CEOs of publicly traded companies can give away their fortunes, but that's essentially just selling their shares to the public, said Joseph Foudy, a clinical associate professor of economics at New York University. But Faulkner is arranging to simultaneously give away her fortune while maintaining a private company structure that will take into account the needs of Epic employees and other stakeholders, he said.
“If she had just sold it off as a public firm, the company would be legally required to maximize returns only to shareholders,” Foudy said.
It's too early to say whether and how much the company will change once it is controlled by a foundation, experts say.
Epic's access to capital for further growth won't be affected by charitable foundation ownership, said Michael Cherny, a managing director at Evercore, a New York-based investment banking advisory firm. The majority of its capital needs will be satisfied by cash flow, he said. Even though the company's finances are not publicly disclosed, Epic has never pursued acquisitions or dividends, and it continues to produce new information technology solutions and expand its campus, Cherny noted.
Once Faulkner's donation is activated, Epic's day-to-day operations won't change, said Andrew Demetriou, a managing director at Berkeley Research Group. But the corporation's ownership will be governed by different principles, and the only way for stock to change hands will be within rules established by Faulkner beforehand. If the company decides to issue equity, that transaction would need foundation board approval after Faulkner is gone, Demetriou said.
“The board might have different views, but she can craft that,” Demetriou said. “The founder has influence over the board from the beginning.”
But a 2013 study published by the Copenhagen Business School and Yale Law School suggests that the way Faulkner decides to set up the foundation board could affect Epic's future earnings. The study, which examined the financial performance of Danish industrial foundations from 2003 to 2008, found stronger performance at companies that placed greater managerial distance between their foundation board and their company. Companies whose directors held no more than two positions on their foundation board earned 2.8% more on their assets than companies with less board separation. They also had higher returns on investment and higher average growth rates.
Asked why she insists on keeping Epic private, Faulkner said, “You don't have to have the tyranny of the quarter. When you're public, you can never forget your fiduciary duty is to increase shareholder value. When you're private, your shareholders are your employees and you will want to do the best you can, but you look at it a different way.”
The amount of Faulkner's shares in Epic is unknown. Last year, Forbes listed her wealth at $2.8 billion. Asked whether that figure is accurate, Faulkner replied: “If I don't even know, how do they know? Forbes says I'm a billionaire. But I'm the worst billionaire ever. That's what one of my staff said. My car is about 5 years old—an Audi station wagon.”
