- Education And Career
- Companies & Markets
- Gadgets & Technology
- After Hours
- Banking & Finance
- Energy & Infra
- Case Study
- Web Exclusive
- Property Review
- Digital India
- Work Life Balance
- Test category by sumit
Touching Lives For A Change
Photo Credit :
|Azim Premji, Founder, Wipro Donated: $2 billion Organisation: Azim Premji Foundation Area: Education|
Nadar and a handful of his peers stand out from the crowd of India's promoter-CEOs not just for such philanthropic activities, but also the way they fund them — out of their personal wealth. This is quite distinct from the corporate social responsibility initiatives their organisations might engage in. And different from, say, the Tata Education and Development Trust's recent grant of $50 million to Cornell University. At last count, 2010 turned out to be the best year for personal philanthropy in India with announcements worth nearly $3.5 billion.
Straight From The Coffers
Having given away $400 million to the foundation, Nadar has pledged 10 per cent of his wealth towards philanthropic initiatives. Last month, Nadar-owned HCL Technologies CEO Vineet Nayar reduced his stake in the $2.6-billion IT firm by a third to raise Rs 43 crore for his educational charity Sampark. But early December, a new dimension was introduced in personal philanthropy in India when Wipro chairman Azim Premji transferred 8.7 per cent of his equity worth Rs 8,846 crore (equivalent to $2 billion) to trusts that run the Azim Premji Foundation. This is apart from an undisclosed amount, albeit smaller, that he has given to the foundation since its inception in 2001.
Infrastructure magnate G.M. Rao says he has willed half of his 25 per cent share, which he shares with his wife (his two sons and son-in-law own 25 per cent each, too), to the GMR Varalakshmi Foundation — amounting to Rs 2,500 crore.
|Anu Aga, Former chairperson, Thermax Donated: 10 per cent of the family income Area: Education|
Mahindra & Mahindra vice-chairman Anand Mahindra gave away $10 million (Rs 45 crore) of his personal money to the humanities programme at Harvard University, where he graduated from. Larsen & Toubro's managing director A.M. Naik has given away Rs 20 crore for a cancer hospital and schools. He has pledged to donate 25 per cent of his wealth to charitable causes. In March last year, Vineet Nayyar, vice-chairman, managing director and CEO of Tech Mahindra gave a third of his equity shares worth Rs 30 crore to the Essel Social Welfare Foundation run by his wife.
Biocon's chairman and managing director Kiran Mazumdar-Shaw, one of India's richest women, has also parted with Rs 200 crore from her personal money. The funds have been used to run an insurance programme, Arogya Raksha, which now reaches 200,000 people; to set up a Biocon Cell for innovation management at the Indian School of Business and a cancer research scholarship at MIT, among other initiatives.
Infosys Technologies co-founder Nandan Nilekani has given away $12 million in endowments. While his wife Rohini, who found her share in Infosys had grown into a personal fortune well beyond their needs, has since parted with Rs 190 crore. It includes the $5-million endowment to Yale University, but largely (Rs 150 crore) funds favouring Arghyam, a charitable foundation working in the area of water and sanitation. She also chairs Pratham Books, which publishes children's books. And she isn't done giving yet.
2010: The Year Of Giving
There are many views on why there has been a spurt in announcements from Indian promoters and promoter families in recent times, particularly in 2010. First, in the summer of the previous year, two of the world's biggest philanthropists — Berkshire Hathaway chairman Warren Buffett and Microsoft chairman Bill Gates and wife Melinda — urged iconic philanthropist, 95- year-old David Rockefeller, to host some of the US's wealthiest and ask them to pledge at least 50 per cent of their wealth.
THE BEST KNOWN GIVERS OF INDIA INC.
Since June 2010, the Gates have hosted the wealthy around the world for their ‘The Giving Pledge' campaign, which will bring them to India next March. So far, the effort has convinced 57 of America's 400-odd billionaires, including Facebook founder Mark Zuckerberg and Michael Bloomberg, to pledge half their wealth. It could have triggered the conscience of many in India, too. Incidentally, HCL's Nadar has been among those met by the Gates.
Secondly, since a vast majority of the wealth of the richest in India — as anywhere — is notional in the form of their equity holding in their firms, 2010 was an opportune moment to donate as domestic equity markets nearly caught up with the all-time peak. India's wealthiest 1 per cent control about 16 per cent of the national wealth, according to consultancy firm Bain & Company. While the $3.5 billion that rich Indians pledged to give away in personal philanthropy may be a fraction of the $227 billion that US philanthropists gave away in 2009 (as per Giving USA report by the Center on Philanthropy at Indiana University), it is still a task well begun. According to Bain & Company's Philanthropy report, 2.2 per cent of the US GDP went to charity in 2009.
|GIVING LESSONS: VidyaGyan, a free public schooling initiative for the rural poor in Uttar Pradesh, is run by the Shiv Nadar Foundation (BW pic by Tribhuwan Sharma)|
In India, it was just 0.6 per cent. And only about 10 per cent of this came from individuals and corporates, while in the US their share was three-fourth. It is unfair to compare India to the US alone, says Adi Godrej, chairman of Godrej Group. India would not, for example, fare as badly when compared to other developed countries such as Japan, he says. The Godrej family set up its foundation diluting 20-25 per cent of family share in the holding company Godrej Boyce in 1994. "We have benefitted from the 500 million Indians who use our products. We have no choice but to give back," says Godrej.
The portion of wealth pledged (12.5 per cent by Rao, 10 per cent by Nadar, 8.7 per cent given by Premji) may appear low against those in the West, but for a nation at such an early stage of its economic evolution, even these are daring acts. Donors in the West, though, have taken bolder decisions. Buffett has pledged 99 per cent of his wealth, Larry Ellison, chairman and co-founder of Oracle Corporation, 95 per cent. "Were we to use more than 1 per cent of my claim checks on ourselves, neither our happiness nor our well being would be enhanced. In contrast, that remaining 99 per cent can have a huge effect on the health and welfare of others," says Buffett in his philanthropic pledge to the Gates Foundation. "We are getting there," says Neera Nundy, managing partner at Dasra, a "strategic philanthropic foundation" set up by former investment bankers from Morgan Stanley.
From CSR To Philanthropy
Even though India Inc. spends thousands of crores every year on corporate social responsibility, the activity has often been looked upon with wariness. For one, it gives companies tax breaks. Second, several state governments mandate it in lieu of free or concessional land. Third, it is seen as a way of keeping the local community compassionate towards the business.
|CLEAN ISSUES: A project by Arghyam, a charitable foundation backed by Rohini Nilekani, which works in the water and sanitation sector since 2005|
Yet, philanthropy is not alien to Indian culture. Historically, says tax lawyer Praveen Agarwal of Agarwal Jetley & Company, philanthropy was limited to religious causes or community and health services in industrial townships such as Jamshedpur, Bhilai and Durgapur. Several traditional business families such as the Birlas, Tatas, Chettiars, Shrirams and Modis have a history of giving.
It is hard to make the distinction, though, for family businesses whose charity arm started 70-80 years ago like the Bajaj's. In 1942, Jamnalal Bajaj gave away his entire wealth, Rs 5 lakh then, to Jamnalal Bajaj Seva Trust. Now, 30 such trusts manage around 20 hospitals, educational and other institutes. With assets worth Rs 4,000 crore gained from the family's contributions and company shareholdings, the Trust undertakes all philanthropic work on behalf of the family, says Niraj R. Bajaj of Mukand Ltd., who is responsible for all of Bajaj's charity work.
But in general, the charity has been largely built around their extended communities, social and geographical. The environment was rather different. Charitable acts were often suspected to be ways of turning black money into white, and earning karmic points in the bargain.
The big difference between personal philanthropy and corporate CSR is that in the latter, the company spends shareholders' money and promoters get the credit. In the former, promoters dig into their own pockets to share their personal wealth.
|HEALTH MATTERS: Donations from Biocon's Kiran Mazumdar-Shaw have been used to run an insurance programme, Arogya Raksha, which reaches 200,000 people|
My Money, My Choice
Peer pressure, however, hasn't caught up with everybody just yet. For instance, less than one-fourth of the top 50 of India's rich contribute to anything substantial towards philanthropy from their personal wealth. A majority of those BW contacted declined to discuss personal philanthropy, though they were happy to talk about CSR initiatives. "I am not suggesting that people rush out and give it all away. But in a society that allows this quick accumulation of wealth, there has to be a way of giving it forward," says Nilekani. Sometimes, even the choice of the donee could attract undue attention.
Nilekani's gift to Yale, along with other Ivy league endowments such as Infosys chairman N.R. Narayana Murthy's $5.2 million to a new Harvard publication series called the Murthy Classical Library Series and Anand Mahindra's $10 million for the Mahindra Humanities Centre have had them answer nationalistic concerns, despite the fact that the Yale India Initiative also engages Indian universities in South Asian studies.
On his part, Anand Mahindra, who has had to explain this once too often, says Harvard is the only alma mater he has known, having done his undergrad and graduation (on a full scholarship) from a college his father too went to. "I am delighted when an Indian gives back to his college anywhere," says Mahindra.
All For Education
Coincidentally, education is the biggest beneficiary of the largesse of the wealthy in India, as much as abroad. Having established the SSN colleges, Nadar is now setting up four VidyaGyan schools and a university in UP. "Education can be the vehicle for a just, equitable, humane and sustainable society," says Anurag Behar, co-CEO of Azim Premji Foundation, which also focuses on education. "We were clear we needed to be part of systemic reforms in education. For that, we had to work with the states." The foundation's work reaches 2.7 million children in 25,000 schools in nine states.
Former chairperson of Thermax, Anu Aga, who is also a member of the National Advisory Council, is another example. Along with her daughter, she contributes 10 per cent of their annual earnings to philanthropy, and has chosen education to donate to. "Education is the key to deal with inequity in India," says Aga.
But healthcare and skill development are just as critical for inclusive growth, says Mazumdar-Shaw. "It is tough to understand healthcare in a country as large as ours. It is not just about free medicine. We are the only BRIC country (Brazil, Russia, India and China) with no basic healthcare system."
All kinds of institutions will be built. Naushad Forbes, director, Forbes Marshall, for example, is looking forward to supporting independent researchers working on policy or social subjects. An academic who juggled his business with a teaching assignment at Stanford, he wants to see policy making more dependent on data and research, and less on popular ideas.
More inimitable philanthropy will also gain momentum. The Shiv Nadar Foundation, for instance, has also built the Kiran Nadar Museum of Art. You don't necessarily need billions for personal philanthropy. "Signing a cheque for the rich is not such a big deal and is a lot easier than the time and passion that some people on the ground give," says Nilekani. Sudha Murthy, who oversees the Infosys Foundation's work, does a fair amount of philanthropy herself. But won't talk about the money.
|THE LEGAL ANGLE|
|Philanthropic organisations can either be registered as a trust (under the Indian Trusts Act, 1882 or a state trust act), a society (under the Societies Registration Act, 1860) or a company (under Section 25 of the Companies Act, 1956). All three enjoy equal status under the Income Tax Act regarding exemptions to their income (receipts) and 80G registrations (whereby donations are exempt in the hands of those making it). These provisions make investments into such entities a one-way street; the money can't be taken out.|
As a trend, registration as societies has been preferred over trusts for the sake of credibility wherever the organisation has had to seek land from local governments for schools, hospitals, etc. Registrations under Section 25 have not been as popular so far, but of late a lot of companies such as GMR have begun registering CSR activities under this as its provisions make trustee compensation flexible.
One of the fundamental questions before a donor is whether he should transfer his equity in the firm to the philanthropic organisation (as Azim Premji did) or sell shares and give cash (as Vineet Nayar of HCL and Vineet Nayyar of Mahindra Satyam did). It is best to give in cash, says tax lawyer Praveen Agarwal of Agarwal Jetley & Company. "The philanthropic organisation and its trustees should not be constantly worried about when the market value is going up or down and whether they should sell or hold shares," he says. But those who sell shares will attract capital gains tax.
The most heartening feature of personal philanthropy is at least some in the GenNext seem to have taken to it. Adi Godrej's younger daughter Nisaba and Nadar's daughter Roshni, who count among the richest heiresses in the world, are actively involved in such initiatives. At GMR, Rao's sons were party to his decision to give away part of the family wealth. Though, as Agarwal says, there are several cases where the parent's decision to give away family wealth is contested in courts. "Socialism and high taxation made business families feel they had little surplus money. Profits were better plough back or saved for a rainy day," says Godrej.
Giving isn't limited to promoter-owners such as Premji or Nadar. Senior executives who hail from the middle class and have accumulated a lot of wealth because of their stock options are among those leading the path. The examples of Larsen & Toubro's Naik, HCL's Nayar and Tech Mahindra's Nayyar, who have parted with a substantial amount of their wealth for causes dear to them, stand testimony.
Bain's report claims the wealthiest or "upper class" give away (at 1.6 per cent of household income) less than the high class (2.1 per cent) and even the middle class (1.9 per cent). It may not be a coincidence then that Shaw and Nilekani are first-generation millionaires of the "good old middle-class stock", whose values, for instance, Rao tries to inculcate in his grandchildren.
The future of personal philanthropy looks promising. Dasra runs Giving Circles, a programme that shortlists credible NGOs for the circle's donors to support. This October its first programme Education Giving Circle — looking to raise Rs 3 crore for Mumbai's urban municipal schools — was over-subscribed.
Nilekani reminds, "Philanthropy (philos+ anthropus) as it is defined means ‘love for human kind' that doesn't necessarily require money." Philosophical discourse of the subject of giving also talks about the power imbalance between donor and beneficiary. Which is why, the principal at Nadar's school insists the 300- odd kids are made to understand that their free schooling is a fellowship they've earned by the dint of their talent and hard work. It's no charity.
Not everybody wants the legacy to linger on either. Buffett has willed that Berkshire shares will be expended for philanthropic purposes 10 years after his estate is settled. Ajay Piramal, chairman of Piramal Enterprises, who runs the Piramal Foundation that covers the mid-day meal costs of 50,000 children everyday, among other things, lists the highest kind of giving, as per Hindu belief, as one where you do it anonymously with not even a ‘thank you' in return. As a popular saying goes, the left hand should not know what the right hand has done.
(This story was published in Businessworld Issue Dated 17-01-2011)