China recently adopted a legislation to extend tax benefits to those who make charitable contributions. This may appear to be just one more step in the privatization/modernization of the Chinese economy. Actually, there is far more to it.
Interestingly, one of the reasons behind that legislation is the realization that successful Chinese businesspeople are contributing less to charities than similar people in Western countries. There are several possible theories as to what caused that shortfall: (a) Fifty years of cradle-to-grave care by the state may have left the Chinese assuming that all is covered in their universal care and neglecting the advantage/benefit of charitable organizations; (b) while some have recently gained wealth, they lack role models for organized charitable efforts; (c) due to the absence of religion in China, the Chinese lack those motivations and directives that Westerners find in their religions; and (d) the general distrust of fellow Chinese makes some leery of giving large amounts of money to be controlled by, well, other Chinese.
Of course, charity comes in different shapes and sizes. Successful Chinese businesspeople, who shun or neglect public charities because they don’t trust their administration, often take care of broadly extended family, sometimes by providing them jobs. That seems to fit with Prof. Paul Shervish’s view of philanthropy as “the social relation where you expand the horizon of your self-interest to include caring for others”.
While I acknowledge that tax incentives lower the cost of charitable giving, I am not sure they can overcome the shortfalls mentioned above. There are other good motivations for charitable giving. In case I am right that tax deductions alone won’t suffice, perhaps the Chinese government, and especially Chinese businesspeople, should explore some other good reasons, including those relating to their families and family businesses, for contributing more to charities.
At last year’s Invitational Conference, conducted by the Center for Family Enterprises at the Kellogg School of Management at Northwestern University, we presented a panel discussion titled, “Family Philanthropy”. The panel consisted of three people with first-hand experience and differing perspectives regarding charity and its relationship to family: Charles W. Collier is the senior philanthropic adviser, Harvard University; Shawn M. Donnelly is a Board member of the Gaylord & Dorothy Donnelly Foundation founded by her grandparents; Susan Crown is the president of the Arie & Ida Crown Memorial Foundation, one of Chicago’s most philanthropic families. I was privileged to moderate the distinguished panel. We were not concerned with how to maximize tax benefits or select beneficiaries. Instead, we focused on why family businesses should have a charitable foundation and contribute as a family to worthwhile causes.
Throughout the entire programme, there was no mention of religion as a motivator, which is not to say its presence was denied or doubted. What was mentioned was that organized philanthropy can be a mechanism to help families pass their values and culture on to the next generations, and to tie the family together. As Charles Collier said: “Philanthropy is not just a vehicle to provide social benefit to society. It is also a tool to express core values—and often is the glue that holds the family together.”
Philanthropy was also viewed as a vehicle for training “next generations” to work in organizations, as part of teams, to set and fulfil goals, to solve problems and manage conflicts—all talents needed when they become involved in the family businesses. Susan Crown, in discussing succession planning, said: “Philanthropy is a key issue in our eleemosynary strategy.” All of the panellists, as well as two-thirds of those in the audience, believed that participation in family charitable foundations’ activities should start early, before high school—maybe as early as age seven.
The generational impact is multi-directional. As Shawn Donnelly said: “It ‘provides’ opportunity not only to honour the values of (my grandparents), but also to look at what the foundation could be, going forward.” Susan Crown contributed to this thought by saying that under proper circumstances, i.e., where the family system and business are strong and sound, “Philanthropy holds great potential to link one generation to the next. (It is a way for) developing a generational identity (while) finding a common ground.” Both quotes make it sound fairly simple. Actually, both alluded to the hard work that their respective families undertook to make old values and missions relevant to next generations. No one was suggesting that families try to bring future generations to particular actions or specific beneficiaries. What they prove is that the benefit is there for the taking with hard work (or, as Susan Crown referred to it, a “huge amount of effort and focus”).
Instead, they exemplify the impact families can have on future generations by involving them (as early as possible), by teaching (through example) the values they hold dear, by explaining the importance of ties to a family’s community and demonstrating styles and techniques for accomplishing all that through thoughtful, deliberate, selfless and successful charitable giving. The programmes are not precipitated solely by religious motivation and tax incentives. Nor are the most important benefits of such eleemosynary largesse measured by heavenly rewards and tax refunds. The passing of family values and culture from generation to generation and the resulting improvement of both the quality and performance of one’s children and grandchildren is reward enough, especially in a society like China, where family is a treasure.
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Lloyd E. Shefsky is clinical professor of entrepreneurship and founder & co-director, Center for Family Enterprises, at the Kellogg School of Management, Northwestern University.