China's Creaking Philanthropy Infrastructure

July 6, 2007 | Print | Email Email | Comments | Category: Viewpoints

David WolfBy David Wolf
During the recent May holidays I had a chance to speak to a group of MBA students from a leading Australian university. At one point in the conversation one of the students, an experienced NGO executive, said that she was amazed at the kind of corporate prosperity she saw in Beijing, and wondered aloud why in the face of such success so few companies actively pursued CSR programs here — or even just gave money to the needy.

That gave me pause. Why indeed? And the more we talked the more I kept coming back to the same problem: China's lousy infrastructure.

Now, I'm not talking about roads, power lines, or broadband (although we could use dome more of those). Webster's defines “infrastructure? as “the underlying foundation or basic framework for a system.? All of those things we take for granted in developed countries that make conducting corporate social responsibility simple and straightforward are either lacking or in abysmal shape in China.

NGOs – More and Bigger!
In the United States, for example, if you want to find an organization or charity to work with to build a CSR program that is somehow relevant to your company, finding those opportunities is simple. There are directories, websites, and even umbrella organizations that are long-established, independent, and reputable. In China, unfortunately, the larger non-governmental organizations are government organized (GONGOs), and those that are not have a limited ability to get things done – or indeed even operate.

Most of the international NGOs here in China have tiny staffs (1-3 people) and are thus limited in terms of how much they can scale. I mean, these folks are fine for small programs, but how many CEOs comfortable pumping even $1 million into an organization with one person?

But I don't blame the NGOs – frankly, I think the ones that are here in spite of the challenges arrayed against them have done well and deserve support so they can grow. The law around establishing a charitable organization in China make setting up a foreign-owned enterprise seem as simple as ordering at McDonald's.

Quis Custodet?
Problem two is a lack of independent oversight of organizations and programs. Auditing and oversight have become a critical defence against inefficiency, fraud and malfeasance in charitable organizations. No company wants to give money to an organization only to find out some time later that said charity spends 45% of their intake on raising money, 50% on staff salaries, and 5% on the cause itself.

In China, unfortunately, any company that donates to even the best known charitable organizations is taking a punt – you have no idea where the money is going and no controls to make sure it gets there. That's going to make publicity-sensitive companies – and firms that just want to make sure their money is actually doing some good – reluctant to write checks.

The good news is that help appears to be on the way in the form of the Charity Law currently being drafted by the Ministry of Civil Affairs. The law would allegedly provide a framework for setting up charities in China and for overseeing their activities. The bad news is we're at least 2-3 years away from the law's passage

The Taxman Careth Not
Even though we'd all like to think that corporate philanthropy is driven by the hearts of executives and shareholders, we all know that it's primarily driven by the careful eye of the taxman. If it weren't for the fact that corporate giving is tax-deductible, it would be extraordinarily difficult to mobilize a fraction of the millions companies give each year in developed countries.

China is almost there. The Ministry of Finance announced a new policy in January making it possible for corporations to claim donations to licensed “non-profit public welfare organizations.? Unfortunately, only 20 such organizations are so designated, and even China Daily quoted China Academy of Social Sciences researcher Ge Daosheng as saying that under the new law “The procedures for donors to claim deductions in taxes are often extremely complicated.?

In short, it's going to be some time before the taxman makes giving easy.

That said, none of the above constitutes a decent excuse for a company to refrain from doing CSR. It's not enough to whinge about the challenges and then just toss CSR into the “too-hard pile.?

What it does mean is that if you are going to engage in CSR, you had best be ready to bring your own infrastructure. Develop your own programs in concert with one or more charities or NGOs. Do a lot of small things instead of one big thing. Prepare to do your own due-diligence on organizations, or build your own in-house organization.

If you do this, reach out to other companies – partners at least, or even competitors – and allow them to share the infrastructure you've created.

And finally do it all because it will enhance your company's standing as a citizen of China, not because it will reduce the tax load.

About the author:
David Wolf, President and CEO of Wolf Group Asia, a management advisory firm providing strategic communications counsel to technology, media, entertainment, and telecommunications companies in Greater China and the Asia-Pacific region. He is also Contributing Editor for China CSR. David's opinions are his own and do not reflect those of either WGA or its clients.

Rate this page: 1 Star2 Stars3 Stars4 Stars5 Stars


One Response to “China's Creaking Philanthropy Infrastructure”

  1. By AdamJuly 13th, 2007 at 10:43 am

    Good article, with fair analysis. However many of the International NGOs have a hundred or more staff and are very transparent about where their money goes. The problem of course, is that they cannot accept funding in China, only off-shore.

Leave A Comment: