Is “Philanthro-Capitalism” The Same As Philanthropy?

Billionaire philanthropy may be growing, but it is also giving rise to a new trend that could change the face of charitable giving.

In December, the birth of their first child prompted Facebook CEO Mark Zuckerberg and his wife, Priscilla Chan, to announce the Chan Zuckerberg Initiative, in which they promised to donate to charitable causes 99% percent of their Facebook shares—currently worth more than $45 million—over the course of their lives.

The initiative’s mission is to “advance human potential and promote equality in areas such as health, education, scientific research and energy.” But it has come under scrutiny because it was set up as a limited liability company (LLC) rather than a nonprofit.

The Chan Zuckerberg Initiative’s LLC structure indicates a wider trend that is emerging in the charitable sector, and that is more significant than the announcement of the initiative itself, notes Benjamin Soskis, PhD, a fellow at the Center for the Study of Nonprofits, Philanthropy and Policy at George Mason University in Washington, DC. “There is a blurring of boundaries between for profit and nonprofit,” he explains. “This is a crisis moment as it is becoming harder to talk about [what constitutes] charity. This move could portend the trend away from establishing foundations.”

The issue at play, according to Soskis, is that with for-profit philanthropic foundations, the public typically knows where the money is being invested. However, as corporations gradually shift toward “philanthro-capitalistic” endeavors such as LLCs, where the money goes is not disclosed.

“To achieve social good, these types of ‘impact investing’ or for-profit organizations can take resources away from basic social service providers, and the public should be wary of them,” Soskis explains.

Using an LLC structure is not new for billionaires engaging in philanthropic endeavors. Steve Jobs’s widow, Laurene Powell Jobs, structured her organization—Emerson Collective—as an LLC, as did Pierre Omidyar, founder of eBay, who started the Omidyar Network, which invests in for-profit and nonprofit companies. Soskis says the blurring of lines between for-profit and nonprofit will continue both at the corporate and individual levels, assuming the public becomes accustomed to it.