Mark Zuckerberg, Facebook founder and CEO, has sold shares in the company worth $95 million before tax to donate to charity.
The money will be used as the first round of funding for the Chan Zuckerberg Initiative, a philanthropic venture announced by the Facebook founder and his wide Priscilla Chan in December. When the announcement was made, the couple promised to give 99% of their Facebook fortune to good causes, a sum that could reach around $45 billion in their lifetimes, writes Davey Alba for Wired.
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More transparency needed over Chan Zuckerberg Initiative
On paper it sounds like a great idea, but there has been no word on how the funds will be distributed yet, let alone any actually distribution.
.“Covering a public announcement of do-gooding, with no follow-up on how he actually allocates the millions of dollars, just burnishes his reputation,” says Rob Reich, co-director of the Stanford Center on Philanthropy and Civil Society. “Don’t call this do-gooding yet. Call for more transparency.”
The stock sale comes at a time when Facebook shares have been rallying. Investors are full of confidence about the social network’s ability to generate revenue. However at the same time Zuckerberg is changing the structure of the stock in order to remain in control of the company even after giving some away.
Facebook founder to keep control of company
Shareholders recently approved a plan to restructure the stock which will allow Zuckerberg to maintain control even if Facebook issues more stock and he gives away his personal shares.This was accomplished by creating new “Class C” shares in the company that do not have any voting power. The majority of Zuckerberg’s stock is “Class B,” which have 10 votes each.
“I’ll be able to keep founder control of Facebook so we can continue to build for the long term, and Priscilla and I will be able to give our money to fund important work sooner,” Zuckerberg said at the time.
Zuckerberg has also pledged to give away no more than $1 billion in Facebook shares every year until 2018. At that rate it will be a long time until his philanthropic pledge is fulfilled.
Chan and Zuckerberg have said that they want to focus their philanthropy on “personalized learning, curing disease, connecting people and building strong communities.” The Initiative has also made its first investment in Andela, a startup which educates engineers in Africa so they can get jobs in the tech world.
What will the philanthropic foundation achieve?
As it stands Zuckerberg benefits from the existence of the Chan Zuckerberg Initiative. “Foundations are one way to generate tax benefits from wealth, as well as social and political influence,” says Santa Clara University School of Law corporate finance professor Stephen Diamond.
According to Reich, it is “legally incorrect” to claim that this stock sale is going towards philanthropy. The Chan Zuckerberg Initiative isn’t a non-profit, it’s an LLC.
Zuckerberg says that the structure of the company affords greater flexibility, but Reich points out that with an LLC the Facebook founder can do “anything he wants with the money, including political advocacy work, electioneering, and investment.”
It will be interesting to see how Zuckerberg does use the money that he claims will be used for philanthropic ends. So far he has given little away, but the public should take a keen interest in seeing what comes of his grandiose promises.