Chris Stone and the Chinese private foundation delegation

On 28 October, the Nonprofits in China Domain invited twelve top Chinese private foundations to a seminar on non-profit governance at the Hauser Center. The seminar was moderated by Professor Christopher Stone, director of the Center, while representatives from the Narada Foundation, China Foundation for Poverty Alleviation, Mercy Crops China, Beijing Western Sunshine Rural Development Foundation, Sun Yafang Foundation, Vantone Foundation, Beijing Ren Ai Charity Foundation, China Social Entrepreneur Foundation, Huaxia Center for Economic and Social Development Research, XinPing Foundation, and Nonprofit Incubator (NPI) served as discussants. Mercy Crops China organized this delegation in a week long program to visit relevant institutes in the United States; Harvard was the delegation’s first stop (details of the delegation’s representatives and their respective organizations are available here).

Professor Stone opened with remarks that the role of governance can be distilled into the responsibility of non-profit organizations. He stressed that an organization, such as private foundations operating in China, ought to maintain its integrity in three areas: finance, operations, and purpose. He challenged representatives from these twelve private foundations to assess the effectiveness of governance in their respective organizations and discuss in general how governance affects non-profit organizations in China.

Xu Yongguang, Vice Chairman and Secretary General of the Narada Foundation, provided an overview of governance in Chinese nonprofit organizations. Xu stated that each NGO should be held responsible to the people, to the government, and to their sponsors, regardless of their country of operations; overall the board of directors should be the ultimate decision maker for the NGO. However, such is not always the case in China. Many Chinese NGOs face structural problems to give the board its proper due: in government-operated non-governmental organizations (GONGOs) the board only ranks third after the government and management in its decision making ability; whereas in grassroots NGOs the founder often find his decisions unchallenged regardless of the board structure. For private foundations there are no external pressures to set its structure: however, donors, often entrepreneurs of strong leadership, often interfered with the decision of the board. The Narada Foundation resolved this problem by establishing a diverse board, composed of both donors and experts. The Foundation created a meticulous but effective by-law to govern its meeting procedures; last summer, the Foundation adopted a declaration of self-governance to reaffirm its autonomy of the board.

Other organizations, however, have experienced difficulties in setting a structure to effectively govern the board. The board and the management team often conflict with one another. According to Yang Dongping, founder and chairman of Western Sunshine Rural Development Foundation, his organization lacks the diversity of board necessary to make the board effective. Composed of only experts, the board is in need of entrepreneurs of business background. For many small private foundations like the Western Sunshine Rural Development Foundation, management team is the actual decision maker. On the other hand, an overactive board with diverse opinions can be equally ineffective. Yang Ping, executive officer of Sun Yafeng Foundation, shared his experience from 2004 to 2007 as the secretary-general of entrepreneur-founded Alxa SEE Ecological Association. The board, largely composed of successful businessmen with rich resources, is powerful while the secretary-general lacks real decision making abilities. To sponsor any grant over RMB 100,000, the secretary-general must submit to the board for approval. Yang noted that a strong board against a weak management has both pros and cons. It creates more incentives for entrepreneurs to participate, but at the same time leaves the experts of the organization no role in decision making. In worst case scenarios, the secretariat may retaliate through manipulation of information to gain power for decision making. Overall, Yang urged for more supervision. Chen Yimei, China Country Director of Mercy Crops, agreed with this view and urged state legislature to impose rules in standardizing non-profit governance.

The Hauser Center accepts gift from the Chinese delegation

Answering Stone’s question on whether members of the board should be compensated, both Xu Xiaodong of Vantone Foundation and Gan Dongning of China Social Entrepreneur Foundation agree that they shouldn’t. Gan further called board member to serve as examples for other members of the organization, suggesting that many staff of some Chinese non-profit organizations are given little or no compensation. Stone further commented that boards, like people, develop their own identity and culture.

Lu Zhao, founder and director of Nonprofit Incubator (NPI), explored the question of non-profits governance in China from a different perspective. Speaking from his experiences in helping numerous grassroots organizations, Lu noted that many of these organization’s problem lie with their founders—many of whom are eccentric and stubborn in character. These creators of grassroots organizations are unwilling to give up their own ideas and seldom pull themselves out. They would only seek help from others and seek diversity of the board when realizing the limit of their own resources; even then few could check on these founders’ decisions. Thus, the lifespan of these organizations are likely to be bound by the limits of the founder’s personal ability and resource. Lu highly esteemed founders of organizations willing to quit their organization, if not disbanding the organizations all together once the organizations’ social purpose is accomplished or effectively absorbed by the government. But this ideal found in many well established civil societies is perhaps still a bit distant from China.

(Article contributed by Hong Liu of Harvard University)