Whilst CSR initiatives are commendable, true philanthropy lies in using ones personal wealth for social causes, says Adit Jain
The year was 1936. Rai Bahadur Sir Bhag Chand Soni, an important city financier of the time, was returning to his native Ajmer in erstwhile Rajputana, from a business trip to Bombay. Having concluded a major financing deal for the Bombay Baroda & Central India Railways, he had reason to cheer. However, his mind seemed preoccupied with the severe drought that had struck parts of his home state. He felt he had to do something as hundreds and thousands of people were facing acute water shortages. Water bodies in the area were reduced to muddy pools no longer fit for human consumption. The shortages had affected both livestock and people, leading to fatalities on a large scale. The rains had failed for a second year running. Eventually, Sir Bhag Chand financed the construction of several wells and water tanks. He did this because he believed that he had an obligation to help others less privileged than him. This charitable work had no business consequences and the contributions were largely discreet and made wholly from personal wealth. He believed that businessmen had a responsibility to step in where the sovereign failed to provide.
Sir Bhag Chand was not unique in any way. Indian business has for several hundred years believed in the need for social responsibility even before management schools coined the term, Corporate Social Responsibility (CSR). Old business families financed hundreds of schools and hospitals. They did this with their own money as distinct from contributions by companies which are owned by many or even publicly listed. In northern India dharamshalas - places for travellers to stay - are common in every town. Frequently associated with religious pilgrimages, they provide free accommodation to visitors, as in the old days people travelled mostly for spiritual reasons. The Birla family created a centre for academic excellence in Pilani with several schools and a fine engineering university. Tata Family Trusts funded the Indian Institute of Science, the Tata Institute of Fundamental Research and the Tata Energy Research Institute, which have all evolved into fine establishments of advanced learning. The list can simply go on and on.
Often contributions were anonymous. Businessmen made them because they believed it was a moral obligation and more so in an unequal society which contained extreme levels of poverty. CSR today is based on similar principles. Companies believe they have a duty not only to their employees and shareholders but equally to the larger community. Large manufacturing investments in remote places are frequently preceded by social development programmes that involve medical facilities, schools, provision of drinking water, housing and other basic necessities for local communities. These are more the norm rather than an exception. Even among service sector companies in urban locations, CSR initiatives are common. They could involve financing mid-day meals in schools; handicapped child rehabilitation programmes; and old age homes among others. The list of CSR projects is endless.
CSR is not philanthropy, ISR is
However, this article will subsequently argue that CSR, while it is admirable, is not truly philanthropic. It is still a nice thing to do, but companies sometimes contribute to charities because everybody else does so and it is fashionable. Frequently, CSR programmes have commercial agendas, for instance stock markets value socially responsible companies a little better; employees are attracted to organisations that have a good feeling about them; governments and public authorities frequently treat such corporations with a greater level of respect, or at least consideration; and communities in the proximity of large manufacturing projects are more tolerant of companies that set up schools or hospitals for them. This isn't in the least bit objectionable - in fact, it is a sensible and progressive approach to ensure long-term business sustainability. But it is still not philanthropy, and must not be claimed as being so.
True philanthropy is different. Philanthropists spend their own money and not that of the general public through publicly listed companies that they might partially own or fully control. The Bill and Melinda Gates' Foundation, with its endowment of USD 30 billion, is funded not from charges written off by Microsoft Corporation, but entirely by private wealth. In India, TV Mohandas Pai, currently HR Head of Infosys Technologies (and previously its CFO), contributes a significant part of his personal wealth and annual income for charitable purposes. Over the years, he has donated tens of crores.
Increasingly, individual employees in corporations lend time, effort, and money to social causes. These could be through personal initiatives or as a component of a larger company-backed scheme. This has led to the evolution of the phrase Individual
Social Responsibility - ISR. The offering of stock options particularly, but also the increase in salary levels in general, has resulted in a phenomenal growth in wealth among professional people often from middle-class backgrounds, with strong value systems. They feel obligated to give back to the less privileged in society, through effort and money, in interesting and unique ways. They do this primarily because it makes a difference to those they seek to help.
A lot has been written in the area of CSR, mainly in its favour, but occasionally opposing the concept. This article, however, seeks to focus not so much on corporate-led initiatives, but more on those led by individuals. It tries to draw a distinction between CSR and ISR. The concept of CSR is much more than charity. In fact it is fundamentally more about better governance, compliance, and sustainable growth. In short, it is about
Corporate platforms support ISR initiatives
Some examples cited in the following paragraphs document the provision of corporate platforms for social welfare programmes, but where individual employees lend their time, effort and in some instances even money to enhance social good. Increasingly, professional people living in metropolitan India, employed on a full-time basis, make the time for ISR activities, largely from the goodness of their heart. For instance, there is growing recognition on issues such as conservation and the environment. School teachers impress upon younger children the urgency of saving water, planting a tree and now most effectively, in avoiding loud fire crackers during festive occasions. Parents too encourage children to be more careful and act responsibly towards the common good. And clearly this effort is paying off, as children today are more aware, behave responsibly and are able to tell the difference between what is an acceptable way to act and what is environmentally irresponsible.
R Natarajan is the CFO of Helion Advisers, a Bangalore based venture fund. Mr Natarajan is closely associated with a foundation called Youth for Seva (YFS). Formed in 2007, YFS involves younger people who wish to contribute to social initiatives but are unable to determine how to go about things. Interestingly, there are many who will fit into this category- eager to participate in community programmes. It connects these people to community projects, based on location preferences and time commitments they are prepared to make - the primary focus being education. Volunteers conduct spoken English and computer classes on weekends and lead summer camps during the end-of-term holidays. Simultaneously, YFS funds underprivileged children through their education and also provides tuition support for those who are enrolled in the government run schools. As the entire scheme is run by volunteers, administrative expenses are under 10 per cent of the funds raised. Funding is generated through mailers and corporate sponsorships. Mr Natarajan through his personal network brought in sufficient funds, to educate over 60 children, over the course of the last year. At Rs 6000 a head this was no mean achievement. In addition he lends time reviewing projects and their financial viability. Raising funds, he argues, is always a challenge but his prescription is to ask shamelessly - that is the only way things get done. Mr Natarajan's motivations in lending a few days every month are clearly no different to others involved in similar activity. He says "I wanted to contribute to some cause and while there is a limit to what one can do individually, being associated with a larger institution widens my latitude as I can then exploit my network in more meaningful ways. When I see pictures of the children who I support - it makes up for all the effort!"
Many CFOs are simply unable to make time commitments required for charitable work. Extensive travel, long office hours, and other compulsions of high growth businesses, leave very little to spare for family obligations and even less so for other activities that may be nice to engage in or important to do, but not essential. For such individuals the concept of work-life balance is of academic relevance. Demands of work always seem to override other aspects. But some of them donate money to charities and even hope that one day, given the time they will extend their involvement to greater levels. Binni Bawa, CFO of Network 18 is one such person. He embarrassingly admits that he is simply unable to make time towards social initiatives, but tries to make good through monetary contributions. He has supported two girls at an SOS village for the last 20 years or so. In addition, he contributes to the Handicapped Children's Rehabilitation programmes, Save the Children's' Fund, and other charitable foundations. He says "Although I am satisfied with the financial contributions that I make, I do regret the fact that I am simply unable to devote personal time and effort." In the coming years, Mr Bawa promises to engage in further activities.
There are several instances where employees participate in welfare programmes sponsored by their companies. No-vartis is one such company whose employees lend private time to community schemes. Akanksha is an example of one that focuses on the education of underprivileged children that live on the streets of metropolitan India. A Novartis initiative has adopted an Akanksha centre which is visited regularly by company managers. This gives them an opportunity to interact with children, mentor older students, and encourage them in the right direction. Many employees lend a few hours every week towards this effort. Novartis also manages a week-long 'Community Partnership Week', which is usually held in April. This involves a selection of social activities, for instance visiting old-age homes, where its employees lend both their time and also provide monetary contribution. Finally, the company allocates space in its premises for various NGOs to organise
activities, such as craft bazaars, where
their employees enthusiastically participate. What Novartis essentially does is that it provides a 'forum' and an administrative platform, which encourages individuals to effectively channel their efforts. Frequently, spouses and families get involved and hence, a corporate association motivates the spreading of individual efforts, even beyond the company's direct employees.
ISR activities under a collective corporate platform such as that offered by Novartis are now becoming common. Companies may not necessarily provide monetary support to social causes, but encourage their employees, on an entirely voluntary basis, to engage in community programmes. They may identify special projects and help employees in channelling their effort in groups on a collective basis. The fact that such things frequently help enhance employee inter-personal relationships, are a nice spill-over benefit to have. And some social good comes out of the effort without financial implications to shareholders.
Canara HSBC Oriental Bank of Commerce Life Insurance Company is another example of a business that provides a corporate platform. CSR activities involve the participation of individual employees in different programmes. SOS Villages is one of them, where executives lend private time, counselling and mentoring students. The environment is another. In June 2009, the company's employees planted over 16,000 trees over a two-week period in 27 different locations, to mark the World Environment Day Campaign.
The research that CFO Connect undertook, while writing this leader, led to interesting discoveries. A number of people we spoke to admitted that they were unable to make the time, but realised the importance of individual responsibility towards social welfare schemes. Preet Dhupar, the India CFO of BBC Worldwide, participates each year in the Delhi Marathon to create awareness for important environmental issues and is also able to raise some money for charity. While Ms Dhupar is a fitness enthusiast, her motivations to participate in these demanding events are strengthened because of the charitable benefits that spill over.
Sam Singh is unique
There are some examples of individuals who have served as professional executives and following retirement, undertaken ISR activities with passion and dedication. Sam Singh will fit this bill completely. Having grown up in the Bulandshahr district of Uttar Pradesh among rural communities, he recognised the need for education among young girls. In a society which forcefully looked down upon the girl child, he realised how important it was to change this primitive mind set. The 'Pardada-Pardadi' Education Society is a shining example that demonstrates what the efforts of one man can achieve.
Mr Singh studied engineering in India and in the United States. Subsequently, he joined DuPont in 1963 and served in it until his retirement in 2000. He says he was influenced by the Dalai Lama and with Tibetan values that are contained in preachings at his ashram in Dharamshala. Following an audience with the Rimpoche in 1998, he conceived a model which will translate 'universal education' into practice. He returned to his native village and set up a school for young girls. Pardada-Pardadi was established as an education society, with the mission to uplift and empower girls from the poorer sections of society by providing education and vocational training. During its initial years, Mr Singh funded it entirely from his savings and family inheritance. Today, the society reaches out to approximately 1200 girls from over 50 villages of Anupshahr. They travel distances of anywhere between 2 km to as far as 20 km. This effort is noteworthy, given the fact that people in the area do not have access even to basic amenities, like three meals, drinking water, and electricity. Education in this region is a remote concept. Mr Singh understood that if this was to work over the long term on a sustainable basis, graduating girls must be able to either gain employment or be sent to universities for higher education. The graduating girls are guaranteed jobs with the society, so that their parents recognise that the education commitments offer tangible opportunities for progress. The Pardada-Pardadi students are provided free education, three meals a day, uniforms, books, bicycles or bus fares for those who live too far away - effectively the parents have to bear no cost at all. In order to support sustainability, girls are provided vocational training to produce products, for example in high-end textiles and home furnishings. The income generated is then reinvested in the school.
In addition, the society has launched other schemes in areas of health and hygiene. It produces affordable and hygienic sanitary napkins; has constructed over 70 toilets in over 10 villages. It intends to encompass over 500 households under this project.
Mr Singh has made a difference in an area where it matters the most. Girls that study at his school are usually from families that are outcast or economically very deprived. Their families have no means of livelihood and the little they make comes from manual labour, burning corpses and other vocations which are treated with disrespect by society. Their homes are usually mud hutments of the most primitive form, with no facilities or amenities to think of. Little girls are left roaming around barefoot in dusty allies; they are occasionally fed, and survive on the barest minimum. They eventually get married and live a life of misery and hopelessness. But Mr Singh's school has changed all this. It has given a new meaning to their existence, taught them responsibility and offered them hope and careers. Most importantly, it has brought laughter and joy into their lives.
Mr Pai's contributions are a substantial chunk of his annual income and extend into several areas. He helped form the Akshaya Patra Foundation and continues to provide a large proportion of its funding. This foundation feeds 1.2 million children with mid-day meals everyday, spread over 7,000 schools located in nine states. Mr Pai provides grants to several schools to increase their capacities, which is more effective than setting up new schools. Most recently, he provided funding to the Bhartiya Vidya Bhawan near Bangalore, which doubled its capacity. With a view to promoting Konkani, his mother tongue, he instituted an endowment to the World Konkani Foundation for an annual prize to promote Konkani literature. Mr Pai also set up a hostel for the Foundation together with a large convention centre. Some years ago, he provided a large endowment to the National Institute of Advanced Studies to institute an annual prize of Rs 10 lakh for a leading Indian mathematician
under the age of 45. The annual prize
money is paid from the initial endowment. This is currently called the Infosys Prize, although the actual financial contribution was entirely personal.
Kiran Pamidimarry works with ADP India,
but separately runs an NGO that
dedicates its efforts towards helping
children who have been deprived
economically, are orphans, physically challenged, or psychologically disturbed. Mr Pamidimarry has arranged surgeries where possible, organised mid-day meal programmes, and distributed books and clothes among other things. He lends almost all his spare time to this effort, and does so with dedication and commitment. This is a fine example of an individual effort which makes a difference to the lives of the few people that it is able to serve.
Team effort makes it fun
The finance team at Juniper Networks, under the leadership of Varun Nayyar, its CFO, engages regularly with the local government school in Bangalore. The way this happened was that Mr Nayyar got together with his team members - comprising 40 individuals - to examine what they could do to contribute to society. They were clear in what they had to offer - their personal time - and wanted to work with organisations that will value this. After a few weeks of internal brainstorming, they short listed education as an area for primary focus and subsequently aligned themselves with a local Bangalore NGO. Eventually, together with the NGO, they identified a government school, approximately 4 km from their office. Company executives, in groups of four, visit the school each day and lead classes in English language to 12 and 13-year-olds for an hour. The content for these classes is provided primarily by the NGO that they have allied with. As these classes are run during the day and therefore, effectively during working hours, Mr Nayyar has instituted a mechanism through a monthly calendar allocating visiting hours to team members. This was obviously based on the work load of the individuals concerned. In addition, the Juniper team has conducted summer camps for children, where English, arts, and dance are the primary focus. Approximately 60 children participate in this. They have donated computers to the school and also help towards computer literacy programmes. This is an excellent example of ISR, through collective efforts under a corporate platform. Mr Nayyar humbly says, "The credit goes to the entire team for making this effort a success." He recognises the fact that you need to constitute a core group, and in the case of Juniper there are five people who have ensured that no slippages take place. These are the individuals who drive the effort, coordinate between the school and the NGO, and in Mr Nayyar's words, "make sure that the buzz remains within the finance organisation".
ExxonMobil is another example of a company that provides a corporate platform to channel ISR efforts. It has an association with an organisation called Junior Achievement globally. As a part of this programme, company employees visit schools, usually ones where children from under privileged families study, to mentor students in the age group of 15-18 years. The mentoring process involves no finance, but clearly making some time and effort. The company's contribution to the employee-driven initiative is simple - it allows a few hours off each month, which enables employees to lend time during working hours; they provide logistical support, for example transportation; and essentially, ExxonMobil provides the framework in which individual employees engage in ISR activities.
Several ISR programmes involve education and children and they are worthy and commendable. However, Joseph Chacko, Head of IT Services at MphasiS, does something remarkable. He lends his time and skills to working with people with disabilities. In India, over 70 million people are handicapped or physically challenged - of this, only a hundred thousand have been employed in regular jobs, since the government set up a Special Employment Exchange in 1959. Mr Chacko visits foundations that work on programmes to provide education for employability among disabled people. He lends time to such programmes and also involves members of his team on a completely voluntary basis. They teach deaf people the skills required by IT companies, and subsequently employ them when possible within the company. Mr Chacko has three employees within his team who are hearing-impaired. He may have also helped several others gain employment elsewhere. He is a role model on individual social responsibility at MphasiS.
Doctors do good
In the medical profession, examples of ISR are common. Doctors are able to balance commercial good with social necessities. They lend time to charitable organisations pro bono to treat patients from under privileged families, who are unable to afford the cost of medical care. Dr RV Ramani is a fine example of such a medical practitioner. He runs an institution called Sankara Eyecare Institute of India, which was established 24 years ago. The institution undertakes surgeries at no charge to patients in 10 locations. The way it works is simple - Eyecare charges commercial rates to 20 per cent of its patients, while the balance 80 per cent, are provided services at no charge at all. A number of doctors, usually the younger ones, lend their time and expertise without a fee. The Eyecare institute undertakes over 500 free surgeries everyday; preventive eyecare for children; and eye banking.
CSR cannot be about charity, but sustainable development
In the process of our research, CFO Connect discovered dozens of companies from within the spectrum of IMA Forums that engaged in CSR initiatives. In fact it was difficult to find ones that did not do so. But CSR is different from true philanthropy. Many corporations donate money for healthcare and education; they contribute generously in times of natural calamities - following the Indian Ocean tsunami - companies made generous donations to charities for helping victims. Clearly there could be no worthier cause, but the fact remains that in the case of public companies, the managers authorising these donations give away other people's money, not their own. 'Philanthropy' at someone else's expense, even for the worthiest of causes, is not quite the real thing.
In any event, the concept of CSR was always intended to be much more about how businesses conduct themselves in relation to stakeholders. They include employees, customers, and the broader society in which businesses operate. CSR in the strictest sense was not really meant to be about giving money to charities. The danger is, critics of CSR will argue, charitable contributions will distract attention from the genuine problems of business ethics that really need to be addressed. And these problems are not in short supply. In the case of Satyam Computer Services, its sponsor family led by former Chairman Ramalinga Raju, undertook several 'philanthropic' initiatives. But many of these were under-written by his company's shareholders and were at Satyam's expense. Clearly, that cannot be a good thing especially if shareholders do not want to contribute to charities that Mr Raju may have favoured, or if they simply may not have wished to contribute at all. In many instances, corporate donations filling the CSR space are a distraction to the more important things that companies need to do first. They can put blinkers on the eyes of board members who might mistakenly assume that a generous company will be a well governed one. Clearly, CSR's advocates will agree that the highest standards of corporate governance are the first steps in being socially responsible.
Mr Pai agrees completely. He says "the best form of charity is through individual contributions to society. Those who have benefited as a result of India's economic growth and amassed personal wealth need to give back". In fact, Mr Pai strongly resents the philosophy that publicly listed companies should make financial contributions to charities. He says, "Managers should have no moral authority to sign off shareholder funds to their favoured projects and subsequently, seek credit and personal publicity." In fact he believes that if every billionaire in India were to contribute 2 per cent of his personal wealth, this will raise USD 5 billion per year, in fact more resources than that spent by the government on the National Mid-day Meal Programme and the Sarva Shiksha Abhyan, put together. He believes they should do so, as India has lower rates of income tax than many other countries; no estate duties and insignificant wealth taxes. He more than lives up to this philosophy through an annual charitable contribution, that exceeds Rs 2.5 crore.
CSR, or philanthropy?
The focus of this article has been on individual social responsibility - the effort of common people to do social good, either independently or, as in some instances, under a corporate platform. And there are many such people, gainfully employed in business enterprise, who have shown a willingness to make time for social causes and in doing so seek no personal publicity or gain. While the examples contained here may not necessarily be high profile, the work most certainly is commendable and deserves admiration. In many ways, such individual commitments are worthier than corporate donations. Individual work is truly philanthropic. Corporate donations on the other hand, are either motivated by business considerations or, specifically in the case of publicly listed companies, amounts to charity with other people's money. While they may both be acceptable, neither constitutes philanthropy. It is this distinction that business managers must make - honestly - first in their hearts, and then in the books.