The Chan Zuckerberg Initiative Isn’t Really A Charity, But That Might Be OK

Business / Editorial

If I seem a bit pessimistic about the recent public vow from Mark Zuckerberg and Priscilla Chan, it’s only because Facebook hasn’t done a whole lot to gain my trust. In an open letter to their newborn daughter, new parents Mark and Priscilla penned a letter expressing their hopes that they’re able to leave her a better world than they were left. On the Facebook post sharing this letter to his followers, Zuckerberg made his philanthropic intentions known, saying that he and his wife would donate 99% of their Facebook shares — currently to the tune of roughly $45 Billion — over the course of their life.

First things first, they haven’t actually donated anything yet. That’s not to imply that they won’t, in fact I truly believe that they will, as Zuckerberg and Dr. Chan have been very generous with their donations to charitable causes in the past. But there haven’t been any giant novelty checks paraded around, or other lavish ceremonies transferring any monies from Zuckerberg to his new charity entity.  That’s another thing worth mentioning, the entity that has been set up to receive the potential influx of cash isn’t exactly a charity. Charities and non-profits have rules and regulations stipulating how they can and cannot spend money, and how exactly any profits can be invested. As first confirmed by Buzzfeed and later corroborated by Ars Technica, The Chan Zuckerberg Initiative is actually an LLC, or Limited Liability Company.


Image Courtesy of ArsTechnica

I admittedly was a bit nervous (as were plenty of other people) after learning that the Chan Zuckerberg Initiative is actually a for-profit entity. The paranoid parts of me started to perk up, especially when I started seeing references to endeavors tantamount to lobbying as part of this charity effort. And while an excellent write-up by the New York Times does even specifically mention lobbying, the rest of the reasons given for operating as an LLC make sense.

By using a limited liability company instead of a nonprofit corporation or foundation, the Zuckerberg family will be able to go beyond making philanthropic grants. They will invest in companies, lobby for legislation and seek to influence public policy debates, which nonprofits are restricted from doing under tax laws. A spokeswoman for the family said that any profits from the investments would be plowed back into the Chan Zuckerberg Initiative for future projects.

We’ve already talked about how no money has changed hands at this point, and it does also seem that there’s no timetable for the complete 99% transfer that was mentioned in the original letter. That might not be a bad thing either. Zuckerberg mentioned that 99% of their stock was currently worth around $45 Billion. If Facebook continues to make money (and as of right now there’s no reason to think that they won’t) that 99% could be worth far, far more in the future. The NY Times also confirmed that the initial rollout should be slow, with Zuckerberg donating no more than $1 Billion for each of the next three years in order to ensure he retains control of Facebook “for the foreseeable future.”

With all that said, the ball is now squarely in Zuckerberg’s court. He’s made his announcement, now we’ll just have to wait and see how he backs it up. It’s easy to be pessimistic about the whole thing but I think it’s probably better to remain hopeful. Let’s see how they pull it off, $45 Billion could do an awful lot of good.

To Top