Monday, January 22, 2007

More About Bill & Melinda Gates Foundation's Corporate Investing Practices

One last thought on the news that the Bill & Melinda Gates Foundation has invested in businesses that may practice poor ethics...even poor ethics in conflict with the Foundation's own mission and values...

Last week, on the Public Broadcasting Channel's "Charlie Rose Show", Mr. Rose interviewed Starbucks Chairman, Howard Schultz. Interestingly, the imagination behind one of the largest corporations in the Pacific Northwest, stands firm on available health care. I say 'interestingly' because arguably he faces the same dilemmas that the Bill & Melinda Gates Foundation faces. In the case of the foundation, it wants to maintain its charitable works so assets must be grown, but, where does it stand in growing its assets, given its goals in our community?

Schultz was not speaking of any philanthropic work, per se, nor was he speaking on behalf of a donation, or a foundation. He, personally, worries about the American worker and the future of health care in this country. He grew up in the projects in Brooklyn and watched his family struggle when his father injured his ankle, could not work, and lost his health insurance. Schultz explains that his and his father's experience led to his forming a company that offers health insurance and stock options, even to employees who work a minimum of 20 hours per week. In the US, of course, part time employees usually receive no benefits; let alone health insurance. Starbucks is a leader in this concept.

Schultz built social responsibility into his corporate business plan when he grew the world's largest coffee retailer. He's doing ok, financially, too. To be fair, he did explain in his interview with Charlie Rose, that the reason that Starbucks had to increase its retail prices this year is because of the high cost of health insurance. So, we'll watch, and see what investing in social responsibility winds up doing to the business of this major international employer.

The issue that the Bill & Melinda Gates Foundation has been linked to is not unique to their foundation. It's not unique to any investor.

There is an interesting counter point to this dilemma which was raised in the January 14 2007 The Seattle Times article "Gates Foundation Faces Multi-Billion Dollar Dilemma" by Kristi Heim at

At the end of the article, the Aldus Corporation's founder Paul Brainerd, also a Seattle based philanthropist like the Gates Foundation, empathizes with them and their recent press. He makes the point that when he began investing his wealth, he too faced the same issue; 'how do I both manage investments AND know that the investments aren't harming our community or world?'

"He soon realized his money would be much more effective by "managing both sides of the equation," he said." the article states of Brainerd.

He is paraphrased as saying that he now works with his investments manager to effect ethical change when businesses he invests in harms the environment (his pet cause). The article ends with Brainerd stating that it's not a perfect solution to the issue raised by the LA Times about the Gates Foundation - but it's a step.

I think these are interesting times; we will see more of the same issue come up, I think, especially since investors are becoming more savvy in having to be more responsible (i.e. Sarbanes Oxley Act); investors such as individuals, corporations, and foundations.

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