FOUNDATION WILL HELP FOR-PROFIT EFFORTS AS WELL AS NON-PROFITS
Wednesday, October 12, 2005
When Google went public more than a year ago, founders Larry Page and Sergey Brin promised to use 1 percent of the company’s equity and profits to create a philanthropic organization that could “eclipse Google itself in terms of overall world impact.’’
Now the company is starting to make good on this promise.
Over the next 20 years, Google will spend money equivalent to 3 million shares of its stock — about 1 percent of the number of shares it had when it went public — on Google.org, an organization that will fund the company’s philanthropic activities. The amount of money will rise and fall with the stock price, but at today’s price comes to more than $900 million, said Sheryl Sandberg, vice president of global online sales and operations for Google. There is no fixed schedule for the donations.
Google will also donate 1 percent of its annual profits, which would have meant about a $4 million donation in 2004.
Several aspects of Google’s giving plans stand out, experts said. First, it is creating a foundation with $90 million in assets. This ranks in the middle of the top 50 corporate foundations in the country, alongside the foundations of much older and larger companies. Second, its giving will not go exclusively through a traditional foundation: Google.org will also fund for-profit enterprises. And finally, Google has chosen to focus its giving on world poverty and the environment, an unusual move in the world of corporate philanthropy, which usually picks safer causes such as education.
“You talk about a big, hairy, audacious goal: to end global poverty,’’ said Peter Hero, president of Community Foundation Silicon Valley. “But good for them.’’
The overall amount that Google plans to spend won’t put it at the top of the nation’s corporate giving ranks. Many large companies donate more than $100 million a year, said Fran Eaton, managing director for corporate grant-making services at the Council on Foundations.
If Google gives $900 million over 20 years, it would average $45 million a year. Google’s plan to give away 1 percent of its profits puts it in line with the national average for corporate donations.
Even the largest corporate foundations are dwarfed by private foundations: The Gates Foundation had $27 billion in assets in 2004. Locally, the Hewlett Foundation had $6.4 billion and the Packard Foundation had $5.3 billion.
Still, Google has set its sights high.
“We will consider ourselves successful if we can look back and see a real impact we’ve had in solving some of the world’s largest problems,’’ Sandberg said.
The Google Foundation, which will be one piece of Google.org, has already made several commitments of money, including about $500,000 to a group of professors from Harvard and the University of California-Berkeley to study the best way to create a clean water supply in rural Kenya.
“They’re taking the approach of, `Let’s spend a little bit of money to figure out what would be the best way to spend a lot more money,’ ’’ said Alix Zwane, a faculty member in Berkeley’s Department of Agriculture and Resource Economics.
Not all companies use foundations for their charitable giving. In fact, most don’t, largely because of the extra paperwork a foundation requires. But foundations can be useful for companies that want to make donations overseas, Eaton said, or to ensure that the company can make donations even when its profits are down.
The Google Foundation is comparable in size to the Cisco Systems Foundation, which had $102 million in assets in 2004, and the Intel Foundation, which had $84 million in 2003. The eBay Foundation, which was founded with more than 100,000 shares of stock before its initial public offering, has about $30 million in assets today and has given away more than $8 million since it was founded in 1998.
Google plans to spend even more money — up to $175 million in the next three years — outside its foundation, Sandberg said. It will run its own programs and give money to groups that the foundation might be restricted from supporting, such as for-profit businesses.
Google is not the first group to fund both non-profits and for-profit groups to achieve its goal. The Omidyar Network, founded by eBay Chairman Pierre Omidyar and his wife, Pam, is an umbrella group that includes a charitable foundation but can also invest in for-profit businesses. Jeff Skoll, eBay’s former president, has used both a non-profit foundation and a for-profit media company to advance his goal of ending the gap between the haves and have-nots.
Still, it’s new territory, especially for a corporate foundation.
“I think we’re seeing somewhat of a blurring between the non-profit and the for-profit sectors,’’ Hero said.
The new blend has both potential and risk, he said.
“However these funds are used, they need to carry a charitable purpose and intent and result. Balancing that with a corporation’s need for profitability and a return to shareholders is just going to take some figuring out.’’