Tue, 20 Aug, 2019

The Reality Behind Zuckerber's $45 Billion Donation

By Bimal Gaire

Photo Courtesy: DWIT News

On December 1, 2015, Mark Zuckerberg, the Founder, Chairman and CEO of Facebook soared through the internet with his statement about donating 99% of his Facebook shares to charity. It was announced shortly after the birth of his baby daughter, Max with wife Priscilla Chan.

It has been said that the sum will not be diretly given to any charity but through the Chan Zuckerberg Initiative. The current worth of the shares in question is about 45 Billion USD. After the announcement of the donation, the couple said they set up the initiative with the mission to "advance human potential and promote equality in areas such as health, education, scientific research and energy."

Following the announcement, Zuckerberg got a lot of media attention and praise by many people. Warren Buffet went on to describe Zuckerberg as a phenomenal personality and said, "Thirty is the new Seventy when it comes to charity and donation". But after he got a windfall of positive publicity, people started to question the inner motive behind such a huge donation. Critics started to dig deep and raise questions about where the money would eventually go.

The Initiative is licensed under LLC, Limited Liability Company, rather than a nonprofit organization. And the controversy has erupted ever since. Critics are saying that Zuckerberg is not giving away 99% of his Facebook shares. He is just transferring his wealth to an LLC which he controls.This will eventually minimize his taxes over the years and give him far more benefits. The donation has been publicized as a simplistic donation of 45 billion USD. The truth about the matter is less known to the public. People are running crazy with the news as if the world is on fire. There is something more to understand to this matter. A little bit of politics and corporate orders should be put into consideration.

Addressing the concerns, Zuckerberg wrote on his Facebook Post, "The Chan Zuckerberg Initiative is structured as LLC rather than a traditional foundation. This enables us to pursue our mission by funding nonprofit organizations, making private investments and participating in policy debates--in each case with the areas of great need. He also wrote, "Any net profits from investments will also be used to advance this mission."

Zuckerberg has denied that he will get any tax benefit from transferring his shares to the Initiative. He noted that incited of this had he donated the money to a traditional non profit foundation, he would have gotten an immediate tax benefit.

One thing is clear, this is not a simplistic charity effort. Zuckerberg may end up giving some money to the charity but his goals are not strictly limited to charity. Bigger things are at stakes. Unlike a charitable trust, which is required to spend its money in charity,The Chan Zuckerberg Initiative will be able to invest the money on whatever they please. The money can also be used for private profit generating investments. Charity is certainly a destination for the money to reside but  it's not the only one.

Ultimately Zuckerberg will get huge tax benefits and will be able to give up his stocks while holding the power of his company. We can only hope he will at least do something for the society.