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The rich giveth, and they taketh away

Larry Ellison's recent withdrawal of a gift to Harvard made headlines, but he's not alone in wanting control over his charitable gifts.
/ Source: Business Week

There's no controlling or predicting Larry Ellison, the maverick chief executive of Oracle. To that, investors, competitors, and industry watchers can attest. Announcements of meetings with, and even public appearances by, the executive ought to be accompanied by a disclaimer, as he's known for showing up late or not at all. So when the world learned that Ellison wouldn't be delivering on a $115 million pledge to Harvard University, many onlookers weren't shocked.

But if Ellison's side of the story is true, his about-face isn't unique among strong-minded, results-driven businesspeople-turned-philanthropists. According to Oracle, it boiled down to Ellison wanting to know he'd get good results from his investment — a hallmark of philanthropic efforts by self-made entrepreneurs, particularly in the tech world. Ellison plans to announce a new gift later this summer, most likely to a health-care or disease-research foundation.

Second thoughts
Ellison pledged the money to Harvard following a meeting with former University President Larry Summers, says Oracle Spokesman Bob Wynne. The two discussed Summers' theory of using an economic model to rate the quality of government health-care programs around the world. Ellison was intrigued and agreed on a handshake to donate the money. Later, Summers came under fire for comments made in January, 2005, suggesting that the lack of women in science and engineering is because of men's "intrinsic aptitude" for these jobs. In March of last year, Harvard's faculty passed a lack-of-confidence vote, and about a year later Summers said he'd resign.

While it's true that talks broke off before the resignation, Ellison started to rethink the donation as Summers' problems deepened, Wynne says. Now that Summers is out, he has officially rescinded the commitment. The University and other skeptics counter that not only University institutions but often its professors and staff stay in place regardless of who's president. Still, Ellison was concerned that with the biggest advocate for the program gone, it wouldn't have the same effect. "It was his brainchild and he was going to oversee it," Wynne says of Summers. "If the president of the university is going to sponsor your initiative and he's gone, how do you know your giving is going to be effective?" (Ellison would not comment directly for the story.)

That question is at the heart of several withdrawn contributions over the years, although few are on the scale of Ellison's. In 2001, Netscape founder Jim Clark withdrew $60 million of his $150 million pledge for a biomedical research center at Stanford University in protest against federal restrictions on stem-cell research. In 2002, philanthropist Robert Thompson withdrew a $200 million pledge to build Detroit-area charter schools amid the city's political infighting. Also in 2002, Washington (D.C.) businesswoman Catherine B. Reynolds reneged on a $38 million deal that would have gone to the Smithsonian Institution because she wanted more control over how the money would be spent.

A question of control
There's a difficult balance of power between an institution and a philanthropist. The philanthropist holds the money and ostensibly much sway. But a large gift to an institution can give wealthy businesspeople an image boost — or do damage if a gift is revoked. That trade-off has become starker in recent years as media and the public have paid more attention to the philanthropic efforts of the rich and famous, says Melissa A. Berman, president and CEO of Rockefeller Philanthropy Advisors.

Donors increasingly want a say in how money is used, and more and more in the business world are funding solutions to specific problems, rather than writing blank checks to well-heeled institutions. Institutions that publicly criticize donors — even when they renege on commitments — risk alienating others and jeopardizing current lucrative ties. "I think these are not conversations that should be conducted through the media," Berman says. "By the time it gets to this level, it doesn't seem like there's a lot of hope of repairing the relationship."

But social pressure does play a role: Consider the megabillionaires who've grabbed recent headlines. Bill Gates is curtailing his day-to-day role at Microsoft to focus on his philanthropic efforts with the Bill & Melinda Gates Foundation, and Warren Buffett recently announced he would leave most of his $42 billion fortune to the Foundation (see, 6/27/06, "Buffett's Mega-Gift").

Competitive giving
Such announcements create pressure on the rest of the billionaire set, says Leslie Lenkowsky, professor of public affairs and philanthropic studies at Indiana University. "This is conspicuous philanthropy," he says. "Now to be a member of the billionaires' club, you not only have to play in business and go to Davos, you have to be philanthropic." That may play to Ellison's competitive nature.

Ellison's philanthropic profile has been rising over the last few years. He ranked No. 27 in BusinessWeek's Philanthropy Ranking last year, his first appearance on the list. He was estimated to have given or pledged 4 percent of his net worth, about $690 million. Ellison has said he'll make a donation elsewhere, and the smart money says it will be connected to health care and medical research on aging and disease. On June 27, he made the first installment of a $100 million donation to the Ellison Medical Foundation, an organization he started in 1998 with an annual $20 million commitment.

That payment was the result of an unconventional settlement to an insider-trading lawsuit, so in some minds, Ellison's track record is still mixed. His late summer announcement should prove how hard he wants to compete in the game of world-class philanthropy.