BUSINESS PHILANTHROPY IN INDIA

By Sanjay Medhavi1 There is a growing awareness today that the government alone cannot bear the responsibility for the development of India and that a variety of resources and talents need to be harnessed. It is not only that the problems are vast and complex but also that occasionally the government is a part of the problem. The role of the government is, therefore, being redefined. With fewer controls, disinvestment and other measures, one of the principal beneficiaries is likely to be the private business sector. Consequently, there is increased expectation on the part of the government and the public that the private sector will share expected surpluses more equitable with the rest of the society and contribute more to national development. Not only does the government not have an infinite amount of resources at its command, but the private sector, comprising both business as well as nonprofit social organisations, have distinct advantages over the government in certain areas. While government action is advantageous where huge resources and a large coverage are necessary, it is not so productive when experimentation with new ideas and directions is needed, because, inflexibility, bureaucratic control and red tape are bottlenecks to pioneering efforts. Today when we face a crisis of values, and there is a distinct possibility of mediocrity triumphing over excellence, there is a particular need for independent, innovative and creative, thinking and action; and private support for this to happen. Though sharing much in common with other countries, Indian business philanthropy has clearly followed its own path. It has been a history of some great achievements but also some shortcomings. There have been some great men who used their own and their companies wealth to mould the society according to their vision. At the same time a large section of the business community, perhaps charitable at a personal level, are yet to fully subscribe to the concept of
The author is a Senior Lecturer and Co-ordinator (MEB Programme) at the Department of Business Administration, University of Lucknow 226024 and can be contacted on E-mail: sanjaymedhavi@hotmail.com
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philanthropy. There is a great variation in the responses of different communities and different regions in their ways of approaching philanthropy. Also there has been a continuous diversification in the causes funded. THE PAST Before and after independence, business leaders played a significant role in building up the technical and scientific capabilities of the nation. Indian society has always placed a high value on education and it has been a favoured area of business social contribution. Business leaders themselves not highly educated, foresaw the need to bring technical, scientific, medical, and management education and research into the country, and acted accordingly. Today we tend to think of education as a purely government concern and forget that it was the private initiative which showed the way, in the field of art (J J School of Art), social work (Tata Institute of Social Science Research), engineering (Birla Institute of Technology), commerce (Sri Ram College of Commerce) and management (Nirma Institute of Management). Private initiative also pioneered many new fields of endeavour, such as cancer research (Tata Memorial Centre for Cancer Research) and wildlife conservation. The government later used the experience and expertise so gained to widen the field and decimate the gains. In addition, one has only to look at the physical and institutional facilities in most cities (parks, gardens, drinking water facilities, auditoriums and halls, hospitals, hostels, museums, art galleries, etc.) to realise how much has been contributed by business towards society. Though wealthy contributors have come from other walks of life also, their numbers have been fewer than those from business. Moreover, several businessmen like Vikram Lal of Eicher, as well as corporations like Tatas and ITC have provided patronage to artists by donating collections of books, precious artefacts and art collections to museums and art galleries like the Prince of Wales Museum, the Birla Academy of Art and Culture and the L D Institute of Ideology, by such actions they have made art available to the art loving public. Today the contribution is less visible since the government is omnipotent in every field, and because the major contributions are towards community

development, which by its very nature, is lower profile than setting up prestigious institutions. Never the less, many corporations have been successful in making a difference to the communities surrounding their operations through their community development work. While the causes espoused by the business community have varied with time, it is commendable that the businesses have adapted their support to social causes to emergent needs fairly quickly so that the responses were appropriate to the needs of the time. Given the hot climate and the scarcity of drinking water in various parts of the country, providing for clean drinking water by putting up water stands in summer is an act of care for the fellow beings. Many went beyond this even in pre-industrial times and contributed towards digging public wells and construction of water tanks for drinking and irrigation. Similarly, at the time when high value was placed on the marriage of girls and the inability to marry off a daughter had dire consequences, contributions were made through providing for dowries for poor girls and construction of marriage halls. Building up the physical and institutional infrastructure of cities was taken up at a time when the endowments in this regard were meagre. But when this became adequate, businesses sought other worthwhile causes that were more needed by society. Consequently, there has been a tremendous diversification in the fields and causes funded from consumer issues, environmental concerns and population control to classical music, experimental architecture and journalism. Yes, the motive for philanthropy has not always been pure altruism, but more generally, a mixture of motives have prevailed: religious beliefs; need for spiritual fulfilment not met by material success; feeling of obligation to society; patriotism towards the country; desire for social status; to memorialise a loved one or a noted personality; response to a personal tragedy or national calamity; lure of tax benefits; government directive or pressure; and so on. Whatever the motive, the fact remains that Indian Businesses have, through donations of money and other resources, played an active roll in fighting social ills and have contributed to progress and change by supporting research and talent, and providing seed money to test out new ideas.

THE PRESENT Is the present business community less or more charitable than before? The upcoming generation of businessmen appears to be less public-minded and more consumerist in their lifestyle than earlier generations that produced many outstanding figures. The younger generation of businessmen is too busy with business interests, or with own pleasure, to give much thought to social concerns. While earlier, wealthy businessmen financed social projects out of their personal wealth, today they do so not from their own pockets but of the companys, and even then it is not because of charity in their hearts, but for the sake of social status or political mileage. Moreover, it deserves mention that the costs of major social projects such as establishing a college, university or research institute has increased so phenomenally that many of them cannot be financed out of personal or family wealth alone. Many young leaders appear to be indifferent to philanthropy, and are content to let their elders take decisions regarding philanthropy, this seems to be in line with Indian social tenets of differing to elders and paying attention to matters ethical or spiritual only in the last phase of ones life. Probably they will shoulder their responsibilities with full commitment when they move up in the hierarchy by age and seniority. This is more likely to be so in business groups with established traditions of philanthropy. In families like the Tatas, Birlas, Bajaj and others, and business communities such as Marwaris, Parsis, and Chettiars have consistently led others in the volume and nature of their social contributions, highlighting the role played by early conditioning and socialising in establishing a tradition. In families or groups without established traditions, and especially among first generation industrialists, the scenario is very uneven. There appear to be fewer of them involved in planned philanthropy. Many of the newly rich businessmen have had humble beginnings like Dhirubhai Ambani, the son of a schoolteacher from a village in Gujarat. Started at age of 25 as a small trader and subsequently entered the business of textiles, petrochemicals and telecom. Today his company Reliance is the top private sector company in India. It will probably take at least one or two generations to pass before there is a desire to engage in planned

philanthropy that goes beyond ad-hoc donations. In the short term, if at all, their philanthropy is likely to go into funding some sort of institution like a school, college or hospital to secure a name, image and status. The reasons cited for the present generation of business leaders being less philanthropic than their forefathers are varied. Some feel that this decline in the charitable instinct is in line with decline in family values. Another reason cited is that businessmen / companies find it difficult to identify and implement worthwhile social development projects, and it would help if the government or other agencies were to provide clear guidelines and directions about where business participation would be desirable. THE FUTURE Business philanthropy has a continuing role to play in the India of tomorrow. Philanthropy fulfils a spiritual and moral need to give a deeper meaning to life by helping the less fortunate. This inner need is timeless. However rich and modern a society, whatever the religion professed, there will always be people in search of a deeper meaning to life and philanthropy will continue to have a role in fulfilling this need. Many business leaders strongly believe that there is a need for businesses and individuals to be involved with philanthropy for the good of all. The need to supplement and complement government efforts in times of emergencies continues, as also the need to ensure that people are not left out of safety nets during times of economic change. The limitations witnessed today suggest a need to cultivate new philanthropic resources to augment existing ones, and to use all resources more strategically. On one hand, the limited globalisation witnessed so far has increased public and political expectations from business, creating a need for new ways and new systems to manage the expectations. On the other, globalisation is weakening the ties between wealthy business families and companies to the cities of their birth, and to which they gave so much. As companies seek to integrate their business operations vertically and horizontally and to develop core competencies to meet the challenges of globalisation, many are moving their philanthropic focus from the cities to village

communities around their production units. This is expected to reduce conflicts likely to arise from islands of prosperity in the midst of poverty and need. The far-sighted business leaders have realised that profits are a necessary, but not a sufficient condition for success, as Jamsetji Tata, Jamnalal Bajaj and GD Birla have demonstrated before, there is a difference between making money and creating wealth. So business corporations of the future will need to be well governed internally, and well behaved externally. ROLE OF THE GOVERNMENT The late 19th to mid 20th century was also a period when the government actively encouraged business philanthropy and created conditions in which businesses could play a major role in society. This period highlights the critical role the government can play in shaping the volume, direction and nature of philanthropy in any society. After independence, partly for ideological reasons and partly because the resources of private philanthropy could no longer cope with the sheer size of the problems, the government itself became the major philanthropist and began funding the charities and NGOs, it reduced the need for and therefore the pressure on, private initiative. Though the government continued to give tax incentives to encourage private contributions, it did not lead to any significant increase in the contribution to charity as is evident from the data compiled by the Income Tax Department. Though businessmen generally disclaim tax incentives as a major reason for engaging in philanthropy, the facts is that tax incentives play, and have played an important role in guiding the corporate world into certain socially desirable activities. However, while tax incentives are important, they are so only at the margin and are less important than policies that directly affect corporate earnings. Non-economic considerations are also important. In responding to requests for small donations, tax deductibility is not a major consideration; the cause or the need to oblige the person making the request is more important. Tax deductibility is significant only when major donations to outside organisations such as a university, a management institute, an arts centre or an NGO are under

consideration, or when major resources are needed for a companys own social project, whether that of establishing an institution or a community programme. Some persons have argued that giving tax incentives distorts and vitiates what businesses want to do or can do best. In their view, rural development was artificially thrust on industry and had not come spontaneously. Without the lure of tax incentives, the companies might have preferred to invest in some other social project, this might be one of the reasons why very few have been successful in their rural development projects. In various countries world-wide including America, it has been observed that charitable giving has declined as a proportion of income with falling tax rates as there is less incentive to make donations. With lowering of tax rates in India too, a similar affect seems likely unless the quantum of incentives is raised. The last seems unlikely because, due to misuse of tax concessions by some companies, public and government attitudes towards giving more tax incentives to business seems to have hardened. Such a hardening of government attitudes is noticeable elsewhere in the world as well. What this argues for is not a scrapping of incentives but a more systematic investigation into malpractice and into how the positive affect of incentives can be enhanced. At the same time, it is necessary to realise that it is not only governments tax policies that are important for a healthy tradition of business giving. Perhaps even more important for a business is its ability to conduct business in an environment of political stability and trust so that it creates more wealth. The Indian State has done pretty well in maintaining an open society and in endorsing pluralism and diversity, but its record in fostering cordial relations between it and the business community has been very uneven. This calls a systematic review of several legislation governing both the business and charitable sector such as company law, the trust laws, the income tax act, and so on, which impinge both on the creation and proper utilisation of wealth. SHORTCOMINGS There have been certain flaws too in business philanthropy in India. At its worst, it has exhibited a multitude of malpractices such as using charitable trusts for tax evasion and misusing tax incentives because of which a common image of

the business community today is that of a tax evading, profiteering and socially indifferent group. Ordinarily, individuals and companies genuinely committed to using their wealth or profits for social welfare have been a small minority. The majority of the business community has engaged in only ad-hoc individual charity extended to members of their own community, locality or religion and that too usually in response to requests. The concept of using philanthropic funds in a proactive manner to bring about desired social change according to a planned strategy is yet to become universal. The professional characteristics of their business operations is usually missing when it comes to using profits for social purposes, and there has been hardly any attempt to develop a core competence in one particular area, or to have trained staff for the purpose. The beneficiaries of business philanthropy have been mostly the urban middle class who took the maximum advantage of the education, health and other facilities provided by the business philanthropic funds. It is only recently that corporate attention has shifted to the rural poor also, though a few like the Bajaj and the Tata groups had shifted their focus earlier. Recently, the business philanthropy is becoming concerned with empowerment of the underprivileged rather than with immediate handouts. But such efforts are likely to alter power equations radically; it is therefore doubtful whether this will receive sustained long-term support. The industry has undoubtedly responded to many new causes as they arose environment protection, AIDS prevention, etc; but by and large business giving has followed not led in spotting emerging problems and finding solutions to them. The spirit of risk-taking, characteristics of business operations otherwise, has been missing in the philanthropic activities and most of the times what has been attempted are more in the nature of cosmetic dressing rather than curative surgery. The businesses have shied away from offering support for controversial issues like human rights, gender concerns, empowerment strategies for underprivileged classes and environmental projects with a potential for conflict. There is a growing preference for sponsorship only where there is expectation of some immediate benefit to the company rather than a long-term commitment to a cause.

Many a times there has been a contradiction between the business actions of a corporate group and its philanthropic objectives and activities. Whenever there was a conflict in the business and social welfare goals, it was the former, which won. For example during the eras of shortages, while many seths continued to give to charitable causes, they indulged in black marketing and other unethical practices so that their giving was really in the nature of guilt money rather than altruism. Many industrialists, while setting up factories have ignored environmental considerations and have continued to discharge industrial effluents to public detriment. Unfortunately, leaders like Jamnalal Bajaj, JRD Tata and Ratan Tata, who believe that doing good also means doing right, are a small minority. SUGGESTIONS While private initiative and assistance is and will continue to be needed in future to help cope with coming transition, merely running schools and hospitals to add to what the government is already doing is not its best social role. Business will need to rethink where its comparative advantage in social development lies. Social development needs to move from a peripheral concern of business to becoming a core competence, with specialisation in one particular area of development. This needs a clearly defined social development mission statement and policy, backed by appropriate resource allocation. Companies need to make a commitment to set aside at least 1% of pre-tax profits for social development. Moreover, it is necessary to do more than just give money. Money is not the only thing needed by groups working to bring about change. They need facilities like places to meet, equipment and technical advice. If business can help them with these, it will go a long way in making them more productive. A company should also encourage its employees at all levels to become involved so that they feel proud of belonging to a company that cares. It is equally important to make the core competence in social development known to the shareholders and the public through reports, publications and advertisements so that others are motivated and can learn from the experience.

Detailed case studies of corporate philanthropy should be included in the business school curricula to inculcate the right attitudes at an early stage. The business must be ready to discuss more openly than it does at present, its social mission, the role it intends to play in realising this mission, and the resources it intends to make available for it. Only with increased openness it can address the conflicting and sometimes unreasonable demands of society. An appropriate institutional infrastructure to advise and assist business in doing all these things is a prerequisite if Indian business philanthropy is to professionalise its social involvement and use its resources strategically. Finally, government and society need to recognise and appreciate the role of corporate philanthropy. To restore prestige to philanthropy as an act worthy of honour, and to accord recognition and status to those businessmen who go beyond business imperatives to contribute to social causes, the government should consider including philanthropy amongst the categories considered for national awards. Indian business philanthropy has a venerable past and a dynamic present. Given the right conditions and business own will, it can have an even brighter future. REFERENCES
Aga, Rohinton D, Changing the mindset, Tata McGraw-Hill Publishing Co Ltd, New Delhi, 1994. Agarwala, PN, The History of Indian Business, Vikas Publishing House, New Delhi, 1985. Sunder P, Beyond Business, Tata McGraw Hill Publishing Co Ltd, New Delhi, 2000. Wadia AR, History and Philosophy of Social Work in India, Allied Publishers, Mumbai, 1961 India: The Road to Human Development, UNDP, New Delhi, 1997. Social Empowerment and Economic Growth, 68th Annual Session Report, FICCI, 1995