“…A rich man’s a thief or a philanthropist.
Is one a crusader or ruthless invader?
It’s all in which label is able to persist…”
- Stephen Swartz, “Wonderful,” from the musical, Wicked

As an avid musical fan, those lyrics popped into my head when I read that Mark Zuckerberg and his wife, Priscilla Chan, would be donating 99% of their Facebook shares to charitable causes over their lifetime. After an initial warm reaction to the generous pledge, the specifics of their plan began generating criticism. Rather than creating a charitable foundation, they are “donating” their shares to the Chan Zuckerberg Initiative, a for-profit LLC. They chose this structure so they could “pursue our mission by funding non-profit organizations, making private investments and participating in policy debates – in each case with the goal of generating a positive impact in areas of great need." Critics are correctly pointing out that this structure does not require the public accountability required by a charitable foundation or nonprofit organization.

However, as both a nonprofit executive and an impact investing practitioner, I’m withholding judgment. Nonprofit accountability mandates do not necessarily mean funds will be used in the most effective way to enact change, and ongoing public scrutiny in our interconnected world is increasing transparency and accountability expectations on all entities. With limited public and charitable resources, it is critical to invest in the development of business models that could radically address our challenges.

What label is able to persist? That will be up to the Chan Zuckerberg Initiative – do they make disclosure of their strategies and investments, successes and failures, a critical part of their approach? That will also be up to the impact investing community – do we effectively engage and hold the Chan Zuckerberg initiative accountable as they help to mainstream for-profit investing as a critical element of a change-making strategy?

by BONNY MOELLENBROCK, IC Executive Director, Durham

“At this level of wealth, being so young and open to innovation, its no surprise Chan and Zuckerberg chose a mechanism that maximizes their options for how they fulfill their charitable commitment.” - Teresa Rodgers

My day job is running a handful of private foundations and advising clients on their charitable gifting. I do this through my company, harp-weaver LLC. So you can probably understand my piqued interest when I read about the Chan Zuckerberg Initiative LLC. I was intrigued by Chan’s and Zuckerberg’s choice of a limited liability company versus a private foundation, trust or any other “traditional” charitable gifting vehicle.

We all probably read about Chan’s and Zuckerberg’s commitment to giving away most of their wealth to charity – an estimated $46 billion (see their Giving Pledge letter and browse others’ at http://www.givingpledge.org). When they made the announcement following the creation of the LLC in November of 2015, many tax experts weighed in and many of my peers in philanthropy were a bit skeptical.

While owners of an LLC do not receive a charitable tax deduction when donating assets; tax is not a motivating factor at this level. Flexibility and control appear to be driving this vehicle decision. If you look at things like ownership, management, investments and intention of activities, an LLC provides a lot of flexibility versus a private foundation. For example, a private foundation may not hold a controlling interest in a business enterprise and there are prohibitions against “jeopardizing investments,” while an LLC can invest in virtually any legal investment. Also, a private foundation must be operated purely for charitable purposes whereas an LLC’s activities are unrestricted. Another big area of consideration is political and advocacy activities. A private foundation is basically completely prohibited from engaging in these types of activities whereas an LLC can make contributions within the boundaries of campaign finance laws.

The selection of a charitable gifting vehicle is mainly driven by “how” you are going to fulfill your charitable intentions. At this level of wealth, being so young and open to innovation, its no surprise Chan and Zuckerberg chose a mechanism that maximizes their options for how they fulfill their charitable commitment.

by TERESA RODGERS, IC Member since 2014, Philadelphia

“This initiative is another great step towards integrating values in all investment decisions and addressing needs in the world more effectively and with greater dignity for those being served.” - Ed Briscoe

I am greatly encouraged by the Chan Zuckerberg Initiative. I believe that both pursuing profit with no other value considered and addressing societal needs only through charity are both prone to error. Many of the world’s toughest problems will need all forms of capital to be effectively addressed, and he LLC can strategically deploy charitable dollars, investments targeting concessionary returns, or market rate investment.

With a stated 10, 20, 50, or even 100-year horizon, the LLC will be able to offer very patient investment capital otherwise unavailable in the market. For too long, quarterly earnings and three-year exits have been the primary drivers of many investment decisions. This initiative is another great step towards integrating values in all investment decisions and addressing needs in the world more effectively and with greater dignity for those being served.

by ED BRISCOE, IC member since 2014, Denver

“Mark Zuckerberg has already radically changed the way younger generations socialize online, and with this announcement can now inspire change in the ways we chose to give back.” - Lisa Hodges

I believe the true groundbreaking potential of this announcement is in moving impact investing further into the mainstream. Mark Zuckerberg has already radically changed the way younger generations socialize online, and with this announcement can now inspire change in the ways we chose to give back. Millennials have already begun demanding that their investments align with their values, and it’s high time that access to high-impact financial products matches that demand and becomes fully democratized. When every person- whether of significant means or not- turns to impact investing as a central part of their financial planning and philanthropic endeavors, then that will really be something to celebrate.

by LISA HODGES, IC member since 2015, New York