Longtime Microsoft Executive Is Chosen to Lead Gates Foundation

The Bill & Melinda Gates Foundation has tapped Jeffrey S. Raikes, a Microsoft executive, to lead the world’s

largest foundation as it embarks on a period of rapid growth and grapples with criticism of its growing influence.

Mr. Raikes, a 27-year veteran of Microsoft, will replace Patty Stonesifer, who has headed the foundation since it started 11 years ago.

Mr. Raikes will start in September and earn a salary that is comparable to those offered by other large foundations, Melinda Gates said in announcing the decision. Ms. Stonesifer, who, like Mr. Raikes, became a multimillionaire through her work at Microsoft, chose to receive no pay for her work.

The Gates foundation fights poverty worldwide, supports global health, and works to improve American education. It employs more than 500 people worldwide and makes grants worth more than $3-billion per year.

Ms. Gates said the foundation chose Mr. Raikes in part because of his demonstrated success at managing during periods of high growth. Mr. Raikes, who is serving on Microsoft’s leadership team until he leaves in September, had most recently been president of the company’s business-software division, which is responsible for such products as the Office software suite.

“We really wanted somebody to build on the organization that we have today,” Ms. Gates said.

Joel L. Fleishman, a philanthropy scholar at Duke University, said that in turning for a second time to someone they already know and trust, Bill and Melinda Gates are following a model established by noted philanthropists of previous generations, such as Andrew Carnegie and John D. Rockefeller.

“It’s probably the right decision,” Mr. Fleishman said. “It’s less risky than picking somebody they don’t know. And the trust in that relationship will sustain differences of opinion and free Raikes up to say things to them in a way that someone coming in from the outside might have a difficult time doing at the beginning.”

Mr. Raikes and his wife, Tricia, have a family foundation that was worth $126-million at the end of 2006. They also chaired the fund-raising drive for the United Way of King County, in the Seattle area, during 2006-7. The drive raised $122-million, a record for the organization, and the largest campaign of any United Way in the country that year, according to Jon Fine, chief executive of the United Way of King County.

“He’s smart and a quick study and it will be wonderful for the nonprofit world to have him involved,” Mr. Fine said.

Vince Matulionis, who oversees the Seattle United Way’s effort to curb homelessness, said Mr. Raikes spent a night out with him helping count the city’s homeless population in January 2006 — and then went straight to an all-day meeting with Bill Gates and Microsoft’s chief executive, Steve Ballmer, a few hours later.

“He’s out there counting homeless people right before this big meeting,” Mr. Matulionis said. “It would have been real easy to say, ‘I can’t make it.’”

Concerns About the Job

Mr. Raikes, whose net worth was estimated at $490-million when Forbes profiled him in 2003, says he weighed how the top job at the Gates foundation would affect his time with his family and how he would cope personally with the regular exposure to human misery that such a job entails. But when Bill and Melinda Gates visited his office to offer him the position, he had made up his mind.

“It took me about a nanosecond to accept,” he said.

Ms. Gates said the foundation, working with the search firm Russell Reynolds, considered more than 150 candidates and that she and her husband personally interviewed several of the candidates. She said that all three of the foundation’s presidents — Allan C. Golston, who heads the U.S. Program, Tadataka Yamada, president of the Global Health Program, and Sylvia Mathews Burwell, president of the Global Development Program — approved of Mr. Raikes.

“I have much to learn, but being able to work with a tremendous team will be very exciting for me,” Mr. Raikes said.

Understanding Big Challenges

Mr. Raikes is known for his competitiveness but also for building strong teams and seeking out new and unconventional views. He grew up on a farm 150 miles from Omaha. In his sophomore year at Stanford University, he chose to move into Ujamaa House, Stanford’s African-American dormitory. Last year, he and his wife gave $2.5-million to Stanford’s Center for Comparative Studies in Race and Ethnicity.

“Jeff shows a combination of compassion and great insight for national and global challenges, combined with well-honed skills at putting resources to work effectively,” says Stanford’s provost, John Etchemendy. “What better combination is there for a foundation like Gates?”

Mr. Raikes initially planned to pursue a career in agricultural policy, but he got into computing at Stanford. He worked briefly at Apple Computer before he was recruited to Microsoft.

His appointment to lead the Gates foundation continues a trend in which charities and foundations are turning to the corporate world for new leaders. In January, Luis A. Ubiñas, a director at McKinsey and Company, became president of the Ford Foundation. In April, the Red Cross named Gail J. McGovern, who has held top management positions at AT&T Corporation and Fidelity Investments, as its new president. Just a few days before Mr. Raikes’s appointment was announced, the Nature Conservancy named Mark R. Tercek, a managing director at the investment firm Goldman Sachs and head of the firm’s Center for Environmental Markets, to serve as leader.

The trend has led some to wonder why current executives at nonprofit groups and foundations are being overlooked. Robert B. Reich, U.S. secretary of labor in the Clinton administration, said a good corporate manager can transfer his or her skills to the nonprofit world, but “all other things being equal, it would be better to find someone from the not-for-profit or philanthropic sectors.”

“A philanthropy is not only or even mainly selling a brand or product,” said Mr. Reich, the author of Supercapitalism: The Transformation of Business, Democracy, and Everyday Life, which argues that capitalism and democracy should be separated. “Leading a foundation or nonprofit is about gaining expertise, depth, and knowledge in a particular set of areas in which a society or the planet needs help.”

$37-Billion in Assets

The Gates foundation, which has a $37.3-billion endowment, has been the world’s largest foundation for many years. It doubled its grant-making capacity after Warren E. Buffett, the billionaire investor who heads Berkshire Hathaway, pledged the bulk of his fortune to the foundation in 2006.

Mr. Raikes has known Mr. Buffett, a fellow Nebraska native, since 1991 and sees him a few times each year. Mr. Buffett, who is one of the foundation’s three trustees, along with Bill and Melinda Gates, was not involved in the hiring process.

In an interview, Mr. Raikes said he sought out Mr. Buffett’s advice when he was considering applying for the position.

Mr. Buffett told him that investing to achieve a return through philanthropy is more complicated than in the business world, Mr. Raikes says. In his investing, Mr. Buffett favors low-risk propositions, especially simple and established businesses, with a sustainable competitive advantage, like a strong brand.

“He has a fairly clear measuring stick and gets near-term feedback, whereas with the Gates foundation, you’re really investing to make substantial changes, but ones that will take place over long periods of time,” Mr. Raikes said.

Mr. Raikes noted that even in his business career, he was comfortable with this higher-risk approach. In 1987, he urged Microsoft to purchase a company whose technology became PowerPoint — now an integral part of the Office software — when business people were still using overhead projectors.

“My experience is different than Warren’s,” Mr. Raikes said. “I’m probably a little more comfortable with aspects of long-term development.”

Outside Advice

Despite the increasing flow of funds to the Gates foundation, Mr. Raikes said he doesn’t intend to push for an expansion into entirely new areas. “The foundation has done a terrific job in getting focused in one of the three program areas,” he said. “We’ll continue that focus.”

Critics have charged that the foundation’s wealth and influence may inadvertently hurt the causes the foundation supports. In March, a senior official at the World Health Organization said that the foundation operates like a scientific “cartel,” hampering the fight against malaria.

A Gates foundation official responded that the foundation meets regularly with others, including the World Health Organization, to discuss strategy.

Mr. Raikes said he will continue the foundation’s existing practice of recruiting strong outside leaders to serve on advisory panels.

Ms. Stonesifer began helping the Gateses with their philanthropy in 1997, in a rented office above a pizza parlor. She announced that she was stepping down in February, although she will continue to work at the organization, overseeing an as-yet-undefined grant-making project.

Mr. Raikes will probably work even more closely with Bill and Melinda Gates than Ms. Stonesifer did.

In September, after giving up most of his day-to-day responsibilities at Microsoft, Bill Gates will focus his attention on the foundation.

Melinda Gates now spends about half her time on foundation activities.

Ms. Gates said her husband will become more deeply involved in setting strategy for the foundation but that he will not meddle with Mr. Raikes’s leadership.

“He in no way wants to be involved in day-to-day leadership,” Ms. Gates said.