Gates Foundation changes could bring transparency, accountability

Reports that Bill Gates and Melinda French Gates are discussing leadership changes for their foundation — including adding a board and outside directors — in the wake of their divorce announcement have renewed criticism about the organization’s governance model.

Currently, the Bill & Melinda Gates Foundation has three trustees: Gates, French Gates, and Warren Buffett, the billionaire CEO of Berkshire Hathaway who pledged much of his fortune to the foundation in 2006. The trio is responsible for all final decisions concerning the foundation’s grants and other charitable giving, while CEO Mark Suzman oversees day-to-day operations.

Philanthropists like Gates who make their wealth in the tech industry often prefer more streamlined decision-making. However, such concentrated leadership is unusual, particularly for a charitable organization of the Gates Foundation’s size, with a staff of about 1,600 and a $49.8 billion endowment as of 2019. While this structure may have worked at the organization’s outset, family foundations typically begin to look beyond the donor family and consider outside board members as they grow.

Philanthropy experts say changing the Gates Foundation’s governance could bring much-needed accountability to the world’s largest private foundation, whose influence extends far beyond its grant making. It’s also an opportunity for an organization with a stated mission to fight poverty, disease, and inequity to elevate the voices of people of color and those from diverse backgrounds at a time when traditional philanthropy has come under intense scrutiny, they say.

Gates and French Gates, who married in 1994, are co-chairs at the foundation, which was established in 2000. The only other person who has served in a co-chair role is Gates’ father, William H. Gates Sr., who died last year.

But French Gates is seeking to change the governance structure following the divorce filing, seemingly as a means of ensuring the couple’s personal split doesn’t affect the foundation’s work, The Wall Street Journal first reported last week.

Initially, the Gates Foundation told Devex that no changes to Gates’ and French Gates’ roles or the organization were being considered. It confirmed last week that changes are in fact underway.

“As I told foundation employees last week, I’m actively discussing with Bill and Melinda steps they and Warren might take to strengthen the long-term sustainability and stability of the foundation given the co-chairs’ divorce,” Suzman said in a statement Thursday.

No decisions have yet been made, and the discussions are part of “their prudent planning for the future,” he said.

Why change is needed

An overhaul of the foundation’s governance structure is long overdue, said Maribel Morey, a historian of U.S. philanthropies.

Adding a board could increase transparency and accountability within the organization — with the idea that “the more people you have involved, the more you feel as a group that you have to justify ideas to each other,” she said.

By including more people in the decision-making process, the foundation would likely have to create more documents and reports tracking how and why it makes decisions — “which is different when it’s only two of you who are married,” she said. “You don’t have to create a report for someone who shares the same bed with you.”

The foundation does publish an annual report and maintains a searchable database of its grant making. But creating more paper trails could lead it to consider making more reports available to the public, Morey said. More visibility into its internal decision-making process might help prospective or current grantees better understand why some areas are funded over others, she said.

It’s still unclear how much the divorce might reshape the Gates Foundation. The organization won’t be divided, since it's a separate entity from Gates’ and French Gates’ personal wealth. But in its current form, the foundation’s direction and giving are subject to the whims of its major donors, said Thad Calabrese, an associate professor of financial management at New York University’s Robert F. Wagner Graduate School of Public Service.

“When you have more people on the board, you do start to move away from that, because you have more voices and more opinions on how that money might be directed,” he said.

The flip side could be that the foundation ends up providing smaller grants overall, he said, because it might place less emphasis on the areas of particular importance to Gates, French Gates, and Warren while putting more emphasis on spreading the wealth to more grantees, according to Calabrese.

Adding diverse voices

Morey is among those who would like to see the Gates Foundation better reflect global needs and the communities its grantees serve. The vast majority of its spending goes to global health and development work in low- and middle-income countries — but its chief decision-makers are three of the world’s richest people, all of whom live in the U.S.

“So, the board needs to be globally diverse [and] needs to be diverse across class, racial, gender lines,” she said.

Morey said she wants the foundation to bring on people who might be willing to challenge the Gateses and some of their beliefs and approaches — for example, the position Bill Gates has traditionally taken against sharing intellectual property for medicines, including COVID-19 vaccines.

The Gates Foundation has not yet signaled who could be under consideration for board or director positions. And the outcome of a governance change will largely depend on who is selected and how much power they have, Calabrese said.

There have been cases where foundations that had been considered “traditional” or “staid” responded to criticism by diversifying, which led to adjustments in their funding priorities, he said.

As an example, Calabrese cited the Ford Foundation’s selection of Darren Walker as its president. Walker, who is Black, co-founded the Presidents’ Council on Disability Inclusion in Philanthropy — a coalition of 17 foundations — and was a founding member of the Board Diversity Action Alliance. He has held several other leadership positions, including previously serving as vice president at The Rockefeller Foundation.

The Ford Foundation’s website notes that Walker was educated exclusively in public schools and was a member of the first Head Start class in 1965. He “has a different background than many folks in philanthropy,” and he’s made different priorities, Calabrese said.

That’s what’s possible when you have a broader mix of people at the top of philanthropic institutions, he said. However, “a cynical outcome could just be that it’s used as a way to insulate the foundation from those charges [of a lack of diversity] going forward, but nothing really changes,” he added.

What the philanthropic sector is watching

The Gates Foundation has maintained a small leadership team even as its grant making has spanned new sectors — it now has more than three dozen strategies — and as its leverage over everything from government spending for official development assistance to the global COVID-19 response has grown.

“The nature of a board overseeing an enormous institution that is … so concentrated in a small set of individuals is a reflection of the ways in which philanthropy now is increasingly fueled by the preferences and interests and prerogatives of individual donors,” said Ben Soskis, a senior research associate in the Center on Nonprofits and Philanthropy at the Urban Institute, which receives funding from the Gates Foundation.

Family foundations established to exist in perpetuity, such as The Rockefeller Foundation, have expanded their governance over time. But the Gates Foundation was set up with a sunset clause, meaning all assets must be spent within 20 years of the deaths of Gates and French Gates.

The Gates Foundation represents more of a West Coast style of foundation than an East Coast one, Morey said. Whereas older, East Coast foundations — such as the Ford Foundation and The Rockefeller Foundation — have boards in place, many on the West Coast are started by founders with tech backgrounds who tend to prefer leaner organizations, with the idea that they can move faster, similar to a startup.

That might be what Gates, a co-founder and former CEO at Microsoft, initially envisioned. But the Gates Foundation has grown to reflect more of the traditional model of East Coast philanthropy without adjusting its leadership, Morey said.

Accountability can come from many structures — not just the board — said Nick Tedesco, president and CEO at the National Center for Family Philanthropy, who previously helped launch the Giving Pledge at the Gates Foundation.

“There are models where concentrated power has been democratically distributed through the use of other mechanisms such as advisory committees, robust staff with a diversity and depth of experience, and accountability from the public,” he said.

But typically, he said, NCFP sees boards grow and diversify as foundations mature.

As more high net worth individuals structure vehicles for their philanthropy, they are sure to watch what steps the Gates Foundation takes to address its governance problems, since many other private foundations with living donors will face similar challenges. Increased democratic accountability is the main issue confronting contemporary philanthropy, Soskis said.

“The Gates Foundation is important in the work it funds, but it’s also important in its public presence and stature,” Soskis said. “It’s operating on a stage which is important for the foundation itself but I think even more broadly for defining philanthropic norms across the sector.”