|The Bahamas Investor Magazine
June 22, 2010
June 22, 2010
From Microsoft magnate Bill Gates, who gives around $2 billion in grants to charitable causes each year, to long-time Bahamas’ resident the late Sir John Templeton, whose foundation distributes around $70 million annually, philanthropy has traditionally been a part of the lifestyles of ultra-high-net-worth individuals (UHNWIs). Luckily for these generous investors, The Bahamas is not only a tropical paradise, but also one of the foremost offshore jurisdictions for charitable giving thanks to its unique regulatory framework and array of highly qualified experts in the financial services sector.
In The Bahamas the Foundations Act 2004 facilitates those investors who wish to follow in the footsteps of Gates and Sir John and set up their own philanthropic foundations to manage and administer assets on their behalf, allowing donations to continue long-term and independently of the benefactor.
The jurisdiction also has legislation governing the charitable trust, which operates similar to an ordinary trust, and corporate philanthropy, whereby money is donated through the donor’s business interests. Hotel and casino billionaire Sol Kerzner, for example, gives millions of dollars annually to Bahamian charities through his company, Kerzner International Holdings Ltd, which owns Atlantis Paradise Island.
There are as many reasons for giving charitably as there are ways of doing so. Investor altruism can be motivated by a number of factors–a sense of social responsibility, to improve corporate reputation or to build a stronger link with the local community, being just a few.
Chairman of the Lyford Cay Foundation, Manuel Cutillas thinks generosity is ingrained in UHNWIs, as they feel obliged to share their good fortune. “People are generous,” he explains. “Philanthropy is something that is very innate in people and I think those who are well-off love to share some of their wealth with needy people.”
The foundation’s general manager Maureen French agrees: “It is a desire to make positive change and to assist those that have less opportunities.”
In many cases, philanthropy arises out of a personal connection that the wealthy benefactor has with the recipient cause, as in the case of Sir John, who had a keen interest in science and religion. His foundation, which was established in 1987, donates substantial sums to organizations that carry out research in those fields.
A well-established philanthropic institution, the Lyford Cay Foundation has its origins in the gratitude felt by a pair of expatriate investors for the country that became their new home. In 1969 US businessmen Robert Blum and William Robbins established The American Friends of The Bahamas. Blum and Robbins had come to The Bahamas to enjoy its tropical climate, luxurious lifestyle and advantageous tax environment. By creating The American Friends of The Bahamas, which later became the Lyford Cay Foundation, they hoped to give back to the country that had welcomed them.
“They enjoyed being in The Bahamas so much that they decided they would like to do something for the country,” explains Cutillas.
Today, many Lyford Cay residents are following the example set by Blum and Robbins. The foundation, which amassed over $2 million in donations in 2009, has a primary aim of supporting the education sector in The Bahamas.
“People are especially drawn to the education component of our foundation because their contribution is not just going to an institution,” says Cutillas. “When you educate a person, you are doing a lot for the country. You are giving that person a tool that he can use to contribute.”
In 2008, the Lyford Cay Foundation awarded new scholarships to 127 Bahamians to study overseas, contributed $1.5 million towards the cost of a virtual library service at The College of The Bahamas and gave another 111 scholarships to students already enrolled there.
Ten wealthy donors gave $50,000 or more each to the organization in 2008, while 27 gave between $10,000 and $50,000. Despite the wealth of its contributors, however, the foundation has not been wholly sheltered from the effects of the recent recession. In 2008, the organization experienced a slight dip in funds due to failing investments, combined with a slight drop in donations. Cutillas says that this is a direct result of the recent economic turbulence, but is quick to point out that while some investments lost as much as 25 per cent of their value, the work of the foundation was unaffected.
“Last year our investments went down like everybody else’s. Some people were affected personally [by the recession] and therefore they could not give as much as before, but generally speaking we did pretty good.
“Fortunately, this negative impact did not affect our scholarship programme very much, because we organized ourselves so we could at least continue providing for those in college.”
UHNWI philanthropists may see it as a duty to reach out to their local communities through charitable donations, but what is the actual impact of these efforts?
Alanna Rodgers, who co-founded the Bahamian charity Hands for Hunger in 2008 with help from a $10,000 Lyford Cay Foundation grant, says it has an enormous impact not only in terms of funding, but also in providing guidance when the charity was seeking non-profit status.
Hands for Hunger takes unwanted waste food from groceries, restaurants, hotels, wholesalers, bakeries and farms around New Providence and redistributes it to relief agencies such as the Salvation Army, churches, the Red Cross, community centres and others.
The logistics of transporting large volumes of food around the island has naturally incurred significant costs, costs which the foundation has helped to meet. Its first grant of $10,000 was followed by the same amount at the end of 2009 and both are being put towards operational costs. As Rodgers explains, these donations do not only benefit Hands for Hunger, but also the charities who receive the food and redistribute it on its behalf.
This cross-community effort is a big part of what draws investors to the cause. According to Rodgers: “We are a middle entity between the private sector and the social iniquities we serve. When an investor gives, that helps a multitude of organizations that we give food to. The members of the foundation are very community minded.”
UHNWIs are also keen to get involved to reward the efforts of the young people who recognized that there was a need and took the initiative in forming the charity, says Rodgers.
“We were founded, and are still fuelled by, young individuals. Often the stereotype is that people of my generation are not interested in making a difference. It really epitomizes that process of people coming together and sharing a vision.”
Some investors choose to shy away from private philanthropy and prefer to set an example in the corporate world and donate through their business interests. Kerzner International has pledged to donate around $700,000 to community affairs in 2010 including the Governor General’s Youth Awards and the Kerzner Community Service Awards, which reward those making a contribution to their communities.
Through its Community Service Awards, the company has donated around $1.25 million in the past five years to organizations such as the Cancer Society of The Bahamas, the AIDS Foundation of The Bahamas and the Bahamas National Children’s Charity.
Another company in the tourism sector supporting the youth of the nation is the British Colonial Hilton. The Hilton Nassau has participated in the hotel group’s Caribbean-wide charity programme, Kindness In Donations and Services (KIDS), since it began in 2001. The KIDS scheme donates to organizations such as hospitals and children’s homes. Money is raised through guest donations, volunteerism among staff and fund-raising events. General manager Pablo Torres explains: “This hotel has such a long history with the local community and that ties back into why we give–it is a constant cycle of giving and receiving.
“We want to be leaders in our industry and at the same time leaders in our local community.”
The Hilton celebrated its 10th anniversary in December 2009 and has embarked on a Ten Months of Giving programme to celebrate the occasion and illustrate its gratitude to The Bahamas. Jermaine Wright, director of sales and marketing at the hotel, says: “The Bahamian community has been such an integral part of our success, we thought it only fair to give something back.”
Banking on the future
It is not just the tourism sector that is setting a good example, Bahamian banks are also realizing the need to contribute and recognizing that it makes good business sense to do so.
Scotiabank, which began implementing its Bright Futures Programme for charitable giving in The Bahamas in 2008, believes that corporate philanthropy is not only about generosity but is also a savvy business practice for those companies wishing to grow. Leah Davis, Scotiabank’s senior manager, products, marketing and PR, says: “There is a relatively saturated [banking] market in The Bahamas, so in order for us to grow financially we need to demonstrate we are giving back to the community in which we operate. Our strength as a company is directly tied to our corporate giving.”
Bright Futures encompasses 80 per cent of Scotiabank’s philanthropy and is focused primarily on young people, with funding for children’s homes and hospitals. The remainder of the bank’s charitable efforts include donations to organizations such as the Cancer Society of The Bahamas and The Heart Foundation. It was one of the first banks in The Bahamas to organize fund-raising activities shortly after February’s earthquake in Haiti–raising over $100,000 for the Red Cross relief effort.
Corporate philanthropy may be good business practice but, like any expenditure within a large business, it is also subject to the fortunes of the company as a whole. The economic recession has made it necessary for most companies to scale back and focus on spending money more efficiently.
Davis believes it is times such as these when it is important to maintain programmes such as Bright Futures. “We have to be a little more strategic in our giving, as budgets have been cut, but it is even more important because you do not want to be seen as cutting back when times are tough. Times are tough in the community too and people are in need,” she says.
Senior vice president of public affairs for Kerzner International Bahamas Ed Fields agrees: “Obviously our capacity to make contributions is affected by overall performance. It is important to note however that we have not cut back substantially, as we are also cognizant that charitable organizations and non-government organizations are more significantly impacted by the economic climate and need our help even more than in previous years.”
Whether giving through foundations, trusts, in a corporate setting or personally, it is clear that investors in The Bahamas have a big heart, even in times of financial uncertainty, and share a willingness to contribute to the community that has supported them. Be it in the field of education, health or youth services, a range of charities in the country are benefitting from these philanthropic individuals, who show that there is a magnanimous side to the UHNWI lifestyle.