Bill Gates’ Good ExamplePhilanthropy Daily

Bill Gates has made two important announcements about his eponymous foundation—but one has drawn more attention than the other. The news that the Gates Foundation will sharply step up its giving to make $200 billion in new grants over the next twenty years has inevitably overshadowed that of his plans for the foundation itself—but it should not. Gates announced that the foundation will not only spend more of its wealth but that it will, in 2045, wind down its operations—or, in the jargon of philanthropy, “sunset.”

Many other foundations have chosen to do the same, notably including Atlantic Philanthropies, whose long anonymous benefactor, Chuck Feeney, Gates name-checked in his announcement about his preference of “giving while living.” But no other foundation remotely on the scale of Gates, by far the world’s largest, has made the decision to close its doors. Gates is generally thought of as left-liberal in its leanings—for instance, because of its support for the Common Core curriculum during the George W. Bush era—but the sunsetting decision puts it in the company of some of the best-known right-of-center foundations, including John Olin and William E. Simon.

Gates sunsetting means, of course, that more funds will be directed more quickly to the causes about which Gates cares most—especially improving the health of children in developing countries. That matters as governments, under their own fiscal stress, are pulling back. That has led to Gates’ decision being framed in the context of compensating for the Trump Administration’s decision to shutter the US Agency for International Development and other reductions in so-called foreign aid. Gates himself has made clear he disagrees with those decisions.

But just as important is the example Gates is setting for other large foundations: that continuing to operate in perpetuity is not the only or possibly best choice. This choice contrasts with some of the best-known and largest foundations, including Ford, Kellogg and Carnegie. 

The best-known reason for “sunsetting” is its link to “donor intent.” Once the original donor dies, their priorities will, it’s argued, inevitably be interpreted differently by those who take charge of the grant making. Henry Ford II famously made this point when he resigned from the board of the Ford Foundation, saying it had turned against the system (capitalism) that had produced its wealth. As he put it:

“I’m not playing the role of the hardheaded tycoon who thinks all philanthropoids are socialists and all university professors are Communists. I’m just suggesting to the trustees and the staff that the system that makes the foundation possible very probably is worth preserving.

“Perhaps it is time for the trustees and staff to examine the question of our obligations to our economic system and to consider how the foundation, as one of the system’s most prominent offspring, might act most wisely to strengthen and improve its progenitor.”

The MacArthur Foundation, similarly left-liberal to Gates, contrasts in its giving with the worldview of its original benefactor, John MacArthur, a major supporter of Richard Nixon.

More broadly, however, foundations that continue in perpetuity evolve to be directed by a professional staff: “philanthropies” who likely have their own pet causes and careers to consider. “Giving while living” sharply increases the likelihood that the original donor will continue to direct grantmaking priorities (Gates himself, age 70, could well live until his foundation sunsets) and that a self-perpetuating board and its chosen staff will not replace him.

This brings us to a larger contribution Gates has made: ensuring the legitimacy of philanthropic foundations. Large concentrations of wealth, directed outside the government, have, historically, co-existed uneasily in American democratic society. Indeed, Congress questioned the motives and legitimacy of the first major foundation, that of John D. Rockefeller, at the time of its founding. Notably, Rockefeller, like Gates, suggested that foundations direct their giving to science and medicine, and avoid political causes. In recent years, foundations from Ford to Open Society have moved toward political advocacy—and prompted backlash, including from JD Vance, who has called major left-liberal foundations a “cancer” whose assets should be appropriated.

That is not a far-fetched possibility: at a time when Congress is considering raising the excise tax on major university endowments, it could well consider doing the same for major foundation endowments—which have grown substantially during the last decade’s bull market. Indeed, setting that tax high enough could, de facto, ensure sunsetting.

Those who would push back against Vance and other critics must do more than defend the status quo. It is difficult to defend the legitimacy of foundations whose giving is directed by professional staff with no connection to their sources of wealth. For those who want the risk-taking and innovation-directed grantmaking of foundations to continue, democratic legitimacy cannot be taken for granted. Bill Gates has taken a step to guard it.