Why do the rich give after they exit their ventures?


Entrepreneurs acquire enormous wealth after exiting their businesses through sales, IPOs or liquidation. But what happens after they exit their ventures?

In a study, “After the harvest: A stewardship perspective of entrepreneurship and philanthropy,” in the Journal of Business Venturing (2017), authors Blake D. Mathias, Shelby Solomon and Kristin Madison found 4 key reasons why the rich redistribute their wealth after exiting successful ventures.

  1. Intrinsic motivations: They want to do meaningful work after making large amounts of money.
  2. Identification: The rich want to have a sense of identity and advance a cause they believe in.
  3. Personal power and long-term orientation: They crave for an opportunity to influence future generations.
  4. Stewardship norms: Most feel they have a sense of obligation to give back.

This award winning study analyzed “The Giving Pledge” letters of 99 entrepreneurs and separately conducted in-depth interviews with 19 of them. In 2017, when the study was conducted, there were 142 individuals, 70% of whom were entrepreneurs who had signed on to the “The Giving Pledge.”

Today, there are over 200 individuals from 23 countries who are part of the “The Giving Pledge,” and have committed a majority of their wealth to philanthropy or charitable causes.

The study found that the rich display an innate responsibility to “act as stewards of their communities.”

And, this is very evident in the way latest entrants to “The Giving Pledge” like MacKenzie Bezos have committed to pledging over half of the $36 billion she inherited in Amazon stocks. “I have no doubt that tremendous value comes when people act quickly on the impulse to give. No drive has more positive ripple effects than the desire to be of service,” she says in her Giving Pledge letter.

“In addition to whatever assets life has nurtured in me, I have a disproportionate amount to share,” Bezos adds.

This reminds me of a well cited Princeton study “High income improves evaluation of life but not emotional well being,” that showed the world that anything beyond a $75,000 annual income will not buy you emotional well-being. Authors Daniel Kahneman and Angus Keaton found that emotional well-being rises with income but anything beyond $75,000 is not going to buy you happiness.

However, for those who have made so many more multiples than $75,000, their entrepreneurial exits, often called harvests, trigger their ability to give.

And, social expectation will prompt them to give, be good stewards of society and perhaps buy a little happiness on the way. But one thing is very clear: it is insanely difficult for the mega rich not to give!

India is a Favorite Destination for Global Corporate Giving


India topped the list of countries where most corporate giving went from international businesses in 2012, according to a recent report by the Committee Encouraging Corporate Philanthropy (CECP). Among 60 large multinational companies that gave a total of $6.8 billion, nearly 70 percent earmarked a share of   their corporate giving to India.

The study, authored by CECP’s Carmen Perez found that most large businesses chose to invest their  funds in geographical neighbors and emerging markets. The study  tracked giving according to three categories, namely direct cash, foundation cash and in-kind contributions.  Total giving per company ranged from $450,000 to about $1.5 billion. The median total giving was $29.25 million.

Below are key points from the study that show trends in global corporate giving :

  1. Global corporate giving remains unevenly distributed. Some companies elected to give large contributions to a select few countries while the others received much less.
  2. A company’s strategic business needs dictate corporate giving, especially among multinationals investing in emerging markets.
  3. Corporate interests govern giving and funds typically flow into neighboring countries or to emerging markets.
  4. Emerging markets namely India, Brazil, China, Colombia, Indonesia, Malaysia and Mexico received larger charitable contributions in 2012, driven largely by robust economic growth.
  5. Businesses gave less in countries like Turkey and Venezuela citing instability and political turmoil.