Zuckerberg's new charity warrants close examination

Is Mark Zuckerberg pulling our strings?

Is Mark Zuckerberg pulling our strings
Credit: Stephen Glasskeys

As you've probably heard, Mark Zuckerberg recently announced he's going to give away 99% of his Facebook shares. On the surface the announcement presents a nice narrative: Zuckerberg selflessly donates vast amounts of money to charity. It's a modern version of the classic "hooker with a heart of gold" story or "bad guy makes good" O. Henry short that delighted your grandparents.

But now it's time to leave Nostalgialand, wipe away sepia-tinged tales of evil-doers-turned-good and inject a dose of reality, because this news doesn't follow the synaptic firing pattern most of us normally associate with Mark Zuckerberg's brain. And if tech pundits or Facebook users sound skeptical about anything Zuckerberg says it's understandable, especially given his famously duplicitous nature.

So what gives? Call me cynical, but when the subject concerns any charity associated with Facebook or Mark Zuckerberg, I too am skeptical, because history has shown us Facebook's charities usually benefit Facebook the most, and so I've been waiting for the metaphorical "other shoe" to inevitably drop.

And dropped it has. According to this New York Times blog post, Zuck's new charity is in reality a limited liability company he created to allow him greater control of Facebook shares, served with a tasty side of less disclosure:

Tax experts and others have focused their ire on how Mr. Zuckerberg and Dr. Chan are technically not giving their shares to charity, but instead are creating a limited liability company that gives them more control over how and what they do with the shares.

To be fair, Zuckerberg countered with his take on the story: "[If] we transferred our shares to a traditional foundation, then we would have received an immediate tax benefit, but by using an L.L.C. we do not. And just like everyone else, we will pay capital gains taxes when our shares are sold by the L.L.C"

Notice he didn't spend much time talking about that magic word disclosure. For Zuck, this is highly unusual. This is the guy that's always touting the wondrous benefit of sharing your life with others (Zuck-speak for advertisers) on Facebook.

Who knows Zuckerberg's true intentions regarding the new charity. It's not entirely out of the realm of possibility that his motives and intentions are genuinely honorable. But if Facebook's past activities in this arena are any indication about the types of charity that will be supported by the new company (e.g. charities that primarily benefit Facebook), then it needs watched and eagle-ly eyeballed by regulators on a frequent basis.

Disguising a profitable corporation as a non-profit charity isn't new. Billionaire Howard Hughes popularized the trend with his non-profit Howard Hughes Medical Institute (HHMI), blazing a trail for other ultra-wealthy technocrats to follow.

Today, HHMI is known for facilitating scientific discoveries and useful life-saving research, but it wasn't always this way. I leave you with an interesting Wikipedia snippet describing HHMI's early years -- back in the days Hughes was alive, fully in-control:

Despite its principles, in the early days [HHMI] was generally viewed as largely a tax haven for Hughes' huge personal fortune. Hughes was the sole trustee of HHMI and transferred all his stock of Hughes Aircraft to the institute, in effect turning the large defense contractor into a tax-exempt charity.

Sound familiar? Let's hope not, and let us also hope Mark Zuckerberg decides to take the path less traveled.

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