With the recent success of signing 40 billionaires to the Giving Pledge, it should not be any surprise that the recent news of Bill Gates and Warren Buffet coming to China would create headlines, and rumors that they were coming to convert.  It is an event, set for late September,  that was on the front page of many of the world’s leading financial mediums, and has remained there when the “story” broke that there were some who were “unwilling” or “scared” to attend the event.

Through all this though, I am left to wonder what the real goals are, what they should be, and is it too early to expect much from this event.  In essence, I am wondering whether or not China (and its wealthy) are ready a "Giving PLedge" pitch.  Even if that is not the stated goal of this trip.

It is a question I ask as I think back to last November when the UN Foundation and CAF held a dinner in Beijing for similar purposes, only this dinner was led by Former Secretary General Koofi Annan, UN Foundation founding donor Ted Turner, and key noted by One Foundation’s Jet Li.  Event organizers were clear in their goal of planting the philanthropic seeds, and much of the conversation surrounded when “China would be ready”.  The 5.12 earthquake, and more specifically the numbers of donations, were fresh in the minds, and the mood was engaging.  Yet, at the end of the event, everyone returned to the parking lot without having made any pledges

Which leads me back to the event that will be hosted on the 29th of September, and what should be expected.

With the list apparently sourced from the Forbes Richest People list, which is itself guaranteed to have a lower turnout than had a core group of friends been enlisted to bring in their friends (Bill and Warren apparently need a refresher on the role of relationships in China) the event being on September 29 only adds to the difficultly as the day after is the last day before a 10 day holiday. Logistical hurdles which could have been better planned, but not themselves event killers

However there are a few reasons why I do not think China is ready for the "Giving PLedge" and the message coming from this event needs to be managed better (releasing a letter after the fact shows they are trying to correct this)

1. As the vast majority of China’s rich represent the first generation of wealth, it is too soon in China to expect anything at that level.  That these business men and women are still focused on ensuring the future (i.e. amassing sufficient wealth and assets) of their family (parents and children) and business(s), and asking any of these people to commit to any gifts of significance is failing to understand the deep rooted cultural and historical drivers of this generation. 
2. While I have no doubt that both gentlemen are respected locally, I do doubt their ability to convert many (in the short term) as they do not understand the drivers of philanthropy in China.  That, while there was most certainly a spike in philanthropy following the 5.12 earthquake, there was a near equally drop off in donations since.  While there have been a significant number of new foundations opening (a typical sign of philanthropy), many of those foundations are tied to the quasi—government GONGOs (Government Organized Non-Government Organizations), and that philanthropy has taken on an era of coolness in China, but has sparked an equal amount of discussion over the lacking transparency of many funds (Zhang Ziyi and Jackie Chan included)
3. Were Bill Gates and Warren Buffet to have a massive turnout, I would suspect it would be for reasons beyond altruism or their ability to connect.  That they themselves would be the draw, and those in attendance would be looking to look aligned to the cause more than be willing to engage in the cause. 

All the above aside, were Bill Gates and Warren Buffet to focus on building a more intimate circle of friends (Like Warren’s investment recipients) who would form a core for future expansion, then the message would begin to filter out. 

Although, once the gates are opened, that does lead to the next problem.  given all the issues in China of trust, and a lacking process for donating large sums to more than a handful of causes, just figuring out what to do with all the money is going to be interesting.

So what do you think? Are China's wealthy ready to sign onto the "Giving Pledge"? Are they they next big pool of philanthropists?

With the recent rise in China’s philanthropic activities, and the increased questions of transparency, China has reached a critical stage in civil sector development and participation.

Historically fueled by large corporate donation drives, during times of disaster or as part of government relationship building, the post 5.12 earthquake era has seen a seismic shift in why, where, and how donations are being made by individuals and corporations.  It is a time where tens of billions of RMB have been brought into the system, into a system that wasn’t ready for to account for such large sums of money easily. A dynamic which has forced senior government officials and NGO leaders to publicly address issues of transparency and program efficiency, and has opened a window to 3rd parties focused on accountability and transparency.

To understand more about how these dynamics were impacting donors and influencing their decisions, and identify the existing gaps, we undertook a number of surveys recently to study the viewpoints of donors.  Studies meant to understand the knowledge base, how donation decisions are made, and their thoughts on celebrity involvement.

It was a study that started with students at one of Shanghai’s top universities due to the historically high rate of student participation in social causes, environment and otherwise, as well as from a desire to understand how students were engaging in this issue.  It included 150 people over two separate survey periods, and the big findings we found were:

1. Student donations are largely linked to on campus campaigns in the aftermath of natural disasters.  These donations are largely collected by student leaders, and donors may not know the organization the money will ultimately be given to.
2. Prior to the earthquake, donation decisions were based on the reputation of the NGO and believing the donation would have an impact, but after the earthquake the reputation of the NGO was not as important as having an impact became the focus of donors.
3. Child health and education were the two issues that donors were most concerned with environmental causes being a close third
4. Celebrity involvement in philanthropy was viewed very favorably, however a large number of respondents saw their efforts either as image building exercises or were unsure of how to measure their effectiveness. 
5. Donors, and their donations, are highly mobile, and only a minority of donors are not inclined to give to the same organization or cause twice.

In her post Things are Different Here, Emily D'Ath touched on the issues that companies face in China when engaging in CSR.  It was a post that, as you will see in my comments to her, hit a bit of a nerve, and in a good way. 

It made me think about what the real barriers to effective philanthropy in China are.

It is a deeply complex issue that reaches outside of any internal issues that a donor organization faces (corporate, foundation, or private), issues of government regulation, limited projects, scalability, the varied quality of moral fiber within benefactors, fear of certain organizations, and general ignorance that any new donor would face when entering "China" for the first time. 

At a basic level, one must first recognize that domestic and foreign donors are, at this time, facing different barriers to effective philanthropy as their approach to and motivations for donation are coming from different places. That, while many domestic organizations may only now be looking past the first steps of philanthropy (cut check, take picture, and move on), many foreign donors who are used to operating in transparent and mature environments are chocking on their own structures.

For both, the core issue faced is really one of ignorance. Ignorance of structures, issue, and organizations of need. Ignorance that has been fuelled by a history of cut check and run philanthropy that benefited large government organizations nongovernmental organizations (GONGOs). Organizations with massive scale, but operationally had legacy issues of program management, governance, and policy making that could have a dramatic impact for the worse on any project goals. A condition that has scared many off, while catalyzing others to ask for transparency and accountability - a sign of progress.

As donors (foreign or domestic) have begun to mature in their practices, and look to expand programming beyond the GONGOs to grassroots organizations, a new level of technical difficulty entered into the picture. Fragmented, scattered, inaccessible, and often unregistered, the grassroot NGOs that typifies the "Western" NGO model were limited, and those that were readily identifiable were largely found in the gateway cities of Beijing, Shanghai, and Guangzhou. Cities that many would agree were least in need of assistance, but would serve well in a pinch.

It is a condition that keeps things at the surface, and will require growth in donors and infrastructure.

Infrastructurally, there are are essentially 5 hurdles that must be overcome:

• REgulation - This is perhaps the biggest elephant in the room, and without regulations that support NGOs, or donors, any efforts are going to continue to be efficient
• Investment - REgardless of regulations, and issues of legalization, there needs to be a significant investment of time and money into supporting the stability of NGOs and their programs. Part capacity training, and part effective program development, someone needs to invest in the non-sexy stuff that will provide a smooth road for future programming.
• Education - Creating awareness about the organizations and issues in need, and the best means of supporting each. it isn't always about the money!
• Trust - Trust between donors and benefactors needs to be established. right now, too many donors are scared of paying too much in administrative fees or having the money go completely to waste, and this is not unjustified in every case. The gap needs to be filled
• Capacity - NGOs need to be granted the funding and expertise to grow. Having a single project in the middle of a hot zone isn't a healthy organization, and donor need to begin funding scale as part of any program. Funding needs to move past the 6 month/ 1 year budget, and develop into 3-5 year programs that provide stability for the organization

On the donor side, there are a few other hurdles that exist:

• Limited project knowledge - There is still a set of donors who expect to find their projects in the gateway cities, and are unwilling to make the investment in time and train tickets to get out and develop project pipelines.
• Fear of GONGOs and "unscrupulous people" - there is still a lot of legacy fear that anyone in the NGO sector is a quasi-government official and should not be trusted. A stereotype that needs to be set aside, and would be overcome once donors did a bit of field work and profiling. There are foxes out there, but they are getting easier to recognize
• Ideas of what an NGO should be - many donors, without ever having managed an NGO, have a perception of how these organizations should be run. this is particularly true of domestic donors who believe that any administrative fees over 5-10% are excessive, but I have worked with a number of international donors who are unwilling to pay administrative fees on any level. For those groups, I recommend reading Uncharitable.
• Scale - donors are always looking for scale (today), not realizing that many organizations have the potential for scale

Executing effective philanthropic programs in China has over the last 5 years become exponentially easier and more interesting over the years, but barriers still exist for those donors who have yet to make the investment in time and money to learn about where effort are best directed, in what way, and what to expect.

With the last 2.5 years being the most active time in China's recent history of citizen based philanthropy, it has become clear that the level of opaqueness in the system has become a real issue for some.  That while the historical system of donations, largely fuelled by corporations looking to leverage their donations into something else, benefited from a level of opaqueness.  the current system that is meant to encourage public engagement does not.

This was perhaps highlighted best during the 5.12 Earthquake when firms, and celebrities, were thrown into a media cycle that no one had expected.  That, unlike before, people were paying attention to how much was donated, by whom, and for what cause, and additionally, it was also clear that, unlike before, the organizations on the receiving end of the donations were going to be expected to show a far higher degree of transparency than they were used to.

It is an issue that has come up recently on a number of occasions when speaking to students, corporations, and ordinary people, and it is an issue that has recently been highlighted in a Global Times piece Skeptical Chinese donors need concrete results where Wang Zhenyao discussed the difficulties of fundraising, reporting, and managing expectations:

To persuade people to support you, you need to have a strong reason for them to do so. Good causes and good proposals speak for themselves. Take the project on autistic children in Shenzhen for example. The Shenzhen Autism Society (SAS) gathered hundreds mothers with autistic kids and wrote to the central government. The top leaders learned about the project and sent inspectors there to learn how SAS helps the young patients. Now SAS receives millions of yuan from the local bureau every year.

In addition to that, you also need to show people what you have done with the money received. The lack of transparency creates misunderstanding. There is a common speculation that the money has gone to the pockets of corrupt officials. What I did back in the Ministry of Civil Affairs to combat such misunderstanding was to have flyers and pamphlets printed out and sent to all sponsors and related departments.

After seeing the smiling faces and reading the reports about the people and projects that received donations, the donors and public had a much better idea of what the charity had done. Some charity organizations posted their statistics online but received unsatisfactory results.

It is a situation that I feel at times is grounded more in ignorance than curiosity as average citizens are looking to understand the "impact" their money is having, and it is a condition that I feel will require NGOs, GOvernment Agencies, and 3rd parties to begin working together in an effort to educate the public, manage expectations, and provide a clearer picture of where NGOs are spending the money.

Why is doing this so important?

Simple. On a fairly regular basis, I find myself fielding questions about the impact of donations, the amount of money that an NGO spends on overhead, and whether or not NGOs are simply wolves in disguise, it is clear that regardless of where the education gap lies, it is NGOs who will be forced to pay the price in the long term. that, without addressing the transparency concerns of donors and opening themselves up to 3rd parties, they will eventually risk their brand, funding streams, and eventually programs.

Recently, while reading Philanthro-capitalism, the author made brief mention of the fact that successful business people who took the time while traveling to get out of their hotels and have real experiences tended to give more thought to the role in their own communities.

It was a point that, like Marketing 101 terminology, I already knew, but the way the author threaded the two issues, the more I realized how my own travels (and general interests in the human condition) have fueled my own work in many ways.

That, while I was myself blinded by the shiny glass buildings on Shanghai's Nanjing West Road, my extensive travel in Asia told me that beyond the glass facades existed another world. A world that I not simply needed to venture through as a tourist, but that I needed to study and work with.

A process that initially lead me to sign up for my first event with Hands On San Francisco in the late 90's, would lead me to see that conditions were ripe to form Hands On Shanghai in late 2003/ early 2004, catalyzed my research into the problems China faces with creating a sustainable balance, and drives me to seek out people and organizations that can be solution providers.

Many of whom are themselves well traveled, and are very likely to step out of their comfort zones as well.

An interesting Youtube clip of

We have just received the following letter from Tsongkha Charitable Association in Qinghai updating us on their efforts, and providing instructions for potential donors.

Dear friends,

Thank you for your concern about the Yushu earthquake.  As local NGOs are now receiving many phone callings from foundations and individuals, expressing their willingness to donate, several local NGOs in Qinghai established a “Yushu Earthquake Response” team and the team will collect all relief resources together and distribute them to those in most needs.  Some Yushu native volunteers of this team are leaving for Yushu soon to set up a relief work site for needs assessment and relief good distribution.

So if you or your organization wants to donate through Tsongkha Charitable Association (TCA) or the Response team, you can transfer the funds to either of the bank accounts below.  If your donation is large and you prefer it to be handled separately, we can arrange it as well.  Otherwise, the team will combine your donation with other resources and purchase relief aids and distribute them together.  TCA will be responsible in submitting reports to you.

In terms if needs, I talked to several people in Yushu.  All of them lost their houses.  Some people still received no aids (by 16:00, 15/April).  They need food, drinks, tents, and electricity generators.  Although CCTV is quick in propagating the swift response by troops, there still seems to be victims in unseen corners that need emergency assistance.  So if you can provide any support, we can purchase needed goods and deliver them to the hands of victims as soon as possible.

If you have any question or need further information, please let me know.

Thank you for your concern,

Kelsang Norbu
Director
Tsongkha Charitable Association
Haidong, Qinghai Province
Tel: 13519714070 / 0971-6363082
 

Last week while speaking with several of my longest supporters, I was introduced to one of the most innovative, creative, and smartest CSR programs I have seen in a while. It was the Nippon Color, Way of Love program, a program that benefited the students enrolled in Project Hope schools. A program that Nippon describes on their site as:

“Color, way of Love” is to color hopes with love. Colors materialize imaginations of kids. NIPPON PAINT, working with DuPont, initiated a program in 2009 to paint walls of 100 Hope schools in the following three years, making the schools more beautiful, improving conditions for education and hopefully contribute to better learning and unleash imagination of the kids. “Color, way of Love” supports the Project Hope, a charity program by China Youth Development Foundation. NIPPON PAINT Color Project Hope Fund, founded in 2009, will donate Nippon art classrooms in Hope schools in addition to building Hope schools. The pupils so benefited shall paint the most promising colors and be empowered to ignite their imaginations in an unlimited way.

When receiving the full introduction from their PR team, there were several things that stood out immediately to me. things, that when I saw them, I wished I would see them from CSR managers more often:

1) The program is aligns and leverages their core, and then matching that to the core of their partners. Nippon is a paint company whose goal is to improve the quality of their customers lives through the application of their product, and this program transfers that core "sell" into the CSR program by improving the educational environment of these students

2) the program engages not only the schools, but also the community at large. Leveraging a corporate minisite, Nippon has developed a platform whereby users can suggest designs for the school. An engagement tool that has resulted in 120,000 design suggestions

3) The program is multi-year and multi-faceted. Going beyond the standard one off donation that has built so many Hope schools, Nippon is committed to a long term arrangement that includes the donation of schools, painting of schools, and additional programing that will benefit Project Hope.

4) They have communicated this superbly through their site, which has received in total more than 3.5 billion hits in a single year. IT is a site that offers plenty of exposure and education to the issues that the Hope Project students face, and in a country where many are only beginning to understand the role of CSR in society, I found this to be an excellent piece that will help to develop a much higher level of engagement and understanding

Overall, it is a program that Nippon (and its partners) should be very proud of.  It is innovative and leverages their core business resources (financial, human, and product) in a way that will have a lasting impact on the communities they are working within, and at the same time, the marketing of the program is not only tastefull, but it is engaging as well.

Late last week, when the State Administration of Foreign Exchange released new regulations (right click to download here) governing how China based NGOs register their inbound donations, several media outlets (AP, SF Examiner, and SCMP) put out coverage that would leave many to believe that this new regulation was going to have an immediate and negative impact on NGOs operating here:

"China has surprised thousands of aid groups by stepping in to regulate overseas donations for the first time, complicating efforts to get money from supporters in the United States and elsewhere. Some groups warned that losing the support could force many to shut down."

The regulation, which was pretty benign in nature, was viewed as another tool that would be used to clamp down on NGOs, and their activities in China, and they offered a number of expert opinions as to the severity of the impact.

However, after reading the regulations through, I am still unsure.  Not unlike many other regulations in China, this one is very loosely worded, non-specific about who exactly will oversee the implementation, and leaves a lot of room for loopholes. 

And while it is a regulation that is by its very nature meant to "limit" activities, or perhaps better record is a better term, and while that typically has meant a more restricted environment for industries in the past, I am also unsure that this regulation would achieve that either.

In fact, depending on how one would lie to read this, it is entirely possible that this new regulation could end up supporting the development of NGOs in China. Which would be a good thing! 

First a few operational things to point out:

1) Even if one were to take this document at face value, and with a negative line, the fact is that this document would fail to have much of an impact anyway as it fails to accurately account for how donation transactions occur.  this document, if you read it letter for letter, is meant to force local NGOs to go to bank and submit a document that would certify the inbound donation.  If this is done in a manner similar to a typical business, then the money would already be in China, but more importantly, the question of where the money originated from was left out of this document as it assumes the donor would be making a direct donation from overseas account to China account.

A transaction that (1) rarely happens without an entity in the middle and (2) fails to follow the facts that foreign donors rarely send money directly to China as they get no tax benefit by doing so.

So the big loophole is that much of the money coming in is in fact not a donation, but an internal transfer between the NGOs legal/ banking center and China.  It would have already have been recorded as a donation overseas, which would negate the technical need to call it a donation in China

Which leads to my first big conclusion.  This regulation is not meant to be the norm, at this time, but to be used against the exceptions.  that, rather than push and effectively monitor all NGOs, what this document will do will give a tax auditor (or some other agency) a regulation that they can use against a specific NGO / group as part of a "normal" investigation of their operations.  Should any donations from overseas group come up, particularly those that are in the gray area, then the NGO could be presented with this regulation. 

2) In comparing this new regulation to others worldwide, I would have to say that this document in its current form is still very lenient in its intensity.  Yes, it is technically "possible" that donors would have to present themselves in China, but for anyone who has ever donated money across the U.S. border you wil know that the paperwork involved in that process (called equivalency) is far more cumbersome to the donor and benefactor.

Where this document gets interesting for me is that it could potentially open a door for NGOs in a very positive manner.  That, with one of the big issues being NGOs forced to registered as corporations, and their donations being taxed as a result (booked as revenues), this regulation could unwind that.  That, thorough the regulation, tax authorities would now have a document that say that NGO XYZ received 123 from Donor ABC on DATE, and with the SAFE seal on that document, the NGO would have the ability to strip that donation out of their revenue and thus reduce their tax burden.

Also, and this is thinking bigger picture and longer term, the setting up of donation accounts is a new piece of infrastructure that could be build upon for legal and tax regulations rumored to be in development.  Another step in the right direction as well.

In the end, what is clear is that China is now looking to develop mechanisms that can create strength in how NGOs are regulated.  for some, this is going to be viewed in a negative light because for some the gray areas that they occupy are comfortable.  However, if this document leads to other steps like legal and tax regulations, and the removal of tax burdens, then I would say that the fears of many will quickly turn themselves into hope for the future.  That does not mean that there are not more hurdles to come, but baby steps are being taken.