Sustainable Philanthropy: Old and Thoughtful Cow

“I made fun of the saying, ‘Wealth does not last three generations – the first generation starts the business, the second maintains it and third destroys it’. I did all three in one generation. After 50 years, this is my time to make a contribution.” – Niu Gensheng

Old and Thoughtful Cow

Niu Gensheng, a founder of China Mengniu Dairy, one of the largest dairy companies in China, is making a new wave of China’s philanthropy. In 2004, Niu established Lao Niu Foundation (“Old Cow Foundation”) and started donating his shares in China Mengniu Dairy. By 2010, he completed donating all of his shares in the company and resigned from all the posts he held at Mengniu Dairy to focus on philanthropic activities. The Chinese society was shocked by Niu’s determination on philanthropy and a few entrepreneurs followed him. This Old and Thoughtful Cow sparked the new era of China’s philanthropy. (Read Niu Gensheng is at the forefront of China’s philanthropy new wave)

We are pleased to share our case study on Lao Niu Foundation. This is the first of Sustainable Philanthropy Case Study series conducted by Cook Pine Capital (www.cookpinecapital.com) and Star Magnolia Capital this summer.

Read: Lao Niu Foundation’s Case Study

Sustainable or Not

To our interests, one of the most thought-provoking arguments coming out of our research was whether the philanthropy should be sustainable, especially learning about the philosophy behind Chuck Feeney’s Atlantic Philanthropies (read Limited life foundations: the hands-on approach and Chuck Feeney: The Billionaire Who Is Trying To Go Broke) and Melinda and Bill Gates. Unlike Educational Endowments (such as Yale and Harvard), most of private foundations do not regularly receive contributions after the establishment. This unique nature put many foundations at risk of sustainability as they purpose their missions. According to our research on 18 foundations, more than half of the foundations faced reducing real, or inflation-adjusted, impacts from 2001 to 2015. Our research was a journey to follow the successes and struggles of foundations to accomplish this conflicting goal: maximize both current and future philanthropic impacts.

Impact Now or Future

Source: The Foundation Center, Cook Pine Capital, Star Magnolia Capital

An Endowment Approach for Sustainable Philanthropy

In November 2016, we published a white paper titled An Endowment Approach for Sustainable Philanthropy and shared our views on sustainable philanthropy. Perpetual philanthropy is a noble goal and one that has been executed by many of the world’s most fabled and storied families. Endowment size and more importantly, impact, provided by such families through their foundations has endured for over a century while also expanding tremendously in scope and scale.

In 1981, the U.S. federal tax-code changed to allow foundations to distribute at least as much as they earned on their assets each year. Since then, foundation asses have greatly increased from $47.6 billion in 1981 to $865.2 billion in 2016, while foundations distributions have expanded dramatically as well; $60.2 billion was distributed to stakeholders in 2015—up more than three times since 2002, and six times more than in 1981 when federal legislation changed.

However, many foundations have not enjoyed the same such triumphs. Indeed, it takes strong discipline and a long-term view to support charitable giving in a sustainable manner.