Adventures in “Big Charity”

The aftermath of spectacular success is often a look back over the shoulder, and Chinese entrepreneurs-cum-philanthropists are busy trying to give back to their societies. As it turns out, corporations are discovering philanthropy is a lot more complicated than they thought. When life was simple, the donor could see where the donation went. When donors and benefactors rubbed elbows, good was done, and seen to be done. But these are the days of “big charity” C the needs may be great or small, or the beneficiaries far or near, but the management of foundations is complicated now; it isn’t easy to follow the money and it isn’t all about money anymore.

The Phianthropy Foundation regulations were passed in 2004. China is relatively new at the game as it’s played today, but the responsibilities are great: Dou Yupei, Minister of Civil Affairs, points out that in the huge transition being made in Chinese society, the onus for providing many social services are now transferred to charities and NGOs, sometimes referred to as “corporate socialism.” China’s benevolent classes didn’t need a push; they went to work, and within the last two to three years have formed an impressive number of foundations for charitable giving: 991 pubic funds and 846 private foundations.And it is the private foundations that are growing at a rate of speed that leaves a kind of social vacuum in their wake.Money used to be the focal commodity of the “social capital marketplace”; donors were “suppliers” of cash, and the nonprofits were “demanders” of their funds. Wealthy Chinese companies embracing their social obligations could simply go off and “do good works” in the name of their enterprises, either through these bodies or not. Many still do. It seems there’s many a slip twixt the cup and the lip however.

The soft skills and executive talent needed to manage a charitable foundation or NGO may be the same smarts used to run a business, and at the same time, different. To complicate matters, the mechanics of intelligent giving have been evolving; there are many hands reaching out for limited help. The proper implementation of laws governing funds and foundations may be lagging behind their actual intent, Xu Yongguang, Secretary General of the Narada Foundation, points out, and today’s charities need an unambiguous relationship with taxation relief laws. Nevertheless, the Narada Foundation, a veteran Chinese charity, led the charge with the likes of foreign “old hands” Mercy Corps and the Ford Foundation (USA) who have their own operations in China.Together they cleared a path for a few high profile companies who followed suit; SOHO, New Oriental and others in China C the “new philanthropists,” let’s call them C decided to pool their resources to sort out important questions related to their own giving.

When Kindheartedness Isn’t Enough

Effective philanthropy looks a lot like running a business, so they addressed it as such. There are issues and challenges involved C regulations, public relations… there are even “markets.” Building corporate competency for managing a charitable fund calls on many skills, and certain kinds of knowledge that may be new to business executives. Criteria and processes exist to help wealthy and generous enterprises answer critical questions related to the “fit” of their charitable profile with their business image. Or so the new philanthropists learned when they self-organized under the moniker the “Educational Roundtable”; this group met monthly, hosted by the Ford Foundation and facilitated by American and long-time China consultant Sabina Brady. They ruminated on how you go about deciding what you want to do for society as an organization.If your business is real estate or test-taking, they pondered, does that influence where you step up? Making better decisions about how to allocate their resources and how to demonstrate internal value for their social “missions” simply made good business sense too.

After sorting out the identity and branding questions, it didn’t get much less difficult though. Once established, corporations increasingly want, and are under pressure, to identify and measure the social and business impact of their giving. It’s relatively pricey to launch a foundation, and efforts can go sideways. There are cases of well-meaning donors providing funding for completely unsuitable “improvements” in less developed regions of China whose infrastructure realities they haven’t grasped.Meanwhile, the threshold for establishing a foundation is fairly high, anywhere from 2 to 10 million RMB. For a corporation, these are unlikely to be serious obstacles however, especially for organizations seeking the tax benefits C another aspect of formal charity that ports well from the West to the East.

In countries with long and established traditions of philanthropy, the governance of corporate charitable funds is much more outcomes-driven, and results-focused;  it’s normal for giving to be considered an investment and returns expected. If that seems cold and business-like, consider that following a company’s decision about mission and fit, there are many areas that require attention to subsequent policy: fund-raising practices, disclosure, transparency to government regulators, donors and the public, accommodation of non-cash donations or donor-advised funds which are earmarked for specific projects, and, in the sophisticated stratosphere of mature, well-run funds, issues like identifying conflict of interest, and encouragement and protection for whistleblowers call for the corporation’s attention.

It doesn’t end with donors either. “Charities and NGOs seem to think their problem is they don’t have enough money,” Brady explained. “What they don’t have, often, is answers to the questions donors pose.” The complexity of serious, well-managed philanthropy is why the Educational Roundtable willed itself into existence and why it continued to open up and transform. Conducting competency-building for senior executives on the donor side is critical to the maturation of philanthropy in China; capacity-building on the grantee side is also critical. Corporations need to figure out whether and how they have control over projects run by their beneficiaries, and how the tax benefits of corporate giving will work for them. But would-be beneficiaries need to figure out how to approach donors with sensitivity to the social mission of each organization. That’s where Sabina Brady’s opposite number He Jin at the Ford Foundation comes in; he is helping charities upgrade their skill set for making approaches, answering donor questions, and setting up monitoring and reporting.

The Educational Roundtable’s mission placed emphasis on education-specific funds but their search for good case studies was broad, and eventually pointed to America. Mercy Corps (US) has done a lot of the heavy lifting with respect to governance guidelines. This organization developed the Standards for Charity Accountability with professional and technical assistance from representatives of small and large charitable organizations, the accounting profession, grant making foundations, corporate contributions officers, regulatory agencies, research organizations and the Better Business Bureau.Case studies were a big part of the Educational Roundtable’s research agenda too. Some very informed speakers helped the group sort out best practices for the philanthropic arms of their member organizations. Guest organizations have been invited to sit in, and these have included Jet Li’s One Foundation.

Stepping up to support and drive this effort was the Civil Affairs Ministry. As sponsor of China Philanthropy Forum, in Beijing October 2009, they welcomed the China Charity Federation, China Children and Teenagers’ Foundation, China Red Cross, China Poverty Alleviation Foundation, China Youth Development Foundation, China Welfare Fund for the Disabled, Li Ka Shing Foundation, Bill & Melinda Gates Foundation, and the Clinton Foundation. On the theme of “Wise and Transparent Charity” delegates from government, businesses and charities focused on how to achieve transparency and high efficiency in philanthropic work. Soon after, a conference on philanthropy took place at Harvard University C mounted especially for China’s new philanthropists, by now expanded well beyond the Roundtable core. Instrumental in that were Chen Yimei, head of Mercy Corps’ China office, and her good friend Mr. Xu of Narada. Guardians of the American philanthropic tradition, through the Philanthropy Foundation and other “grandfather” groups in the forefront of giving in the U.S.A., shared their lessons learned with these serious, well-organized Chinese benefactors. They returned to begin work on a charter for the China Foundation Center, modeled to some extent on the US Foundation Center, to carry the standard and provide support to this emerging sector.

China’s Next Economic Miracle

The corporate best-practice quest soon billowed out into the general question: What are the best practices for philanthropy in China?The compliance environment for foundations and funds is just emerging in China but the assumptions of the expanded group were that they could not just recommend transplanting North American philanthropic practices and regulations here.

“Charities have an immutable charter and articles of association that are welcomed by the Chinese government; unlike your average civil sector NGO, they cannot announce their mission as ‘we want to plant trees’ and the next day decide that human rights is what they really care about,” Brady explains. Foundations have to be clear on their mission and can’t change it, which is why they were the first through the gate in China. Organizations that work too directly with the grassroots can create governance problems the Chinese leadership could do without however. “On the other hand,” Xu Yongguang comments, “organizations like Bill Gates’ foundation and the Asia Foundation don’t develop much understanding of the people they’re trying to help, because they distribute their funds directly to governments. Mercy Corps and the Ford Foundation are the best examples of how to work in the balance between grassroots and government.”

With an eye to formulating practices for a China-suitable philanthropy, the mission now has to be in interpretation and modification. Some of the new philanthropists formed a delegation that returned to America on February 25, 2010 to decide what to bring back, and brainstorm about what problems might arise with the adoption of particular approaches in China.Fleshing out plans for the China Foundation is another milestone in the maturation of philanthropy in China.This over-arching support organization will have a mission to grease the wheels in the eternal partnership of grantors and grantees, providing what’s needed in order to loosen the purse strings quickly and confidently. “Expect more miracles,” Xu Yongguang smiles, “miracles always happen in China.”