The central question that private bankers ask their clients is: “What does your money mean to you?” It’s a fundamental moral issue at all levels of wealth. Revealing answers range from the odious (controlling the lives of your family members) to the visionary (saving the world).
Eventually, bankers say, new wealth enjoys the luxury lifestyle for about five years before they start looking for some purpose in their lives.
New and old Asian wealth have confused and conflated the meaning of charity versus philanthropy, and the need to accomplish more with their vast assets. The best analogy is that charity is when you hand money to the Salvation Army in the street, who then decides how to distribute it. Philanthropy is when you stand in the street and decide by yourself who to hand money to.
Living with the obligations and responsibilities of wealth isn’t easy. Big money creates its own gravity, forcing their owners’ lives into an orbit. Gift giving as a form of charity is certainly commendable and flexible, allowing donors to shift the management of charity to established organisations.
But this concept is becoming inadequate, even corrupted, considering the super wealth being created by technology success. And charities are also becoming a source of potential abuse. (...)
Here’s a twist on the spirit of giving. In his recent Facebook post, Mark Zuckerberg said he intended to divest between 35 million and 75 million Facebook shares in the next 18 months to fund his charity. He currently holds 53 per cent of the voting stock. If he sold 35 million shares, his voting stake would be reduced to 50.6 per cent.
But, according to the Financial Times, if he sold 75 million shares, he would be dependent on the votes of co-founder Dustin Muskovitz to exercise control over a majority of votes. So Zuckerberg’s advisers cooked up a stock reclassification that effectively created a third non-voting class, that would have solved this problem. Objections and the threat of a lawsuit from investors stopped his plan.
Once the US$12 billion of proceeds from the stock sale is transferred to his foundation, all investment income is tax free. He only needs to donate 5 per cent of principal per year to charity. Most foundations and family investment offices of that magnitude can make investment returns more than 5 per cent per annum. So the principal in the foundation never, ever actually need to be disbursed for charity.
For many foundations, the present value of the tax subsidy to the tycoon personally far exceeds the net disbursement of the principal from the foundation on charity.
New technology wealth seems fixated on funding scalable charity projects with the same model as their companies. Or that which benefit their companies.
Unfortunately, many poverty alleviation projects can’t be scaled, such as finding clean water for poor villages in Africa. It would be more practical and noble if Zuckerberg would simply give away the US$12 billion, rather than playing games with tax planning.
Eventually, bankers say, new wealth enjoys the luxury lifestyle for about five years before they start looking for some purpose in their lives.
New and old Asian wealth have confused and conflated the meaning of charity versus philanthropy, and the need to accomplish more with their vast assets. The best analogy is that charity is when you hand money to the Salvation Army in the street, who then decides how to distribute it. Philanthropy is when you stand in the street and decide by yourself who to hand money to.Living with the obligations and responsibilities of wealth isn’t easy. Big money creates its own gravity, forcing their owners’ lives into an orbit. Gift giving as a form of charity is certainly commendable and flexible, allowing donors to shift the management of charity to established organisations.
But this concept is becoming inadequate, even corrupted, considering the super wealth being created by technology success. And charities are also becoming a source of potential abuse. (...)
Here’s a twist on the spirit of giving. In his recent Facebook post, Mark Zuckerberg said he intended to divest between 35 million and 75 million Facebook shares in the next 18 months to fund his charity. He currently holds 53 per cent of the voting stock. If he sold 35 million shares, his voting stake would be reduced to 50.6 per cent.
But, according to the Financial Times, if he sold 75 million shares, he would be dependent on the votes of co-founder Dustin Muskovitz to exercise control over a majority of votes. So Zuckerberg’s advisers cooked up a stock reclassification that effectively created a third non-voting class, that would have solved this problem. Objections and the threat of a lawsuit from investors stopped his plan.
Once the US$12 billion of proceeds from the stock sale is transferred to his foundation, all investment income is tax free. He only needs to donate 5 per cent of principal per year to charity. Most foundations and family investment offices of that magnitude can make investment returns more than 5 per cent per annum. So the principal in the foundation never, ever actually need to be disbursed for charity.
For many foundations, the present value of the tax subsidy to the tycoon personally far exceeds the net disbursement of the principal from the foundation on charity.
New technology wealth seems fixated on funding scalable charity projects with the same model as their companies. Or that which benefit their companies.
Unfortunately, many poverty alleviation projects can’t be scaled, such as finding clean water for poor villages in Africa. It would be more practical and noble if Zuckerberg would simply give away the US$12 billion, rather than playing games with tax planning.
by Peter Guy, South China Morning Post | Read more:
