PERSPECTIVES ON THE NEW PHILANTHROPY
by William H. George
Chairman and CEO, Medtronic, Inc.

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PHILANTHROPY IN AMERICA
Of all the revolutions taking place in America as we enter the 21st century, none will have a greater impact on our society than the estimated $100 trillion in equity capital that will flow into the nonprofit world over the next 50 years.

Over the last 20 years we have witnessed the greatest creation of wealth in history as the direct result of the high-technology revolution and the incredible gains it has created in equity values of publicly traded companies. Now it is time for those of us who have benefited from these gains to give back to society - in ways that will help address society's ills and the economic distortions these gains have created.

In the year 2000 charitable giving in the U.S. will top $200 billion for the first time ever. This equates to 33% of the federal budget for domestic spending and 2.1% of the GDP! Bill Gates' incredible $22 billion in gifts to his family foundation and Ted Turner's $1 billion gift to the United Nations have set the example, but let's not forget that 73% of all Americans give money to charitable organizations and nearly 50% report volunteering for civic activities.

This is in sharp contrast to other wealthy countries. In the early 1980s when I was living in Brussels, I chaired the national United Way campaign for Belgium. Although we reported better than a 100% increase that year, our total campaign was less than 3% of what the Minneapolis United Way raised. Fewer than 10% of the funds raised came from Belgians. As Count Solvay said in a meeting with our fund-raising team, "You Americans raise the money, and we Belgians give it away." Indeed, most Europeans and most Japanese believe that it is their governments' job to fund education, the arts, health care and the needy.

In contrast, we Americans believe that the independent sector is "the engine of social change in our country," and that "foundations have frequently been society's passing gear." Instead of relying on government spending to correct society's ills, we see charitable giving as an alternative to government intervention and a way to fill in the gaps left by government, such as private training programs to facilitate the Clinton administration's "welfare to work" initiative.

To accomplish our goals we need to be wise, we need to be effective, and most importantly, we should give based on our most deeply held values. The measure of our success, or "our ROI" if you will, is not measured in dollars but in lives changed, in values buttressed, in justice achieved, and in faith and healing.

Today's givers, in contrast to our forebears, are different: we want to target our giving to the objectives and programs we value the most, we want to be involved in the organizations we support, and we want to measure the results of our giving. Most of all, we want to have an impact now, not after we die! Some call this venture philanthropy, some call it targeted giving, but what is not is writing a big check to an endowment and turning responsibility over to a general fund to manage our gift.

PHILANTHROPY IN MINNESOTA
Here in Minnesota we have a philanthropic tradition of which we are deeply proud. It began with the families who built our great corporations: the Daytons, the McKnights, the Pillsburys, the Crosbys, the Hills, and many, many more. Today this tradition is being carried on by the major corporations based here and the people who work for them. It is being amplified in most important ways by a new generation of entrepreneurs who are building the great corporations of the 21st century.

We currently have 4,176 nonprofit corporations in Minnesota. Perhaps that's too many, but they have helped create a health care system, an education system, a job training and creation system, and a social justice system that ranks at the top of all the states in the U.S. and is the envy of the nation. The combined United Ways of Minneapolis and St.Paul this year will raise over $90 million, placing us third among all United Ways in the U. S., yet we are only the 14th largest metropolitan area! These giving levels have enabled us to create model programs for the nation like "Success by Six" and our "Welfare to Work Training Programs." When I was chairing the United Way campaign for Greater Minneapolis in 1997, Dr. Glen and Marilyn Nelson and Penny and I created the Century Legacy program by each giving $1 million to the United Way. There are currently 14 Century Legacy members who have given $1 million or more.

No one exemplifies this commitment to community better than the Dayton family, led by Ken Dayton and his brothers Bruce, Wally, Doug, and Don. For decades Ken himself has set the standard for giving in his personal gifts, and he has personally implored CEO's and other corporate leaders, whether they are Minnesota natives or itinerant executives from the east coast, to get behind community efforts and to give generously. He has led the way by giving tens of millions to build the Minnesota Orchestral Association while Bruce has done likewise in creating a great art center at the Minneapolis Institute of Arts.

Ken led Dayton Hudson (now Target Corporation) to set the standard of giving 5% of its pre-tax profits to the community, a standard which Target, now the most profitable corporation in Minnesota, carries on to this day across the United States! Ken then created the 5% Club and the 2% Club along with other civic and corporate leaders and implored every local company to sign up to one of these levels of giving. Currently there are 250 Minnesota companies committed to these levels of giving!

More recently, low-income housing pioneer and former Catholic priest Joe Selvaggio created the 1% Club, comprised of individuals and families who have committed to give a minimum of 1% of their total equity (not their income) to charity! The 1% Club now has 325 local members and will be over 1,000 in two more years!

My own company, Medtronic, has committed to give 2% of our pre-tax profits through the Medtronic Foundation. When I joined the company in 1989, that amounted to only $1.5 million. Thanks to our profit growth of 23% per annum over the last eleven years, last year we made grants totaling $17 million and were awarded the Keystone Award for our charitable programs.

We target our giving to health care, K-12 education, healthy countries, and our local communities. For example, in 1999 we launched a $15-million, 5-year health care initiative called the "Full Life Patient Partnership." This initiative is aimed at augmenting our corporate mission of "restoring people to full life and health." Its programs include Patient Link to support 24 patient associations, Health Center Leadership Grants for integrated health care to such leading medical institutions as Harvard, Stanford, Scripps, and Duke, and a community-based Heart Rescue program to enable people to survive sudden cardiac arrest. In education we have given over $6 million in K-12 grants to support unique teaching programs in science and math through our STAR program.

GEORGE FAMILY FOUNDATION
What about giving on an individual level? I certainly would not presume to speak for others, especially those who are giving far more than my family is, but let me share some of the giving philosophy that my wife Penny and I have established. I should really credit Penny for these ideas as she is the one who is president of the George Family Foundation and who is pioneering new forms of venture philanthropy in our targeted areas.

	SHARE YOUR THOUGHTS George believes that a key to successful giving is "putting in your personal time to the giving process." Is it easier for you to give money or time? What do you think does more good? Participate in the Forum

Our shared philosophy is drawn from the words of the Episcopal funeral service, "We brought nothing into this world, and surely we can take nothing from it." So why not give it all away? After all, how much do we benefit from our efforts to consume our wealth? Do we really help our children and grandchildren by setting them up with trusts and estates so they don't have to work to earn a living as we and our parents did? I don't think so!

Unfortunately, we are all influenced by estate planners and estate lawyers with endless ideas to avoid estate taxes. For many wealthy people these plans only protect a small fraction of their estates and subject the remainder to the 55% tax. For those of us trying to build our equity base, these plans tie up our funds and limit our flexibility to give as we wish and when we wish. Besides, there is no more tax-efficient way to manage your funds than giving them away in your lifetime! I'm finding many more people are planning to give it all away, as we are, after their children's education is secured. This past week I heard this precise philosophy articulated by the founders of EDS, Home Depot, and MiniMed.

There are three basic ways to do so, other than complex estate plans: 1) direct gifts, 2) community foundations, and 3) family foundations. Penny and I chose a family foundation because it gives us the greatest degree of control over our giving and is the most tax efficient. That's not meant to overlook the other two options, as they may suit others better.

We set up the George Family Foundation in 1994, starting with $1 million. We have built the foundation up to just under $30 million through a combination of gifts of Medtronic stock and aggressive investing in equities. Our goal is to build the corpus to $100 million within five years, and to give away a minimum of $5 million per year.

	SHARE YOUR THOUGHTS Bill George plans to give all of his wealth away and leave nothing to his children - what do you think of this approach? Participate in the Forum

We believe the key to making a family foundation work is being prepared to putting in your personal time to the giving process and having an executive director. As one friend warned me, "It's a lot harder to give your money away thoughtfully than it was to earn it." Our foundation really got going in 1998 when Penny gave up her practice of psychology to focus on the running the foundation as president and when we engaged Diane Niemann of Family Philanthropy Advisors as our executive director. Together they make an awesome team!

The first thing Diane asked us to do was to write a mission statement for our foundation. It reads:

Our mission is to foster human development - spiritual, intellectual, physical and psychological - and to enhance the work of people and organizations devoted to exemplary service in the community.

Next we drafted "Our Guiding Philosophy" which is:

To invest in values, ethics and character formation to support the efforts of those who are successfully making a difference in people's lives; and to help build the communities in which we live. We believe in sharing the blessing that have been bestowed on us and in celebrating the spiritual reciprocity between donors and receivers working collaboratively to make the world a better place.

Admittedly, neither our mission nor our guiding philosophy is typical of most foundations, especially with our emphasis on spirituality. But this is what we believe and are attempting to put into practice through our giving programs. We believe we are but mere stewards of these funds, largely earned through restoring people to full life and health, and now distributing them back to those areas where our passion is the greatest to help contribute to building a new generation.

We believe in trying to build the communities in which we live, and by working collaboratively with our recipients, donating both our time and our money, and by bringing them together to collaborate with each other toward common objectives. At a deep level, we believe in the spiritual reciprocity between the giver and the receiver, and in investing in people who are making a difference.

We are attempting to make a difference in five areas:

• Integrated healing, by changing the paradigm of medicine
• Educational opportunities for local AND especially international students
• The practice of spirituality in everyday life
• Youth leadership development
• Overcoming barriers for women and minorities

Let me illustrate each of these five areas by citing a current program we are working on: Approximately half of our grants go to integrated healing - the integration of conventional medicine with complementary therapies - to treat the whole person, mind, body, heart, and spirit. We believe integrated healing is vital to changing the paradigm of today's medicine. Penny adopted this approach in her successful recovery from her 1996 battle with breast cancer. Now we are supporting programs at the Virginia Piper Cancer Institute and the Minneapolis Heart Institute, both here locally associated with Abbott Northwestern Hospital, at the Center for Spirituality and Healing at the University of Minnesota, Dean Ornish's Preventive Medicine Research Institute, Duke University, and Jim Gordon's Center for Mind Body Medicine, to name just a few.

Penny and Diane are taking these efforts one giant step further by creating "A Conversation" next April which will bring together the nation's leading practitioners of integrative medicine and the philanthropists who are funding these programs to build a national agenda to change the paradigm of medicine. Dr. Claire Gaudiani, president of Connecticut College, will facilitate the conference. Their hope is that it will put these efforts "into the passing gear."

In education, we have funded George Fellows, drawn from people of color, women and international students, at Georgia Tech, Harvard, Amherst College, and locally at Macalester, St. Thomas, Carleton and the Hamm Clinic. We are also supporting a very innovative English acquisition program at the Abraham Lincoln School for New Americans.

In the area of spirituality we are funding creative programs at the United Theological Seminary to extend its spirituality offerings to the entire Twin Cities community. A breakthrough program in youth leadership development called "Horizons" for college sophomores created by the Sigma Chi National Fraternity. And, finally, a unique training program targeted at enabling men of color to reach economic self-sufficiency called "Twin Cities Rise!"

In nearly every case we are backing people we believe in to help them reach their goals - - people like Dr. Greg Plotnikoff at the University of Minnesota, Louis King of Summit Academy OIC, Murisiku Raifu, a young medical student from Ghana, Linda Carole, creator of "Healing the Heart" at Minneapolis Heart, President Wilson Yates at United Seminary, Steve Rothschild, founder of Twin Cities Rise! and Renato Westby, a former soccer player of mine who is creating an entire new village in Guatemala City for 200 families to replace homes they lost in Hurricane Hugo.

To reach our giving goals, we have set very strict fiscal ground rules. Since we want to make an impact today yet build the size of our foundation, we do not make grants to other foundations, nor do we make endowment gifts. Instead, we prefer multiyear gifts, with commitments up to 10 years, so the recipients can count on the funds being there in future years and collaborate with us in building their programs. This approach enables us to invest the funds in our foundation in high-growth equities so we can build the corpus of the fund at a much faster rate. Hopefully, these approaches will enable to expand our areas of impact over the next several years.

CONCLUSION
I hope this thumbnail sketch of Minnesota philanthropy and our family foundation has provided you with some "food for thought" as you engage this vital topic over the next 24 hours. I'm quite sure we haven't yet got it right, but that through idea sharing and dialogue we can make the revolution in giving the most effective tool in creating societal change to create healthier communities and a better world in which to live.