The philanthropy of the super-rich
Many of the world’s super-rich elite, whose assets are so enormous that they have money to spare even after funding a lifetime’s lavish lifestyle of mansions, fancy food and luxury travel, are active supporters of charitable causes. Why?
Who are the super-rich?
Whilst there is no clear definition of “super-rich”, this elite is broadly divided into two groups: heads of state and their families; and ultra-successful businesspeople, who have founded, or run, huge companies.
There is little publicly available information about the finances of the first group, but considerable assets are surely in the hands of the royal/heads of state families of oil-rich nations such as Saudi Arabia, UAE, Qatar and Kuwait, and European kingdoms such as the UK, the Netherlands and Monaco.
For the latter group, we can use published corporate and tax authority data to estimate their wealth. US company Forbes publishes an annual rich list, and the top ten entries for 2017 are as follows:
1: Bill Gates (US): total assets US$86.0bn Co-founder of Microsoft, developer of Windows and other software. Now runs charitable organisation the Bill & Melinda Gates Foundation. Age: 61.
2: Warren Buffet (US): total assets US$75.6bn Chairman and CEO of asset management company Berkshire Hathaway, noted for his pearls of wisdom, such as that investors should buy the business, not the stock. Age: 86
3: Jeff Bezos (US): total assets US$72.8bn CEO of Internet giant Amazon. Expanding his business domain through moves such as buying the Washington Post newspaper and investing in aerospace development. Age: 53
4: Amancio Ortega (Spain): total assets US$71.3bn Founder of Inditex, parent company of fashion chain Zara. Age: 80
5: Mark Zuckerberg (US): total assets US$56.0bn CEO of Facebook. Topped the list of Forbes’ Youngest Billionaires in the World 2010. Age: 32
6: Carlos Slim Helu (Mexico): total assets US$54.5bn Controls America Movil, Latin America’s largest mobile telecoms company. Age: 77
7: Larry Ellison (US): total assets US$52.2bn Chairman of database and other business software developer Oracle. Age: 72
8: Charles Koch (US): total assets US$48.3bn CEO of Koch Industries, which has built out from the original oil refinery business to include materials, energy and financial businesses. Age: 81
9: David Koch (US): total assets US$48.3bn Brother of Charles Koch and vice president of Koch Industries. Age: 76
10: Michael Bloomberg (US): total assets US$47.5bn Founder of financial and economic information and media company Bloomberg. 108th mayor of New York. Age: 75
The two reasons why the super-rich engage in charitable activity
There are two main reasons why the super-rich engage in charitable activity. One is the feeling of self-worth and social significance that comes from philanthropy. The other is tax avoidance.
Charitable activity involves conducting business with no thought of profitability. It involves not only giving an array of bursaries and scholarships, but also providing targeted financial support in specific areas. Unlike politicians and civil servants, philanthropists do not need to give fair and equal consideration to the full cross-section of society, but can focus on only those areas they particularly wish to support (grow).
Bill Gates, the world’s richest man, established a foundation, the Bill & Melinda Gates Foundation, to further his charitable work, guided by the belief that “every life has equal value”, and promotes a wide range of charitable endeavours in areas such as health and medicine, environmental protection, agriculture and education. Warren Buffet supports the work of the Foundation with generous donations.
Engaging in charitable activity offers tax advantages. In Japan, only donations to national and regional public sector organisations and charitable corporations are deductible from taxable income, but the practice of offsetting charitable donations against tax is more widely allowed in the West. Consequently, some wealthy individuals make charitable donations at least partly for tax avoidance purposes. In the West, where income tax rates are lower than in Japan and tax avoidance schemes more advanced, people may be motivated by a preference for making their own voluntary contribution to society over paying tax.
Whatever their motivation may be, it is surely desirable that the super-rich think not only of boosting their own personal wealth but also of contributing to the welfare of society as a whole.