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Thursday, November 26, 2009

Submitted by: Editor

Original Gates Foundation Proves Non-Profit is a Misnomer

The new 900,000 sq.ft. headquarters for the Bill and Melinda Gates Foundation is scheduled to be completed in April of 2011 and will cost an estimated $500 million.

We can't quibble with the fact that Bill Gates and his wife are among the most charitable people on the planet. Not only have they given philanthropy a massive boost in recent years, but they are personally donating $350 million of their own funds to help pay for construction costs of their new eco-friendly, Gates Foundation, Seattle headquarters. The question needs to be asked: "Why do they need so much space?"

The foundation employs 800 people. In terms of square footage, the new buildings will provide each employee with 1,125 sq.ft. of personal space. The general rule of thumb in business is to allow for approx. 100 - 200 sq.ft. per person. Bill and Melinda will have some very comfortable employees. This kind of expansive space will bring interoffice Nerf warfare to a whole new level.

Non-profits, no matter what their tax status may be, are not non-profit. The problem is that the "non-profit" tax status has become a haven for tax cheats and organizations whose underlying motives are not always meant to benefit the general populace. The 800 people who work for the Gates Foundation all draw salaries, and I'd be willing to bet they get paid really well when compared to national standards. By that very fact, how can a non-profit be non-profit if people get paid to manage it? The national average non-profit CEO compensation is $160,000.00, not unreasonable given the fact that these people are running multi-million dollar charities. The range for annual non-profit CEO salaries, however, begins at 150k and runs up to $6 million for health-related and education-related foundations. By anyone's standards, these are very very good to amazingly good salaries. Should non-profits expect that their employees work for free or for lower-than-average salaries? We aren't suggesting such an absurd notion. However, we are suggesting that a CEO who chooses to work in the non-profit arena and accepts a salary that is significantly higher than the average American annual income isn't terribly concerned about spreading the wealth through his/her charity.

It is too easy to brush this off as a spurious argument. How dare we bash the Gates Foundation! Actually, we aren't bashing anyone, we are, however, bringing up a very cogent point. Many non-profits pull in so much money that, if not for their non-profit status, they would be listed on the Fortune 500. The tax breaks that they enjoy allow them to operate outside of the incorporation laws the rest of us business owners have to abide by. "Non-profit" is a complete misnomer and should be taxed just like any other multi-million dollar corporation. The tax breaks non-profits receive are enormous, and if you consider that many, if not most, of the biggest non-profits spend the vast sum of their money abroad, what benefit do they provide to Americans other than a handful of jobs?

I am arguing that, for an organization (including churches and religious-affiliated organizations) to be granted non-profit status under the U.S. federal tax code, they should have to live up to some very stringent standards.

For example:

  • Cap the amount of money a non-profit can spend on buildings and other assets (like private jets).
  • CEO's, however important they are perceived to be, should have hard caps imposed on their salaries. There is simply no reason that the CEO of a charity should need to earn a half million dollars per year, let alone $6 million. In fact, CEOs of non-profits should have their salaries capped at no more than 4% of the highest paid employee.
  • Employee salaries should be capped at the national average.

Gates Foundation Campus RenderingBack to the new Gates campus: Why do they need a $500 million building(s)? Is Bill Gates's ego writing the check? Does he simply need to put his name on another grand edifice? Why not take that $500 million and help pay for a new health care system for Americans? Or jump start an alternative energy initiative? Or build schools? Or create a fund to help compensate teachers fairly for their jobs?  Or any number of a thousand things that are currently plaguing America? Yes, I am fully aware that the Gates Foundation has supported a few of the initiatives suggested in the preceding paragraph and has done more than, perhaps, 90% of their competing non-profits ... but that doesn't justify a charity needing to provide a handful of people with over 1000 sq. ft of personal space within an office.

Mr. Gates is free to do with his money as he pleases, but like it or not, $500 million is a lot of money to waste on a building. The Gates Foundation is, after all, a company whose charter is to improve the lives of people worldwide through innovations in health and learning ... It's not ridiculous to suggest that the 800 do-gooders who work in the Gates Foundation corporate office can get by without a $500 million roof over their heads.

Posted by Editor on 11/26/09 at 04:05 PM •  (5) Comments

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