Should the Gates Foundation sell its stock in Monsanto?

The Bill & Melinda Gates Foundation (BMGF) has been very active in the plant improvement field in the last few years. While funding projects from the Wheat Rust Ug99 project (of previous radio subject matter) to helping fund the IRRI, and promoting Pam Ronald’s book, Bill Gates et al are really trying to improve the agricultural conditions in more troubled nations while also raising awareness about the issue. Along with providing vaccines and working on eradicating diseases, they have a lofty set of millennium goals in agriculture. There are millions upon millions of hungry mouths to feed (and feed well), and they are hard at work making this possible through technology, infrastructure, and building a knowledge base within those countries so that they can continue to produce food under their own innovative powers.

However, not everyone views the Gates Foundation’s involvement in the developing world as a good thing. Eager to shape foreign agriculture in a less technological way, critics have objected often to any use of fertilizers, pesticides, genetically engineered traits, and even hybrid crops. Arguing that agricultural aid should be limited to organic techniques, anything that smells of technology (which is strange because organic is a specific set of technologies) is immediately associated with big business interests in developed countries like the US. For years, the Bill & Melinda Gates foundation was associated with the likes of Monsanto, and criticized as just working for their interests. The premise is strange, though, that a 33 billion dollar charitable organization would feel it necessary to work for the business interests of any corporation over their own stated aid goals. The chatter in the social media up to this point was that Bill Gates wanted to rule the biological world with patented seeds after taking over the computer world. Or that Bill Gates was going to help Monsanto do it instead, well, because the conspiracy just seems to make sense to those who are so inclined to believe it.

Recently the discussion has taken a bit of a turn, as the Seattle Times reports that the Gates Foundation purchased 500,000 shares of Monsanto stock, worth about $27.6 million. Immediately, several organizations and individuals from the Organic Consumer’s Association to La Vie Campesina, to Jill Richardson of La Vida Locavore denounced the purchase, while at the same time cheering that they now had an argument that the combined Gates-Monsanto Evil Empire™ was real. Several letter-writing campaigns were started to lobby the Gates Foundation to drop its new financial holding in Monsanto, arguing it is a conflict of interest. Is it, and in what way exactly? What exactly does this purchase mean in terms of this philanthropic org being able to achieve its goals? Should the Gates Foundation sell its stock in Monsanto?

Trust the numbers

First, the Gates Foundation as a rule does not discuss the specifics of its financial investments, so I don’t expect that we would hear much of a statement, if any, about this purchase. I imagined that they have countless investments all over the place and that the reasons for specific investments are made for financial reasons. Turns out, according to the foundation’s website, they hardly make decisions themselves on what to invest in:

In October 2006, our trustees created a two-entity structure. One entity, the Bill & Melinda Gates Foundation, distributes money to grantees. The other, the Bill & Melinda Gates Foundation Asset Trust, manages the endowment assets. This structure enables us to separate our program work from the investment of our assets.

How the asset trust works

The asset trust holds the endowment, including the annual installments of Warren Buffett’s gift, and funds the foundation. Bill and Melinda are the trustees for the asset trust, and the endowment continues to be managed, as it has been for more than 10 years, by a team of outside investment managers.

Already, this removes the decision to buy Monsanto stock from the part of the foundation that decides where the philanthropic money goes. Perhaps the ‘team of outside investment managers’ heard about the stuff that the philanthropic arm of the organization is doing related to biotechnology, and thought, hey, this sounds like this could make money, and bought a chunk of it. In the extreme version, perhaps those investors thought that the Gates Foundation’s efforts to expand and develop modern crop varieties would grow the market for companies like Monsanto, which could in turn make the foundation more money.

“Our biggest concern is that the foundation is invested in Monsanto so they’re looking for Monsanto to make a profit,” said Travis English, of AGRA Watch. “What they’re doing is opening up new markets in Africa for Monsanto to monopolize the seed market.”

Glenn Beck educates us on the money behind the conspiracy

Let’s examine this extreme hypothesis by the numbers. The investment was worth $27.6 million, however, just one research project that the philanthropic arm invested in cost them $42 million. From the Seattle Times article:

The Gates Foundation gave a $42 million grant to the African Agricultural Technology Foundation to develop new varieties of drought-tolerant maize in a partnership with Monsanto. The new varieties are expected to be available in about seven years and will be royalty-free for small-scale farmers in Africa, the Gates Foundation spokeswoman said.

So the investment managers thought that by buying $27 million in stock, they could make money off of a $42 million grant for drought-tolerant corn that might benefit Monsanto if a lot of commercial-sized growers in Africa adopt the varieties they develop? (Note that small farmers will not owe royalties.) The Monsanto stock price would have to increase by 150% merely to recoup the ‘losses’ of that grant alone! It doesn’t sound like there’s much math to support this outlandish idea. (I assume that investment managers can do math, of course.) I seriously doubt that they would base their decision on such pennies-on-a-dollar considerations.

The price of Monsanto stock is another interesting thing. Every time there is a dip in the price, the anti-GE social media lights up in applause. Even the Non-GMO Project frequently tweets about dips in prices, while others joke about now being a good time to buy into biotechnology. (I wonder if any of them have decided to buy any?) They seem to know a lot more about biotech stock prices than I do. Apparently, MON stock has been at a relative low, and while future prospects look good, the current outlook for revenue is not so good. It was probably a good time to buy.

While some will use this investment as an argument that the Gates Foundation will cow-tow to Monsanto’s interests, there is another aspect to stock ownership that is worth bringing up. Stockholders get to vote on board elections, and 500,000 shares brings 500,000 votes. Could it be that Bill Gates is trying to wrestle control of Big Biotech to bend it to philanthropic goals? It could be just as likely, or rather unlikely as the other case. Keep in mind that $27.6 million is less than one thousandth of the total foundation’s assets, and half as much of Monsanto’s total market value. You may see the dollar amount of the stock purchase in future campaigns against the Gates Foundation, just remember how few drops it is in the $33 billion bucket.

Glenn Beck educates us on the money behind the conspiracy

Competing interests

Does the Gates Foundation having a financial stake in Monsanto present a conflict of interest? In order to be a conflict of interest, the goals of one must be different from the goals of another. If, for example, a nonprofit organization stated as its goal to stop the hunting of whales, but invested in a Japanese whaling company – you would have a clear difference of goals. In order to achieve the goal of the nonprofit, they would have to harm their own financial interests. In the case of the Gates Foundation, their agricultural goals include:

Working with a wide range of partners, we are seeking to enhance the complete agricultural value chain—from planting the highest quality seeds and improving farm management practices to bringing crops to market—while protecting farmers’ natural environments.

They continue.

Science and technology: We are exploring the development of a diverse range of crops that can thrive in different soil types and are resistant to drought, disease, and pests. We also support the creation of crops that have enhanced nutritional value to combat chronic vitamin deficiencies. Our partners employ a range of tools and techniques, from traditional breeding to the newest biotechnologies, in the search for solutions that will help small farmers.

Indeed, their third overall guiding principle states that “Science and technology have great potential to improve lives around the world.” So as companies like Monsanto and others also use science and technology with breeding, genetic engineering, crop protection methods, etc, there is no inherent conflict of interest in this area. If they had as a stated goal that they would build the world’s agriculture without the use of these things, you bet that would be a conflict of interest! (The foundation also has an up-front policy on CoE if you want to take a look.)

From the perspective of anti-GE (and anti-industrial) groups, however, it would appear to be a conflict of interest. This is because they believe that the best way to help the agriculture in developing countries is to avoid such applications of science and technology. In their view, if Gates really wanted to help those farmers, it would not be with hybrids, GE crops, or anything else like that. But this assumes that those farmers will not benefit from such crops. Often cited are lawsuits against farmers saving seeds, and the argument goes that if biotech companies gain a foothold in Africa, that they will just sue the small farmers into oblivion, and that the BMGF is providing that foothold. But remember something important from the drought-tolerance project quoted above: Small farmers (below $10,000/year I believe) will owe no royalties to Monsanto or anyone else for growing, saving, and regrowing seeds that come out of that project. These projects are specifically designed with the interests of small subsistence farmers in mind. While I understand that many anti-GE groups believe that anything related to Monsanto is against the interests of small farmers in developing countries, I think they are wrong in their assumptions, and they continually overlook the actual details of the intellectual property situations involved. You would think they would be happy to hear about the royalty-free situation, unless the IP arguments aren’t really the reason why they dislike it, and that is really just about some other issue with genetic engineering (as is often the case).

From the Seattle Times article,

Elise Lufkin, senior program director of Giving Assets Inc., a group that advocates socially responsible investing, said conflicts of interest usually arise when the programs a foundation funds are at cross purposes with companies in which they’re invested — an environmental organization opposed to oil drilling whose endowment benefits from oil company stock, for example.

The Gates investment is not necessarily a conflict of interest if the foundation and Monsanto share the same goals.

You could argue that there could potentially be a conflict of interest in a very specific situation. Let’s say that a Gates Foundation-funded project, such as the drought tolerance one mentioned above, found that the genetically engineered drought tolerant corn did not do so well. Let’s assume that they found that a non-GE corn was the most drought-tolerant, and that by adding the transgene that did the same, it did not make it any better. It would therefore be in the project’s interest to help needy farmers to scrap the GE trait and just go with releasing the non-GE variety, as the GE trait would be encumbered by biosafety regulations. This interest might not be shared by their private-sector partners, who may want to release the GE trait in the variety (although they actually might not for the same reason in addition to bad PR from a useless transgene release that would cost money).

But in order to argue that the Gates-funded project would be conflicted in their loyalties, you would have to make one more assumption about the financial connections. In addition to the assumptions above about the cause-and-effect connections between the philanthropic and investment arms of the foundation, you would also have to assume that the people in the project believe that they will benefit through the twisted path of money from commercial growers to Monsanto stock price increases to the 0.1% of the investment arm, to the philanthropic arm, and finally, to the project itself. You are welcome to believe that this is the case, but once you layer on so many assumptions, Occam’s Razor suggests that this is not likely to happen.

I am not saying that there is no conflict of interest, in fact, the next thing I will talk about is the conflict of interest that the foundation has generated through this purchase.

Public Perception and Communication

It through how this may affect the public perception of the mission and goals of the BMGF, and how they communicate those intentions that purchasing Monsanto stock generates a conflict of interest. At the same time as funding the needed research, the BMGF is also spending considerable effort explaining why this research is necessary and will be beneficial. Genetic engineering is one of the tools that they are funding, which remains contentious in many parts of the world, especially Africa. Trade relations with Europe and past issues with food aid have shaped their local politics to be fairly resistant to genetic engineering, but not intractable. South Africa grows them, and several other countries announced this year that they are considering them. Field trials are underway for crops such as the biofortified Super Cassava.

Monsanto, as a for-profit corporation, is interesting in making money through its business. There’s nothing wrong with making money, however when a company argues in favor of something that it can profit off of, whether it is Monsanto and GE crops or Whole Foods and Non-GMO Project certified products, there is an inherent bias. Are they advocating it because it is right or because they can make a buck? If is is because it is right, it will be difficult for people to separate it from the possibility of making a buck. I believe it was Monsanto that proposed the royalty-free idea for small farmers, thereby enabling the poorest to have free access to the technology. Yet, it seems that it is very difficult for Monsanto to do any good deeds without being punished for trying. (Remember what happened with Haiti?)

As the BMGF continues to be involved in world agriculture, they are figuring out what they believe is the right approach, and are promoting their reasons & decisions to the rest of the world. Owning stock in Monsanto may harm this effort for the simple reason that this connection will lead people to suspect that their intentions are not what they say. Various groups that oppose a second Green Revolution for developing countries will use this information in order to sow doubt about the genuine nature of the Bill & Melinda Gates Foundation’s goals and interests. In fact, those groups such as AGRA Watch and La Vie Campesina have already indicated how they intend to use this information. For example, they are trying to harm the image of wheat-related projects that the Foundation is funding at Cornell and Washington State University merely by associating it with the wheat interests of Monsanto.

Keep in mind that before the news of this development, AGRA Watch uttered Monsanto and Gates in the same breath. In fact, they were bending over backwards to go all Glenn-Beck-style linking Gates to Rockefeller to Monsanto. Check out this handy graphic that they published back in June (document file):

Kathleen Talbot educates us on the money behind the conspiracy

So they were not letting the lack of financial links get in the way of making the claim in the first place! The only arrow going from Monsanto to the BMGF is a single person.

So it is clear that when groups come out to oppose projects that the Bill & Melinda Gates Foundation s involved with, they will shift the discussion away from what the foundation is trying to accomplish and toward a discussion of the financial interests of Monsanto. Their argument, while tenuous before, is made to seem stronger by this proportionately small stock purchase. They will quote the dollar value and the number of shares, rather than the fraction of the BMGF holdings that it represents. Time will tell whether this argument will change any minds. But if the argument does make a difference, there is the risk that successful developments coming out of the BMGF’s scientific philanthropy could be curtailed in the political realm, and that should be avoided. A lot of this rests on how the BMGF communicates its goals effectively.

So should the Gates Foundation sell its stock in Monsanto? It all rests on what the eventual outcome will be. If this has no measurable effect on the public perception of the BMGF and its mission and the outcome of the mission itself, it won’t matter and they shouldn’t worry about it. But if this puts the future of the foundation’s ability to reach the neediest and most vulnerable people in jeopardy, maybe it would be a good idea to do so. What do you think?

Hilarious Glenn Beck chalkboard images generated at skinnymojo.

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Written by Karl Haro von Mogel

Karl Haro von Mogel serves as BFI’s Director of Science and Media and as Co-Executive Editor of the Biofortified Blog. He has a PhD in Plant Breeding and Plant Genetics from UW-Madison with a minor in Life Sciences Communication. He is a Postdoctoral Scholar at UC Riverside and works on Citrus genetics.

11 comments

  1. I’ve always thought that a far better way for folk against how Monsanto operates to actually do something would be to invest, en masse, in Monsanto shares – as a for instance, if the million against Monsanto all put $50 to work for the good they’d purchase 50 million votes – companies are beholden to their shareholders – generally this is touted as a reason corporations are evil, because shareholders are faceless profit whores, however I see no reason why, should a sizable voting block appear in any given company which votes not on EPS or profitability, but on ethics, philanthropology or looking more bleakly in terms of my own job simply just shutting down research on GMOs that you wouldn’t sway the company (or you could just take it down by backing an utterly hopeless CEO – Jeff Smith for Monsanto CEO in 2030?) – owning shares really shouldn’t mean that you kowtow to company interests, any more than having a vote means you kowtow to whatever the government says – having shares should mean that the company kowtows to your interests – the reason it normally looks the other way is that the bulk of shareholders vote only on what makes them the most money (as if I’m properly informed, and I rarely am, most shares are owned by trust funds and bizarre non-tangible entities which essentially are purely greed driven) – if you have enough shareholders who are willing to voice that they’ll happily accept a drop in EPS for whatever lofty non-profitable goal then the board of directors are legally bound to follow the demands of the shareholders.
    As such I’m inclined to see the BMGF investment somewhat in this light (although it may just be a shrewd investment for the future – Monsanto shares tend to perform pretty well comparitively, and while the price has seen some rocky times of late (and hopefully will continue to do so until the week before I retire when they’ll Rally to 500% of their present value (I have no personal interest in a high share price until this time to be honest)) the shares are probably still massively undervalued assuming Monsanto can make good on current R&D projections (I’m very interested to see how smartstax and RR2Y perform this year and how sales go next year for instance – good performance would indicate a probable strong market presence next year which imo would see the share price jump from it’s current ~$50 to probably more in the $70 range, whereas a failure to perform could indicate troubled times ahead) – getting a sizable voting share which pushes the CEO and board of directors towards more philanthropy rather than less seems to me a good thing, obviously vehement anti-GMO folk won’t see it that way, although you do have to sort of point out that Monsanto invests as much in breeding as it does in biotech (often overlooked) and as such could offer massive amounts in terms of knowledge and products completely and utterly GM free (Haiti anyone?) – which infact is a really big and pretty much ignored part of Monsanto’s collaboration in WEMA.
    Apologies if this is insanely disjointed – 5AM feed & using the interwebs is probably something I should put on my “don’t do” list

  2. I actually think the foundation’s much much larger investments in McDonald’s and Coke are more of a story. It is tough to say with a straight face “we support global health” and then invest in a system that has a well developed marketing machine for selling what are primarily (yes McD has some healthy food, and an occasional Coke isn’t killing anyone) unhealthy foods and beverages linked to diabetes, obesity, heart disease, etc.

  3. However, and I may be coming at this slightly wrong, just thinking out loud or whatever the internet equivalent is, is there something to be said for taking profits from businesses which sell primarily unhealthy foods (no arguement there) and using this money to improve lives elsewhere?
    I’m assuming the income on shares from the foundation goes towards projects the foundation sponsors, I think there may be an arguement to be made that money made (and which would have been made anyway particularly in the case of McDonalds and Coke) from products which are unhealthy when eaten in excess (acknowledging that it is far easier to consume McD’s and coke products in excess than healthy alternatives) is still better utilized for the good than going to bolster trust funds and making the wealthy moreso.
    Again it depends on how you act because of ownership of the shares – if the foundation simply uses the shares to generate cash, but doesn’t make efforts to improve/maintain the cash generation of these shares, then I don’t see that it’s a bad thing – if the foundation becomes more driven by profit making than by doing good, then not so much.

  4. Good point. It would be like a tax on the profits from unhealthy food being used for good, not unlike a gas tax being used for renewable energy. The issue would be if at any point the interests of the people the foundation is trying to help ran counter to the financial interests of Mickey D’s, and the foundation actually thought it should alter its decisions based upon that. This is where I think it is good that they have separated the investment half from the philanthropy half.
    People also blame the junk food companies for how people eat too much junk food. Granted, they are heavily marketed, but at the same time people like eating junk food. Our simple desires for sugar, salt, and fat are hard to fight. I think the companies have an influence on how much people eat and drink, but the influence of media (incl. advertising) is overestimated in public discourse. Everyone seems to believe they are immune, while everyone else is being herded like sheep to eat Cocoa Puff candy bars. (Actually on that note, maybe they are. I can’t understand how anyone would think those are worth putting in their mouths!) Many companies want to cash in on the junk that people can’t get enough of (to the detriment of their health) , even the most ‘health-minded’ producers. Ever notice how much (organic) junk food Whole Foods sells? (Under its own brand?) Hey, as long as it’s non-GMO, it must be good for you!

  5. They make cocoa puff candy bars? Why wasn’t I informed? People going around combining my favorite things and not letting me know about it, ‘t’aint right.

  6. I think this reply shows a lack of understanding about food access in the poor regions of American cities, the heavy preponderance of fast foods in these areas with a related lack of stores selling fresh produce or unprocessed food even at retail level. I’m on the road, but if you want to look for statistics about “Food Desserts” in America (look into Oakland) you will see that choosing to eat healthy food over Micky Ds is not as easy for a poor black American than it is for a middle class white American. Not even close. And there are also reams of studies about these companies marketing specifically to children – as well as studies that show that kids under age 8 don’t have the same rational ability to differentiate marketing hype from objective truth (go figure).
    Finally the Gates foundation is not at all involved in socially active investment, that is they are not trying to influence these companies to do better. And let’s not forget they have investment choices. They could invest in better companies to grow their (already considerable) fortune. Is it a coincidence that Gates Foundation owns so much Coke stock, and that Warren Buffet’s Berkshire Hathaway is a dominant investor in Coke? And that Warren gives heavily to Gates Foundation? It’s all a bit sloppy, and a bit unforgivable given their goals. Plenty of ways to raise money for Global Health when you are Gates other than having these be the top 2 firms you invest in. Plenty of stocks in the pond.

  7. Deserts shurely!

    Is it a coincidence that Gates Foundation owns so much Coke stock, and that Warren Buffet’s Berkshire Hathaway is a dominant investor in Coke? And that Warren gives heavily to Gates Foundation?

    So even more money that is made profiting from unhealthy choices gets funneled into doing good rather than making fat cats fatter? Is this necessarily a bad thing? I feel it merely illustrates that Gates and Buffet either are shrewd investors themselves, or employ shrewd investors, rather than their being some sort of conspiracy or sloppiness going on.
    When the Gates foundation starts making moves which directly benefit Coke or McDonalds then perhaps one could call shennanigans – if the foundation makes moves towards improving nutrition availability while at the same time investing in companies diametrically opposed to this I feel that it merely suggests they are well aware that at least in the short term their efforts are not likely to have any significant impact on the profitability of the companies in which they invest.

  8. Posing the question of whether the BMGF should or should not invest in Monsanto is imho a good start for the answer. Any NGO which strives to better the world (which BMGF claims, and I do believe them) should be open & transparant in their activities. This does include the investment arm, legally separated or not. You cannot give with the right hand and take with the left and still wish to be liked/loved/appreciated. The current investment in Monsanto thus undermines the credibility of the BMGF and as such is a bad thing. An explanation of the underlying reason for the investment would/should clarify their intentions and thus the decision can be supported or opposed on fair grounds. No statement = loss of credibility.

  9. This is a good point. I don’t believe either Gates or Buffett are sincere about promoting the public good. Buffett who promotes higher taxes for millionaires (he’s a billionaire) is currently fighting the IRS over 1 billion in back taxes they claim he owes. Gates is famous for his ruthless predatory business practices, which included trying to undermine the “open source” movement. To believe either of these guys is a “humanitarian” is utterly ridiculous. For people like Buffett and Gates it’s about money and power, period! These are the type of people who would pee on your head and then tell you it’s raining.

  10. I somehow doubt that the goal of setting up an elaborate foundation with its separated management and philanthropic arms is an elaborate scheme to get more money and power. There are much better ways to do that than become a philanthropist.

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