Frankly, they don’t give a damn
Resource type: News
The Sydney Morning Herald | [ View Original Source (opens in new window) ]
By Miriam Steffens
When it comes to philanthropy, many seriously wealthy Australians have deep pockets and short arms.
IN THE midst of an unprecedented mining boom that’s creating more millionaires than ever, rising standards of living and wealth, it is our dark little secret. Australian of the Year Simon McKeon calls it the elephant in the room.
The prominent investment banker and corporate philanthropist says it’s time to shine a light on the big end of town, and what is one of the uncomfortable truths about rich Australia – the lack of generous giving.
And it begins with the fact that in a country where thousands of people earn seven-figure incomes and the richest 200 have built $200-million-plus fortunes each, the greatest philanthropist isn’t Australian, but a reclusive Irish-American who doesn’t even live here.
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Chuck Feeney, 80, a billionaire who has made his money with airport duty-free shops and gives it away to support health and social projects around the globe, has spent more than $500 million on charitable causes in Australia, mainly in medical research.
And while in the US, tycoons such as Warren Buffett and Bill Gates are donating most of their riches to charity, turning themselves into the Rockefellers and Carnegies of our age, little is heard of comparable commitments by the wealthiest people on our shores. Fostering giving among the rich is a ”national challenge”, says McKeon, executive chairman of Macquarie Group’s Melbourne office, who works part-time to pursue philanthropic interests such as the Global Poverty Project.
”I do feel that over the next few weeks it’s time for me to elevate that issue,” he says. ”It starts with declaring that there is an elephant in the room. We really are not overly generous.”
While the nation tops a recent World Giving Index of 153 countries in terms of people’s willingness to give money, volunteer and help strangers, and proves generous in tragedies such as the Queensland floods and Victorian bushfires, there’s a growing sense the rich are not pulling their weight.
Daniel Petre, a former Microsoft executive who worked alongside Gates and has focused on philanthropy after his return to Australia, says the average worker gives away more cash than the super wealthy, ”and that is just appalling”. ”Our wealthy in Australia are morally bankrupt,” he says. ”Generally speaking, they don’t see a moral obligation to give generously to the society in which they’ve built their wealth.” This puts us in contrast with the US, where philanthropy has become a cause celebre among the rich and famous.
Taking guidance from steel industrialist Andrew Carnegie’s 1889 The Gospel of Wealth, which called on the affluent to support ”the masses of their fellows … to dignify their own lives”, leading philanthropists there have been inspired by his suggestions of giving away their excess wealth during their lifetime, rather than leaving it to the kids, and using their business acumen to spend money effectively on the common good.
Last year the country’s two richest men, Gates and Buffett, started their Giving Pledge, committing most of their wealth to charity and challenging other billionaires to do the same.
About 60 rich Americans have taken up the call, including media mogul Michael Bloomberg, corporate raider Carl Icahn and Facebook’s Mark Zuckerberg. The founders have been travelling to India and China to recruit some of their wealthy. And there is – unconfirmed – talk that Gates may come to Australia this year.
He would find much potential. Thanks to the mining boom and a budding recovery in financial markets, the number of millionaires in Australia bounced back by almost a third to 174,000 in 2009, holding a combined wealth of $US519 billion. In fact, there are more millionaires now than before the global financial crisis, according to the World Wealth Report, published by CapGemini and Merrill Lynch.
Leading up to the crisis, ”people were amassing money far faster than what they were giving away”, says Wendy Scaife, a senior researcher at the Australian Centre of Philanthropy and Nonprofit Studies at Queensland University of Technology. The dial hasn’t changed. While high-net-worth individuals globally gave away 3-11 per cent of their assets, in Australia it was less than 2 per cent, she says.
McKeon says he was gobsmacked by tax statistics showing that of about 8000 Australians earning more than $1 million a year, ”more than a third made no gift at all” to charity, claiming not one $2 tax deduction.
Taxpayers claimed $2.1 billion in deductible gifts in 2008-09, down 10.8 per cent from the year before – the first drop in a decade, according to Australian Taxation Office data. While the number of people overall who claimed gifts rose slightly, the value of donations fell. And the most dramatic decline was among the biggest donors claiming deductions of more than $25,000.
”In Australia, some evidence suggests that giving at a higher level is something that may not be considered by wealthier Australians,” Scaife and fellow researchers conclude in a February report on major giving in Australia. ”It is a practice that is not widely seen or expected of them.”
Some see it more bluntly, such as the multimillionaire electronics retailer turned activist Dick Smith. ”In Australia, it is utter greed and selfishness,” he says. ”You can be very wealthy and be on the BRW Rich List and give nothing away.”
It’s not like there aren’t any impressive donors. Former transport magnate Greg Poche is widely seen as the greatest domestic philanthropist, having given $40 million to the Mater Hospital in 2005 to start the Melanoma Institute of Australia. He has also spent more than $20 million on indigenous health.
IT entrepreneur Steve Killelea set up the Charitable Foundation in 2000, which has become one of Australia’s biggest private overseas aid providers. John Kinghorn, using funds from his $650 million windfall from RAMS Home Loans, has donated $25 million to build the Sydney-based Garvan Institute’s and St Vincent Hospital’s new cancer research centre.
And some of the nation’s mining magnates have also opened their wallets. Clive Palmer in 2008 pledged $100 million to establish a foundation for medical research in Western Australia and support indigenous communities.
Fortescue Metals’ Andrew Forrest has given more than $90 million in shares and options to his trust for underprivileged children (although there was media speculation that tax deductions and falling stock prices might have shaved his net costs to a fraction). He transferred $50 million more of shares to range of charities this week, and said he would step back to devote more time to philanthropy.
Yet talk to people in the sector, and they’ll tell you these are notable exceptions, echoing again and again how there’s just no ”culture of giving” akin to the US.
While real estate and race horses may be the talk of Sydney’s dinner soirees, in New York and Boston it’s the charities one supports, former expats such as Daniel Petre have observed.
If you are wealthy in the US and do not give, you are seen as a social pariah – with peer pressure so high that even ”not very nice people” give, he says.
And the ticket to the ball does not come cheap, with sizeable sums expected before earning the right to call yourself a philanthropist. In contrast, Australia’s millionaires give away peanuts compared with their wealth.
”As a nation we have to understand that when a very wealthy person gives a million dollars away it sounds like a whole lot of money,” McKeon says. ”But it actually really is a tiny proportion of their wealth.”
So are Australia’s elite really just a club of Scrooge McDucks?
People in the sector see various reasons why a US-style ”culture of giving” has yet to take off. For one, much of the wealth here has been accumulated over the past four decades, compared with the long-held philanthropic traditions of US dynasties such as the Rockefellers.
Australia has no estate duty, or death tax, which could be a powerful trigger for the wealthy to give money to select causes during their lifetime, rather than let the state take it off their heirs. At the same time, there has been a greater reliance on government here to provide welfare.
And some of our richest simply seem too busy expanding their empires. Take James Packer, who has yet to make any notable investments with the Packer Foundation he set up in 2006 after inheriting $6 billion from his late father, Kerry.
Yet a major factor in Australia’s laggard status may be what philanthropy researcher Scaife calls the ”quiet code of giving” – people making donations anonymously in fear of being lambasted for showing off or for seeking publicity.
”The tall-poppy syndrome is very much alive and well here and people tell us that if they were to talk about their giving publicly they in fact would be shunned,” she says.
The tall-poppy syndrome is cited by many, including Deborah Seifert, head of the sector’s peak body, Philanthropy Australia, who says the US has a ”culture of giving then talking about it”, whereas here ”people have been much quieter about their giving especially in the high-net-worth income band”.
But not everyone buys into the argument. ”I believe it’s a myth, I believe they don’t give,” says Dick Smith. Petre argues such secret donations would have to be felt in tax statistics and charities’ coffers. ”If you talk to any major charity and you say to them, are you getting in cheques in millions of dollars – no, they’re not,” he says. ”Sure there are pockets of people, but if it was happening at a great level you’d see the money flows.”
Valid or not, there’s a growing sense that donating needs to become more public to inspire major giving. Some call for philanthropist ranking lists to shame the stingy. Others take a more gentle approach.
Corporate adviser and philanthropist David Gonski, as chancellor of the University of New South Wales, asks the university’s benefactors to make their donations public.
”I have a strong, strong view that there are two parts to giving,” he says. ”One is the money itself and the second thing is the example.
”If you’re giving anonymously that’s really a matter for the giver, but it lacks the second part which is to set the example.
”When Bill Gates started his foundation, that was very instructive to the world.”
And improvements have been made over the past years. ”There’s substantial evidence that the wealthy in Australia are giving more than they ever have,” said Andrew Thomas, head of Perpetual’s Philanthropic Services, which oversees more than 450 charitable funds with $1.1 billion in holdings. Overall, tax-deductible giving in Australia has tripled over the past 10 years, he says.
The introduction of private ancillary funds (PAFs), earlier known as prescribed private funds, in 2001 has been a watershed, making it easier to set up tax-effective foundations. PAFs have to give away 5 per cent of their assets each year. At the peak of the sharemarket in 2007, about 160 new such funds were set up. Today, there are about 860 PAFs with a combined asset base of more than $2 billion.
Yet Peter Winneke, who helps families set up such structures as head of philanthropic services at the Myer Family Company, believes ”we have the wealth to have 8000”. He calls for a widespread giving campaign to promote donations and dispel the myths of our generous country.
”No one knows the stats,” he says. ”Most don’t even know the contributions made by this embarrassingly small sector in Australia.”
Lawyers, financial planners and tax advisers should be better educated about trust structures, and there should be giving targets such as donating 1.5 per cent of personal income, compared with the current national average of 0.4 per cent, Winneke reckons.
Despite the shortfalls, he is optimistic for the sector. With baby boomers reaching the end of their wealth-creating years and looking to build a legacy, coupled with the mining bonanza, there could be a new wave of giving in Australia. The Myer Family Company just opened an office in Perth, hoping to tap WA’s new jet set.
Activists are also hopeful the establishment of the Australian Charities and Not-for-Profit Commission next year to better regulate the sector – revealed in last month’s federal budget – could play a key role in establishing trust in the sector.
But the biggest change agent yet may come from peer pressure, as brought on by Gates’s and Buffett’s Giving Pledge.
On our shores, Chuck Feeney has clearly raised the bar. Having donated more than $500 million through his trust, The Atlantic Philanthropies, mainly in Queensland, he is now seeking to build ”giving while living” networks across the country, calling on philanthropists to pool their funds for large projects.
Earlier this year, he pledged $10 million to the University of NSW’s Kirby Institute for infection and immunity in society for new $80 million facilities – but only on condition that the federal and state governments and the university pay $60 million, and other wealthy people cough up the remaining $10 million.
The university has so far raised about two-thirds of that from wealthy donors.
Call it philanthropic public-private partnerships. Feeney hopes to create such networks of high-net-worth individuals in each state and territory by 2015.
”We need examples, people like Feeney,” Gonski says.
Seeking to inspire a culture of giving on our shores, McKeon is keen to bring American philanthropists to Australia to network and be role models. ”Something is happening in the US that is simply not happening here and it’s on a scale that we’ve never seen before,” he says.
He plans to use his clout as Australian of the Year pursuing the ”elephant in the room”, meeting fellow philanthropists such as Dick Smith and seeking to elevate the issue in a speech at the National Press Club next week.
Ultimately, McKeon believes the rich need to realise it’s not just about parting with their money, but enriching their lives even further.
”I’m saying, do you really want to die as someone who may have established an amazing business … but you had the opportunity to go even further again and without any great expectation to get anything back to give, to give, to give? Because that is a special feeling, which unfortunately not that many seriously wealthy Australians have ever experienced.”