Amazon’s Prelude to Foundation
Nick is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In “Part 1: Behind the Smile in Seattle - Amazon a virtual no-show in hometown philanthropy” of the Seattle Times series, it appears that Amazon’s (NASDAQ: AMZN) greatest sin is not being “a no-show in hometown philanthropy,” but is having not spent money putting on a show.
The article begins with concerns that Amazon does not participate in the United Way mafia shakedowns – an organization that despite good-faith efforts in recent years still best epitomizes everything wrong with old school charity. It seems that one of Amazon’s cardinal principles in giving is the same as in its business: Cut out the middleman.
The United Way, a “value-added mutual fund for donors,” is overseen by Brian Gallagher who made $813,338 for overseeing (what one Seattle Times letter writer dubbed the “shotgun slush fund” of) $4.2 billion in revenue, whereas Amazon’s Jeff Bezos received a salary of $81,840 for managing $48.1 billion in annual sales.
Old school charitable operations like United Way are hastening the death knell of traditional corporate giving as the assurance they provide over donations to other charities begins to cost more than its worth – especially as local non-profits devise better forms of transparency and communication directly with donors. It should come as no surprise that Amazon would prefer a partner that is closer to its values (and margins). After all, the current corporate smile logo stresses getting from A to Z without having to stop at an intermediary (though critics might say the message is that Bezos would sell his mother if that’s what it would take.)
The Seattle Times also continues with its perception-is-reality logic by proclaiming, “In a city noted for its big-time philanthropy, Amazon has been a small-time donor.” While Bill Gates is a notable name around the world, unfortunately, the Northwest continues to compete with the Northeast for lowest charitable giving (incidentally, both blue bastions also vie annually for lowest church attendance).
While the Seattle Times tries to shame Amazon with tales of giving from other local companies like consumer cooperative Recreational Equipment Inc. – which caters to rich people who like to look poor – they fail to put into perspective that talking about charity is not the same as actual cash (let alone results). REI’s coop’rate philanthropy last year resulted in $275,000 in donations (.9% of their profit) – as well as a pay package that exceeded $2 million last year for their CEO who managed $1.8 billion in sales (up 8% from the previous year though with no increase in net profit). From information obtained from publicized recipients of Amazon’s corporate giving, it can be estimated that the millions Amazon gave is at least .5% of its annual profit – but unlike REI (which is part of the Trinity of Smug along with Whole Foods and Toyota Prius), Amazon truly does operate on very tight margins which means that an enormous amount of savings (which is to say customers’ discretionary income that could be used for charity) is conferred upon their customers (who are likely a much broader and less affluent clientele than REI’s).
However, the Seattle Times spends the bulk of its column comparing Bill Gates and Microsoft (NASDAQ: MSFT) with Jeff Bezos and Amazon without taking into account the relative time and amounts between the two – and, worse, the article completely missed the important distinctions that individual and corporate giving represent, not only to shareholders and employees, but to the stakeholders and beneficiaries.
Microsoft was founded in 1975, but Gates foundation v1.0 did not begin until 19 years later (incidentally, after his marriage in 1994). While Gates invested the corpus with a stock gift of $94 million (1% of his $9.35 billion net worth at the time), he did not begin his philanthropic pursuits in earnest until around 2000 when he and Melinda began feeding it additional money and attention.
Amazon was founded in 1994, and 7 years later (just after Amazon and his personal fortune took a major hit) Jeff Bezos started the Bezos Family Foundation with a stock gift of $2.4 million (.2% of his $1.2 billion net worth in 2001). In 2010, the foundation’s assets had grown to $45.7 million (.3% of Bezos’ $12.3 billion net worth then), and going into Amazon’s 18th year with an $18.4 billion net worth, the Bezos family is already ramping up to meet the Gates family benchmark.
In 2010, the Huffington Post charitably projected that Bezos’ net worth (84-96% of it based on his Amazon holdings) could pass $30 billion by 2015. Already Bezos’ giving (estimated currently at .5% of his net worth) includes pledges over $37 million to several scientific institutions as well as another $42 million for what some have described as the “kooky clock” (which should last much longer than the 6,000 years the Earth already has on its celestial meter). Then there is also the multi-million dollar investment – Bezos describes his private company Blue Origin’s space work as “hard nosed” but also “sentimental” and “inspiring” – spent raising an Apollo booster rocket from the ocean floor (which some speculate may be more than just nerd’bation on his part).
Perhaps Microsoft Co-founder Paul Allen’s Science Fiction Museum (part of the Gehry-designed Experience Music Project), which is next door to the Amazon campus in Seattle’s South Lake Union (just on the other side of the new Gates Foundation complex), can get in on Bezos’ next round of largesse and host the Apollo rocket engine in a Banksy-inspired collaboration with the adjacent Space Needle. Not only was the booster built by Boeing (just down the road from Amazon), but it would also be the neighborly thing to do as Bezos has already given $10 million as a house-warming gift to their newest neighbor on the other side of the Amazon campus, the Museum of History and Industry (MOHAI). Of course the Seattle Times chose to focus on Amazon not responding to a local organizer’s $500,000 request for a Fourth of July fireworks display.
Still, the interesting thing for investors about Jeff Bezos and Amazon’s giving is not so much the amounts or even the imaginative projects beyond traditional charity that they do choose to engage in, but the philosophy that underpins their approach to giving. In recent years, many corporations (in part due to tax and other regulatory pressures) have inaugurated increasingly convoluted schemes for their employee’s health care, pensions, and charitable giving. Much like highly-complex derivatives, the farther information is from the core item being manipulated, the less likely decisions are based in reality.
While the Seattle Times fails to see trends indicating Amazon is following its predecessors down the increasingly moribund corporate social responsibility path (and simply does not want to be bothered with an issue it sees far removed from its core activities), the article does articulate the Amazon philosophy on giving:
...[Bezos] made clear that he believes Amazon can do the most good by doing good business.
“Our core business activities are probably the most important thing we do to contribute, as well as our employment in the area,” Bezos told The Times.
...
“I'm convinced that in many cases, for-profit models improve the world more than philanthropy models, if they can be made to work.”Amazon…makes its philanthropic mark not by giving cash, but by “letting charities use its technology to raise money,” said Stacy Palmer, editor of the Chronicle of Philanthropy.
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Nick Slepko has no position in any company mentioned here at the time of publication. Motley Fool newsletter services recommend Amazon.com, and Microsoft. The Motley Fool owns shares of Amazon.com, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
