On June 18, representatives from the Ragon Institute of Massachusetts General, the Massachusetts Institute of Technology and Harvard University gathered in Cambridge to commemorate the opening of the institute’s new headquarters. A photo on Massachusetts General’s website shows the institute’s namesake, billionaire tech entrepreneur Phillip T. (Terry) Ragon, cutting the ribbon, flanked by his wife Susan and the institute’s Dr. Bruce Walker.
The origins of the institute date back to 2007, when Phillip Ragon joined Walker, an esteemed AIDS researcher, on a trip to South Africa where they spent three days visiting doctors treating patients afflicted with the disease. The experience left a deep impression on Ragon, and two years later, the Ragon Institute was established thanks to a 10-year, $100 million gift from the couple’s Phillip T. and Susan M. Ragon Foundation. While the institute’s original focus was developing an HIV vaccine, it has since expanded its mission to include six priority areas, including global infectious diseases and clinical studies. In 2019, the couple announced a $200 million gift to endow the institute.
We don’t know if or how much the couple may give through donor-advised funds, as DAF donors are not required to publicly disclose grant recipients. But we can learn a lot about the couple’s priorities by looking at their foundation’s Form 990s, and an analysis of fiscal years ending December 2018 to 2022 reveals a set of traits we frequently find in billionaire donors who give through private foundations.
The Ragons fund their operations with incoming contributions, which enables them to blow past the IRS rule stipulating foundations disburse 5% of noncharitable use assets annually in the form of qualifying distributions, including grants. Like other foundations led by billionaires, the couple’s operation is a lean one, so practically all of its qualified distributions take the form of grants to mostly Boston-based organizations.
Lastly, the couple, like many of their mega-giving peers, give enormous amounts of money to organizations where they have a personal connection. Of the $213 million the couple moved out the door from 2018 to 2022, 98% of funding went to Mass General (75%), where Phillip Ragon has been on the board of trustees since 2014, and the Massachusetts Institute of Technology (MIT) (23%), where he received a bachelor’s degree in physics.
Here’s a quick overview of these Giving Pledge signatories and their Cambridge-based family foundation — and a look at how their philanthropy reflects several key dynamics common to many living billionaires who give through foundations.
Finding “the right fulcrum”
In 1978, Ragon founded InterSystems, a software company that enables hospitals, manufacturing firms and banks to analyze big data. Forty-six years later, he’s still the CEO and retains full ownership of the company, which says it has over 2,000 employees and $976 million in revenue. Susan Ragon is InterSystems’ vice president of finance, administration and recruitment.
In 2016, the couple signed the Giving Pledge and said they’d give the “majority” of their wealth to charity after providing for their children. “To change the world, you need to find the right fulcrum and the right place to put it,” they wrote. “In our case, we decided the fulcrum was research and the right place for us to put it was in Cambridge, Massachusetts, where there is an enormous density of extremely talented and dedicated people.” The couple cited the Ragon Institute and its vision “to harness the immune system to prevent and cure disease.”
The foundation does not have a public web page, and the telephone number I came across on a few sites directed me to InterSystems’ headquarters, where the operator told me the foundation doesn’t have a number. Of course, I was able to access its Form 990s, and as I dug into the most recent one, for the fiscal year ending December 2022, I discovered it made only a combined $400,000 in grants to three organizations — the Cambridge Community Foundation, the Archdiocese of Boston and the Boston-based Camp Harbor View, an organization that provides a summer camp and family services.
Next, I calculated the foundation’s payout ratio by dividing its qualifying distributions by the net value of its noncharitable use assets. The resulting percentage, 0.61%, made me triple-check the math since it was dramatically less than the 5% figure mandated by the IRS. But then I crunched the ratio for the previous year when the foundation gave Mass General $85 million and MIT $30 million, and its payout ratio was a whopping 70%. (Rather than earmark funding for the Ragon Institute, the purpose of each grant was “to carry on organization’s charitable activities.”) Payout ratios from 2020, 2019 and 2018 were 26%, 16% and 16%, respectively.
The exercise reflected how foundations often treat the 5% payout figure as a five-year rolling average. If they underperform one year, they can make up the difference the following year or years without raising red flags at the IRS. Indeed, it’s safe to say the Ragons do not worry about an audit, as their foundation’s five-year average payout ratio was a healthy 26%.
A lean operation
We can attribute the foundation’s high payout rate, in part, to the fact that like other living donors, the Ragons frequently shore up its assets with incoming contributions. Since they know more money will be pouring in at some point, they can comfortably eclipse the 5% payout ratio without worrying about imperiling the foundation’s perpetuity. Foundations that solely rely on endowment interest income lack that luxury, and as a result, tend to have payout ratios at or around 5%.
In the fiscal year ending December 2018, the couple made $67 million in contributions. They contributed only $1.4 million over the next four years, and by the time the fiscal year ending 2022 came around, the foundation’s net assets stood at $63 million — a 73% decrease over 2018’s $232 million.
Another key characteristic of foundations run by living donors is that they’re often run as lean operations. Many of these donors made their billions by squeezing out business efficiencies, and they believe it’s only natural to apply that thinking to their foundations. Low administrative overhead also enables them to devote more money to grants and less toward other qualifying distributions, like salaries.
Phillip and Susan Ragon are the only officers listed on the foundation’s Form 990s, and neither individual took a salary. Of the $213 million and change the foundation made in qualifying distributions from 2018 to 2022, all but $17,950 — or 100% of the total, for all intents and purposes — was earmarked for grants. In contrast, the Council on Foundations notes that grants constitute 90 to 95% of qualifying distributions for the average foundation.
Of course, one potential drawback of having a lean shop is that donors lack the resources to manage a large grant portfolio or bring new grantee organizations into the fold. But in many instances, this is by design. Many donors running multi-million-dollar businesses prefer to keep their heads down and fund a set of organizations they’re already familiar with.
As for the Ragons, their foundation made only 17 grants to eight organizations from 2018 to 2022. All but one recipient, Instituto San Pablo Apostol Carrera, a religious school in Bogotá, Colombia, was based in Boston or Cambridge. (Phillip Ragon spent his senior year of high school in Bogotá, when his father, a U.S. Air Force pilot, was stationed there.)
Meanwhile, the 74-year-old Phillip Ragon’s net worth has risen from $2.2 billion in 2018, which was around the time when the couple made their last major contribution to the foundation, to $3.1 billion in 2024. It isn’t a huge stretch to expect the couple to make another large infusion to replenish the coffers at any moment, and perhaps they already have. If so, we’ll learn about it when the foundation’s Form 990 for the fiscal year ending in 2023 is made public.
Either way, the couple has kept the mega-gifts flowing. Last March, Boston Business Journal’s Greg Ryan reported that Mass General will name a new complex the Phillip and Susan Ragon Building after the couple made what hospital executives called a “monumental” contribution toward the project. The building is expected to open in two phases, between 2027 and 2030.
When the Ragons signed the Giving Pledge in 2016, they wrote how research generated in the Boston area was the “fulcrum” with which they could change the world. Extensive support for Mass General and MIT from 2018 to 2022, plus last year’s gift to the former institution, suggest that they haven’t deviated from the plan.
