Thursday 24 September 2009
In China, Philanthropy as a New Measuring Stick
As the 10th anniversary of his company approached this month, Jack Ma sat down and penned a note to his 15,000 employees at Alibaba Group. The chief executive reflected briefly on the success of his enterprise, which in a decade has become an e-commerce juggernaut with more than 100 million users and has vaulted him into the ranks of China’s ultrarich. But the bulk of his message concerned another theme: philanthropy.
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In China, Philanthropy as a New Measuring Stick
By JULIE MAKINEN
23 September 2009
HONG KONG — As the 10th anniversary of his company approached this month, Jack Ma sat down and penned a note to his 15,000 employees at Alibaba Group. The chief executive reflected briefly on the success of his enterprise, which in a decade has become an e-commerce juggernaut with more than 100 million users and has vaulted him into the ranks of China’s ultrarich. But the bulk of his message concerned another theme: philanthropy.
“Money and wealth are two different concepts,” he wrote his workers, some of whom have accumulated stock worth millions of dollars.
“If you have money, but have not turned this money into an experience to elevate your own or other people’s level of happiness, then you may very well only possess a lot of symbols and a mountain of very colorful pieces of paper.”
Mr. Ma is backing up his words with action. On Wednesday at the Clinton Global Initiative in New York, Mr. Ma and Muhammad Yunus, the Nobel-winning founder of Grameen Bank, a pioneer in the field of microfinance, will unveil plans for Grameen China.
Alibaba Group is contributing the initial $5 million in seed money, but both men hope their combined star power will soon draw in other corporate sponsors, giving Grameen a hefty piggy bank from which to start making modest loans to farmers and other small-business people in Sichuan and Inner Mongolia, two of the poorest provinces in China.
Alibaba’s donation is the latest example of a change in attitude by corporations in China toward philanthropy.
“In the last two years, China’s corporations have become much more aware of philanthropy and social responsibility and are putting a much higher priority on it,” said Zhihua Yan of Z. H. Studio, a media and marketing consultancy in Beijing. “They are striving to innovate ways they can give back to the community.”
Donations in the country soared last year to 107 billion renminbi, or $15.7 billion, three times their level the previous year, according to a recent report by Jia Xijin and Zhao Yusi at the NGO Research Center at Tsinghua University in Beijing. About $11 billion of that went to relief efforts after the May 2008 Sichuan earthquake.
The disaster prompted a huge outpouring of individual donations to charity, accounting for 54 percent of total giving.
Such a public outpouring also led to new attention on corporate philanthropy. Soon after the disaster, the Internet in China was abuzz with lists of so-called Iron Roosters, or birds so stingy they would not share a feather. Among those branded with the moniker were international giants like Samsung, Nokia and Coca-Cola, but also local companies like China Vanke, a giant real estate development firm. Under withering criticism for giving too little, Wang Shi, the chairman, apologized and made a gift of 100 million renminbi.
“Up to this point, charitable giving had never been a ruler by which public leaders were measured in China,” said Grace Chiang, managing director of Social Venture Group, a philanthropic advisory firm based in Shanghai.
The earthquake dovetailed with two other developments in China, said Alan VanderMolen, president of Asia Pacific operations for Edelman, the public relations firm. First was a 2007 mandate that companies with shares traded on the Shanghai and Shenzhen exchanges produce annual corporate social responsibility reports. Second was the government’s “Harmonious Society” drive, which aims to narrow the nation’s rich-poor gap, address the problems of unequal access to education and health care, deter environmental degradation and improve disaster relief.
Still, it is not easy for corporations to figure out where to steer their money. China’s philanthropic landscape has three main tiers. At the top are the Gongos, or government-operated charitable organizations, which are backed by the state and staffed with civil servants.
Below that are international and local nongovernmental organizations that have navigated the arduous process of finding a government department to sponsor them and have registered with authorities. On the bottom rung are an estimated 300,000 grass-roots organizations that are unregistered or set up as commercial enterprises.
Corporations and tycoons are increasingly shying away from Gongos, many of which are regarded as opaque and lumbering. Likewise, most large businesses steer clear of the grass-roots organizations, because those entities are not allowed to provide official receipts for tax deductions. (Corporations that donate as much as 12 percent of profits can deduct that amount from taxable income.)
“Many business leaders are experimenting with the idea of setting up foundations after years of using other channels to donate to charitable causes in China,” said Ms. Chiang of Social Venture Group.
There are hurdles, however. The China Charity Information Center, which is affiliated with the Ministry of Civil Affairs, noted in a recent report on charitable giving that Cao Dewang, chairman of Fuyao Glass, announced this year that he wanted to set up his own foundation with a large stake, worth more than $600 million, of his family’s holdings in the business.
But the report said that “there has been no precedence of the approval of nonpublic foundations funded with stocks, nor have any legal processes been approved to allow such a move,” and so Mr. Cao’s foundation “will likely encounter problems with its registration, tax issues, etc.” Nevertheless, Mr. Cao “intends to push for changes to the existing system,” the report said.
“What’s fascinating is that business leaders who once pushed the envelope in the business regulatory environment years ago are now applying the same prowess to setting up private foundations,” Ms. Chiang said. “They are studying the history of foundations in the U.S. and Europe to make their case for regulatory reform.”
At the end of 2008, there were only about 650 private foundations in China, in contrast to more than 115,000 in the United States.
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