A billionaire couple who promised to give away most of their fortune a decade ago has made a new charity-related pledge: a commitment to donate 5% of their net worth every year.
Former Enron trader and hedge fund manager John Arnold and his wife Laura, a former lawyer, made the 5%-per-year promise as part of a “Give While You Live” campaign created by Global Citizen, an international group that fights extreme poverty.
The Give While You Live initiative “is about encouraging the world’s billionaires to do more in regards to charitable giving and to move forward with a sense of urgency,” said David Hebert, communications manager at Arnold Ventures, a philanthropic LLC founded by the Arnolds.
‘They should be deploying that wealth in a way that causes them to not be billionaires anymore.’
— Nia Wassink, co-host of the Nonprofit Reframe podcast
But the Arnolds’ new 5% pledge won’t do much to change the status quo when it comes to their charitable giving, and it won’t make much of a dent in their estimated $3.3 billion fortune. That riles some critics of elite philanthropy.
“They’re pushing in the right direction, but not significantly enough,” said Nia Wassink, a Colorado-based consultant for nonprofits and co-host of the Nonprofit Reframe podcast. “It’s laudable, but it’s just that they want to do that while maintaining their wealth and power, and that for me is what’s mutually exclusive. We can’t see real change and power shifting when the wealthy still hold the money and power.”
Billionaires have gotten richer during the pandemic
Billionaires and how they use their money for the public benefit have been under growing scrutiny in recent years. That spotlight has intensified as the pandemic made the life-and-death consequences of income inequality all too clear.
Some of the world’s wealthiest people have seen their fortunes swell during the global-health crisis. Most Americans — 72% — say it’s unfair that the rich got richer during the pandemic, according to a recent poll by Vox and Data for Progress. Some 47% said billionaires do a good job of giving away their money, while 33% said they don’t, the poll found.
Wassink says the inherent power imbalance between wealthy philanthropists who hand out money and nonprofits who rely on their largesse makes it harder for nonprofits — and society as a whole — to solve long-standing systemic problems. Dismantling that power structure could do more to benefit the public good than letting elite philanthropists continue to amass money and influence, she and other critics argue.
Even if they give away 5% per year, the Arnolds’ net worth would grow by another $974 million over the next 25 years, assuming a 6% rate of growth on their wealth, according to Wassink’s calculations.
‘Philanthropy is an important tool in addressing some of the systemic issues facing our country. Philanthropists can routinely take risks that elected officials often find too scary.’
— David Hebert, communications manager at Arnold Ventures
“They should be deploying that wealth in a way that causes them to not be billionaires anymore,” Wassink said of the Arnolds.
In response to criticisms of elite philanthropy, Hebert said, “Philanthropy is an important tool in addressing some of the systemic issues facing our country. Private-sector donors can, and often do, attempt to address critical issues that often go ignored simply because of political and/or reputational concerns. In short, philanthropists can routinely take risks that elected officials often find too scary.”
He added that the Arnolds “also recognize the fact that changes are needed in the country’s tax laws in order to maximize charitable giving and ensure that donors are not abusing the charitable deductions afforded to them.”
The couple has already been giving away more than 5% of their net worth annually for at least the past several years, according to the Chronicle of Philanthropy.
They often rank among the largest individual donors to charity in the U.S. In 2020, they earned the highest possible score on a Forbes magazine ranking of billionaire philanthropists, because they had given away 20% or more of their wealth in their lifetime.
In contrast, Amazon
founder and CEO Jeff Bezos and two heirs to the Walmart
fortune got the lowest score, because they had given away less than 1% of their wealth at the time.
The Arnolds have funded efforts to lower drug prices and end mass incarceration
The Arnolds fund a wide variety of causes, using a few different entities. Arnold Ventures, an LLC , oversees the Laura and John Arnold Foundation, the Action Now Initiative, and the Arnolds’ donor-advised fund.
Using what they’ve described as a “data-driven” and evidence-based approach, the Arnolds have funded efforts to lower drug prices, end mass incarceration, and make tax policy more equitable, among many other issues.
“The Arnolds approach philanthropy as a good trader would: by spending a lot of time doing research, evaluating data, and then making a handful of big bets, regardless of the level of risk involved,” Philanthropy News Digest once wrote.
‘Many charities are in danger of not surviving the pandemic’
The Arnolds’ interests also include advocating for changing federal laws related to charitable giving. They are part of a coalition of philanthropists and private foundations behind the Initiative to Accelerate Charitable Giving, which wants to speed up how fast philanthropists move their money into the hands of nonprofits.
The group wants to put deadlines on how long wealthy donors can keep money in donor-advised funds. At the moment, donors can put money into DAF accounts — an increasingly popular charitable giving tool — and receive an immediate tax deduction.
But there’s no deadline for when that money must leave the DAF account and be handed over to a working charity. (Others argue that there’s no need to speed up giving; they point out that DAFs already give out 20% of their assets annually on average.)
“Right now, many charities are in danger of not surviving the pandemic,” John Arnold said in a statement this month when he and his wife announced their 5%-per-year pledge. “Yet, more than $1 trillion promised to them remains warehoused in tax-free investment accounts. America’s charities cannot afford to wait for some larger crisis to arise. Business as usual is simply not good enough.”
In a separate interview, Laura Arnold said donors don’t intentionally “warehouse” their money in DAFs. “This doesn’t happen because you’re a bad person, but because most people have day jobs and just don’t get around to it,” Arnold told the Houston Chronicle. “There are tons of good intentions, but not enough attention to the sense of urgency we should all feel.”
The sometimes elusive, noble goal
In 2010, the Arnolds signed the Giving Pledge, the initiative founded by Warren Buffett and Bill and Melinda Gates to encourage billionaires to publicly promise to give away the majority of their wealth either during their lifetimes, or in their wills.
Meeting that noble goal has proved elusive for some Giving Pledgers, in part because their fortunes grow so fast that it’s difficult to give away a significant share of their wealth in a timely manner.
For example, MacKenzie Scott, the former wife of Jeff Bezos, was among the top donors of 2020, handing out some $6 billion directly to nonprofits, but she ended the year $23.6 billion richer.