Originally published in The Australian.
When Atlassian co-founder Scott Farquhar was in his 20s, he and his girlfriend made a four-hour trip from Ho Chi Minh City in Vietnam to visit a school.
Farquhar had been inspired to visit the school after reading a book by former Microsoft executive John Wood called Leaving Microsoft to Change the World.
One of the students, an eight-year-old girl, hugged them and burst into tears, thanking them for the support they were being given by the charity, Room to Read, which was founded by Wood. “Without you giving money and the help from Room to Read we wouldn’t have had an education,” the girl told them.
“It was somewhat embarrassing,” Farquhar recalls in an interview with The Weekend Australian, “as we hadn’t actually given anything. But from then on, we said, ‘How can we help this organisation?’ ”
Soon after, when Farquhar and his university friend Mike Cannon-Brookes founded their software company Atlassian in 2002, they decided that giving money to charity would be part of the DNA of their organisation.
Room to Read, which supports children’s education programs in developing countries, particularly in Asia, has remained one of their favourite charities, receiving more than $8.5 million from Atlassian, which has turned into a global software giant.
But their idea was to take a more systematic approach to corporate giving, which eventually turned into what Farquhar calls the One Per Cent pledge.
“About 10 years ago we decided (we would) give away 1 per cent,” he says. “We would give away 1 per cent of our equity to charity, 1 per cent of our profits, 1 per cent of our products and 1 per cent of our employee time.”
At the time, Atlassian’s equity was not worth much. But now it is a public company, having listed on the US Nasdaq in December 2015 and with a market capitalisation of $8 billion, that 1 per cent is worth about $80m.
“Back then, when we decided to do it, we didn’t have many employees or products or even revenue,” Farquhar says. “So it was 1 per cent of almost nothing. But over time it has grown.”
The 1 per cent pledge taken by Farquhar and Cannon-Brookes, now both 37, has evolved into a broader philanthropic movement. About two years ago Farquhar came together with like-minded US tech entrepreneurs, including Salesforce chief executive and founder Marc Benioff and Rally Software founder Ryan Martens, to form Pledge 1%.
“We said we have all got similar minds around this. We have all done some permutation of giving away 1 per cent,” Farquhar says.
“How about we codify this and try to get more companies to join?
“Since then around 2000 companies have signed the pledge, including 70 of our ecosystem partners. It’s now starting to get momentum,” Farquhar adds.
Farquhar says the pledge involves companies agreeing to give 1 per cent of their equity, 1 per cent of their employee time and 1 per cent of their products to charity or a philanthropic foundation. Some also give 1 per cent of their profits, as Atlassian does.
He says the goal is to encourage entrepreneurs to think about “giving back” from the time they start their company instead of waiting until later in life when they have made their money. “The old school model of giving is that you work until you have got grey hair, you retire and give your money away,” he says. “But people of my generation and younger want to give back throughout their lives. When Mike and I started Atlassian it was a core part of what we wanted to do.”
Farquhar says Atlassian’s policy of supporting charities and giving employees time off to support their own causes has helped in attracting talented staff.
“When we made the pledge we told our staff about it and made a big public commitment to giving back,” he says. “Over time we have given away $12m in cash, some $90m worth of our own software products and 20,000 hours in employee time.”
The money that has gone to the Room to Read charity, which helps children in developing countries learn to read, has helped more than 260,000 children.
“For our employees, it is one of the top three reasons why they work here,” he says. “When you talk to them, a commitment to philanthropy is almost always in the top three reasons they give for choosing an employer. It has been a huge benefit in attracting staff.”
Atlassian’s workplaces, which include offices in Sydney, London, San Francisco and Austin, Texas, are regularly voted in the ranks of top places to work in their field.
Farquhar argues that if entrepreneurs pledge to give 1 per cent of their equity to charity when they are starting out, the amount being given can turn big as they grow. “If all the unicorns (US tech companies worth more than $1bn) gave just 1 per cent of their equity, it would be worth almost $10bn. It could make a huge impact.”
The Atlassian Foundation is already one of the largest philanthropic foundations in Australia with assets of more than $60m.
Farquhar says his goal would be for every company starting out to automatically include the decision to give 1 per cent of their equity to charity as part of their articles of incorporation.
“If people did that they would be able to change the way philanthropy works,” he says. “Every company will do things differently, but we all agree that the world would be a better place if people in business gave back on a more organised basis and did not wait until they were old.”
Farquhar says Atlassian sends a group of people to Cambodia each year to see children in schools supported by Room to Read. It also encourages its staff to donate to charities or the foundation, with a “dollar a day” program where donations can be automatically deducted from their pay.
He says the company has supported several different charities by giving away its software, which helps team-based work.
This has included helping a US organisation called Mercy Ships, which operates a ship fitted out as a floating hospital that visits Africa to provide healthcare and medical assistance. Other groups that have been given its software include the American Red Cross and the Wilderness Society. In Australia, it has worked with a range of not-for-profits to help them set up websites and campaigns, while some staff volunteer to teach at school holiday computer science camps and work with Habitat for Humanity.
Farquhar says the company’s staff will often have their own charities, including a cancer charity that was supporting one of its own employees who had cancer.
He says he and Cannon-Brookes are passionate about helping children’s education.
“We are incredibly lucky to be born in Australia in this day and age,” he says. “And we were lucky to have a good education. We believe that every human life is equal and we want to give back to help a lot of other people who haven’t had the opportunities that we have had.”
Farquhar says there is a need for companies to step up philanthropy to help fill a gap by the declining role of churches and some other social groups. He says people may be working longer and don’t have as much free time to devote to community organisations but they still want to support charities in their own way.
The company recently hired Mark Reading, the former head of PwC’s Australian foundation, to run the Atlassian Foundation.
Reading says Atlassian’s culture was part of the attraction in taking on the job.
“Because Mike and Scott took the pledge so early in the Atlassian journey — and because Atlassian has subsequently been so successful — the foundation is now one of the most well resourced corporate foundations in Australia,” he says.
“At Atlassian we see huge potential in both business and education as a force for good. That’s why we’re so committed to growing the Pledge 1% movement and changing the way Australian businesses approach corporate philanthropy.”
Farquhar says the Pledge 1% movement also includes providing assistance to other companies to set up their foundations and charitable giving programs. Donors need to see there is return on equity for their investments and that the funds are well managed.
He says his goal is to see the 2000 companies around the world supporting Pledge 1% expand to more than 10,000 companies. “We have 2000 companies, which is an incredible achievement, but in terms of the number of companies in the world, we are really only getting started,” Farquhar says.
He says it is important that the commitment to give 1 per cent is made when the organisation is just starting out.
“There is an element of making the pledge when you have nothing so when it grows you wont have to worry about it,” he says.
“It is easy to plant a seed when it is small, but it is harder to plant a big tree. But if you plant a seed it can grow and you can change the landscape.”