Mark Zuckerberg COVID-19 Donation.

There has been some recent controversy on Twitter and Instagram regarding a donation of $25 Million made by the Chan Zuckerberg Initiative, a charity created by Mark Zuckerberg (Facebook founder and CEO) and his wife Priscilla Chan. This donation was made to a Therapeutics Accelerator which aims to speed up the development of a COVID-19 vaccine. It was created by the Bill & Melinda Gates Foundation, along with MasterCard and Wellcome. (See link for more details)

People have scrutinized this donation, contrasting it to his net-worth saying that its the equivalent of an average person donating a few dollars. It is not the first time that there has been criticism for a donation made by the top 1%, in late 2019 Jeff Bezos came under fire when he donated $100 million to fight homelessness. People were posting on social media, as well as some published articles on how this should not be considered charity when compared to his net-worth. With such straight forward logic it is hard to disagree, especially when a simple google search will tell you that someone like Jeff Bezos has an estimated net worth of $119.9 Billion to date. However, like most things these scenarios are not as straight forward as some believe.

To begin with, I would like to define two business terms which are critical to understanding the full picture.

Liquidity: “Liquidity refers to the ease with which an asset, or security, can be converted into ready cash without affecting its market price.” (See link for more details)

Rule 10b5-1: Established by the SEC in 2000, this rule governs trading by corporate executives to help avoid insider trading accusations. One particular section prevents CEO’s from selling large amounts of stock, confining them to buying or selling stocks on a scheduled basis in specified amounts. (See link for more details)

As with all of the top 1%, including the upper middle class the majority of their wealth is invested in stocks. In the case of Mark Zuckerberg it is estimated that about 96% of his fortune is comprised of Facebook stock, which in 2017 equated to $67.6 Billion (Link). The rationale to own so much stock is to ensure that he has control over the company. He currently owns 12.18 Million Class A shares and 365.72 Million Class B shares, giving him 53% of the voting rights. With so much wealth tied up in stocks, Mark Zuckerberg has around $2.204 Billion left that is not governed by Rule 10b5-1. Now for the sake of this scenario, I am going to assume that anyone criticizing such donations would not be willing to sell their house or investment properties in order to give to charity. Applying this same logic to Zuckerberg, his real-estate portfolio approximates $401.8 Million (Link) leaving $1.802 Billion. All in all this means that a donation of $25 Million is about 14% of Mark Zuckerbergs liquid assets. To put this in context, someone with a salary of $138,700 a year has approximately $18,700 sitting in their bank account (Link). Meaning that if they were to give 14% to charity they would have to give $2,618 bringing their account down to $16,082. Granted, these are not jaw dropping figures and I don’t think someone in this situation would win a Nobel Peace Prize. But from a numbers standpoint this charitable act does not seem like something to scoff at.

Another aspect that I think should be considered is the intent. In having so much wealth, there immediately comes a sense of responsibility since just one donation of such a sum could have very large impacts. In this case I can happily quote uncle Ben, “With great power comes great responsibility”. Therefore with these kinds of donations which have true intentions, dollar figure comes second to the amount which is actually required. The structure of the Therapeutics Accelerator is intended to be used as a distributor of money in order to more effectively fund promising research (Link). In terms of the information that has been made available, $25 Million could simply be the remaining amount needed.

Many of our societal problems are so ingrained within our system that just throwing money at them would be a lost cause, requiring a prudence on the 1% to strategically effect change that will last. I agree that there is a lot of work to be done in order to improve and progress society, and that some of the wealthiest among us do little more than sit in their ivory towers. However, the position I am taking on this topic is that before I criticize someone else’s generosity, I should look into the facts first.

I appreciate you reading my two cents on the matter, let me know what you guys think! I would really appreciate feedback and any perspectives that you might have.

Louis.