On June 26, 2006, Warren Buffett announced he would start giving much of his fortune to philanthropic causes, including a pledge to donate 10 million shares of Berkshire Hathaway Inc. stock to the Bill & Melinda Gates Foundation Asset Trust.
The value of the gift
At the time of the pledge, the gift was worth approximately $31 billion. Because Warren has made a gift of stock that will be delivered over time, the value of the gift will be determined by the underlying value of those shares, which will vary over time.
How the gift will be distributed
The gift is being implemented in annual installments. Ten million Berkshire Hathaway Inc. shares have been pledged. Each year, 5 percent of the remaining pledged shares will be transferred to the asset trust.
- The first installment of 500,000 shares, or 5 percent of the total 10 million shares pledged, was transferred to the asset trust in August 2006, with a value of about $1.6 billion.
- In July 2007, 9.5 million pledged shares remained, and 5 percent of those shares were transferred to the asset trust, with a value of $1.76 billion.
- In July 2008, there were 9 million pledged shares remaining, and 5 percent of those shares were transferred to the asset trust, with a value of about $1.8 billion.
- In July 2009, there were 8.6 million pledged shares remaining, and 5 percent of those shares were transferred to the asset trust, with a value of about $1.25 billion.
- After the Berkshire B stock split in January 2010, there were 407,253,100 million pledged shares remaining. In July 2010, 5 percent of those shares were transferred to the asset trust, with a value of about $1.6 billion.
Increased grantmaking, with tight focus
For the next couple of years, we’ll continue on a steep climb to ramp up our grantmaking. Beginning in 2009 and continuing through the next decade, the payout target will be more than $3 billion per year, tightly focused on our major areas of investment—including global health, global development, and improving access to a great education and to technology in public libraries here in the United States.
The future of the gift
As Warren wrote in his annual letter to Berkshire Hathaway shareholders on March 1, 2007, he has stipulated in his will that the proceeds from the Berkshire Hathaway shares he still owns at death are to be used for philanthropic purposes within 10 years after his estate has been settled. This direction will affect any remaining shares that were included in his 2006 pledge to the foundation.
There are also three key conditions attached to the pledge:
- Either Bill or Melinda Gates must be alive and actively involved in the management of the foundation.
- The foundation must continue to satisfy the legal requirements qualifying Warren’s gift as charitable, exempt from gift or other taxes.
- Starting in 2008, the total value of the previous year’s gift must be spent. This means that in 2009, the foundation must spend at least the amount that was gifted in 2008, in addition to the amount we would be required to spend under federal tax law.
The impact on our work
Warren has said that he wants us to accelerate and deepen our work on the tough issues we’re working to solve, and we feel comfortable we’re on the right path to do that well. We have structured this foundation so it can grow and change. This is one of the guiding principles behind the structure that CEO Patty Stonesifer put into place in 2006. In establishing that structure, she organized our staff and grantmaking around three major areas of grantmaking—
Global Development,
Global Health, and
United States programs—each headed by a president. With this structure, we’re on track to spend responsibly the full amount of each annual installment under Warren’s annual pledge.