Bhupesh Bhandari: Charity in the East and the West
If all goes well, the money spent by companies for corporate social responsibility may increase in the days to come
Bhupesh Bhandari / New Delhi Sep 10, 2010, 00:32 IST
Bill Gates, at that time, was an infrequent visitor to India. At a public function, attended by top-notch businessmen, he talked about his work and business philosophy. Then someone from the audience asked if it was true that he would give away his wealth to charity. The businessmen in the audience gave out a short and meaningful laugh before Gates could answer in the affirmative. Hard-earned wealth is not meant to be given away to charity, certainly not in India.
Gates has since then given $22 billion to the Bill and Melinda Gates Foundation. Warren Buffett, the third-richest man in the world with a personal fortune of $47 billion, too has pledged a large chunk of his wealth to the Foundation. Gates and Buffett are now on a mission to ask hundreds of American billionaires to earmark at least 50 per cent of their wealth to charity. Several of them have already converted to the cause.
Cut to India. Some time in early 2007, this newspaper did an analysis of the charity done by the 36 Indians on the Forbes list of billionaires. Their combined worth was over $190 billion, but the money they had set aside for charity was not even a fraction of that. Most of them had nothing to say when asked about their contribution to philanthropic causes. Things may have improved since then, but not dramatically. All told, industry estimates suggest, Indians spend about Rs 30,000 crore in a year on charitable causes. This is not a small amount. But there is a catch here: This number includes the money spent by companies on corporate social responsibility. If that is taken out, contributions by businessmen would not add up to a lot.
So, the difference is that in the West, charity is driven by individuals, while in India it is done by companies. Businessmen say there is a historical perspective to it. Punitive taxation in the pre-liberalisation days meant businessmen did not have huge piles of wealth. The stock market boom, which has spawned dozens of billionaires, is a recent phenomenon. So, they couldn’t do charity in their personal capacity. But tax breaks were given to companies (and also individuals) if they gave their money for charitable causes. The legacy carries to this day. Companies are at the forefront of charity, not individuals. For instance, the corpus of the Bharti Foundation, which wants to put as much as Rs 200 crore into education, is contributed by various Bharti companies.
But there are signs that things could change in the future. The Azim Premji Foundation, for instance, is funded totally out of the personal wealth of Wipro Chairman Azim Premji. Nandan Nilekani along with historian Ramchandra Guha has started the New India Foundation which supports research in social sciences. Ex-bureaucrat and Tech Mahindra honcho Vineet Nayyar has donated shares worth Rs 30 crore to the Essel Social Welfare Foundation, which is run by his wife.
Perhaps the best example of charity in India is the Emergency Research Management Institute, which runs emergency ambulance services in various states. It was, believe it or not, started by Ramalinga Raju, the scam-tainted ex-promoter of Satyam Computer Services. It was known for its efficiency and reach. In narrow lanes, where ambulances cannot manoeuvre their way, it would send paramedics on scooters. Once the Satyam scam broke out and Raju was put behind bars, there was the danger that it might collapse. But the GVK group stepped in. ERMI is alive and kicking. It operates 2,600 ambulances in 10 states, and wants to raise its fleet to 10,000 by the end of next year.
You can argue with some justification what difference does it make if the money is coming from the pocket of the businessman or his company. Indeed, for the beneficiary it really doesn’t matter what’s the source of the aid. But charitable work carried out by companies is often aligned to their business interests. Very often, it is meant to placate affected parties near factories. Thus, information technology companies push computer education in schools; this may help them get customers in the days to come. Some retailers have run contact programmes for small green grocers. It’s good but it also helps quell opposition from an affected party.
Corporate social responsibility, as companies and businessmen alike will tell you privately, has become an integral part of business. Thus, pharmaceutical companies, not just in India but the world over, run elaborate charities because they always walk on a razor’s edge — any negative word about their medicine can cause ruin. Some bit of philanthropy in India is also to build the image of the country globally, experts reckon, especially as homespun companies have turned aggressive buyers of distressed assets worldwide.
Still, if all goes well, the money spent by companies for corporate social responsibility may increase in the days to come. The proposed Direct Taxes Code has laid down that trusts, societies and not-for-profit companies will get tax breaks only if they spend 85 per cent of the money allotted to them. That could mean improved corporate social responsibility in the days to come.
With reference to the statement that the proposed Direct Taxes Code has laid down that trusts, societies and not-for-profit companies will get tax breaks only if they spend 85 per cent of the money allotted to them, it may be noted that, as per clause 93 (2) (b) of the DTC Bill, no portion of the voluntary contributions received with a specific direction that they shall form part of the corpus of the non-profit organization, is not subject to this requirement. As a matter of practice, managers of charitable societies request for such "direction" from the donors, in the covering letter, enclosing the cheque for the amount of donation! Further, as per Clause 94 (f) (i), to the extent of fifteen per cent of the total income, or ten per cent of the gross receipts [after excluding donations under clause 93 (2) (b)], whichever is higher, need not be spent, but can be carried forward.
Nice trend but all these foundations/charitable organizations are being manned by people who have no knowledge of the social sector. For a social sector also you need qualified people so that the funds are properly managed. This is the need of the hour today keeping in view healthy trend of CSR by business houses.companies.
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