11
11TO GIVE AWAY MONEY IS AN EASY MATTER AND IN ANY MAN’S POWER. BUT TO DECIDE VIRTUOUSLY WHO TO GIVE IT TO, THE AMOUNT TO GIVE, WHEN, HOW, AND FOR WHAT PURPOSE IS NEITHER IN EVERY MAN’S POWER, NOR AN EASY MATTER.
Shortly after writing the paragraph (in chapter 9) describing Crown Fellow Donna Auguste’s virtuous leadership of Freshwater Software, I discovered that Donna and her partners had sold the company. Donna has since used her portion of the proceeds to fund the Leave a Little Room Foundation, at which she carries on a variety of domestic and global philanthropic activities. For instance, in Tanzania, she is funding a source of solar electricity to provide power for lights, a vaccine refrigerator, and satellite-based e-mail for a remote hospital adjacent to the Serengeti. Her philanthropic commitment is unusual for someone still in her forties.
More typical is Michael Zaleski who, at age 55, “retired” from his investment partnership in order to start a family foundation with his wife, Caroline, an architectural historian. In a New York Times interview, Michael Zaleski offered three motivations for starting the $5 million foundation: to get a tax break, to support favorite charities like his alma mater, and to become involved personally in philanthropic activities. The Zaleskis are hardly alone among their generation in choosing to become philanthropists. According to the Foundation Center, there was nearly a 20 percent increase between 1999 and 2000 in the total number of family foundations in America. Not counting those affiliated with family-owned businesses, there were over 24,000 such foundations, controlling some $200 billion in assets and annually giving away $11 billion. Nor are the Zaleskis’ motivations unique. The question we explore in this chapter is: To what extent are those motivations virtuous? In particular, we examine how Aristotelian ethical analysis can help each of us to make more virtuous charitable contributions, no matter how large or small the sums involved.
Like almost everyone I know, I wish I had more money to donate to worthy causes (to be honest, I wish I actually donated more of what I have, which is a paltry percentage of my net worth). Because an analysis of the small amounts I give would trivialize the subject, it is useful to apply Aristotle’s analytical method of exploring the philanthropic behavior of bigger-than-life characters. But remember, we do so only to gain perspective on the virtue of our own behavior, to help us assess if we give enough and if we give to the most worthy causes.
Of the many traits of excellence Aristotle cites, one of the most difficult to exercise is generosity. A generous person, by definition, is giving. This virtue, Aristotle says, lies between the defect of miserliness and the excess of extravagance. Although charitable giving is a common manifestation of generosity, Aristotle says it is not necessary to engage in such acts to live virtuously, nor does giving, no matter how generous, guarantee virtue. Indeed, when Aristotle left a sum of money for charitable purposes in his will, he regarded doing so as a duty not a virtue. He took it for granted that rich people and the relatively well off like himself would be generous. In his era, Greeks who could afford to do so were expected to contribute to religious and athletic events, support drama and music festivals, and pay for public monuments and statues. Meeting those civic responsibilities was simply a duty and not a virtue that expiated one’s sins or compensated for one’s failure to participate in politics and philosophy. To Aristotle, it would be as absurd to say one could make up for not living a good life by acts of charity, as it would be to suggest a bank robber can compensate for villainy with a good sense of humor.
Aristotle would agree with the contemporary view that it’s nobody’s business but our own what we do with our money. After we have serviced our debts and paid our bills and taxes, we are free to invest, spend, save, or give away the remainder as we each see fit. Although not compelled to do so, many people today, as in Aristotle’s era, choose to donate some of their disposable assets to charitable causes. In doing so, Aristotle says the ethical man or woman carefully considers a set of interrelated questions: To whom, how much, when, why, how, and for what purpose should I give my money? Before giving, the virtuous person engages in moral deliberation, attempting to answer such questions as:
Is the recipient worthy?
Is this the best among many worthy causes?
How much is needed?
Will the money really help the recipient?
Does the recipient need more than just my money (what about my help, advice, or knowledge)?
As with all questions requiring the exercise of practical wisdom, what matters to Aristotle is our philanthropic motivation: Am I giving this money away for my good or for the good of others?
Though it is difficult to answer any of these questions, identifying motivation is the trickiest. Some people are clearly and simply generous. But for most of us, our motivations are many and mixed, and one needn’t be a cynic to conclude that the following are among the reasons we make donations:
To achieve social status and a reputation for generosity
As displays of conspicuous consumption
To attempt to achieve immortality
For purposes of atonement and contrition
It is not painful to give because we get tax breaks
At the turn of the millennium, Jean-Marie Messier, then CEO of Vivendi Universal, moved to New York from France, and he and his wife found the fastest way to gain acceptance in Manhattan society was by making large contributions to the Whitney Museum, the New York Philharmonic, and a handful of other “A-list” causes. Don’t get me wrong; we all should be thankful for such useful donations. Visiting some of the institutions the Messiers supported is high among my reasons for vacationing in the Big Apple. But would Aristotle consider the Messiers’ useful gifts noble in light of the social benefits they received?
In similar acts of public benefaction over the last decade, many wealthy individuals donated large sums to endow business schools and, in particular, to support the construction of business school facilities. In the development trade, these are called “naming opportunities.” In fact, professional schools are among the easiest university programs to fund, and more rich people give more money to business schools, which are already the largest campus moneymakers in terms of tuition revenue, than to resource-starved undergraduate liberal arts programs. Being an indirect beneficiary of such largesse, I feel entitled to question the motives of the hand that fed me: In the case of the individual whose name graces the business school where I am employed, the gift was useful, the decision to give was freely made, and there were many resulting benefits enjoyed by students, faculty, the dean (who won praise for fund-raising prowess), and the donor himself, in whose honor the school is now named. Yet one wonders if the donor first inquired if the university had a more pressing, nobler, or harder-to-fund cause?
Consider a similar, considerably larger gift recently given by the heirs of Sam Walton’s Wal-Mart fortune that was not, as far as I am aware, a naming opportunity. After considerable deliberation, the Walton family gave its money to the woefully underfunded University of Arkansas largely for the purpose of providing access to higher education for thousands of young students the university otherwise would not have been able to accommodate. How can one tell if this philanthropic act was more or less virtuous than the gift to erect a new building for my business school?
Aristotle helps us to think about the earmarks of virtuous giving by offering a few commonsense observations. First, he says the amount given is, in all regards except one, irrelevant to the question of virtue. In fact, “It is quite possible that one who gives less is more generous if his gift comes from smaller resources.” That’s encouraging to the vast majority of us who are neither self-made billionaires nor heirs to great fortunes. Then, he adds, people who have been virtuous throughout their lives probably would never accumulate great sums in the first place because they have a strong tendency to give and not to horde what they earn. But he is realistic. Given the behavior of the young, it isn’t surprising that most people accumulate throughout middle age and don’t start to think seriously about philanthropy until they are in their fifties. But no matter when we begin to give, Aristotle says the amount we give must be adequate by one measure: Rich people who give away a fortune are not virtuous if they still have a fortune left.
Those conditions noted, he says a “generous act does not depend on the amount given, but on the characteristics of the giver.” Virtuous donors “give to the right people, the right amount, and do everything else that is implied in correct giving.” Everything else is measured in terms of right desire: The only motive in virtuous giving is the good of others. Not only must the cause be noble, there can be no gain for the giver except the pleasure to give.
According to Aristotle, gifts rendered to buy honor and respect are not virtuous. He says there is no excellence in philanthropic acts that “follow the appetite for honor and self-aggrandizement” because such self-indulgence is a childlike characteristic. He warns us not to mistake the excess of magnificence for the virtue of generosity. People building monuments to themselves, even when endowing such worthy causes as concert halls, hospitals, and museums, are doing so for their own good and, thus, are engaged in what he calls “vulgar” displays of wealth. In Aristotle’s day, kings and conquerors built palaces and pyramids to create a sense of awe among contemporaries and in hopes of establishing their immortality throughout generations to come. He says virtuous people do not engage in such conspicuous consumption. After your death, if others decide to honor your generosity by putting your name on the opera house you funded, that’s fine and fitting; just don’t claim virtue when you fund it as a naming opportunity.
Because Aristotle feels that achieving immortality is out of our hands and dependent on the judgment of future generations, he would ask, on seeing a name on my business school, For what noble deed is that person being honored? Would the faculty, students, or business community have nominated the donor for such an honor based on his contributions to business, to the local community, or whatever? Or did he simply decide to pony-up to honor himself?
Of course, it is almost always better to give than not to give. Aristotle believes it is even worse to be a miser than it is to build monuments to one’s self. Dying rich and leaving it all to the kids and the government is the least-generous act because it evidences both miserliness and extravagance, but wasting money while we are alive on unworthy expenditures is not much better. That’s why Aristotle has little respect for rich people who spend fortunes on their daughters’ weddings while giving pennies to charity (damn, there’s another low grade on my ethical report card).
Even giving appropriate amounts to worthy causes isn’t noble in Aristotle’s eyes if the donor hasn’t applied practical wisdom to the choice. He would ask if potential donors to museums have inquired if there is a decent community hospital before they choose to support arts institutions, which, in the main, serve people who can afford to support them themselves. This doesn’t mean cultural contributions can’t be virtuous; instead, Aristotle says potential donors should learn to make distinctions between those that are and those that aren’t.
Consider three comparable acts of giving to museums, all in Southern California: (1) Oil magnate Armand Hammer funded a museum on Wilshire Boulevard near UCLA for which there was no demand or apparent need (there was no substantial art collection to house). Moreover, he used Occidental Petroleum’s shareholders’ money to erect the imposing edifice, which he named in honor of himself. (2) Ten miles or so east on the same boulevard, oil magnate Robert O. Anderson funded a wing for the Los Angeles County Museum of Art, at the request of the museum trustees, in order to house the institution’s collection of modern art. He used Atlantic Richfield’s shareholders’ money to erect this monumental building, which he allowed to be named for himself. (3) In nearby Pasadena, packaged-foods magnate Norton Simon used his own money to buy an existing museum that he renovated to house the first-rate art collection he had assembled and paid for himself. He left the Norton Simon museum and its collection as a public bequest.
The ethical distinctions between these three examples are subtle but not obscure. The issues involved in a CEO using corporate money to build a monument to himself were clear enough to the boards of Occidental and Atlantic Richfield to precipitate the dismissals of Hammer and Anderson from the employ of those corporations. But that’s obvious stuff. More difficult, but not impossible, at least for Hammer, Anderson, and Simon themselves to have assessed, was the degree to which they weighed alternative ways, means, conditions, and stipulations in making their gifts. For all charitable contributions, Aristotle says donors must first assess their own motivations, “For whose ultimate benefit am I doing this?” and then ask, “Is what I am creating ‘suitable’ (not showy), is it ‘worthy of the expense’ (necessary), and ‘a proper object’ (useful)?” And “Am I just giving money, or am I also giving of myself?” Surely there was more than a small degree of vanity involved in Norton Simon’s gift; nonetheless, it seems more worthy of praise on Aristotle’s scoreboard than the other two bequests.
The Greek root of the word philanthropy, philia, means, as noted in the context of friendship, the “love of others.” Because there are numerous ways one can demonstrate the love of others besides doing charitable acts, Aristotle says philanthropy is not a necessary virtue. Obviously, a poor person who has little to give nonetheless can lead a virtuous life. But if we choose to give, the act requires “divine love” in order to be altruistic. Divine love involves acting for the good of others and giving of oneself.
Aristotle noted that most of what passed for philanthropy in his era lacked the element of divine love. Although things have changed over the passing millennia, it still is easy for those who donate their names and time to fool themselves into thinking they are acting for others. Recently, I witnessed such an act of self-delusion: A trustee of a sizable bequest decided to divert a substantial sum from the educational program it was supporting into an annual prize she had the honor of personally bestowing on famous individuals. In so doing, she starved the worthy educational program in order to gain the pleasure of hobnobbing with notables, individuals who, not incidentally, did not need the prize or the money.
The New York Times notes there are now nearly 100 such annual international prizes, most of fairly recent origin, offering awards of $100,000 or more. For example, the annual million-dollar Dan David Prize is awarded to an individual “for contributions to the improvement of the world.” It turns out Mr. David is an entrepreneur who can easily afford this route to name recognition. The first recipient of his prize was another wealthy but more famous entrepreneur, which raises a series of ethical issues related to such high-profile awards: Are they merely marketing gimmicks? Is their purpose to enable the donor to bask in the reflected glory of the recipient? Do they go to people who don’t need either the money or the recognition? Do they siphon funds away from more worthy causes? For instance, if prize money goes to an individual, it may be taxed and a large part end up in government coffers; instead, if the money goes to a nonprofit organization as a grant, the entire, nontaxed sum might be put to a worthy cause. Aristotelian moral deliberation is valuable because it helps us make distinctions between the good and the bad or, more practically, the better and the worse among such awards. The Nobel Prize, regardless of the motivation of its original donor, seems noble because the worthiness of its recipients is the subject of serious deliberation. But one might question the motivation of the donor of the Templeton Prize because, in order to garner maximum publicity, the amount given is recalculated annually to exceed the dollar value of the Noble Prize. (The donor says the reason he keeps ratcheting up the prize money is to show that the spiritual accomplishments he rewards are more valuable than the materialistic ones rewarded by the Nobel committees.)
Aristotle tells us charity is always good, but it may not be virtuous if a donor acts charitably for the wrong reasons. In the early part of the 20th century,aging business moguls often engaged in philanthropy to atone for abuses of corporate power committed in their names when they were younger. Alfred Nobel, who made his fortune as a dynamite manufacturer, sought public “re-branding” through the establishment of a peace prize in his name. Doubtless, it was better for him to put his money to good ends rather than to spend it in acts of conspicuous consumption (like William Randolph Hearst’s anachronistic castle). But is such atonement-seeking virtuous?
When used to buy a good name, philanthropy may be the last refuge of the scoundrel. In the era of the robber barons, Andrew Carnegie, J. D. Rockefeller, Andrew Mellon, and J. P. Morgan famously sought to expiate real, observed, supposed, and imputed sins by giving money away. Not only did they seek respectability in the eyes of the public through philanthropy, they established foundations for the express or implicit purpose of winning back their souls. Two of the greatest philanthropists of the 20th century, Carnegie and Rockefeller, gave away fortunes as acts of atonement and to win honor after lengthy business careers in which they had earned the enmity of their employees, competitors, and business associates.
Rockefeller, a deeply religious man, sought to atone for decades of intemperate business practices that had made him both rich and reviled. In the 1880s, his Standard Oil trust had gained a virtual monopoly in the domestic market, and he had been repeatedly warned about the potential consequences of the growing hostility toward himself and the trust. Even so warned, Rockefeller did not halt the practices that made him the object of scorn among his employees, customers, competitors, suppliers, and dealers. J. D.’s moral defense of his actions was more creative than contrite. Years later he wrote, “I did not choose or seek to be the recipient of such wealth. It has not been the greatest happiness.” Clearly the first sentence was disingenuous; did the Devil force the money on Rockefeller? But photos of Rockefeller as an old man cause us to believe he was telling the truth in the second sentence. And much has been written about him since to confirm he wasn’t greatly happy. Nor, apparently, was the philanthropist son who followed closely in his footsteps and whose life ended in a sanitarium.
Not until long after the Supreme Court ruled his trust illegal in 1911 did Rockefeller begin the philanthropic activities through which he sought to scour his blemished reputation. His charitable acts were driven by concern for his reputation and his soul; as far as we know, his giving involved no Aristotelian ethical deliberations. Although his money was put to good use, his motivations were not virtuous, and thus, as Aristotle would have predicted, his philanthropy did not make him happy. Indeed, Aristotle admits it is devilishly difficult to make charity virtuous until and unless a philanthropist has developed the habit of giving based on the exercise of practical wisdom. To Rockefeller’s credit, he and his son raised the Rockefeller grandchildren to behave not as the old man did but as he preached, and many of them grew up to become virtuous donors. Even so, it took several generations for the Rockefellers to learn how to engage in effective moral deliberation about philanthropy. In the late 1960s, one of John D.’s grandchildren hired a young lawyer to ghostwrite a book on the subject of his philosophy of giving. In their first session together, the lawyer asked the obvious question: “Sir, can you give me a general view of your beliefs about philanthropy?” The Rockefeller answered: “Young man, if I knew the answer to that question, I would not have needed to hire you.”
In contrast, Andrew Carnegie thought deeply about the issue and developed a logical and morally defensible theory of philanthropy. Convinced of the Aristotelian precept that “it is a sin to die rich,” the Scottish-born steel baron believed one should spend the first half of one’s life amassing a fortune, the second half giving it all away. Unlike the intemperate J. D. Rockefeller, Carnegie’s moral weakness was a lack of self-discipline. Throughout his business career, he acted in ways he knew were morally wrong. At age 33, Carnegie had written in his diary “$50,000 per annum … Beyond this never earn … but spend the surplus each year for benevolent purposes … the amassing of great wealth is the worst species of idolatry.” For the next 3 decades, the great Scot dedicated his every moment to the pursuit of “the worst species of idolatry.” In the process, he let nothing stand in the way of amassing great wealth. In 1892, he even ordered the use of violence against his own striking workers.
Aristotle would have questioned Carnegie’s virtue. To the Ancient, the source of a donor’s wealth must be virtuous in order for his gifts to be virtuous. A drug dealer can’t become virtuous by giving away his ill-gotten gains. While Aristotle doesn’t address issues of business misconduct or whether dirty money can be “scrubbed” in subsequent generations by virtuous children (like the Rockefellers) or by virtuous administrators (like those who run today’s Carnegie foundations), he does consider the issue of late-in-life atonement. He says it is highly unlikely that past evil can be expiated by subsequent, albeit noble, philanthropy.
Nonetheless, Carnegie’s claim to philanthropic virtue was stronger than Rockefeller’s. The Scot’s atonement seems to have been genuine, and, second, the charitable causes he supported involved moral analysis based on the needs of recipients. His overarching, near-Aristotelian principle was to support causes from which “the masses” reap the principal benefit. Indeed, he educated himself in order to develop his practical wisdom, which he then applied to what were arguably the most creative and effective philanthropic acts of his era. Carnegie gave away his money both wisely (he donated $55 million to build public libraries around the world in an era when a dollar would buy several quality hardback books) and thoughtfully (he gave seed money to start the first pension fund for university professors). The latter act illustrates the ethically creative way Carnegie worked as a philanthropist. While serving as a trustee of Cornell University, Carnegie observed professors meeting classes until their dying day. When he inquired why profs, many in their eighties, some infirm and dotty, were still on the job, he was told they had not been able to save enough on their meager salaries to afford to retire. Since even the few well-endowed colleges in the early 1900s could not pay their faculties well or offer them pensions, Carnegie developed the solution of giving seed money to create a private, nonprofit retirement fund for professors. Eventually, this fund would become self-financing as the result of subsequent contributions by educational institutions and professors themselves. In creating Teacher’s Insurance (today’s TIAA-CREF), he made it possible for the thinking class to retire in relative comfort.
Because of his unusually imaginative giving, Carnegie came the closest among the robber barons to being a virtuous philanthropist. Unlike Rockefeller, Carnegie practiced what he preached. In Aristotelian terms, he warned his fellow millionaires “the man who dies rich thus dies disgraced” and, by his own terms, went on to die full of grace, having dispensed with his entire fortune well before his death in 1919. Unlike today’s philanthropists, Carnegie received no tax breaks from his giving. However, he did buy a share of immortality thanks to the ongoing Carnegie foundations; and, to the extent such honor was his motivation, his gifts lacked Aristotelian virtue. The Ancient’s admonition that donors are not virtuous when they dangle the possibility of gifts to encourage fawning and flattering may have disqualified Carnegie, as well. Nonetheless, today’s philanthropists could do worse than study the good works of Andrew Carnegie.
Why didn’t the public at the time embrace the efforts of Carnegie, Rockefeller, and others who, in old age, showered society with munificence? As Aristotle might have told Carnegie, he and his peers failed to buy forgiveness because dying poor is only one, small aspect of virtue. The real test is How did you live? That’s the test the public seems to use. Carnegie et al., unfortunately, waited until the ends of their lives before seeking virtue, thus recalling the prayer of a man facing temptation in the form of a voluptuous woman who was, alas, not his wife: “Lord, make me virtuous, but not just yet.” The public could neither forget nor forgive Carnegie and Rockefeller for getting rich at the expense of weaker business partners, using ethically questionable business tactics, and, worse, mistreating workers. Indeed, throughout history, there are few examples of formerly bad people who successfully bought respectability through philanthropy, but that hasn’t stopped people from trying.
Financier and convicted felon Michael Milken is following in the great tradition of the robber barons. The Milken family foundations’ Web site displays photos of the philanthropist in the company of Jimmy Carter, Colin Powell, Kofi Anan, and other notables to advance the impression that Milken is a virtuous man who bestows largesse on worthy people. In fact, many Milken donations do go to worthy causes; unfortunately, other gifts appear to be made for the purpose of presenting himself in a positive light. His motivation is often transparent: He wants to buy back his good name. Unlike Carnegie, Milken’s attempts to buy respectability through philanthropy show little sign of being informed by practical wisdom. His gifts to educational institutions often come with the expectation that Milken will be invited to speak before students or at public events where he may subtly plead the case for his innocence. He thus uses the prospect of a gift as a means to making recipients subservient to his agenda. Aristotle would ask if his choice of causes to fund is influenced by that motive, and, if so, does he then choose the less over the more worthy?
Worse, from an Aristotelian perspective, Milken has demonstrated no public contrition for the acts of financial manipulation that led to his conviction. He and some of his supporters continue to argue he “did no wrong” legally, while the prosecutor in the case, Rudolph Giuliani, argues otherwise. Whichever way one comes down on the legal questions involved, there is little doubt Milken’s acts were ethically wrong. As New York Times writer Floyd Norris noted when Milken was being considered for a pardon in 2002, subsequently denied by President Clinton, he “has never faced up to the reality of the way he abused power.”
Aristotle says we are incapable of doing just acts without being just ourselves, and to do just acts, we must choose to do them consciously, habitually, and with true charitable intent: “We can say that some people who do just acts are not, for all that, just—one must do them as a result of choice, and for the sake of the acts themselves.” So when Aristotle asks us to consider “What is the point of being virtuous?” he expects we will reply, “because virtue is splendid, fine, and noble.” If we have that disposition to do noble things, we ennoble our acts of charity.
In contrast, morally unreflective people tend to do good things “because virtue pays.” Colin Powell told Time that business leaders should give because it is in their self-interest to do so: “If you want to keep making a profit, then you’ve got to keep growing the society, so that you have people out there who are workers and consumers.” That’s a riff on Henry Ford’s 1907 justification for paying his workers the unheard of sum of $5 a day: so they could afford to buy a Ford. That didn’t make old Henry virtuous; it made him shrewd. So when the likes of Michael Milken engage in an act of charity in order to meet their business or personal ends, their base motives cheapen the good deed and turn it into a less-than-noble, albeit useful, act. As a postscript, we should note that Powell, during the years when he was out of public service, failed to heed his own mistaken advice: His own charitable acts were, in fact, virtuous by Aristotelian standards.
The Aristotelian is made particularly uneasy when the lately virtuous justify their reformed behavior using arguments inconsistent with their life-long principles and beliefs. There is the faint odor of hypocrisy when former sinners tie themselves up in theological knots trying to offer moral justification for newly adopted charitable roles. Throughout his long life, Rockefeller wore his Baptist faith on his sleeve, yet, in the end, sought redemption through good works, a practice not necessarily in keeping with the tenets of fundamental Protestantism, which, to oversimplify, state that redemption comes through accepting Jesus as God. Similarly, Michael Milken, who often explains his philanthropy with reference to Jewish tradition, at the same time ignores a basic principle of that tradition: Virtuous charity is anonymous.
Like the ancient Hebrews, Aristotle says donor anonymity is a sign of virtue. This may raise some questions about the motivations of high-profile celebrity philanthropists who advocate causes directly related to their personal agendas and personal medical problems, while enjoying the limelight that falls on them as the result of their “good works.” This is a complex issue, as Paul Newman, who has raised some $150 million for charity over the last 2 decades by selling Newman’s Own salad dressing and other food products, explains.
One thing that really bothers me is what I call “noisy philanthropy.” Philanthropy ought to be anonymous, but in order for this to be successful, you have to be noisy. Because when a shopper walks up to the shelf and says, “Should I take this one or that one?” you’ve got to let her know that the money goes to a good purpose. So there goes all your anonymity and the whole thing you really cherish.
One can see how celebrities like Newman might be virtuous in lending their names to raise public awareness of worthy causes, but the question for each of us to examine is our own personal motivation for associating ourselves with any cause, no matter how worthy. According to Aristotle, we must each ask: Who is the real beneficiary of my act?
Aristotle’s standards for virtuous giving are extremely high. Short of consciously developing a theory of philanthropy based on the needs of recipients in which the sole motivation to give is the good of others, it is hard to imagine a philanthropic act that would qualify. Alternatively, a donor would have to turn over her money, anonymously and without strings, to philanthropic trustees or administrators who were themselves virtuous. By setting such high standards, Aristotelians run the risk of discouraging people from giving. That wasn’t the Ancient’s intent. Instead, as with all attempts to achieve the complete good, he is warning us that we won’t reach our goal if we don’t subject our assumptions to rigorous moral testing.
When assessing virtue of any kind, a key metric for Aristotle is completeness. He is not interested in a little bit of virtue, partial justice, or an almost good life. So when people engage in worthy acts of charity to advance a selfish agenda—to buy atonement, social status, celebrity, or whatever—he doesn’t say it is wrong; he simply warns that the act is not completely virtuous. Similarly, donors who exploit loopholes in the tax code lack complete virtue. One well-meaning group, called New Tithing, offers advice to the wealthy on how to make charity almost costless. The organization shows how a married couple with $18 million in investments could give up to $1 million per year and not experience erosion of their asset base (albeit, they would have a reduced amount of disposable income). Couples who could afford to give away $1 million might only be parting with $120,000 per annum, after taxes are factored in.
In light of this, one wonders why the rich don’t give more, because, with a little tax consulting, the act can be virtually painless. An article in a glossy magazine sent gratis to American Express Platinum Card holders outlines how one can create a Charitable Lead Trust (CLUT) that offers a dandy inducement to giving. If a sum of approximately $1 million is well invested in a CLUT, it can throw off about 5 percent per year to charity and—here’s the incentive—more than $2 million eventually can come back to the donor’s family. CLUTs bestow benefits on many, but Aristotle would award no points for virtue to those who establish them.
Similarly, Aristotle might question the motives of latter-day Fords and Rockefellers who create charitable foundations in their own names that are designed to last forever, or as long as tax laws remain unchanged. He would particularly question the virtue of such foundations when they accumulate assets faster than they pay them out. But he would look favorably on the current philanthropic practice of quick distribution of assets with the intent of solving pressing social problems, instead of creating high-overhead institutions.
At last count, there were nearly 2.5 million millionaires and 267 billionaires in the United States, many freshly minted during the 1990s. According to a Time cover story, almost all of the newly rich among those ranks are starting to think about philanthropy. Tax advisors have counseled many of them to give their money away, “otherwise the government will take it.” Yet choosing to direct the expenditure of their own money, instead of leaving that choice up to Uncle Sam, seems more an act of good sense than of virtue. While Aristotle never heard of a tax break, little harm is done in extending his reasoning to this issue: Taking advantage of a tax break does not disqualify a donor from being virtuous, but, by Aristotelian ethical standards, tax avoidance cannot be the purpose of giving. Since Aristotle’s key metric of virtue is motivation, he might find the uses of tax breaks self-serving rather than altruistic.
Nonetheless, we now have tax laws, and as a result, the ethics of giving are more complicated today than in the Ancient’s era. Here’s an example of a complex contemporary moral issue related to taxes, which Aristotle could never have anticipated. In 2002, the United States Senate acted to repeal inheritance taxes in the future. Arguably, the vote of Senator Dianne Feinstein of California allowed the bill to pass by the narrowest of margins. Apparently, Feinstein had received considerable pressure from her Silicon Valley constituents, who argued it was unfair they couldn’t leave their hard-earned fortunes to their heirs. About the same time, Bard College president Leon Botstein wrote that many of the largest gifts made to colleges and other nonprofits are motivated by the existence of the inheritance tax, because many wealthy people would rather leave a large part of their estates to charity than to pay taxes to the government (if they don’t have the third option of leaving it to their heirs tax free). Hence, when the new tax law eventually comes into full force, loyal Stanford grads who petitioned Feinstein to ax the inheritance tax will have succeeded in abolishing the incentive to leave bequests to their beloved university. If one advocates the value of philanthropic donations to private higher education, is it consistent to work at the same time to abolish the prime incentive for taxpayers to give to the same? ’Tis a puzzlement.
Of course, as Andrew Carnegie demonstrated, some wealthy individuals will donate their money absent tax incentives. Moreover, from what Carnegie wrote, one is encouraged to believe his philanthropic decisions would not have been influenced by the existence of inheritance tax laws. Carnegie believed rich parents did their children no favor by making them rich. He held to an Aristotelian belief in the value of individual merit and concluded that children are better off morally if they have to earn their own livelihoods. Carnegie believed the duty of parents is to educate children so they have the moral foundation and parental role models to act virtuously themselves. Hence, the current phasing out of inheritance taxes raises fascinating questions: How many wealthy people will be like Carnegie and continue to give; how many will be like the Rockefellers and teach their children to be responsible philanthropists; and how many will leave their fortunes to ne’er-do-well offspring to fritter away money that might have gone to good purposes?
Aristotle says painless giving is not likely to be as virtuous as when the act involves sacrifice. Although big sums may be involved in the gifts of the fabulously rich, to Aristotle it is less virtuous for a billionaire to give $100 million than it is for a working stiff to give $100 if the latter sum represents a larger share of the working person’s disposable income or savings. Though facts show that rich Americans give a higher percentage of their incomes than people with average incomes, the relative difference is smaller than one might expect. Boston College’s Social Welfare Institute reports those with fortunes in excess of $10 million give away 9 percent of their annual income, those worth $5 to $10 million give 4.8 percent, those in the $1 to $5 million range give 3.8 percent, and the national average is 2.2 percent. Now, is 2 percent of $25,000 ($500) more virtuous than 4 percent of $5 million ($200,000)? Which hurts more? That’s a subjective call; but, according to Aristotle, proportionality is a valid measure of the virtue involved in an act of charity, as it is with all ethical acts.
Issues of philanthropic motivation and right desire are being raised today in ethically puzzling ways. In an interview with Fortune, the head of the Community Foundation of Silicon Valley, Peter de Courcy Hero, claims the argument “Giving is a moral obligation—you’re rich, they’re poor; you have to give your money away”—“doesn’t fly” in the high-tech community. Thus, Hero says he has had to invent other arguments to encourage charitable contributions in the Valley, home to some 75,000 millionaires, but where a full quarter of households with incomes over $100,000 give less than $500 per year. His approach has been to repackage philanthropy with slick marketing in which the language and principles of venture capitalists are applied to social problems. Fundable projects are presented in terms of risk assessment, and cost effectiveness is offered as the measure of relative worthiness. Similarly, Time’s special section on “The New Philanthropy” concludes:
This new breed of philanthropist scrutinizes each charitable cause like a potential business investment, seeking maximum return in terms of social impact—for example by counting the number of children taught to read or the number inoculated against malaria.
Modern Aristotelians are realists and appreciate that it may take a little hype to market even the noblest ideas, and Aristotle himself says it is both prudent and virtuous to make sure the money one gives is used wisely and for the intended purpose. So the New Philanthropy’s measures of efficiency and effectiveness are relevant in moral deliberations about alternative uses of charitable dollars. But surely there is also danger that marketing, economic, and engineering concepts will drive out ethical principles. At best, the New Philanthropy seems based more on practicality than morality. According to Time, venture capitalist John Doerr makes philanthropic decisions the same way he makes investment decisions in start-ups, stressing such issues as “pricing, revenue assumptions, and sustainability.” Though bringing some efficiency to the nonprofit world is a plus, from an Aristotelian perspective, the rationale for charitable giving is nonetheless different from investing in a business. If the two activities were identical, solutions to all social problems could be turned into self-sustaining businesses, and there would be no need for charities.
This isn’t to say Doerr doesn’t do considerable good as a philanthropist and isn’t a positive influence on potential donors. For example, a middle-class professional friend tells me he has changed the way he gives in order to get more bang for his buck: “I used to give a lot of small donations, twenty-five here, a hundred there, which got lost in the administrative noise of receiving organizations. Now, I have shifted my strategy to concentrate my giving on one or two organizations where I can make a difference.” This makes sense for relatively small givers, and I am considering following suit myself. But in Aristotle’s view, doing so will increase the effectiveness of my giving, not its virtue.
Moreover, thinking about philanthropy as a form of venture capitalism obscures the fact that the neediest causes almost always are the least efficient in market terms. When basketball star Dikembe Mutumbo was interviewed in 2000 by CBS’s Ed Bradley, he described himself as a businessman; when Bradley asked him how he justified building a hospital in Zaire in terms of business efficiency and return, Mutumbo shook his head and explained there’s “a difference between a business proposition and a gift.” That difference is enormous and fundamental, and it is blurred by the New Philanthropists to the point where the act of “venture giving” may not be virtuous.
Clearly, there is no virtue in throwing money away, but should charity be based on measures of cost effectiveness? The Gates Foundation’s boast that it had only 25 employees compared with 525 at the Ford Foundation could be irrelevant. For example, charity A’s efforts to distribute free movie tickets to the poor may be more cost effective than charity B’s soup kitchen, but should we therefore choose to fund the former over the latter? Although economic measures may be appropriate in evaluating charitable activities, in many instances they are neither the relevant nor the primary metrics that should be used. Investments in medical research are particularly difficult to justify using conventional metrics. Billions have been spent, so far without great results, on finding cures for cancer. Though these investments have not been particularly effective, few would argue they were wasted or shouldn’t continue to be made.
Using conventional methods and measures, it’s also difficult to demonstrate justifiable returns on most investments in education. It is hard to imagine a more inefficient institution than Stanford University if one uses common cost-effectiveness measures such as weighing the vast amounts of capital invested and the large number of faculty employed against such outputs as useful knowledge created and imparted. Because my own university would fare no better against those criteria, the example is offered only to show that some important activities are inherently inefficient, like opera companies and systems of mass transportation, and some are inherently ineffective, such as university research and teaching. But the inefficiency and ineffectiveness of such institutions doesn’t automatically equate with moral unworthiness.
In 2002, then U.S. Treasury Secretary Paul O’Neill inadvertently demonstrated the shortcomings of applying business metrics to the evaluation of social programs. O’Neill, who had demonstrated intellectual excellence as CEO of Alcoa, revealed himself to be morally tone deaf on a fact-finding trip in Africa with rock star Bono. According to the New York Times’ Bill Keller, “Mr. O’Neill talks about ‘productivity growth’ as the litmus test of whether aid is effective … [while] James Wolfensen, president of the World Bank, notes that Mr. O’Neill seems to be setting a standard of effectiveness we don’t even apply to our own government.” By insisting on applying inappropriate metrics to programs designed to help poor people in the underdeveloped world, O’Neill was blinded to the demonstrably positive results of such aid programs as education for girls, rural roads, birth control, clean drinking water, vaccination, and financial credit for farmers and small businesspeople. O’Neill was right, the United States has thrown billions away in aid to prop up corrupt dictators like Zaire’s Mobuto Sese Seko, but it doesn’t follow that smaller amounts given to NGOs and democratic governments for the activities cited above aren’t effective or efficient if the measure is improvement in quality of life of the poorest of the poor.
Ironically, efforts to market social programs in business terms are probably less efficient than old-fashioned moral suasion. As impulsive as Ted Turner’s $1 billion cash contribution to the United Nations may have been, it was efficient in that it involved no administrative overhead, it was big enough to make a difference, and it went directly to programmatic activities (instead of creating a monument to the donor). Most significant, the gift was effective in achieving Turner’s goal of “leverage.” It shamed other billionaires into giving big bucks to unpopular but worthy causes. One might also add that it was courageous for a business leader to support a cause as reviled by most of his peers as is the United Nations.
Moreover, Bono and Turner may be more effective than venture philanthropy’s marketing sorts in clarifying for potential donors the difference between a useful and a noble gift. Prior to 2000, Bill Gates, like many other high-tech multimillionaires, had not been deeply involved in philanthropy; to the extent he was, his charitable acts were limited to donating computers, and cynics say the funding of the Bill and Melinda Gates foundation coincided rather too neatly with the bad press he was receiving during the Microsoft anti-trust case. Doubtless, Gates had been a prisoner of his own background, believing the biggest problem in the developing world was “bridging the digital divide.” Now, thanks to educational efforts by Bono, Turner, and others, he sees the world through the eyes of those on the receiving end of his generosity and, in the process, has come to understand that the wretched of the earth need food, clothing, shelter, and, above all, health care before they need laptops. He now says he was “naïve—very naïve”—for having believed computers were the answer to the world’s most pressing social problems. Gates explains:
That’s why my wife, Melinda, and I decided to make polio eradication one of the primary goals of [our] Foundation. And once polio has been wiped out, just as smallpox was eradicated in 1977, we want to reduce or eliminate other diseases…. Toward this goal, we have made a $750 million commitment to the Global Fund for Children’s Vaccines and have joined with UNICEF, the World Health Organization, the United Nations, Ted Turner and many other organizations, individuals and governments who have made remarkable strides in this direction.
And Gates echoed Turner’s courage when, in 2002, he chose to address the World Economic Forum on the subject of “AIDS in Africa,” a topic not on the radar screens of the assembled business leaders, and not one likely to win him social approbation among those who had come to hear him pontificate on the miracles of the computer age. Moreover, Gates now publicly dares to ask executives the Aristotelian question: “Do people have a clear idea what it is like to live on $1 a day?”
It is obviously much easier to raise money for popular causes, for causes that benefit “people like us,” and for causes that are close to home than it is for causes that involve dreadful suffering and disease among exotic peoples in distant lands. When I lived in Aspen, I recall attending a successful fundraiser in support of a local community arts center. At the end of the event, in which hundreds of thousands were raised, the donors (most of whom had first homes in such metropolitan locales as Dallas, Chicago, and Los Angeles) congratulated each other on their public-spirited generosity in support of the art classes they took during their summer sojourns in the Rockies. Aristotle would ask whether those donors were as generous to arts programs in the depressed inner cities of their hometowns?
The Community Foundation of Silicon Valley now gives about $1 million a week to worthy groups in neighboring communities in Santa Clara and San Mateo counties. Although many of those recipients are quite needy, Aristotle would ask if they are needier than people who live a few miles farther north in depressed Richmond and central Oakland, let alone people in Africa, Latin America, and Asia? To address this difficult question in a disciplined way requires more than metrics of efficiency and effectiveness; it requires the very moral deliberation Mr. Hero says “doesn’t fly” in Silicon Valley.
The New Philanthropists’ metric of “risk assessment” may be a good measure misapplied. By adopting this measure, donors are looking to invest in charitable activities they think are likely to work, much as they would seek to invest only in new business ventures for which there is a reasonable likelihood of a return. Yet if one applies Aristotelian analysis to the activities of, say, the Ford Foundation, the most ethically sound projects it funds are ones that governments and other risk-averse organizations can’t or won’t fund precisely because they have a seemingly low probability of success. Often, the perceived undesirability of such programs is because they are controversial, unorthodox, or innovative approaches that are “wrong” only in that they haven’t been tried. Thus, the ability to engage in truly creative funding may be the strongest rationale for the tax-exempt status enjoyed by private charities.
Philanthropy becomes truly noble when donors put aside preconceived notions of what recipients need in order to help beneficiaries invent new ways to help themselves. Over a century ago, Jane Addams argued that noble philanthropists involve recipients in the definition of their needs. In The Metaphysical Club, Louis Menand describes how Addams formed her philanthropic philosophy while inventing the field of social work on Chicago’s mean streets:
She found that the people she was trying to help had better ideas about how their lives might be improved than she and her colleagues did. She came to believe that any method of philanthropy or reform premised on top-down assumptions—or more simply, that philanthropy is a unilateral act of giving by the person who has to the person who has not—is inefficient and inherently false.
To put this in perspective, we might note that practical activities like philanthropy rank below engaging in the life of the mind on Aristotle’s hierarchy of virtues. Why? Because he believes first things come first; in particular, one must have a clear understanding of a problem and a clear sense of what one should do to solve it before acting. The first order for philanthropists is to understand that the purpose of their actions is to create conditions under which others can realize their own potential. Aristotle argues that we cannot realize the potential of others for them; all we can do is remove the obstacles preventing them from doing virtuous things for themselves. Hence, the question a philanthropist must ask is the same one a virtuous politician or business leader must ask: “What can I do to provide conditions in which others can pursue happiness?” The philanthropist begins by asking what others need, indeed, by asking them what they need.
Asking such questions, Bill Gates discovered basic needs must be met before people can begin to achieve their potential. However, among many wealthy donors, there is little interest in the unglamorous charities that provide the basic food, clothing, and shelter poor people need before they can help themselves. Of the $212 billion that individuals, foundations, and corporations donated in 2001, I calculate that less than 20 percent went directly to programs addressing the basic needs of the poor. Instead, many wealthy techies gave computers to schools, an activity, which, if not self-serving, is morally unimaginative. And if the real problem is that kids can’t read, write, or do math, such gifts aren’t even particularly effective when compared with such alternatives as David Guggenhime’s tutoring program.
On the subject of charity, Larry Ellison suffers the confusion common to others in his neighborhood. For years, his pet project was giving schools inexpensive “network computers” he had been trying to sell to the world, unsuccessfully, as a business venture. Abandoning that, Ellison later told Time he could do more good investing in for-profit start-ups than he could through philanthropy. He asked rhetorically: “Which did more good for the world, the Ford Motor Company or the Ford Foundation? That’s an interesting question.”
It is also the wrong one because, although both Ford organizations have done great good, their purposes and methods cannot be equated. The act and consequence of giving (I do this for you, for your benefit, at my expense, and without expectation of thanks or reward) is completely different from the act and consequence of investing (I do this for me to make a profit, understanding that you, too, may benefit as an unintended consequence of my self-interested action). Thus, the good done by the Ford Motor Company, in terms of job and wealth creation and contributions to community tax rolls, is a consequence of its business activity, not its purpose.
For the record, Ellison heads BusinessWeek’s list of “cheapskates,” having given only 0.4 percent of his total wealth thru 2002, compared with Bill Gates’s 60 percent and growing. BusinessWeek asked Ellison, “Do you ever think about competing with Bill Gates in philanthropy?” He replied:
I’ve got very strong feelings about philanthropy. For one thing, it’s measured entirely the wrong way. Let me posit the following question: Mr. A, sitting over there, has given $10 billion to cure cancer. Mr. B, sitting over here, has given $10,000 to cure cancer. Mr. B cures cancer. Mr. A does not. Who is the biggest philanthropist? We measure philanthropy by how much money you waste. We measure the size of your donation, not results.
Ellison’s “strong feelings” on the subject are, apparently, neither channeled nor consistent. When asked by Time to explain his motivations for engaging in philanthropy, he answered, “Why do I do this? It’s a strategy for happiness. If you’re on the road to self-esteem, it’s not about accumulating as much money as possible. The best way is to help someone else.” According to Time, he thinks the best way to do that “is by making virtue profitable.” So he is now onto a new “philanthropic” venture, a large investment in a for-profit Israeli corporation searching for a cancer cure. When asked about his motivation, he answered, “What do you think is cooler, being the richest guy on earth or helping find a cure for cancer?” In contrast, one can’t help but think of Oracle’s late cofounder, Bob Miner, who created a foundation to give his money away anonymously.
It is time for us to go back to Aristotle’s ethical tests of philanthropy found at the beginning of this chapter. I leave it to the readers’ consciences to test the ethics of their own giving. Having done so myself caused me to rethink the motivations for my own small effort in support of the Fine Arts Museums of San Francisco and reluctantly to conclude that there is little virtue in the act. I give because I enjoy going to the museums and because, when I was young, I had spent many hours in rapt study of the Rembrandts then hanging in the old De Young Museum a few blocks from where I grew up. Over some 20 years, I never paid for the pleasure of entering the museum. So my donations are, in fact, payback and a self-serving investment to ensure that my daughters will have the same opportunity I enjoyed. Besides, I get a tax write-off, free admission, catalogues, opening night social galas, discounts at the museum store, and my name etched in the wall when the new De Young opens in 2005! So, after asking myself some of Aristotle’s probing ethical questions, my meager giving no longer feels so altruistic.
Negative examples not withstanding, there are numerous examples of virtuous philanthropists who satisfy Aristotelian criteria for virtue. I am particularly taken with Ann Bowers’s leadership of the Noyce Foundation. Bowers, a former human resources executive at Intel and Apple, created the foundation in honor of her late husband, Intel cofounder Robert Noyce. After considerable research and deliberation, she decided to focus the foundation’s efforts on the problems of public primary and secondary schools. Before she could become an effective donor, she realized she would have to make herself an expert in the educational field. Hence, for many years, she has devoted herself to understanding the underlying issues facing public schools; as a result, she now gives not only generously but wisely. Moreover, she gives more than money; she gives her time and herself.
Grants made by the Noyce Foundation are hardheaded; they go to support initiatives designed to improve academic achievement, and the programs supported are rigorously evaluated. The goals of the foundation reflect the scientific spirit and entrepreneurial risk-taking of Robert Noyce, the inventor of the integrated circuit. Noyce’s personal beliefs were Aristotelian: His ideal society was a democratic meritocracy, and he concluded that those who had the means to do so had a responsibility to provide the educational tools needed for economic opportunity, social mobility, and political participation in such a system. Noyce believed that having high expectations about the performance of people caused them to rise to the challenge. In educational circles, the Noyce Foundation is known for challenging conventional wisdom about public education and for supporting creative approaches to deep-seated problems. That few Americans have ever heard of Ann and the relatively large Noyce Foundation, with over $200 million in assets, indicates that she gives not for her sake but for the sake of others.
Finally, there is John Wood, a modern-day Carnegie of relatively modest means. Former head of business development in China for Microsoft, Wood took “early retirement” from the company in his late thirties and cashed out his stock options to the tune of some $2 million. In 1998, he created the Room to Read organization with the intent of creating libraries in some of the poorest parts of southern Asia, from India to Vietnam. By greatly leveraging his stock, Wood has raised enough money to date from fellow techies to start a thousand libraries, donate 500,000 books, and provide scholarships to over 900 poor girls. He also has enlisted others to join him in the effort, including his chief operating officer, Erin Keown Ganju, who says, “I fell in love with the work, and now I’m doing it full time for half my old salary.”