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Pushpa Sundar
The Financial Express on Sunday gets experts to address readers' queries on issues of social and environmental concerns. In this edition, Pushpa Sundar, the executive director of the Indian Centre for Philanthropy, answers readers' queries about the role corporates can play in bringing about social progress through creative use of their wealth.
How come individual philanthropy has given way to corporate social responsibility?
Firstly, it is due to corporatisation of Indian business. Indian business was pioneered and controlled by families and whether profits were given for philanthropy or not was an individual decision of the head of the family. Though Indian business is still dominated by families, the company board has become the prime decision making authority. Secondly, the cost of large projects such as the setting up of institutions, like the Birla Institute of Technology at Pilani, have increased to such an extent that no individual philanthropist can meet it out of personalwealth alone. Only companies can engage in social action on a large scale.
What is the difference between terms like corporate philanthropy, corporate social responsibility or corporate citizenship, which are commonly used today in connection with corporate contributions for public causes?
The term corporate philanthropy implies a charge on corporate and not personal wealth and is based on the concept of managerial trusteeship, i.e. that the company is to be managed for the good not only of the owners but also for the good of society as a whole. It denotes creative use of wealth for the long term benefit of society. It includes company giving not only for removing poverty, but also for promotion of education, scientific invention and the arts--anything which brings about progress and makes society a better place to live in. But the contribution has to be without expectation of any quid pro quo. Therefore, company spending on welfare activities for its own employees is not philanthropy, though manycompanies believe so. The term corporate social responsibility goes beyond the donation of resources for public welfare to include responsible behaviour in terms of social obligation and morality. It includes ethical business practices, obligation to all the stakeholders in society (labour, consumer, and government, and not only the stockholders) and towards the physical environment. Corporate citizenship means putting something back into the community that generates your profit. It implies a considered board decision based on enlightened self interest. Unlike the concept of social responsibility, it stresses the benefits to business rather than its obligation.
Why should corporations engage in or contribute to social action?
Corporate profits depend on the goodwill of communities of which they are a part. Their workforce is also drawn from those communities. Therefore, devoting a portion of profits for community betterment is an investment and not charity. Its benefits include employee commitment,good public image, improved relations with government, and even tax benefits.
How do companies contribute to social development?
Companies can set up trusts and foundations through which they give out money for public purposes or operate projects such as a hospital, college, art gallery, etc.; give donations to philanthropic works being carried out by non-company organisations or operate their own programmes for development, be it promotion of art and culture or rural development directly through the company or provide sponsorships. The last is not really philanthropy because the company expects to get some direct benefit through publicity.
What are the advantages/disadvantages of operating through a foundation, directly running a social development programme and working through a voluntary organisation?
Operating through a corporate foundation has the advantage that since an endowment is created, funds are not subject to profit fluctuations and the programme does not suffer. The trustincome is also tax exempt if utilised according to provisions of the IT Act. Direct operation of programmes entitles a company to claim tax benefit. But the project must be of a nature specified under section 35Ac. Partnering an NGO which has 80 G certificate has the advantage of getting tax benefits for amounts donated, plus expertise in social development which is unlikely to exist in-house. Also companies are insulated from unrealistic demands by potential beneficiaries.
Can a company contribute to social development in non-monetary ways?
Yes, indeed. In fact this kind of help is as valuable, if not more, than mere donation of money. It shows that a company cares enough to get involved in a social cause. The corporate world has management, marketing and technical skills which are an important resource for the numerous organisations which are working for development and welfare of society. There are several ways in which these can be made available: Companies can second personnel to NGOs to helpwith accounts or to design management information and personnel management systems, etc., and purchase goods from NGOs working with the disadvantaged to use as corporate gift items or for in-house use. Employees can be motivated to volunteer services to charitable organisations by recognising their contributions in performance appraisals. Used furniture, equipment, vehicles, computers would also be welcomed by many NGOs as would making facilities available for meetings and functions since few charitable organisations can afford to hire halls and auditoria. Mentoring on a one to one basis--either organisations or individuals wanting to start some gainful activities--is invaluable for teaching marketing skills, preparation of bankable projects, costing and pricing of products, and so on.
How can a company maximise the impact of its contributions?
To make a sustained impact on a particular problem such as population, or in a field such as education, it is necessary to identify an interest area andcontinue to support it over some years, rather than fritter away earmarked resources on a variety of unrelated activities. Corporate community relations programmes need to be planned and integrated with mainstream business goals of companies. Therefore, that field or issue should be chosen for support which aligns company interests with social needs. Having identified the interest, there should be a clear articulation of the company's contributions policy, which should be communicated throughout the company as well as to outsiders. The policy should be accompanied by an earmarked annual budget, and assigned staff.
What level of contribution should the company aim for?
Worldwide, a minimum of 1 per cent of pre-tax profits is accepted as the standard, though many corporations give more or less than this.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
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