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Thursday May 6th, 2021 11:39AM

Bill and Melinda Gates divorce could shake up philanthropy

By The Associated Press
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As much as Bill and Melinda Gates might want to keep their pending divorce private, the split between the billionaire co-founders of the world’s largest private foundation is sure to have very public consequences, with the breakup having already sent a wave of anxious uncertainty through the worlds of philanthropy and community health.

The Bill and Melinda Gates Foundation, with an endowment of nearly $50 billion, donates about $5 billion annually to causes around the world. Last year, it donated $1 billion to combat COVID-19 through the administering of vaccines.

In a statement after the Gateses’ announced their divorce on Twitter, the foundation said the two would remain co-chairs and trustees and that no changes in the organization were planned.

“They will continue to work together to shape and approve foundation strategies, advocate for the foundation’s issues and set the organization’s overall direction,” the foundation said.

Despite such assurances, some say they worry that the split could shake up the foundation’s plans. According to a filing in King County Superior Court Monday, the Gateses had no prenuptial agreement but have signed a separation contract.

The couple pledged in 2010 to donate the vast bulk of their fortune — estimated by Forbes at around $133 billion — to the foundation . Divorce attorneys say the committed money would no longer be considered marital property. Yet it remains unclear how the divorce might affect future donations to the foundation.

“There’s no precedent for this, for what the Gateses represent both in their wealth and their status,” said Benjamin Soskis, a historian of philanthropy and a senior researcher at the Urban Institute. “Even more importantly, this reflects this new era that we're in which these engaged living donors really dominate the landscape in a way they haven’t for a century.”

Through their philanthropic efforts, the Gateses reshaped attitudes about the obligation of the uber-wealthy to leverage their vast fortunes for the public good in enduring ways. Years ago, they created the Giving Pledge, along with Warren Buffett, to persuade their fellow multi-billionaires to commit to give away the majority of their wealth.

Linsey McGoey, author of “No Such Thing as a Free Gift: The Gates Foundation and the Price of Philanthropy,” suggested that the philanthropy world is most likely concerned about the divorce in part because past such marital breakups have sometimes caused disruptive changes at foundations.

When the British hedge fund billionaire Chris Hohn and his wife, Jamie Cooper, divorced in 2013, it resulted in management problems at their charity, the Children’s Investment Fund Foundation. The breakup also triggered a prolonged legal fight over whether another member of the fund should vote to approve a $360 million grant to a new charity founded by Cooper. The United Kingdom’s Supreme Court eventually ruled last year that the money should be given to Cooper’s initiative, Big Win Philanthropy.

“People do fear that when a divorce like this happens, it can really emphasize the volatility surrounding private giving and the fact that private giving is so contingent on the whims of a couple,” McGoey said. “The fact that we don’t really know the long term ramifications of this divorce on the foundation just highlights the fact that we are too reliant as a society on the whims of wealthy people when it comes to voluntarily distributing their excess wealth.”

At the same time, some experts note that for years the Gateses, who were married in Hawaii on New Year's Day 1994, have each pursued their own interests within the foundation as well as their own separate investment funds. Since 2008, Bill Gates has had Gates Ventures. And, in 2015, Melinda Gates founded Pivotal Ventures, which focuses on helping women and families in the United States.

“In a sense, they’ve decoupled already,” Soskis said. “They have emerged as two distinct individuals with distinct approaches and focus areas already. And in some sense that might make the divorce easier in an institutional setting because they already have the distinct lines.”

One definite change, though, is that when Bill and Melinda Gates tackled an issue together as philanthropy’s ultimate power couple people naturally paid it significant attention. Especially in recent years, Soskis said, Melinda Gates’ impact on the foundation could be seen in its approach to education funding and gender equity issues.

“She’s done this not only behind closed doors but by being somebody who kind of tempers Bill Gates,” Soskis said. “It was actually a part of her public personality, her public identity and we all could see it sort of happening.”

A dominant player in development and global health, the foundation wields outsize influence as the largest private donor to the World Health Organization. That’s why recent comments from Bill Gates about protecting intellectual rights for coronavirus vaccine manufacturers upset some global health experts. Gates has come out against sharing the intellectual patents for the COVID-19 vaccines, arguing that the manufacturing process for the shots needs scrutiny. Some critics faulted his sentiments as favoring profits over supply.

“It was a crushing disappointment to hear that,” said Lawrence O. Gostin, a professor of global health law at Georgetown University. “It’s not just a side issue; it’s the most consequential issue facing the world today.”

Because the foundation has been a long-established entity with a large professional staff, experts say any changes that might happen because of the divorce would likely be incremental and happen over an extended period.

A shakeup, McGoey argues, could even be beneficial for a foundation that is managed by three trustees: the Gates and Buffett. She suggested that “having an organization so tightly run by a small group of people is not necessarily good for creating a diversity of ideas, and for ensuring that different ideological perspectives are widely represented.”

Though questions have circulated about how the divorce might affect the couple’s pledge to donate a majority of their wealth to the foundation, Susan Moss, a New York-based divorce attorney who has worked with high net-worth clients, says that shouldn’t be a concern.

With philanthropic commitments, Moss says, there’s usually a three-pronged test to determine how it’s going to play out in divorce proceedings.

“Both spouses need to know about it, both spouses need to agree and the commitment needs to have happened prior, and not on the heels of the divorce,” she said. “All three prongs have been met in this case.”

“The money that has been committed to the foundation will stay going to the foundation,” she added. It “likely will not be held up because there is so much evidence that each party knew, each party agreed and it’s not on the heels of a divorce.”

___

The Associated Press receives support from the Lilly Endowment for coverage of philanthropy and nonprofits. The AP is solely responsible for all content.

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