You are here

Family wealth develops into philanthropy

The new Beichuan town in Sichuan, Southwest China, was rebuilt from scratch after the massive earthquake that hit the province on May 12, 2008. Chinese tycoons, including Yu Pengnian (below), donated generously to the relief efforts. (Photo / AFP)
Chinese real estate magnate Yu Pengnian hit the global headlines in 2010 when he donated his entire family fortune of $1.2 billion in cash and property assets to aid various humanitarian causes — one being reconstruction after the 2008 earthquake in Sichuan province, Southwest China.
China was hit by two major disasters that year. As well as the earthquake that devastated Sichuan province in May, a cold weather spell hit 20 provinces in February.
Chinese traditional culture and family businesses have long emphasized the importance of charity and philanthropy. However, the outpouring of support, especially from high-net-worth individuals (HNWIs), following the two natural disasters proved to be a watershed moment in the development of modern philanthropy in China, a study, Family Philanthropy in Asia, by financial services firm UBS and graduate business school INSEAD shows.
Yang Guoqiang’s Country Garden also responded immediately with donations for disaster relief.
The family-run property development company supported activities in Sichuan to provide education and health access in impoverished rural areas, funded a construction project for new rural highways to facilitate the transportation of goods to market, and provided support to social entrepreneurs in the region to enable them to create sustainable projects to stimulate the economy.
Philanthropists from Hong Kong, including Lee Shau-kee of Henderson Land Development and Ronnie Chan of Hang Lung Group, another real estate firm, made significant donations to disaster relief, as did Chang Yung-fa of the Taiwan-based transportation and hotel firm, Evergreen Group.
The Chang Yung-Fa Foundation rebuilt five schools and eight clinics. Lee sent doctors from his private hospital to help victims in Sichuan, and many of his employees and senior managers contributed to relief projects.
Likewise, Cho Tak Wong of Fuyao, a manufacturer specializing in safety glass, donated 70 percent of his family’s shares — worth $600 million — to disaster relief efforts, alleviating poverty and education.
Rupert Hoogewerf, founder of the Hurun Report magazine, said the Sichuan earthquake was “a catalyst for Chinese philanthropy” and that together with the Yushu tremor in Qinghai it “brought social responsibility and charity to the fore”.
Cao Dewang, chairman of Fuyao; Lu Zhiqiang, chairman of conglomerate China Oceanwide Group; and Wang Jianling, chairman of Wanda Group, each donated more than $10 million after the Yushu earthquake, which hit western China’s Qinghai province in 2010.
Huang Rulun, founder of property firm Century Golden Resources Group, donates money for relief for the elderly and assistance to farmers on an ongoing basis as well as to disaster funds. He topped the Hurun 2013 China Philanthropy List by donating $92 million.
“Family businesses give back to society and forge close local ties for establishing a long-term presence in the community,” Kevin Au, director of the Center for Family Business at the Chinese University of Hong Kong, tells China Daily Asia Weekly. “Working together and developing with the community is essential in building a family dynasty.”
Modern philanthropy in China, especially by family business houses, may be a young phenomenon, as the country has witnessed massive growth in private sector enterprises only in the last 30 years.
Hoogewerf of the Hurun Report, however, has revealed that Chinese philanthropists on average donated 6 percent of their personal wealth to various humanitarian causes, which “is a pretty high number” even compared with those in Europe and the US.
In India, big family businesses have a history of involvement in political and social causes. One prominent example is GD Birla, a founder of the Aditya Birla conglomerate. A close associate of Mahatma Gandhi, he made significant financial contributions to India’s freedom movement in the early part of the 20th century.
Other prominent business families behind the Tata and Murugappa conglomerates pioneered charitable contributions to hospitals and schools.
“Families in India have a long tradition of giving to the poor and needy, and business families do not focus only on achieving sustainable financial growth but also on contributing a part of their income for social good,” says Kavil Ramachandran, a professor focusing on family business and wealth management at the Indian School of Business in Hyderabad in southern India.
The urge to give is a universal human trait and families in Asia, like their peers across the globe, have a range of motivations for their philanthropic activities.
The UBS-INSEAD study says some of these motivations have an outward focus, such as the desire to impact a particular community, address a social problem or achieve a pragmatic objective.
Through concrete financial and personal commitments like contributions and volunteerism, families can display to the community their commitment to help solve social issues.
“Family businesses tend to be more local in their philanthropic activities, as they are often very firmly entrenched in the community,” says Peter Englisch, global leader of the Family Business Center of Excellence at financial services firm EY.
“Family businesses consider the community to be one of their stakeholders, so it makes sense for their giving to be local. They don’t tell the world about their activities because they are more discreet,” he adds.
Some motivations are more internalized, such as the desire to perpetuate family values or build family cohesion. Within the family, philanthropic activity can give family values concrete meaning.
Philanthropy can also become a common or neutral ground that includes parents, children, partners and grandchildren in a project that is not the family business. It also provides space to create new conversation topics, especially around intangible values.
“Business families tend to be values-driven, and a charitable foundation provides a platform for the strengthening and continuity of these values across the generations,” says Mary Ann Tsao, chairman of the Singapore-based Tsao Foundation, which works to improve life for elderly people.
“Sustaining the family together in an organized way will most certainly increase the long-term sustainability of the family business, as this would not be a possibility if the family does not survive.”
In Asia, family-driven businesses and philanthropic activity are often conducted in tandem, so charitable activities are made visible to employees and, in many cases, conducted through the family business.
An important motivation for such conduct is to drive the adoption of family values by employees and business partners. A number of leading family philanthropic efforts in the region include employees in their initiatives.
“Reputation of the company is a much-needed incentive for the employees,” Thomas Zellweger, a professor specializing in family businesses at the University of St Gallen in Switzerland, tells China Daily Asia Weekly. “Family firms involved in community participation will be able to retain good talent, which would eventually lead the company to prosperity.”
The growth in prosperity across Asia over the past few decades has been breathtaking and, according to various reports, many are entering the category of HNWIs.
Capgemini and RBC Wealth Management’s World Wealth Report 2014 says the Asia-Pacific region is expected to overtake North America for the No 1 spot shortly, driven by strong projected HNWI wealth growth at 9.8 percent annually to reach an anticipated $15.9 trillion by 2015.
With a huge increase in the wealth of family businesses and the rising number of HNWIs, the region’s family philanthropy pie is sure to grow.
However, Au from the Chinese University of Hong Kong sounds a note of caution that just doing philanthropy in a “me too” kind of way will not help family businesses.
“They need a strategy, and to align it with the values and uniqueness of the family and the business,” he says. “If these activities are done well, it will benefit the family and its business.”

Friday, August 15, 2014
Media Name: 
China Daily 中國日報