Philanthropy Takes Root in Israel

Social programs begin to receive private support in organized way

The road to Galileo Technology winds up from an Arab village over a Galilean hill, past the spacious red-roofed villas built by young Israelis in search of open spaces and inexpensive real estate. The semiconductor-design

company’s three buildings — one in use, two in the final stages of construction — pop up unexpectedly around a turn at the top of the hill. Here is an icon of the new Israel: high-end, high-earning, and high tech.

But Galileo also wants its employees to be high giving. At the instigation of its founder and chief executive, Avigdor Willenz, the company has set up an employee-controlled fund that contributes 1 percent of the company’s profits to local charities, currently about $200,000 a year. In addition, Mr. Willenz and his wife, Adina Even-Zohar, have set up a private family foundation, the Galileo Foundation, that began awarding grants a few months ago.

Mr. Willenz, Ms. Even-Zohar, and Galileo Technology exemplify the new face of Israeli philanthropy. In a country with a long tradition of being on the receiving end of giving, newly rich business executives and entrepreneurs are slowly deciding that they have a responsibility to commit some of their wealth to improving their society.

There is no lack of programs to finance. Israel has one of the world’s largest nonprofit sectors, thanks in part to the government’s withdrawal from the direct provision of many social services during the past two decades. That policy has created a vacuum that has been filled by nonprofit organizations.

Furthermore, concerned citizens have in recent years formed organizations to act in areas long neglected by the government. Organizations in one such area, that of promoting coexistence and understanding between Jews and Palestinians, will be playing a critical role in the coming months in trying to heal the wounds created by the current round of violence between the two peoples.

The idea that private citizens, especially affluent ones, ought to contribute money to nonprofit organizations that operate social-welfare programs is a new one to many Israelis. While Israelis are donors — 77 percent of the adult population made a charitable gift in 1997, according to a recent report published by the Israeli Center for Third Sector Research of Ben-Gurion University of the Negev — the donations are mostly small ones, with 60 percent of donors giving less than 0.5 percent of their income to charities of all kinds, including religious ones.

In any case, the high percentage of donors is misleading, says David Roth, executive director of the Yoreinu Foundation, an American foundation set up by Mr. Roth’s family that awards many grants in Israel.

“The attitude behind the giving is different,” he says. “Israelis have long felt that the government will take care of these things. Americans, in contrast, have had to do things themselves, and they’ve developed this tremendous concept of responsibility.”

Mr. Roth makes a distinction between charity and involved philanthropy. The average Israeli will not turn down a door-to-door fund raiser or a telephone solicitation for the local cancer society or for handicapped children, for example. But, he says, Israelis don’t have a tradition of active giving, in which donors develop a sense of partnership with nonprofit organizations.

Changing Views

In previous decades, Israeli nonprofit organizations looked primarily to the government and to Jews overseas for financial support. Jews in the United States and elsewhere primarily gave to organizations like the United Jewish Appeal, which channeled the money to Israeli hospitals, schools, and other charities.

During its early decades Israel had only a small class of wealthy business leaders, and they, like their counterparts abroad, generally preferred giving not for programs but for buildings or equipment that could bear a plaque with their names on it. Furthermore, the socialist government of those years saw social welfare as its own turf and had little interest in organizations that operated without its financial support and direction.

That system began to change in the late 1970’s.

A new generation of Jews outside of Israel was less and less willing to give money blindly, trusting the U.J.A. and its representatives in Israel to use the money as they saw fit. Donors wanted to know where their money was going, and many of them had their own agendas to pursue: the encouragement of democracy and religious pluralism, for example, or inter-ethnic and Jewish-Arab cooperation, or women’s rights.

Moreover, Israeli governments began imposing stricter fiscal discipline on themselves during the 1980’s and 1990’s in an effort to fight the country’s high inflation rate and to encourage foreign investment. The state started to withdraw from providing a whole range of educational and social services it had once considered its sole province, and began not only tolerating nonprofit players but actually encouraging them to take over those tasks.

Then strong economic growth in the 1990’s, and in particular the blossoming of Israel’s high-tech industry, produced both a thriving upper-middle class and a coterie of newly wealthy entrepreneurs. It also sharply increased the gap between the country’s rich and poor. The combination of wealth and a growing awareness that there are important problems that the government is not dealing with is slowly leading the high-tech elite to determine that their money brings responsibility.

“It’s still very much at the beginning,” declares Eliezer Ya’ari, executive director in Israel for the New Israel Fund, which supports programs that promote Israeli democracy, pluralism, and civil rights. “Before, there was almost no corporate giving. But suddenly there’s new money, born out of high tech, that is coming in.” Just a few years ago, Mr. Ya’ari says, his organization was receiving nearly all its money from overseas. This year he expects local donations to bring in $2-million to $3-million.

‘Had to Be Done’

Mr. Willenz at Galileo Technology is another case in point.

“He just felt that this was a thing that had to be done,” recalls Ms. Even-Zohar, speaking of her husband’s decision to set up the employee-controlled philanthropic fund. “The company has brought a lot of welfare to its workers, but society has to benefit as well. Our welfare is tied to the welfare of the country.”

Ms. Even-Zohar says a sign of how important the fund has become is that when her husband’s company was recently purchased by Marvell Technology Group, a Sunnyvale, Calif., company, in a $1.9-billion deal, a key concern raised by employees was whether charitable giving would stay in place. She says it is expected to continue, especially because her husband is staying on as chief executive.

The 1 percent of profit that goes to philanthropy comes out of the employee profit-sharing program — a move that was designed to help employees see the importance of making charitable giving a part of everyday life.

The money is allocated by a small committee headed by Ms. Even-Zohar, a social worker who, like most of the committee’s other members, is married to an employee but is not an employee herself. Employees can serve on the committee, but many find they don’t have time for site visits and other essential aspects of grant making, so they tend to ask their spouses to get involved in the decision-making process.

The fund, now in its third year of operation, has supported educational, vocational-training, and youth projects. Grants average about $10,000, says Ms. Even-Zohar.

Ms. Even-Zohar and Mr. Willenz have also set up their own family foundation. Initially, it is making grants totaling between $200,000 and $300,000 a year, Ms. Even-Zohar says, but eventually it will give away much more.

Tax Break

Mr. Willenz was among a group of business executives and public figures who met with Israel’s finance minister, Avraham Shochat, in July to press him to offer a bigger tax break for charitable donations.

In response, Mr. Shochat announced that he would raise the ceiling on deductible charitable donations from $120,000 to $500,000 a year. While that pleased nonprofit leaders, observers note that the tax incentive for philanthropy in Israel still remains much smaller than it is in the United States. Not only is there a ceiling on the amount that can be deducted, but the sum of one’s donations is not subtracted from one’s taxable income. Instead, the donor’s tax bill is reduced by 35 percent of the donations he made. (The top marginal income-tax rate is 50 percent.)

“In my opinion, the ceiling should be eliminated entirely,” says Dov Lautman, chairman of the board of Delta, an Israeli clothing manufacturer. Mr. Lautman, who was among those who met with Mr. Shochat, thinks that a bigger tax incentive will encourage donations.

“It’s also important psychologically,” he observes. “It says that the government is expecting people to give more.”

Mr. Lautman sees education as a top priority. “People understand that the social gap is not healthy, and the way to close it is education,” he says. “There’s a consensus that this is an area that has to be given top priority. The business community has to do its part both with money and in certain cases with actually working in the field.”

The idea that business should be giving money for social and educational projects is just beginning to catch on among Israeli entrepreneurs, Mr. Lautman says, but he adds that he has heard of several initiatives in different companies and thinks the future looks bright. “A very important process has begun,” he says.

No one is sure, however, if the tax breaks to individuals will make a difference.

Most well-off people, says Ms. Even-Zohar, are not giving enough to take full advantage of the current tax break, so she is not certain that they will jump at the opportunity to get a larger tax benefit.

Training Donors

She and others say that Israelis not only need to be made more conscious of the need to give, they also need to be taught how to give. Her three years of leading the employee fund have shown her that choosing projects and organizations to support is no easy task.

Mr. Roth and the Yoreinu Foundation have made the encouragement and education of local Israeli philanthropists one of their program goals.

Mr. Roth, who leads the Funding in Israel working group of the Jewish Funders Network, says he thinks it is vital to get Israeli and overseas foundations communicating and working together. Well-intentioned Israelis don’t do as much good as they might because of a lack of information, he notes. For example, people with money and a goal in mind will often set up their own small nonprofit organization rather than seek out and support organizations that are already working in the field.

Ms. Even-Zohar thinks that her and her husband’s family foundation can serve as a way to get more Israeli donors involved and educated in local giving. Unlike most family foundations, the Galileo Foundation will not simply distribute the earnings on its family-provided endowment. Ms. Even-Zohar plans to solicit money from other successful Israeli high-tech entrepreneurs as well.

“A lot of people are doing well and want to give,” she observes. “But when you give big sums of money you want to know that you’re giving it to a place that has some control, that you’re not just throwing it away. I think if we can come to people and say we have this foundation and we’re running it professionally and these are the programs that we’re funding, I’m sure a lot of people will say, we’ll give the money to you.”