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Feb. 5, 2022, 10:13 a.m. EST

Exclusive: Jeff Bezos’s $200 million, 50-year naming-rights deal with the Smithsonian does not include a ‘morals clause’

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By Leslie Albrecht

Amazon.com founder Jeff Bezos’s name will be displayed on a new building at the National Air and Space Museum and in several additional places throughout the Smithsonian Institution for at least 50 years in exchange for his $200 million donation. 

The terms of the agreement, which MarketWatch obtained through a public-records request, do not include a “morals clause,” a provision that would allow the Smithsonian to terminate the naming rights if Bezos’s behavior brought disrepute to the institution.

Bezos’s naming rights were subject to approval by the Smithsonian Board of Regents. However, the $200 million pledge would be void “and you will not be required to fulfill any portion of this pledge” if the regents didn’t approve the naming scheme, according to a gift agreement signed by Bezos and Smithsonian officials. 

The agreement also specifies that the Smithsonian will start using the Bezos name “immediately,” even though construction on the new Bezos Learning Center will not be complete “for some time.” 

Big-dollar donations like this one are typically trumpeted by institutions (this one was covered in major media outlets and came with an inspirational video ), but the legally binding contracts that surround the gifts are usually kept private. Bezos’s gift agreement with the Smithsonian offers a rare glimpse into how institutions and their wealthy benefactors engineer a mutually beneficial exchange.

Bezos secured the naming rights in a gift agreement signed two days before the $200 million gift was publicly announced in July 2021, and about a week before he blasted off in a suborbital rocket built by his Blue Origin company.

Part of the $200 million donation, the largest gift ever made to the Smithsonian, will pay for a new science, technology, engineering and arts, or STEAM, education center called the Bezos Learning Center. It’s slated to be housed in a new building connected to the National Air and Space Museum, on the east side of the museum’s grounds on the National Mall in Washington, D.C. 

As part of a larger renovation of the entire National Air and Space Museum, officials plan to demolish the museum’s existing restaurant area this spring and replace it with the new building, with the aim of opening it in 2026 to mark the 50th anniversary of the National Air and Space Museum’s National Mall building and the 250th anniversary of the United States, a spokeswoman said.

Bezos’s name will be etched onto a new glass sculpture

Under the terms of the gift agreement, Bezos’s name will be displayed on the outside of the learning center facing Jefferson Avenue and the National Mall, on the outside of the center facing Independence Avenue, and on an entrance to the center that will be inside the National Air and Space Museum. 

Bezos’s name will also be etched onto a new glass sculpture that will be suspended from the ceiling of the National Air and Space Museum in honor of donors who have given $10 million or more, and his name will be displayed on a wall in the Distinguished Benefactors Room in the Smithsonian Castle (a separate building that’s also on the National Mall). His name will also appear on another donor wall at the National Air and Space Museum’s Virginia location.

Bezos’s name will be displayed on the Bezos Learning Center for 50 years, or until the building is next renovated, whichever is later, according to the gift agreement. 

The Board of Regents, whose members include Vice President Kamala Harris and U.S. Supreme Court Chief Justice John Roberts, as well as several U.S. senators and members of Congress, approved the gift agreement at a July 14, 2021, meeting. 

The agreement notes that while the Smithsonian is “deeply grateful” for the support, it maintains control over its exhibitions and mission. Bezos, for his part, gets prior written approval of any press releases or public announcements about the gift. A Smithsonian spokeswoman said those are both standard clauses in gift agreements.

A representative for Bezos referred questions to the Smithsonian. Amazon /zigman2/quotes/210331248/composite AMZN +2.57% and Blue Origin did not respond to requests for comment.

Missing from the Bezos agreement: a ‘morals clause’ 

Emblazoning donors’ names on buildings has been common practice in philanthropy going back centuries. Just a few examples: The Smithsonian itself is named after the British scientist James Smithson, and its collection of 19 museums includes the Hirshhorn Museum, named after uranium magnate Joseph Hirshhorn. The Smithsonian’s National Museum of African American History and Culture contains the Oprah Winfrey Theater in recognition of a $12 million donation from the TV legend.

It’s “absolutely standard for a gift of this size” to include naming rights, a Smithsonian spokeswoman told MarketWatch.

But the requirement to prominently display Bezos’s name for the next 50 years comes as naming rights have been under scrutiny. Most notably, the Sackler family name has been removed from museums and other institutions they helped fund with profits from OxyContin maker Purdue Pharma, which is now seen as playing a pivotal role in the opioid epidemic that’s killed some 500,000 people since 1999.  

(The Sacklers have denied wrongdoing , and say they’ve been unfairly blamed for the opioid epidemic. Purdue Pharma and the Sacklers are currently poised to appeal a ruling that threw out a $4.5 billion settlement that would have protected the Sacklers from future opioid lawsuits. That settlement included a nine-year ban on the family putting its name on institutions to which they donate.)

In light of the Sackler controversy, and amid broader debates about the soft power exercised by elite philanthropists, nonprofits are rethinking how to recognize benefactors’ generosity without tattooing themselves in perpetuity with a donor’s name. 

There’s now consensus that institutions should have the right to refuse a donor’s name or take a name down, said Melissa Berman, president and CEO of Rockefeller Philanthropy Advisors, a nonprofit consultancy that advises individuals, corporations and foundations on their philanthropy; it spun off from the Rockefeller Family office in 2002. What’s less clear are the grounds and principles used to determine those decisions, Berman said. 

“The Rockefellers no longer control Exxon, but their wealth comes ultimately from oil, and the same is true for many fortunes around the world,” Berman said. “They come from industries we would now regard as causing direct or indirect harm: oil, mining and minerals, forest products, and all the wealth that relied on enslaved people as free sources of labor. We haven’t yet reached, as a society, a consensus about how to think about and acknowledge how wealth was created and how that should or should not affect how it’s being used philanthropically.”

Some institutions now include “termination rights” or “morals clauses” in their gift agreements, which allow them to remove a donor’s name if the person’s reputation is tarnished and it’s more of a liability than a benefit to be publicly associated with them.

Termination rights also protect an institution in the event that 100 years go by, a building needs a renovation, and the original donor (or their fortune) isn’t around to pick up the tab. The ability to remove the name from the building lets the institution sell the naming rights anew and raise fresh funds.

Bezos’s agreement with the Smithsonian contains no morals clause or termination rights. A spokeswoman said that’s standard for Smithsonian gift agreements, and that the Smithsonian “evaluates these issues on a case-by-case basis when they arise.” For example, the Smithsonian posted a sign next to an exhibit of art owned by Bill Cosby at the National Museum of African Art, saying it “in no way condones Mr. Cosby’s behavior” after sexual assault allegations about Cosby surfaced.

The lack of a morals clause in the Bezos agreement is a notable absence, said Ben Soskis, a historian of philanthropy and a senior research associate at the Center on Nonprofits and Philanthropy at the Urban Institute, a Washington, D.C., think tank. 

“At any given moment there could be a major investigation into Amazon — I could see his reputation really dramatically shifting over time in many different directions,” he said.

Building the world’s largest online retailer earned Bezos his billions, but it’s also opened him and the company up to criticism. The company recently said it will shut down its Sold by Amazon program after an antitrust investigation by Washington state’s attorney general; the company has said it believes the program was legal. 

Amazon has also been accused of mistreating its warehouse workers and suppressing unionization efforts. Amazon says it offers competitive pay and benefits, and that worker health and safety is a top priority.  “Our employees are the heart and soul of Amazon, and we’ve always worked hard to listen to them, take their feedback, make continuous improvements, and invest heavily to offer great pay and benefits in a safe and inclusive workplace,” the company said after Alabama employees voted not to unionize.

A relationship to the entire American people

The Smithsonian, a nonprofit that was created by the federal government and is funded mostly by taxpayer dollars, “has a relationship to the entire American people,” Soskis said, and it’s now “formalizing a relationship in which it’s — for half a century — going to be closely tethered to the name and reputation of an entrepreneur who is highly controversial,” Soskis said.

“It’s not to say that the Smithsonian doesn’t have a right to acknowledge and express gratitude for the gift. I have no problem with his name being put on a donor wall. But Bezos’s identity now is certainly very complex. He represents many different things, and the Smithsonian is taking them all in,” Soskis said. “That to me suggests a real problem.” 

In addition to being displayed on the physical building, Bezos’s name will be attached to a program for middle and high school students called the Bezos Science and Technology Challenge and a program called the Bezos Empowered Educators, which will “accelerate and expand integrated STEAM education programs nationally, starting locally in the D.C. metro region,” according to the agreement. Both programs will be funded by Bezos’s donation. The learning center’s director will be known as the Bezos Learning Center Director and the endowment that supports that position will also carry the Bezos name. 

Bezos got a few extra decades of naming rights because of the size of his donation

The Smithsonian’s standard expiration date for naming rights is 20 years, but Bezos got an exception, in part because of the size of his donation, but also because the learning center is brand new and expected to last longer than 20 years, a spokeswoman said.

The Smithsonian enacted the 20-year policy in 2011, because it “wanted to get away from perpetuity” in gift agreements, a spokeswoman said. 

Case in point: A legally binding contract to display a name forever is one reason the Smithsonian says it won’t remove the Sackler name from its Arthur M. Sackler Gallery, despite calls from a U.S. senator and activists to do so. The name remains on the building, though the Smithsonian rebranded the gallery in 2019 as the National Museum of Asian Art. Arthur Sackler’s widow has pointed out that he died almost 10 years before Purdue Pharma (which was owned by his brothers) developed and marketed OxyContin, and that none of his charitable donations were funded by OxyContin or Purdue Pharma.

In addition to protecting against reputational risks, there’s another argument for putting time limits on naming rights, says Linda Sugin, a Fordham University law professor. A single large donation that bestows permanent naming rights discourages future gifts, Sugin says. She’s called for changing tax laws around charitable giving to discourage perpetuity. Her theory is that limiting the amount of time donors get naming rights would clear the way for more donations — and promote “ competitive philanthropy ” among the wealthiest philanthropists.

“If you can keep reselling the same naming rights, then it’s the gift that keeps giving,” Sugin told MarketWatch.

Many institutions see themselves as “supplicants at the mercy of these donors,” Sugin said. “That’s not a good situation for anybody. We want a law that gives institutions some power when they go into these negotiations.”

She added, “The super rich have a lot of power and influence over our public space and it’s important that we regulate that power and influence in a way that the public gets the most benefit from it.” 

Congress could, for example, pass a law saying that donors can’t get a charitable tax deduction on donations if their naming rights last more than 20 years, she said. On the other hand, the wealthiest donors probably aren’t as motivated by tax breaks as the typical person writing a $50 check to a local charity. “I worry about the situation in which people are just so rich that they don’t care about those incentives, and they’re willing to do what they want to do even though it costs them more money,” she said.

Potential tax benefits for Bezos 

Bezos plans to fulfill the $200 million pledge over four years with four equal annual payments of $50 million each, and he’s allowed to use stock transfers to do so, according to the agreement. That means he could get a tax benefit, because donating appreciated stock directly to nonprofits allows donors to claim a charitable tax deduction for the fair market value while also avoiding capital gains taxes, Sugin noted.

If a donor gives $200 million in stock, but they only have a $20 million basis in that stock, there’s $180 million of capital gain they would have had to pay tax on if they had sold the stock. By giving it away, they don’t pay capital gains on that amount and they still get a deduction for the $200 million. “When tax rates are high, you can make money giving your money away,” Sugin said.

Bezos and other donors who get naming rights stand to get favorable tax treatment in another way as well, Sugin noted. When people donate to a nonprofit, they can only claim a tax deduction if they don’t receive anything of value in exchange. For example, if you buy a ticket to a Smithsonian gala for $400, and the dinner at the gala is worth $100, you can only deduct $300 from your taxes. Naming rights, however, aren’t considered to have any value by the IRS, so donors that get naming rights can typically deduct the entire value of their donation.

Bezos is just starting his philanthropic career

As one of the world’s wealthiest men with an estimated net worth of $167 billion, Bezos, 58, is poised to be an influential figure in philanthropy. He stepped down as CEO of Amazon in July 2021 in part to focus on his other passions, including space exploration, the Washington Post ( which he owns ) and his philanthropic organizations. 

His charitable endeavors include building a network of free preschools for low-income children and funding groups that serve homeless families across the U.S. Bezos has also pledged $10 billion toward the Bezos Earth Fund, which works to address the climate crisis. He also handed out two $100 million “Courage and Civility” awards after his 2021 space flight. 

Last November Bezos donated $100 million to the Obama Foundation. In that case, the gift included naming rights for someone other than Bezos: It stipulated that a plaza outside the Obama Presidential Center in Chicago carry the name of Congressman John Lewis, the civil-rights icon. 

“With the gift from Bezos, the Foundation is seeking to change the paradigm around naming public spaces within the Center, using it as an opportunity to give donors the option to honor and elevate the names of those who have fought for a more just and equitable world,” the foundation said in a statement when announcing the gift. 

Bezos has supported the Smithsonian previously and donated with his former wife, MacKenzie Scott, to the National Air and Space Museum and to the National Museum of African American History and Culture.

“The Smithsonian plays a vital role in igniting the imaginations of our future builders and dreamers,” Bezos said in a statement when his $200 million donation was announced. “Every child is born with great potential, and it’s inspiration that unlocks that potential. My love affair with science, invention and space did that for me, and I hope this gift does that for others.”

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