From fake corporate responsibility to fake philanthropy

Mark Zuckerberg inspired collective media fawning last year when he announced that he was ‘giving away’ 99 percent of his fortune to charitable enterprises. Oh, the humanity! A man with massive profits and capital from a savvy, sharp entry into the tech economy was willing to give it all away for the good of the people! Hooray! However, it quickly emerged that the story was more complicated than that, and the specifics of the situation as well as the public pushback are both important to evaluate, because they say a great deal about social inequality in the US and tolerance of same.

First, to Zuck’s magnanimous gift. To begin with, the funds are being funneled not into a recognised charity — a 501(c)3, say. They are organised into a limited liability corporation (LLC) which has considerable discretion when it comes to how those funds are used. It’s not even a b corporation, which must be able to demonstrate that it’s offering benefits to society and the environment even as it also reaps a profit. Notably, LLCs are pass-through entities, lowering tax liability for those who hold shares. How convenient, just like the timing of Zuck’s marriage.

For those holding vast fortunes, taxation is a consideration, and so is the ability to avoid it. As Warren Buffett noted, he pays less in tax than his secretary despite their considerable income disparities, and the same holds true for other corporate heads, who use a variety of tricks to dodge liability for their personal income taxes in addition to supporting clever tactics like incorporating in Ireland for tax breaks. These measures are perfectly legal, and perfectly shady, reflecting a lack of interest in contributing their fair share to a society that relies on taxes to fund basic social initiatives.

There’s a growing trend in recent years towards ‘corporate social responsibility‘ and the notion that corporations need to be able to demonstrate that they are behaving ethically and offering social benefits. This trend isn’t surprising in light of the growing demands for transparency coming from the public, as well as a push towards being more responsible global citizens — people are angry about pollution, about human rights violations, about other problems created or compounded by corporations. By getting ahead of the curve with promises to take care of society and the environment, corporations can create a positive image for themselves in the public eye.

The same holds true with individuals. As people like Bill and Melinda Gates, Buffet, and Zuckerberg commit to donating huge percentages of their fortunes to charity, it’s not just about the charity. These people may have a genuine interest in social benefits and addressing inequality, but it’s not the only interest. Doing so provides them with massive tax breaks, and additionally, it also offers a formidable public relations image, and one available entirely for free. Look to the massive outpouring of favourable media coverage of Zuckerberg and Facebook after his gesture, made in the face of substantial social inequality in the US — hey, I have a lot of money, but look how generously I’m sharing it.

Even given the massive personal wealth of these figures, though, their contributions are dwarfed by government budgets. They claim to be ‘making a difference’ with such donations, which fuel individual charities or their own programmes, but their companies, and they themselves, don’t pay their share of taxes, which could contribute to actual structural change, rather than individual charitable models. It’s easy to give up part of your wealth voluntarily: Ask your accountant to stop exploiting the tax code.

Growing gaps in income paired with rising class rage are clearly contributing factors here. There’s a growing middle and upper class anxiety that’s happening in areas like Silicon Valley as people realise that they’re outnumbered by angry members of the working class, and that they’re also extremely unpopular. Feeling ‘besieged’ by people who just want their fair share and a chance at social equality, many are trying to reinvent themselves as net positive contributors to society, rather than as people exploiting the system for their own benefit while leaving others behind. These measures are perfect illustrations, intended to distract people with promises of honey and warm milk.

What’s amazing in this case is that it didn’t work. Media coverage of Zuck’s move was initially very positive, with reports on how he was giving away his fortune and building a better world. As details began to emerge, though, that same media turned against him, and the story shifted, becoming instead a conversation about fake philanthropy and how people like him attempt to make themselves look good with these kinds of grand gestures — an LLC can invest, say, in the development of medical technology that will cheaply and efficiently save lives in regions where such technologies are not readily available, but it can also invest in purely for-profit ventures. Zuck defends himself with the argument that forming an LLC creates more room for visionaries, and fewer restrictions on activities, ensuring that all sorts of benefits and possibilities open up, but that argument sounds more like a justification for profiteering on a supposed charitable donation than actually doing good.

There’s no question that people like Zuck do want to see the world better. But they are also aware that being wealthy and powerful is no longer as socially acceptable as it once was, and that they need to make token efforts to appear on the level of working class and ‘ordinary’ people, so measures like these get trotted out to confirm that they’re ‘just like us.’ But they aren’t. They’re wealthy, powerful people who are skilled at tax dodging and image control, and the creation of ‘charitable’ endeavors like this one is a great illustrator of both.

Image: Mark Zuckerberg’s original Facebook profile, Niall Kennedy, Flickr