates announced an eye-popping $20 billion donation to the Bill & Melinda Gates Foundation, bringing its total endowment to $70 billion — by far the nation’s largest and up from $49 billion in 2020. Although the dollar amount commands the most obvious attention, Bill Gates’s explanation for his new donation deserves serious notice as well. “I hope by giving more, we can mitigate some of the suffering people are facing right now,” Gates said in a statement.

The key words are “right now.” Along with the donation — its biggest gift ever — the foundation is raising its annual payout to charities to $9 billion by 2026. That’s a 50 percent increase over the prepandemic rate.

Among those who should take special note of these developments are the trustees of the second largest philanthropy in the United States — the Ford Foundation.

Some may differ with the Gates Foundation’s priorities, which include eradicating diseases in the developing world and advancing education in the United States. But the important point to focus on here is the Gates’s commitment, along with his ex-wife Melinda French Gates, to disbursing their fortunes mainly over their lifetimes rather than maintaining the organization forever. Bill Gates’s massive new gift reflects the decision at the foundation’s formation to distribute the entire endowment and go out of business 20 years after his and French Gates’s deaths.

This is how the Foundation Trust, which manages the Gates endowment, puts it: “The decision to use all of the foundation’s resources in this century underscores our optimism for progress and determination to do as much as possible as soon as possible to address the comparatively narrow set of issues we’ve chosen to focus on.”

The philosophical contrast with Ford, whose endowment is $16 billion, could not be greater. Founded in 1936 with a $25,000 gift from Edsel Ford, son of Henry Ford, the grant maker has continued far more than 20 years after the death of either Edsel in 1943 or Henry in 1947. Indeed, Henry Ford II famously resigned from the foundation’s Board of Trustees in 1977, “complaining,” as the New York Times wrote “that the philanthropic agency was spreading itself too thin, was cultivating a ‘fortress mentality,’ and had staff that often failed to appreciate the capitalist system that provided the money the foundation gave away.”

The point here is not to criticize Ford’s grant making, although there is little doubt that it has continued to lean left, prioritizing, for instance, the reduction of economic inequality in its grant making. Nor is it to criticize Ford’s celebrated president, Darren Walker, a progressive hero who nonetheless struck a markedly nuanced tone in a July 4 New York Times op-ed in which he criticized the nation’s founders for their tolerance of slavery but acknowledged that “they initiated a grand, complicated experiment with self-government that made possible abolition and suffrage, worker’s rights and civil rights and women’s rights, however slowly and unevenly.”

Nor is it to contrast the causes it supports with those of Gates. It is, rather, to highlight the difference in the structure of America’s two largest foundations and why that matters. Gates is set to close its doors, or “sunset.” Ford is overseen by what’s known as a “self-perpetuating” board, meaning it continues without a time limit, long after the deaths of its founders, and is guided by trustees who choose their successors.

Certainly, the board includes some distinguished people, such as Bryan Stevenson, founder and executive director of the Equal Justice Initiative; Chuck Robbins, CEO of Cisco Systems; and Ursula Burns, former CEO of Xerox. It even recently added a member of the Ford family, Henry Ford III. The foundation also seems to have a soft spot for trustees whose prominence is in part due to their association with well-known family members. Laurene Powell Jobs is a current trustee, and former trustees include Irene Hirano Inouye, wife of the late former Hawaii Senator Daniel Inouye, and Thurgood Marshall Jr., son of the late Supreme Court Justice, both of whom were among those who chose Walker as president.

Self-Perpetuating Board

This illustrious board, however, has failed in one of its most important tasks: to confront its self-perpetuating nature, which arguably undercuts its legitimacy. There are other such boards, of course. And there are other self-perpetuating major foundations with low payout rates. But none are as wealthy as Ford.

Unlike other institutions with large endowments and self-perpetuating boards — Harvard University, for example — Ford also faces no market test. If prospective students stopped applying to Harvard or faculty and government research grants went elsewhere, its board would inevitably be held accountable. Ford contends with no such tests, short of investing its endowment poorly and going broke. Given its propensity to include serious money managers on its board, that seems unlikely.

Nothing, to be sure, prevents the board from adopting a payout rate high enough to phase out the foundation. Ford, however, has not chosen that approach. In 2019, for instance, when the Gates Foundation disbursed grants equal to 11 percent of its assets, Ford disbursed just 5.3 percent of its assets — only slightly higher than the federal requirement of 5 percent.

Low payout rates ensure an organization exists in perpetuity not just in theory but in practice, given the likelihood that long-term investment returns will exceed 5 percent. They also enable high salaries, such as the more than $1 million earned by Darren Walker, and the maintenance of Ford’s striking and valuable headquarters in midtown Manhattan, now officially known as the Ford Foundation Center for Social Justice.

To its credit, Ford issued a social bond early in the pandemic, which allowed it to borrow for less and increase giving during the health and economic crises. But it also made it possible for Ford to protect and expand its endowment’s principal, in contrast to the spend-down philosophy of Gates or such foundations as the Atlantic Philanthropies and the Olin Foundation.

Bill Gates and Melinda French Gates, in both their founding structure and Bill Gates’s latest gift, have laid down a challenge for other foundations — but especially Ford, whose prestige rivals that of Gates. A New York Daily News headline could put it this way: Gates to Ford — Drop Dead.

At the very least, the Ford trustees owe the country on whose wealth and tax exemptions it relies an explanation of why it believes perpetuity is the right way to go.