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Microsoft Corporation (MSFT), 3M Co (MMM): Warren Buffett Gives It Away

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On this day in economic and business history…

Berkshire Hathaway Inc. (NYSE:BRK.A) CEO Warren Buffett shocked the worlds of both investing and philanthropy on June 25, 2006, when he announced his intent to give 85% of his fortune to charity. The vast majority of that fortune was earmarked for the Bill & Melinda Gates Foundation, a decision spurred in no small measure by the long-standing friendship between Buffett and Bill Gates. The CNNMoney/Fortune exclusive that broke the story offered the following details on Buffett’s gift:

Beginning in July and continuing every year, Buffett will give a set, annually declining number of Berkshire Hathaway Inc. (NYSE:BRK.A) B shares — starting with 602,500 in 2006 and then decreasing by 5% per year — to the five foundations. The gifts to the Gates foundation will be made either by Buffett or through his estate as long as at least one of the pair — Bill, now 50, or Melinda, 41 — is active in it.

Warren Buffett

This arrangement was no doubt modified by a 50-to-1 split of Berkshire Hathaway Inc. (NYSE:BRK.A)’s Class B shares in 2009. As a result of that split, the total gift Buffett originally promised in 2006 now looks like this:

  • To the Bill & Melinda Gates Foundation: 500 million shares
  • To the Susan Thompson Buffett Foundation: 50 million shares
  • To the Susan A. Buffett Foundation: 17.5 million shares
  • To the Howard G. Buffett Foundation: 17.5 million shares
  • To the NoVo Foundation: 17.5 million shares

Buffett has already given away many millions of shares to the Gates Foundation (based on split-adjusted totals). At the current price of Berkshire Hathaway Inc. (NYSE:BRK.A)’s B shares, seven years after it was first pledged, this gift is worth nearly $67 billion. That’s nearly twice the original value of the pledge, which was calculated at $37 billion in 2006.

The record-breaking nature of Buffett’s gift would inspire Gates and Buffett to develop the Giving Pledge, a campaign begun in 2010 to encourage the world’s wealthiest to leave most of their money to charity. Seven years after Buffett unofficially kicked off the greatest charity drive in history, the Giving Pledge has swelled to 114 signatories, virtually all of whom are worth at least $1 billion.

Incorporating for the future
Two of the Dow Jones Industrial Average 2 Minute (INDEXDJX:.DJI)‘s components took the necessary steps toward public markets when they incorporated on June 25.

3M Co  (NYSE:MMM) was the first, having incorporated on June 25, 1929. The company had been founded in 1902 as Minnesota Mining and Manufacturing, and after some early struggles it grew rapidly through the 1920s on the strength of innovations like waterproof sandpaper and Scotch tape. By 1929, the company was getting big enough to require a more investor-friendly corporate structure, which was one key reason for the change from partnership to corporation. Unfortunately for investors, 1929 was the worst possible year in decades in which to buy shares of small industrial concerns. 3M Co  (NYSE:MMM) survived and eventually thrived despite the Great Depression, and it eventually became a Dow Jones Industrial Average 2 Minute (INDEXDJX:.DJI) component in 1976. Want to learn more about 3M Co  (NYSE:MMM)’s origins? Click here.
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