Gates Fund Will Increase Giving This Year Despite Losses, New CEO Says

Since Jeffrey S. Raikes joined the Bill & Melinda Gates Foundation here as its new chief executive, he has been on a worldwide learning tour.

He has visited a rice research center in China, an Indian charity that assists female sex workers, and Washington inner-city schools to form a better understanding of the philanthropy’s role in global health, American education, and international development.

But the last few months have not been a honeymoon period.

Since he joined in September, stock-market losses have drained the Bill & Melinda Gates Foundation Asset Trust, which holds the foundation’s assets. During the period from the end of 2007 to October 1 — the most recent figure the foundation says it has — the trust’s asset value fell $2.7-billion, to $35.1-billion.

But in Mr. Raikes’s first extensive interview since beginning his new job, he told The Chronicle that despite the investment losses the fund will increase the total amount it distributes in grants this year by 10 percent. The foundation will probably give around $3-billion in 2009.

Though the increased amount is smaller than what the foundation had planned to give before the recession hit, Mr. Raikes is encouraging other donors to consider giving more during rough times.

“For most philanthropy, with the market declining there will be this tendency for people to step back,” he said. “And we are hoping that we can — amongst others in our sector — help encourage a strong or even stronger commitment to the importance of philanthropy.”

To be sure, Gates is not dependent on its investment income to pay for grants, as many foundations are. The investor Warren E. Buffett makes annual contributions of Berkshire Hathaway stock to the foundation, and this year’s gift was worth $1.8-billion when he transferred it to Gates in July.

That money, however, creates its own challenges for Mr. Raikes.

The Gates organization has grown rapidly since Mr. Buffett announced his philanthropic pledge in 2006. Currently the foundation has 686 employees, more than twice as many as it had three years ago.

Mr. Raikes, a former Microsoft executive, said one of his goals is to build better relationships among the foundation’s staff members, who are spread out over five buildings.

“Folks working on U.S. education may have no idea what we’re doing on agricultural development that will change the lives of smallholder farmers in Africa. There’s some connections that need to be made,” he said.

On a lighter note, Mr. Raikes said he has found other ways to bring the foundation together — his karaoke duet with Bill Gates’s father of “Jingle Bell Rock” drew rave reviews at the foundation’s holiday party.

“They seem to like to have me on stage,” he said, laughing.

Another goal, Mr. Raikes said, is to create new ways for the foundation to discuss its charitable efforts with the public.

This month, Bill Gates will write for the first time a letter that outlines the foundation’s 2009 priorities. And the foundation recently began operating its own page on Facebook, the social-networking Web site.

While the foundation is trying to be more open, Mr. Raikes declined to reveal his salary.

“It’s fair to say I’m not the highest-paid CEO in the sector,” he said.

Mr. Raikes’s predecessor, Patricia Stonesifer, earned no salary in her role, having become a multimillionaire at Microsoft. Mr. Raikes, who also became wealthy working at the software company, said he did not ask to be paid but that the Gateses wanted to “professionalize” the position.

The following are excerpts from The Chronicle‘s conversation with Mr. Raikes. Audio excerpts from the interview are available at http://philanthropy.com/extras.

How is the economic turmoil affecting the foundation?

Very effective, successful philanthropy is always important. I will suggest that in a time like this — I don’t want to say it’s even more important, but it certainly underscores the importance. We announced that we are planning to grow our payout this next year. The long-term, intractable problems that impact global health or helping people in poverty, those require an ongoing commitment.

But the increase is less than previously planned?

All things in the future are somewhat speculative. Some people may have predicted that we would grow even more rapidly when the market grew rapidly. But I feel very comfortable with 10 percent growth, especially given how much we’ve grown in the last three years since we’ve been ramping up with Warren Buffett’s magnificent gift.

Are you encouraging other foundations to increase their grant making?

It’s important that we be respectful. Their situations may be different than ours. For whatever they can do, I want to encourage them toward the high-end of that range. I hope that’s the stance they’ll take.

The foundation recently gave $1.4-million in emergency grants to anti-hunger organizations in the Pacific Northwest. Will you make other emergency grants?

I am very impressed with how Allan C. Golston, president of our U.S. programs, and his team have been very thoughtful about the role that we can play. They are continuing to develop their ideas, so I don’t want to precommit them to any specific things. But they have definitely felt that they should shift some of their funding toward what you might call emergency response.

Do you have any concern that the economic downturn will hinder the foundation’s work with pharmaceutical companies or other businesses?

Certainly there’s the concern. That’s why we want to do what we can to help encourage people to continue or increase their commitment. We have that concern with the government as well.

How much has the Gates trust lost in assets compared to this time last year?

The numbers are very much up in the air. We haven’t gotten the latest returns. It’s fair to say we’ve been impacted as others have been impacted. But the actual quantification will come as part of our reporting in January.

How will the incoming Obama administration affect the foundation’s work?

Our foundation reflects the general mood of excitement with the transition to the new administration. We’re very impressed that President-elect Obama has publicly stated his commitment to increasing [foreign] aid.

We’ve also been very much impressed with the [cabinet] selections; we were particularly pleased with the selection of Arne Duncan [as the nominee for education secretary].

The persona, the principles, and the goals President-elect Obama has set have been very, very much appreciated for how they can help facilitate the work that we are trying to do.

Do you know if any foundation staff members will join the administration?

I know several who we think are coveted. We’re hoping that our employees will help facilitate the transition, but be here with us. If they decide to take a role in the administration, that can be very good, too.

David Brooks, a New York Times columnist, recently speculated that walking into the Obama White House will be like walking into the Gates foundation, writing that both will be “pragmatic and data-driven.”

We appreciated that comment. I do think it’s very important that the work that we do at the foundation, and philanthropy in general, be very driven toward follow the evidence, follow the data, and David Brooks underscored that.

A recent study showed that the Global Alliance for Vaccines and Immunization, to which Gates has committed $1.5-billion, may not have inoculated as many children overseas as previously had been estimated. How do you respond to that study?

Millions more children got immunized because of those programs. Now, did some of the dollars get paid for situations where there weren’t immunizations? No doubt. The thing that will get the most reporting is the glass is half empty. There is the glass is half-full part of it. We made some great progress. The progress could have been even better.

Critics of the foundation say it needs to do a better job of listening to people other than its founders and employees. Is it trying to do that?

We think it’s extremely important that we be good listeners. We have put in place advisory panels for each of the program areas, and they are a terrific set of thought leaders. I had the opportunity, along with Bill and Melinda, to be in sessions with those advisory panels in November.

But the concern is that these advisers may have a voice, but they don’t have a vote, per se.

They will point out things that we should be doing differently or thinking about differently. Frankly, there’s good dialogue or disagreement amongst themselves, too. Understanding and hearing that is very important.

I can understand the concern that people might have, but I’m quite confident that we have a culture here — and co-chairs — that is very anxious to listen to the points of views of others. That’s been a very important part of Bill’s success in business; his ability to monitor closely what’s happening and make changes when necessary.

For example, if you take the education forum we had in November (The Chronicle, November 27), we were quite willing to share what we had learned — both the good and the not so good. That’s an example of the cultural style that’s here.