Insights Preslav Tonkov

Just giving? Philanthropy in the 21st century

Philanthropists of the world, unite!

In the late 19th century, John D. Rockefeller made PR history by hiring the famous press agent, Ivy Lee, to change his public image from robber baron to caring philanthropist. Lee encouraged Rockefeller to publicise his philanthropic bent instead of making his charitable donations anonymously. Before long, this strategy — which effectively “branded” Rockefeller, and implicitly his commercial endeavours, as benevolent and caring — was emulated by other business magnates. This is how strategic philanthropy was born.

Response? On Sunday, during a commencement address at Morehouse College, billionaire Robert F. Smith announced that he will wipe out student debt for the entire 2019 graduating class at the university, prompting cheers and more than a few tears from shocked listeners to his speech. The gift is worth an estimated $40 million according to the Associated Press, and Smith said his family would pay off the loans through a grant. Is this a positive move by an altruistic philanthropist or a reputation-enhancement exercise?

Impact? Smith appears to stand apart from his class of contemporary ultra-wealthy individuals. His donation is novel because it was given directly to students rather than to institutions such as universities or non-for-profit organizations. In 2017, Bill and Melinda Gates and Warren Buffet signed on to the Giving Pledge thereby publicly committed to giving the majority of their wealth to philanthropy. Similarly, Michael Bloomberg donated 1.8 billion US dollars to Johns Hopkins University.

Good intentions aside, Smith is clearly making a political statement because instead of donating money to the college, he is giving it away to indebted students. He also urged Morehouse alumni to follow his footsteps and take care of “their own community”. Circumventing institutions and establishing direct relationships of patronage feels like a form of clientelism rather than a modern-day version of noblesse oblige.

It is clearly necessary to question the societal impact of this donation and the model it creates for the exploitation of power. Smith did not consider the relative indebtedness of students and instead opted for a one-size-fits-all approach. It is not clear that all students had similar debts and indeed the mechanism by which they will receive this gift has not been clarified.

We are aware that trust in all institutions is low but side-stepping them may not be the answer.  Noble motives met with the right execution could achieve the desired results. A failure to do so creates an opportunity for the abuse of power which business leaders must avoid.