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Does Personal Philanthropy Make Executives' Companies Look Better?

from the charity-or-PR? dept

Thu, Feb 1st 2007 10:50am — Carlo Longino

The Wall Street Journal earlier this week released its latest survey about corporate reputations, which put Microsoft at the top. This seemed a bit surprising, given all the venom that's generally spewed towards the company and its products, but the WSJ says that Microsoft's corporate reputation was enhanced by Bill Gates' personal philanthropy. We've wondered before just what these sort of surveys mean, and what their use is to businesses -- not to mention how well they really reflect public perception of and feelings about a company. But it's interesting to see that social responsibility, and executives' personal philanthropy in particular, is apparently bolstering how people view certain companies. This fits in to the discussion on the blog of a couple of University of Chicago professors last month, with one wondering if individuals like Gates or Warren Buffett deserve personal tax breaks for their charitable donations, since they polish their companies' images. The tax breaks for philanthropy are intended to serve as motivation for people, and there's little doubt that they help drive some rich people to give some money away. From that perspective, it seems short-sighted to argue that people like Bill Gates shouldn't get the same benefits as other people, since they have a company whose reputation could benefit by being associated with good works. Also, any standard for determining when a personal charitable gift benefits a company's image would be purely subjective, while you'd also be hard pressed to argue that it's possible for somebody like Gates to do philanthropic projects on a large scale without attracting much attention.

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20 Comments

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Dave, 1 Feb 2007 @ 12:04pm

I would say yes.
I rarely pass up an opportunity to criticize, and even gratuitously ridicule, Microsoft. Many times the huge sums of money seem like ill-gotten monopoly gains.

But even I have admiration for some of the initiatives that the Gates foundation is doing.

I would obviously be even more impressed if a large amount of the money were above and beyond what is deductible. One could regulate deductions more, but I suppose people would argue that huge donations would be greatly reduced if that happened. I don't know enough of the legal minutiae to comment on that.

I guess that right now we're just hoping that multimillionaires will make good choices when donating. And maybe we've lucked out with Bill so far.
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comboman, 1 Feb 2007 @ 12:06pm

The problem with high-tech philanthropy
My biggest problem with high-tech philanthropy is that a small donation will net you a big deduction. Microsoft donates a copy of Vista Premium to a high school and they tell the tax man they donated something worth $399 (the retail price) or at least, the wholesale price which we can assume is about half that. But it really only cost Microsoft whatever the disc is worth (a few pennies at most). Other types of donate-low/deduct-high schemes are considered tax evasion. It's about time the IRS cracked down this. If Microsoft wants credit for helping schools, make them give the schools the $399 in cash so the schools have the option of choosing to use Linux and spend the cash on more teachers/books/building repairs/etc.
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Nasty Old Geezer, 1 Feb 2007 @ 12:13pm

Credit Melinda
As far as I know, Bill G never gave a dime out of his own pocket until Melinda got him civilized. Microsoft's culture was ingrained from the hypercompetitive nature of Gates, Ballmer, Allen, et al. In fact, I would guess that Bill is simply changing the competitve field -- he will set the philanthropy bar higher than anyone else.

As long as Melinda selects the causes, that is not a totally bad thing.

And I agree with the prior post, determining when a contribution has larger business purpose is far too subjective to leave with the IRS.
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Xavier Longfellow, 1 Feb 2007 @ 12:28pm

Misguided jelousy
Should we really be criticizing a tax regime that encourages charity? Isn't that the point? Are we concerned that the US goverment is getting enough tax money? Bill Gates, love him or hate him, has now done more to solve world problems than anyone who is complaining on this board. He has also done a remarkable job -- with the help of his wife -- to reinvent the charitable donation process. His contributions, along with those of Buffet and Branson, should be wildly applauded. But someone, namely Ivory Tower professors, will always find a way to nitpick. Bill Gates could throw himself on a grenade to save children in Darfur and someone would accuse him of profiteering. I agree with Carlo. There is no way to properly discount the positive effects of charitable giving.
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UniBoy, 1 Feb 2007 @ 12:30pm

Couple of points...
By allowing individuals to deduct charitable contributions, the government is basically admitting that you and your charity can accomplish more for the greater good with X dollars than we, the government, can accomplish with only the tax liability on the same X dollars. I would argue that this logic is true nearly 100% of the time. Therefore, long live deductible contributions and there should be no set limits.

Second point is that Gates' assets belongs to him, and he has the right to do with it whatever he wants. It's called property rights. When other people try to seize your property and/or tell you how you can utilize it, it's called tyranny.

This article and the comments seem to indicate that most people prefer tyranny. At least as long as it is some rich guy, and not yourselves, that is on the receving end of it.
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whattaxes?, 1 Feb 2007 @ 12:53pm

Gates doesnt need tax deductions
Filthy rich people like Bill Gates don’t even need to get tax deductions for their philanthropy. Rarely do they pay any US taxes at all. You may want to check my facts, but I am pretty sure Bill, along with the richest of the rich aren’t even US citizens anymore. Most becomes citizens of Monaco where they pay 0 taxes. All they have to do is buy a small house over there, donate a relatively small portion of their yearly income (well under 10%) to the kingdom, and poof, they never pay taxes again.
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TheDock22, 1 Feb 2007 @ 12:56pm

Re: Couple of points...
This article and the comments seem to indicate that most people prefer tyranny. At least as long as it is some rich guy, and not yourselves, that is on the receving end of it

Sheesh, I think you missed the point. The point is should a company, like Microsoft, be able to claim retail price for donating a product that wholesale wise would cost much less? Also, should they get recognition for charitable deeds that, in the concept of profits as a whole, is a fraction of what they could give? Also, there's nothing tyrannical about stating your opinion. If you disagree, then move to a communist country where someone decides your opinion for you.

As far as tax deductions go, I think they should be able to claim full market price for their product. I mean, Microsoft is trying to pay their legions of programmers, software executives, and hundreds of other employees which all comes out of the hopeful sale of their product. Giving it away take away from those gains (even though I bet they make ten-fold in profits for the company). The product is still WORTH the retail price.

If you start excluding Microsoft from the tax dedication list, what does that mean for small businesses or people just trying to give back to the community? Let's not give the IRS an inch, or else they will take a mile.
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Francisco d'Anconia, 1 Feb 2007 @ 1:02pm

Bill Gates for President of Monaco
Taxes take from the strong to feed the weak. Congratulations to all who can a way to direct that energy towards a cause of thier choosing - rather than dumped into Iraq. Horay for Bill; down with Robin Hood.

In regards to comboman - your comment was irrational. If MSFT gave money for schools to buy linux, then MSFT would grow weak and ultimately have no money to give to schools. Which do you want? A strong, charitable MSFT - or - nothing?
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JM, 1 Feb 2007 @ 1:07pm

Re: I would say yes.
My personal feelings and opinions regarding the following organizations and individuals aside...

What the Gates Foundation does in the world and what Bill Gates does personally are separate from what Microsoft does. Combining them is flat out retarded. We're talking about two completely separate institutions and an individual. Just because they have something in common (Bill G.) means exactly squat.

Microsoft should be viewed and judged in the community by what Microsoft does and says.

The Gates Foundation should be viewed and judged in the community by what the Gates Foundation does and says.

Bill Gates should be viewed and judged in the community by what he personally does and says.

Trying to say that because an individual does good in one area automatically makes the dealings of a separate entity (MS in this case) somehow, better, is utter crap and such viewpoints should be shat upon immediately.
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Overcast, 1 Feb 2007 @ 1:08pm

Yea, I agree - good point UniBoy

Wall Street is like Hollywood - follows all these little trends and 'feel good' things like a cat following a ball.

And it put them at the top - on a Survey.. nothing 'official' there, just people's opinion.

You know, it beats what MOST politicians do with their money... like stuffing cash in freezers, using it to whine and dine interns, pay obscene amounts to get elected again, or power and time to IM young boys.

And in the end - you know it's hard to say what Gate's true intentions were - was he just playing a game to bump up opinion or did he really want to be more charitable?

My guess... Guilt - from being so obscenely rich while others beg for a bowl of soup. I think many have a 'guilt complex' about doing well in life.

Doesn't hurt to spread the wealth around, ESPECIALLY when it's not the government doing it!!
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Jo Mamma, 1 Feb 2007 @ 1:38pm

Gates will change philanthropy
Love him or hate him, Bill gets things done.

Also, since I'm interested in this stuff, I may be able to put a few things straight, at least according to what I read.

I have no doubt that Bill is still a US citizen. The IRS systems can't handle Bill's tax return. (Source: forbes.com)

Bill has never intended to give huge sums of money to his children. It was actually listening to Warren Buffett's views on this that convinced him it was the right thing to do. Perhaps not so much to give your money for the good of mankind (though I'm sure that was a large factor), but because it absolutely destroys your kid’s lives (I believe I read this in either Fortune or Forbes).

Gates seeks to address large issues and actually fix the plagues that are affecting people, particularly in Africa. Since he's got tremendous wealth (as measured for individuals) he seeks to solve the biggest problems. (There’s an EXCELLENT interview with Bill, Melinda, and Warren Buffett on Google video. It's Charlie Rose and hands down the best interview I've seen anywhere about any topic. I highly recommend it if you're interested in the way Gates and Buffett think).

Gates likely will never pay taxes again... but you know what? I'm perfectly ok with that. If he employs his money in good faith, for the betterment of humanity, I've no doubt that a guy who could rise to become the richest person in the world would beat the piss off of some gov't money manager when it comes to using money efficiently. If the government put 1 million dollars to work, they might help 2 people, but Gates can help 1000 times that amount.
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|333173|3|_||3, 1 Feb 2007 @ 2:39pm

Gates has the right to spend his mone y how he likes, same as we all do, and if he wants to donate it to a tax-deductable cause, then thats fine. the Gates Foundation has to play by the rules of being a charity, but again, can use the money for whatever causes they want.

M$, on the other hand, is a business, and so has to maximise revenue for shareholders. However, the value of donations should be held to be the *lowest* price for which the company sells the product, in hte financial year during which the product was donated, wether at a special discount or not. THis stops M$ from setting a reccomded price for Vista to $10000000 or whatever for five minutes, donating a half-dozen copies, and laughing all the way to the bank. They will still cheat this system, by creating a new version which has some minor difference, and calling it the charity version, and selling it to the public for more then Ultimate even though it is only a tweaked version of Premium (or whatever), and caliming that this was the price, but it can only help.
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dorpass, 1 Feb 2007 @ 2:41pm

Re: Gates doesnt need tax deductions
Gates is still a US citizen and he is not a resident of Monaco. I have no particular love for him or MS, but what the hell is the point of making such a dumb comment?
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security, 2 Feb 2007 @ 12:08am

Google has Google ORG
http://www.google.org/

Google has a Google.org just for the company sponsored philantropy - this helps the companies image, so the funds that Sergey and Larry independantly give to charities are of their own individual choosing and should afford them all the benefits as anyone else who donates.
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fuse5k, 2 Feb 2007 @ 5:55am

Im hardly a microsoft fan, but i think that the ill gotten gains that have made bill gates so rich, are doing good things now. It kinda makes me feel a bit less raped!
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rahrens (profile), 2 Feb 2007 @ 7:40am

moron
Whoever that moron is whose going by the moniker whattaxes? needs to consult a tax lawyer if he ever wins the lottery and decides to change his citizenship.

The IRS doesn't care what country you owe your allegiance to. If you live in the US and work here (and you'd better have a work visa if you're not a US citizen!) they're gonna expect you to pay taxes according to the US tax code. Not only on your US earnings, but on what you earn overseas, too!

Get your facts straight before you blow off and make yourself look stupid.
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Celes, 2 Feb 2007 @ 11:28am

Re: Re: Couple of points...
From IRS Publication 526, Charitable Contributions:

If you contribute inventory (property that you sell in the course of your business), the amount you can claim as a contribution deduction is the smaller of its fair market value on the day you contributed it or its basis. The basis of donated inventory is any cost incurred for the inventory in an earlier year that you would otherwise include in your opening inventory for the year of the contribution. You must remove the amount of your contribution deduction from your opening inventory. It is not part of the cost of goods sold.
If the cost of donated inventory is not included in your opening inventory, the inventory's basis is zero and you cannot claim a charitable contribution deduction. Treat the inventory's cost as you would ordinarily treat it under your method of accounting. For example, include the purchase price of inventory bought and donated in the same year in the cost of goods sold for that year.

So Microsoft would not be able to deduct retail price for a donated copy of Vista - not legally, anyway.
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Celes, 2 Feb 2007 @ 11:34am

Re:
But Microsoft *can not* deduct retail price for the product. Either it deducts its basis in the inventory (the cost to make it, usually), or it deducts nothing at all and adds the actual cost to its cost of goods sold. See my post above.
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The truth, 7 Apr 2009 @ 10:54am

u can never understand
The decade all those complaining get rich then you might just understand what guys like Gates , Warren et all are doing andgoing thru

Does anyone on this blog think it was easy building Microsoft????? Dropping outta Havard willingly???

Waking up.... and giving out cash almost tripple the budgets of a lot of countries???????? ( so you get tax rebate!!!!..... i am sure there are better ways )

You little minds!!!!!!,

As I said you will never understand

until $$$$$$$ ( if only more were like Bill, if only......)

hmmmmmm
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security, 16 Apr 2012 @ 4:49am

charities
The charities are outweighed by the Inland Revenue children
Thank you for the information given to us
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