Penny Abeywardena

Head Behind the Headlines

Compassionate Capitalism?

Google's latest venture is dubbed by some as "capitalism with a heart." And it's causing somewhat of a sensation in the media- a lead story in the New York Times ended up on the "most emailed list" top five for about a week, and coverage is abundant within the financial and philanthropic circles.

"We hope that someday this institution will eclipse Google itself in overall world impact by ambitiously applying innovation and significant resources to the largest of the world's problems," and with these words they are turning corporate philanthropy on its head.

So what exactly is Google up to? The founders announced that they will develop a nearly $1 billion charity venture under Google.org and the Google Foundation. Unlike traditional corporate philanthropy, which John Tierney best describes as, "Tycoons (who) have traditionally discovered their inner saint only after exorcising the inner capitalist. (Meaning that) Carnegie, Ford and Gates made their money and then gave it away." Google has instead decided to create a charitable venture, very early on in their company's lifetime (six years as compared to Microsoft's 25 years). Their charity will be completely funded by company profits and most importantly, they will be trying to make a profit at the same time they are trying to change the world.

Whether this new space Google is carving in corporate philanthropy is good or bad has yet to be seen. They've hired Dr. Larry Brilliant (seriously, it's Brilliant), who is an extraordinarily accomplished physician, public health expert and Silicon Valley entrepreneur. He defends the Google venture by likening "the traditional structure of corporate foundations to a musician confined to playing only the high register on a piano." He tells the NYT that "Google.org can play on the entire keyboard. It can start companies, build industries, pay consultants, lobby, give money to individuals and make a profit."

Google has also committed to rapid disbursement of the $1 billion. This is commendable in a time when some private foundations whine over the 5% they are required by law to disburse annually. According to Brilliant, Google plans to spend out the entirety of their funds in 20 years and will disperse $175 million in the next two years.

Regarding the profit talk, which has been an emphasis of the coverage, Google has gone out of their way to dismiss the importance of making their capital back. Rather they put the emphasis on the flexibility of their scheme that allows them to "invest" in charitable opportunities that are otherwise restricted to traditional 501(c)3s. Google.org declares a lofty mission of judging success on "social returns, not economic returns."

Critics have also clearly weighed in by pointing out the number of limitations with their venture structure. "What happens when there is a sort of economic depression? The board of directors and shareholders of Google ultimately have the power to recall the money. Won't they ask for Google.org to release their funds to "shore" up the company financially?" Judging by past experience this scenario is more than likely and is definitely a reality they will have to contend with. Folks are also pointing out the reluctance of the founders for not tapping into their combined personal wealth of $22 billion.

Also, Google talks about "no desire to reinvent the wheel" and the promise that just because Google is a high-tech company "that does not mean that Google.org will be throwing around high-tech solutions." Can we trust them? Only time will tell but I guess they get credit for going on the record with, "why would we put Wi-Fi in a place where what they needs is food and clean water?" Why indeed.

All we do know is that this philanthropic world is far from perfect. One of Google's non-traditional corporate philanthropic peers, John Mackey, co-founder of Whole Foods and environmentalist is on record with saying, "Corporations are lifting billions of people out of poverty...why are they so hated." Oh boy...

Please stay tuned.

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Posted at 6:00 AM, Sep 28, 2006 in The Head Behind the Headlines
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