He’s a Chinese government official. She’s a British lawyer. Together they publish a magazine that hopes to lift a veil of illegitimacy clouding a local NGO scene that’s thriving in a gray area of Chinese society.

Edited by Wang Liwei, vice-mayor of Guan County in Shandong Province, and Clare Pearson, a lawyer at the Beijing offices of DLA Piper, The Charitarian wants to encourage the local non-profit sector by informing NGOs about how to operate within government goal and guidelines.

Though there’s a flood of activity in the local NGO scene, reliable information is scarce. Sources of reliable information are even less assured. A crew of Chinese and foreign volunteers under chief-editor Wang is working hard on the March issue.

There are thorny issues to be explained: A recently proposed tax on investments by non-profit organizations has pitted the national Tax Bureau against the Ministry of Civil Affairs, which worries that such a tax will kill off many NGOs which rely on earnings from those investments to run their operations in China.

Different backgrounds, same goal

Wang describes the operation as “Chinese food with a British cook and an African market.” The British cook is clearly Pearson, a corporate lawyer and corporate social responsibility (CSR) expert who put up much of the cost of the first issue of the magazine (helped by adverts bought by companies, including her law firm and Boeing).

In charge of CSR – the voguish but often questioned science of corporations contributing to local communities – across Asia at DLA Piper, Pearson met Wang at a conference. Well connected, she helped put together a 3-week tour of the UK to explore how Western governments regulate and cooperate with NGOs.

Pearson recalls being introduced to Wang by a mutual media friend in Starbucks.

“We immediately hit it off and realized we represented two sides of the same charity coin, the Eastern and Western approach. He interviewed me for the magazine and it turned out to double up as an interview as English language editor. The rest is history.”

The African link is Vimbayi Kajese, the Zimbabwean-born editor who uses time off her anchoring job on CCTV9 news to write for the magazine. Author of a searching article on sexual abuse of women in the workplace, Kajese said the magazine finds stories “as much in what’s not reported as what’s reported [in the national media]. An example is fears of quakes in coal-rich central China, which went unreported due to coal companies’ fears of walk-outs by frightened miners. The human element of the story, workers’ welfare, will be reported in the upcoming Charitarian.”

The magazine is a bridge between government and the non-profit sector: Stories touch on sensitive issues but are written in a constructive manner, explained Wang.

Introducing the magazine at a recent Beijing launch party he explained the magazine’s purpose in three acronyms: CSR, GSR and PSR. “Corporate social responsibility, government social responsibility and public social responsibility.”

Sure enough in the latest issue of the magazine peppered between pieces on local NGOs there’s articles for a corporate readership about CSR budgets getting cut in the recent recession. Some interviews with local CSR heads of multinational companies read like heavily censored corporate copy.

Some of the more interesting copy centers on a trend of CSR among local companies. A relaxed Jin Siyu, head of publicity at the State Owned Assets and Administration Commission talks frankly on why some State-owned firms are giving more money than others to needy causes.

More controversially, there’s two pages on successful water bottler Nongfu Springs suing two government-affiliated entities the Philantrophy Times and the China Association of Social Workers for allegedly defaming the company by raising skepticism on their pledge to donate 0.01 yuan to charity from every bottle sold between January and July 2006. The case has prompted Chinese lawmakers to reshape laws in favor of charities.

Drawing the line

Upbeat and smiling, Wang’s energy is infectiously articulated in language that’s more that of an evangelical preacher than that of a hard-faced bureaucrat. He talks of wanting to influence change, “to bring hope and love to people.”

Yet Wang is a government insider with a duty to implement the government line. His role as a vice-mayor – he divides his time between Beijing and Shandong – means Wang has an insider’s knowledge of what goes in terms of issues open for coverage. Being a government official means he knows “where to draw the line.”

Wang also wants the magazine to increase trust between government, NGOs and the community to ease disaster relief work and charity work. “We want to bring trust and security,” he said.

Yet Wang won’t take sides in intra-government affairs. As the manager of a non-profit firm and a government official Wang finds himself uniquely in the middle, and he’s not taking sides. On the spat between tax officials and Ministry of Civil Affairs, he said: “Time will tell us what is the best solution to this issue.”

As a government official Wang is also au fait with the commercial realities of media in China. Since 75 percent of local publications are losing money, the government wants to reform ownership. “The government wants to own the media but it doesn’t want to operate it.” 

Changing attitudes to have nots

The magazine will take advantage of a recent media preoccupation with charity work and NGOs. Wang recalls last year sharing a TV talk show couch with one of China’s wealthiest men, Chen Guang, who on live TV donated 40 million yuan ($5.8 million) to help underprivileged locals have a better Chinese New Year. The outsized gesture was criticized as the attention-seeking ploy of a man with more money than sense. “But I thought ‘why not?’,” recalls Wang.

Chen’s gesture, said The Charitarian editor, was useful if it encouraged others to similarly share their wealth. The episode convinced Wang that media and charity work depended were interdependent.

“Media is now really interested. And charities really need media [to get their message out].”

The son of a working-class Shenyang family – “we were poor,” he recalls, Wang nonetheless feels he has reached professional as well as personal satisfaction out of caring for others. He recalls a reunion with his university classmates, 15 years after their graduation. With the wealth and responsibility of executive roles some of his classmates had no hair, some had big bellies, were overweight and overstressed.

“Of them all I was the happiest. I make a living in a job I like.”

Competition

There’s plenty of publications, online and off, covering charity in China. They range from the dry, corporate-focused CSRChina to Global Charity, a bilingual monthly published under the umbrella of the China Soong Ching Ling Foundation, a government-affiliated organization.

The Ministry of Civil Affairs meanwhile authorizes its own monthly journal the Philanthropy Times, detailing what’s happening for a mostly political readership.

An earlier publication, China Development Brief, was pithy and well edited but closed several years ago when its reports proved too revealing for certain provincial governments. The Chinese and foreign sides in this partnership were well represented among the healthy turnout at a launch party in a stately Thai club in the city’s business district.

Judging by the plentiful presence at the magazine’s launch party NGOs are keen on the magazine. “Right now it’s only the first issue and there’s a lot of improvements that would make it more reader-friendly, like using less text. But these issues need covering and there’s no one publication that does that as well as this one has managed,” said an NGO spokesperson present.

Pointedly, she didn’t want to be quoted as her NGO remains on shaky legal ground in China.

The Charitarian clearly has a way to go but the thickness of the first tome and the turn-out for its launch suggests there’s a ready readership. The future editorial direction may still be hazy, and funding is less than secured. But Wang is clear about the end vision: “that there will be no Charitarian because there will be no more poverty… I hope that day will come soon.”

gaofumao@globaltimes.com.cn

(Original Title: Charity Cases, published by Global Times, Februrary 1, 2010: http://www.globaltimes.cn/www/english/metro-beijing/community/events/2010-02/502674.html)

(By Wang Hongyi, China Daily)  SHANGHAI: The latest donation of 43.16 million yuan ($6.3 million) by a major philanthropist and 512 other entrepreneurs toward the needy has stirred controversy in the charity sector.

On Friday, Chinese entrepreneur Chen Guangbiao stood behind a wall of banknotes at the Industrial and Commercial Bank’s Jiangsu provincial branch to announce his new charity trip.

Related readings:  Philanthropists donate to the poor in Tibet, Xinjiang  Love cannot be measured with money  The most inspiring Charitarian in China  Nation’s ‘First Charitarian’ touts his deeds  Charity in any way welcome

Before next month’s Spring Festival, Chen, with 126 other philanthropists, will visit the remote rural areas of the west and distribute aid to the poor in the Xinjiang Uygur and Tibet autonomous regions, as well as Yunnan, Guizhou and Sichuan provinces.

Still, many in the Chinese online community have questioned Chen’s motives and accused him of generating publicity for his own benefit.

“I have committed myself to philanthropy in the past 10 years, during which many people said I was just concerned with my own reputation,” Chen was quoted by China National Radio as saying yesterday.

“But I really hope more people can follow me and also make a show with their own money, of course,” he said.

“In this way, more people in need can get help.”

Stories of Chen’s generosity abound. After growing up in a small, poor village in Jiangsu, Chen now manages a construction company and is one of the entrepreneurs who received the Charity Award by the Ministry of Civil Affairs. He said he has been committed to charity from the day he started his own business.

After the massive earthquake that hit Sichuan province on May 12, 2008, Chen arrived in the quake-hit area with his rescue team and excavation equipment. He and his colleagues pulled more than 200 people out of the rubble. His team also went on to build roads in the quake-hit areas.

Chen has returned to Sichuan many times, helping the area’s reconstruction with his time and money.

So far, Chen has reportedly donated 1 billion yuan to charitable causes in the country, including the reconstruction of disaster-hit regions and the building of primary schools in remote mountainous areas.

From 2008, Chen said he took his aid directly to the needy.

“Where is our money going to? That is a question that most donors asked,” Chen said.

“An inadequate charity system and lack of openness and transparency on funds are the main reasons that many entrepreneurs choose to donate directly to the poor,” he said.

“This has also restrained the development of China’s philanthropy.”

Tang Jin, a member of the standing committee of the Jiangsu provincial people’s congress, echoed Chen’s views.

Tang said several problems exist in the country’s charity scene.

These include the high management costs of running charity organizations that make people more willing to donate to the needy directly rather than through groups.

Zheng Yuanchang, an official of the social welfare and charity affairs department under the Ministry of Civil Affairs, said regulations and standards were needed to reform the country’s charity sector.

China has seen a rapid development in philanthropy in the past few years. Official statistics show that donations toward charitable causes in the country’s reached 107 billion yuan in 2008, 3.5 times that of the previous year’s figure.

(See oringinal at http://www.chinadaily.com.cn/china/2010-01/25/content_9368782.htm)

Product Description

From the Inside Flap

Since mid to late 1980s, board of directors system (the board system) has become an important theme in international studies on non-profit organizations (Middleton, 1987; Conforth, 2003; Ostrower & Stone, 2006). Since 1990s, the rapid growth of Chinese non-profit organizations has attracted research from domestic and foreign scholars; academia, while paying sufficient attention to external structural environment for the development of Chinese non-profit organizations, also notes many significant cases caused by some nonprofits’ deficiency in their internal structure of governance.[1] Chinese academia, government, and practitioners consider the establishment of an effective mode of governance a key issue for nonprofit organizations. This article surveys Chinese nonprofit organization’s basic framework in board of director system, and problems encountered in modes of governance; it further analyzes the problems that the current mode of governance encounters in practice, and offers some thoughts and suggestions.

1. Basic framework of Chinese nonprofit’s board of director system

Compared to the practice of international nonprofit organizations, China’s nonprofit organizations developed its board system much later; not until the late 1990s did China set up a rudimentary board system legally. Thus, development Chinese nonprofit organization’s board of director can be divided into three phases since 1949.

The first period from 1949 to 1998, when “Provisional Regulations for the Registration Administration of People-Run non-Enterprise Units” (henceforth “Non-enterprise regulation”) and “Regulation for Management of the Registration of Social Organizations” (henceforth “Social Organization Regulation” were issued, can be called the “pre-board” phase. In this phase, Chinese administrative policies did not set up norms and standards for internal governance of nonprofit organizations. In many ways, the government was more concerned about the conditions for setting up nonprofit organizations and management of their capital, etc, and paid little attention to internal structure of governance in these organizations.

The second phase lasts from the 1998 passing of Non-enterprise regulation and Social Organization Regulation to the 2004 issue of “Regulation for the Management of Foundations” and should be called initial phrase for the board system. During this phrase, government administrations have shown concern for nonprofit organization’s internal governance, and have confirmed the status of board system as the basic structure of Chinese nonprofit organizations through regulations and publishing example procedures. They have set more specified regulations for makeup, size, voting procedure of the board, the makeup and responsibility of supervisory board, etc. Although the regulations are not yet complete, they have placed the board as a clear area for mechanisms of internal governance development.

The third phrase is from the 2004 passing of Foundation Management Regulation to the present, which should be called the developmental phrase of board system. From the passing of Social Organization Regulation and Non-enterprise regulation in 1998 to the present, social environment for social organization and non-enterprise units has changed tremendously. Scholars and practitioners have made many suggestions to answer problems encountered in implementing the two regulations. Since 2006, Legislative Affairs Office of the State Council has for three consecutive years set up trial evaluative checkpoints for statues and law; Non-enterprise regulation is an important part of it. The Legislative Affair Office and the Ministry of Civil Affairs have jointly established Non-enterprise regulation evaluative team to gather information of the law’s implementation through questionnaires, interviews, and other methods. How to further improve board system will become key to future amendments of Non-enterprise regulation and Social Organization Regulation.

The 1998 Non-enterprise regulation (State Council Order No. 251), Social Organization Regulation (State Council Order No. 250) and 2004 Foundation Management Regulation (State Council Order No. 400) established Chinese nonprofit organization’s basic structure of internal governance. This is a typical policy-driven mode of governance; it bares many similarities with that of the developed countries’:

i)        Setting the Board as the Core Mechanism for Internal Governance

Non-enterprise regulation and the new Social Organization Regulation of 1998 do not directly regulate structure of governance for social organizations and non-state units; instead they set organizational structures through setting up example procedures to be followed. The 2004 Foundation Management Regulation, instead, directly states in its clauses that the board should be the governing organ of foundations. These legal structures set the board as the core mechanism for internal governance; the board possesses centralized powers of final decision on major affairs related to an organization’s development, and of major legal rights. The board has the power to determine an organization’s bylaws and its amendments, major plan of activities, annual budget, structure for internal governance, and human resource allocation, etc. The director of the board serves as the organization’s legal representative.

ii)      Division of Power Between the Board and Executives

Under the current framework of non-profit organization’s internal structure, the power of the board and the executives are divided. The board is at the center of power, and controls executives. The board is responsible for hiring, evaluating, and dismissing executives. Executives, entrusted by the board, handle the organization’s day-to-day function, are responsible to the board, and fulfill in detail the policies set by the executive board. The executive director performs his role under the leadership of the director of the board. Because there are possible crossovers between the board and the executives in some of their specific roles, and because particular situation of each organization varies, the Foundation Management Regulation allows each organization to determine the specific division of labor between the director of the board and the executive director.

iii)    democratic collective decision-making process

The purpose of a functional mechanism of internal governance is the prevention of an organization’s tendencies towards individual control. To do so, the current regulation framework confirmed collective decision-making mode to replace and prevent individual decision-making. The board is the decision-making organ of an organization; it is composed of many members of the board. The director of the board is elected by the board members. The board meetings allots each member one vote, and can only be called when meeting a quorum of given ratio;[2] decisions made by board needs to be agreed by more than half of board members.[3] The Foundation Management Regulation also employed principles to avoid conflict of interest, regulating that a member in a situation where his personal interest connected to the interest of the foundation cannot participate in the board’s decision-making on related matters.

iv)    Using Supervisory Board or Supervisor as Mechanisms of Internal Supervision

To effectively check on the power of the board, director of the board, and the executive board, regulations emphasize that organizations must create internal supervisory positions or a supervisory board to prevent abuse of power within an organization. Supervisors of a non-enterprise organization must be chosen from organizers, donors, or employees; those of a foundation are mainly sent by donors or supervisory government organs. The government registration and management agencies can send supervisors depending on the need of their work. These related regulations give supervisors or the supervisory board respective powers of supervision: for example, the supervisor can examine an organization’s financial and accounting documents, can attend board meetings, and raise question or offer advice to the board, etc.

2. Problems Encountered by Chinese Non-Profit Organization Board System in Practice

The Chinese non-profit organization’s board system has served some positive functions in regulating an organization’s management since its promulgation. But just as the new institutionalist economics and new institutionalist analysis of organizations observe, some difference exist between a system’s design and practice. Many organizations, to obtain legality, are forced to submit to the requirements of the system in name and design some formally mechanism as a result; but the actual functioning of the organization actually departs from these formal mechanisms (Meyer & Rowan, 1977; North, 1990). Non-profit organization’s board system has encountered several problems in actual practice, especially in the following areas:

i)        Dual Management System’s Influence of Board Functions

Dual management system is Chinese government’s particular method of managing non-profit organizations, and a major background element in influencing Chinese non-profit organization’s board system in practice. The dual management system refers to the responsibilities taken by both registration and management government agency and supervising government organ in managing non-profit organizations (Wu Zhongzhe, Chen Jinluo, 1996:33). Currently, the registration and management agencies are Ministry of Civil Affairs of the People’s Republic of China and various local organs of civil affairs above the county level, while supervising government organs are government agencies directly guiding and managing non-profit organization’s activities and functions.

From the global perspective, national governments play indispensible roles in supervising non-profit organizations worldwide.  Non-profit organizations have an important characteristic—its public responsibility. Because non-profit organization enjoy tax deductions, or receive public donations, they have greater responsibility towards the general public. Governments are often regarded as the defenders of public interest, and therefore often keep a firmer control over non-profit organizations than over private enterprises.

The case of China is different, though, as the government’s control over non-profit organizations has exceeded the usual range of supervision and excessive governmental intervention in some organizations has undermined the non-governmental characteristic of these NGOs. For one, overly strong influence by the government has interrupted the implementation of the board system for NGOs. Decision-making power within non-profit organizations has been controlled by exterior forces: part of the internal decision-making authority that non-profit organizations used to have has been transferred to the governmental system, which deprived non-profit organizations of their autonomy in making decisions. Although in theory, the board as the central decision-making body, should consist of Director of the Board, Deputy Director of the Board, and Secretary General, all of whom are democratically elected. However, in reality, in many NGOs strongly influenced by the government, Director of the Board, Deputy Director of the Board, and Secretary General are often directly appointed by the supervising agencies or the party agencies in charge. In addition, important decisions within these organizations are made by the government/party agencies, instead of by the board. Supervising government agencies and management agencies also have a final say on the list of candidates for trustees and supervisors. When such important decision-making power is lost, the board system cannot function properly.

For NGOs in China now, therefore, important problems remain unanswered: what role should the government play in internal management of non-profit organizations? What is the boundary between governmental supervision and autonomy of non-profit organizations? What specific position should the government assume in the system? How should government switch from the dual management system to reasonable supervising functions? Proper answers to these questions are a prerequisite for improving the non-profit organization board system in China.

ii)       The structure of the board

Who can become the members of the board? Should members of the board be chosen because of their expertise, or because of the interest groups or individuals that they represent? Should a member of the board be expected to represent and speak for a specific interest group, or to give an expert’s opinion? For these questions, different theories have different opinions.[4]The makeup of board members in Chinese NGOs is especially complicated; this is closely related to the particular administrative system of Chinese NGOs. On the whole, board members are chosen in two ways: they are either directly sent by supervising agencies to oversee the operations, or employed by the NGOs themselves as key figures who could potentially give the NGOs an edge in acquiring important resources—more often than not, they are government officials in such key fields as finance, taxation, capital, and civic administration, or chief patrons to the NGOs (entrepreneurs and individuals). The second type of board members, because of their frequent manipulation of resources, often show characteristics predicted by the resource dependency theory, as they perceive the board as a bridge that connects themselves with exterior interest groups and enables themselves to acquire more resources (Pfeffer & Salancik, 1998). Because of the scarcity of various kinds of resources available to them, Chinese NGOs have to prioritize the concern for acquiring accessibility to scarce resources when they choose board members and turn a blind eye on the scale and efficiency of the board, the expertise of the board members and the diversity of the board members’ origins. From a survey that I conducted, many non-profit organizations in China each have a board with more than 30 or even 50 members, a drastic departure from the world average of 19 members per board for each non-profit organization (National Center for Nonprofit Boards, 2000). A board for a foundation is usually even smaller, with only 11 members on average (Council on Foundations, 2002).

From the perspective of group dynamics, when the scale of the group exceeds 10 members, the group is defined as a large group, in which information sharing and communication both become more difficult (Jones, 2003：326). Chinese non-profit organizations, each with a board of such considerable scale, often run into communication problems among board members, which then translate into deadlocks in board decision-making and negatively affect the efficiency of the board. The 2004 Foundation Management Regulations and the 1998 Non-enterprise Regulation were right in limiting the size of the board to 25 members. In addition, many non-profit organizations neglect the candidates’ qualifications of expertise and skills when choosing board members and fail to include interest groups that are closely linked to the operation of the NGOs but do not directly provide the organizations with key resources—such as the recipient of the services that the NGOs provide and community representatives. These practices, in a way, undermine the functions of the board.

iii)     The board deprived of power under strong personal  control

In China, many non-profit organizations established the board system merely because they were obliged by law and regulation to do so; as a result, the board system in these organizations is only established in constitution, but not in daily operations, and the board is often without any real power. Decision-making power in such organizations still remains in the hands of a few individuals, and their control over the organizations is highly personal. Such individuals—often respected as heroes either because they were the founders of the organization themselves, or because they played eminent roles at turning points of the organization’s history such as significant crises—enjoy high status and power in the organization.

This personal heroism, more often than not, in early developmental stages of Chinese non-profit organizations, yet can potentially undermine long-term development of such organizations when viewed on a longer time-horizon. The core of the board system lies in its effective check on individual power and control on individual behaviors so as to make sure administrators act in the best interest of the relevant parties. Under the administrative pattern in which personal heroism prevails, however, individual power goes without a check, and fate of the organization is dictated by the administrative methods and decision-making accuracy of one individual, and hence the rise and fall of one individual often significantly alters the perspective of future development of the organization itself, leading to inconsistency in organizational development. Hence, this administrative pattern with strong personal heroism characteristics is at odds with such concepts that the board system champions as group decision-making and check-and-balance of power.[5]

iv)     Relations between the board and the executive branch

The relations between the board and the executive branch have been long debated by international academia and practitioners. The foci of the debate are the following: how should responsibilities be divided up between the board and the executive branch? If the board is legally responsible to the organization and serves as the decision-making branch, how can the principal-agent problem between the board and the executive branch be solved (i.e. as the board hires the executive branch to perform on the board’s behalf, yet the executive branch, not the board, possesses all information regarding the operations of the organization, how should the board effectively oversee the actions by the executive branch to ensure they are in the best interest of the organization)?

The analysis above shows that China has been trying to establish an administrative pattern in which the board and the executive branch share power and check on each other: the board, as the decision-making organ, dictates the actions of the executive branch; the executive branch, employed by the board to run daily administrative operations of the organization, is responsible to the board. However, in actual operations, the power-responsibility relations between the board and the executive branch are not yet clear: in many large organizations, the chief of the board, by the official record, is not the head of the executive branch, yet often takes up the de facto role of the latter. The chief of the board then becomes overly powerful: besides his prominent role in the board, he is entitled to make both long-term strategic plans and specific, everyday decisions about the running of the organization; in fact, he makes and executes the policies.

In the above pattern in which the chief of the board takes up the role of the head of the executive branch, the principal-agency problem no longer exists, which makes it easier to synchronize the entire organization. However, this pattern is also seriously flawed. The chief of the board has to busy himself with petty errands involved in daily administrative work, and therefore has insufficient time and energy to think about strategic issues about the organization’s development on the macro-level. The chief of the board, when taking up the de facto role of the head of the executive branch, necessarily drives the actual head of the executive branch into the role of lower-ranking executive personnel. This necessarily makes the role of the CEO much less rewarding, undermines the flexibility and adaptability of the organization, and often drives the organization into the trap of personal control.

v)       Supervisory power of the Supervisory Board

The supervisory board is an important establishment in the internal governance of non-profit organizations. The ultimate goal of having such an establishment is to effectively supervise and check on the power of the board and the executive branch. In actual operation of Chinese non-profit organizations, the effectiveness of such supervising is often in question, which poses the chief challenge to the supervisory board. In general, for the supervisory board to perform its functions properly, several prerequisites have to be met: (1) the supervisors should possess enough information about the organization’s operations to base their judgment upon; (2) the supervisors should harness sufficient specialty, expertise, and skills to perform the supervisory role; (3) the supervisors should have the autonomy in carrying out their supervisory actions independently from the board.

In many organizations, these prerequisites are not met. First of all, important interest groups such as recipients of services, patrons to the organization and representatives of staff are not included in the supervisory board, and hence cannot influence decision-making which has significant bearing on their own interests. Secondly, many supervisors lack expertise and skills in such fields as finance and law and cannot supervise on matters that require such expertise. Thirdly, in many non-profit organizations, the supervisory board is often subject to direct intervention or control by the board of the chief of the board, and hence loses its autonomy. Because of such reasons, the supervisory board system is often paralyzed. As exterior environment does not pose sufficient check on the internal governance of an NGO either, the ineffectiveness of the supervisory board leaves the board with too much power and too little check, fails to reveal problems within the organization in a timely manner, and potentially undermines future development of the organization.

3. Conclusion

The Chinese government and academia started to pay great attention collectively to internal governance of non-profit organizations in the late 1990s. For over a decade, China has been trying to institutionalize a governance pattern centered at the board system. This pattern is based on the division of power between the board and the executive branch: the board, with its central decision-making power, dictates the activities of the executive branch; the executive branch, entrusted by the board, is responsible for daily operations of the organization; the organization relies on its democratic collective decision-making system for internal decision-making and relies on the supervisory board for checking on the internal governance of the organization. This governance pattern has a lot in common with that in practice in developed countries.

Among the three kinds of non-profit organizations—foundation, NGO and social groups—foundation usually has the most well-developed board system. The most significant problems in the operation of the board system are: (1) dual management system directly affects the enforcement of the board system; (2) the prevalence of paralyzed supervisory board and personal control; (3) the power relations between the board and the executive branch is not well-coordinated; and (4) the supervisory board underperforms its supervisory role designated by the constitution.

How to improve and effectively enforce the board system is a key question to the healthy development of Chinese non-profit organizations. To solve the problem, the government needs to clearly define its role, to establish a reasonable boundary between government’s supervision and non-profit organizations’ autonomy, to transform the dual management system to reasonable supervision, and to create more amicable conditions for the effective operation of the board system for non-profit organizations. Non-profit organizations, on the other hand, can also help establish a mature and institutionalized board system by competing against each other in a reasonable scale, seeking higher efficiency, and accumulating relevant administrative experience.

Reference:

Wu Zongze and Chen Jinluo, 1996. Shetuan guanli gongzuo. Beijing: Zhongguo shehui chubanshe.

Gareth, J. Contemporary Management. Li Jianwei, et al., tr. Beijing: Renmin youdian chubanshe.

Cornforth, C., 2003. “Introduction the Changing Context of Governance-emerging Issues and Paradoxes.”In Chris Cornforth, ed. The Governance of Public and Non-profit Organisations. London: Routledge.

Council on Foundations, 2002. Foundation Management Series. Washington, DC.: Council on Foundations.

Meyer, J., and B.Rowan, 1977. “Institutionalized Organizations: Formal Structure as Myth and Ceremony.”American Journal of Sociology. 83: 340—63.

Middleton, M., 1987.“Nonprofit Boards of Directors: Beyond the Governance Function.”In W.Powell, ed. The Nonprofit Sector: A Research Handbook. New Haven: Yale University Press.

National Center for Nonprofit Boards, 2000. The Nonprofit Governance Index. Washington, DC.: National Center for Nonprofit Boards.

North, D. 1990. Institutions, Institutional Change and Economic Performance. Cambridge University Press.

Ostrower, F. and Melissa M. Stone, 2006. “Governance: Research Trends, Gaps, and Future Prospects.”In W.Powell, ed. The Nonprofit Sector: A Research Handbook（2nd Edition）. New Haven: Yale University Press.

Pfeffer, J. and G. Salancik. 1998. The External Control of Organizations: A Resource Dependence Perspective.New York: Haper & Row.

Wood, M., 1992.“Is Governing Board Behavior Cyclical?”Nonprofit Management and Leadership. 3: 139—63.

Zald, Mayer, 1969. “The Power and Functions of Boards and Directors: A Theoretical Synthesis.”American Journal of Sociology. 75: 97—111.

[2] Quorum for foundations and social organizations consist of two-thirds of the board; non-enterprise unit’s quorum consists of one-half of the board.

[3] Social Organization Management Regulation states that each decision must be approved by two-thirds of the board.

[4] Of which stewardship theory and democratic perspective theory are two opposing views. Stewardship theory believes that the board members should have expertise, which is beneficial in guiding the organization towards better performance; hence board members should be selected based on expertise. Democratic perspective theory believes, on the other hand, that board members are representatives of non-experts who serve the interest of their represented constituents.

[5] Wood (1992) observes that when the board of a nonprofit organization is consisted of outstanding individuals, it is easy to create a structural tension: individualist orientation of outstanding individuals and implied collective orientation of board system have different outlooks.

 (Publication with anthorization from the author. All rights reserved to the author.)

According to China’s Corporate Social Responsibility Report 2009, a set of comprehensive assessment system of the CSR development status and information disclosure system has been built to research on the indexes of China’s top 100 corporations by Research Center for Corporation Social Responsibility at Chinese Academy of Social Sciences. The assessment system is on the basis of four areas, the responsibility of management, marketing responsibility, social responsibility and environmental responsibility. The followings are their findings:

First and foremost, the overall level of China’s CSR is still in a low stage. Approximately one fifth of China’s top 100 corporations are in the start stage of CSR without sound idea and system. Roughly 40% of China’s top 100 corporations had little awareness of CSR as bystanders.

Secondly, in terms of the four-dimension model, the responsibility of management, market performance, social performance and environmental responsibility, the market responsibility scores the highest, due to corporation’s profit-driven model. Environmental responsibility scores the worst. Moreover, the responsibility of management is also very low. The huge gap between the communication effects of CSR of international corporations and some China central corporations, for example, actually suggests the gap of communication strategies, a significant part of management.

Third, natures of China’s corporations have huge impacts on CSR. China central state-owned corporations perform the best, followed by state-owned financial corporations, then private ones. China central state-owned corporations even did better than many foreign-invested corporations in China.

Fourthly, the bigger the scale of a corporation, the greater CSR index. The State Grid Corporation of China (SGCC), China National Petroleum Corporation (CNPC), China National Petroleum and Chemical Corporation (CNOPC) rank the first three as CSR leaders. Furthermore, only two industries, power grid and electricity, are in the advanced stage, which might due to their long-term attention to the environment. Additionally, the textile industry has done very well in CSR beyond expectation, nevertheless, only Shandong Wei River Bridge Group is qualified in the top 100 CSR list.

Chen Jiagui, director of Economics department at CAS, pointed out that China’s CSR had been to a new era. The whole society, including the government, public, media, staff, consumers, non- governmental groups, community, investors and research institutions so forth, has been involved in the development of CSR. These different social sectors concern CSR from various prospective, which promotes China’s CSR to be a social movement. Especially in 2008, China has encountered several severe disasters and emergency events, such as flood in the north part, Wenchuan earthquake, Sanlu milk powder incident, as well as the financial crisis. Hence, CSR is even critical to China.

Furthermore, China’s CSR movement is accelerating. China’s corporations have shown increasing awareness of CSR and the focus of CSR has stepped from scholars’ discussions to corporations’ practice. As of September this year, over 500 corporations have announced the “Corporate Social Responsibility Report”, and many of them have established CSR departments.

In addition, some corporations have been positively exploring ways to make CSR as the business strategy and daily management to establish a comprehensive CSR management system.

(Compiled by Xin Li of Boston University, based on Chinese article http://news.hexun.com/2009-10-18/121379000.html. Edited by Wanxin Cheng of Harvard).

 By ANDREW JACOBS, New York Times, Published: December 2, 2009

 (Abridged from artilce entitled “H.I.V. Tests Turn Blood Into Cash in China“)

 …Although not trumpeted in its promotional materials, the foundations (Gates Foundation) other goal is more far-reaching: to empower the small but growing crop of nongovernmental groups that stand a better chance of addressing the AIDS epidemic than Chinas lumbering bureaucracy does.

To carry out its mission, the foundation has linked up with the Ministry of Health, which funnels $20 million to about 200 nonprofits, many of which exist in a bureaucratic gray zone and are viewed suspiciously by Chinas authoritarian government.

The distrust flows both ways.

By compelling the government to work with privately run organizations, the foundation is hoping to foster a lasting relationship between them and over time contribute to creating more profound changes in Chinese society.

Dr. Ray Yip, who runs the foundations China effort, acknowledges problems with the program but likens them to growing pains.

We are experiencing some of the hiccups of a less-than-perfect arrangement, but we expected that, he said. If you look historically at arranged marriages, some of them last.

Dr. Yip, who is the former director of the Centers for Disease Control and Prevention office in China, embraces the Gates Foundations philosophy of bold initiatives and risk taking traits often lacking in government-run global health behemoths. He said that if some of the money ended up in the pockets of corrupt officials running fake organizations, it was the cost of doing business in China, where government malfeasance is endemic.

We dont expect every grant in every city to be spectacularly successful, he said. Thats like buying 30 stocks and expecting them all to go up.

Sun Jiangping, deputy director of Chinas National Center for AIDS/STD Control and Prevention, said the program had already had a positive impact on government attitudes toward private AIDS organizations, whose numbers have increased to more than 400 from just a few dozen when the initiative started. He said his agency was working to weed out illegitimate groups.

Compared with the rates in other developing nations, the prevalence of H.I.V. in China is relatively low, with fewer than a million people thought to be infected, according to government figures released last week.

But public health experts are alarmed by an infection rate among gay men that has been doubling annually. By the end of 2008, nearly 5 percent of gay men in Chinas largest cities were thought to be H.I.V.

positive; in some cities, that figure exceeds 10 percent. Health officials say gay men now account for a third of all new transmissions, up from 12 percent in 2007.

Advocates for people with AIDS say the government has been ham-handed in its efforts to prevent the spread of H.I.V., in some cases banning condoms in bars or hounding activists who become too vocal.

In recent years, organizations have sprung up to help those with AIDS who are refused care by hospitals. Many, like Deep Blue, a group that operates from an apartment on the outskirts of Tianjin, are largely financed by grants from abroad.

Deep Blues two counselors meet with the 50 people who come each week for an H.I.V. test.

If you have any questions, contact the volunteers with the red armbands, says one poster. You can stop the testing at any time,

says another. About 65 percent of those who test positive come back for counseling, said the groups director, Yang Jie.

Tong Ge, a veteran AIDS activist who has advised the Gates Foundation on its China program, said he was pleased with the foundations work, though he said he wished there was more of an emphasis on training government workers and less money spent on testing. His biggest regret, he said, is that the foundation chose to funnel the money through the government.

So much of the Gates money has ended up nurturing corruption in a place it didnt exist before, he said. Then, after a pause, he added:

But the truth is we cant blame them. The real problem is with China.

 (Orginal article available at http://www.nytimes.com/2009/12/03/health/policy/03china.html?_r=2)

Nongovernmental organizations (NGOs) committed to fighting HIV/AIDS in China will soon get legal status to operate, as the government is considering legally recognizing these organizations, experts close to the situation said.

These efforts will help the fight against AIDS, said Shen Jie, secretary general of the government-backed Chinese Association of AIDS and STD Prevention and Control, on the eve of World AIDS Day.

“If realized, that will not only facilitate the work of these organizations but also give a long-term boost to China’s anti-HIV/AIDS efforts,” Shen said.

China has 740,000 people living with HIV, with another 50 million facing high risk, she told China Daily yesterday.

Currently, more than 400 NGOs are working in this field nationwide. The majority operates unregistered, which makes fund-raising and operations more difficult, experts say.

“But they actually play an important role in fighting AIDS and have an advantage over the government in reaching out to vulnerable groups like sex workers and men having sex with men,” said Michel Sidibe, executive director of UNAIDS.

Sun Weilin, director of the Social Organization Registration Bureau of the Ministry of Civil Affairs, said the ministry is revising the current law on social organization registration, issued in the late 1990s, to adapt to the changing landscape and the new development of China’s civic groups and NGOs. He conceded the current law is outdated.

With legal status, these organizations would have a better work environment and the ability to develop in a sustainable way, she said.

Administrative expenses would also be saved by the health departments and other organizations like the Centers for Disease Control, she noted.

Currently, NGOs have to be a subsidiary of legal groups like the CDC to have a bank account and operate.

“Working as a subsidiary, we NGOs feel inferior and always at the beck and call of others,” said Bailaoshi, who heads an NGO based in Beijing supporting HIV/AIDS sufferers.

However, to better work with the government in the fight against AIDS, NGOs need to constantly enhance their working capacity, Shen said.

The government’s work with the NGOs would also include constant financial support and policies that give benefits to NGOs and training, she said.

Yesterday, President Hu Jintao visited anti-HIV/AIDS volunteers in Beijing, one day before the annual World AIDS Day.

President Hu said China is still facing a tough task in HIV/AIDS prevention and control and called for constant efforts against that.

The last official estimation puts China’s HIV positive population at 740,000. But another 50 million are at high risk from the disease.

Li Xinzhu contributed to the story

(China Daily 12/01/2009 page5)

Many look to introducing some innovative funding strategies having recently immerged in the West  into the nonprofit sector in China. These models include micro-finance, social investment, or the earned income model.  Are these models applicable to China’s situation?  What factors are needed for the new models to work in the emerging social market of China?  What can be the way out for the nonprofits in China to get sustainable source of funding?  We will look at these questions at the lunch dialogue with Professor Michael Chu of Harvard Business School, and Grace Chiang, Founder and Managing Director of Social Venture Groups in Shanghai and Hong Kong on Dec 2nd at the Hauser Center.

Grace will speak from her personal experience of starting up the Social Venture Group, and what she and her team has learned in trying to set up a model of ”innovative philanthropy in China”, about the readiness of the field in China for innovative funding solutions, about current situation of micro-finance in China as shown by some of their clients, and about the effort to sustain their own organization through the earned income model.

Professor Chu will first brief the audience the latest development of innovative funding models for social purpose initiatives, and then comment on Grace and the Social Venture Group’s case, throwing insights on why things are working or not working well in China, and provide advices on potential way out in China for application of those models.

Event Details:

Social Enterprises & Philanthropic Investment in China:

How to Break New Ground in Emerging Markets

A  Lunch Dialogue with

Michael Chu
Senior Lecturer,  Harvard Business School Social Enterprise Initiative; Managing Director, IGNIA Fund in Mexico dedicated to investing in commercial enterprises serving low-income populations in developing countries

Grace Chiang
Co-Founder and Managing Director, Social Venture Group in Shanghai and Hong Kong

Moderator: Xing Hu

Domain Manager, Nonprofits in China Domain of Practice, Hauser Center of Nonprofit Organizations at Harvard

December 2, 2009
1:30–3:00pm

Lunch Provided

Nye B & C, Taubman Building 5^th Floor , Harvard Knnedy School

Co-organized with Harvard Initiative for Nonprofits and Social Entrepreneurship in China [HINSEC], and HKS China Caucus

Li informed the audience that he first came across AIDS-related work as an undergraduate in Beijing Normal University. While volunteering for the Red Cross Society of China, Li came across a child carrying AIDS from Hunan—Song Pengfei, the first publicly identified AIDS patient in China. Visiting frequently and befriending Song from 1998 to 2000, Li realized that AIDS orphans are no different from other children and deserve attention from society. His mind was made up upon a personal visit to a Henan AIDS village in 2000. Thus, in 2003, Li took a path unlike most other graduate students of astrophysics in the Chinese Academy of Science, and became an AIDS humanitarian activist urging for understanding and societal care for AIDS orphans.

In October 2003 Li founded a school for AIDS orphans in Shangqiu, Henan. Taking 20 AIDS orphans from surrounding areas, Li attempted to provide a home for these children left behind by a society where orphanages were unwilling to accept children carrying HIV. The establishment of the school was difficult: it required a license from the state. The best way to do so, according to Li, is to operate the school together with the local government. But this would have cost RMB 1.7 million—a figure almost impossible for self-started humanitarian activist like Li Dan. Thus, the operation functioned without license for a number of months, and was ultimately shut down by the government in 2004.

Li Dan did not give up his endeavors after this setback.  Attracting the attention of media both within China and abroad, Li made pubic many of the needs for AIDS orphans in Henan and criticized the government’s lack of action. In addition to his continued attempt for humanitarian work in Henan, Li made documentaries to let China’s situation in AIDS villages and orphans become known both domestically and internationally to become a subject of interest to Phoenix TV and Human Rights Watch alike. He was eventually awarded the 2006 Reebok Human Rights Award. Unfortunately, winning international acclaims could not help Li Dan’s work in Henan. Meeting numerous resistances from local government and villagers, Li was forced to abandon his original project to operate in Henan. In 2007 Li attempted to organize a conference in Guizhou on AIDS, inviting experts from both within China and abroad. However, the sensitive nature of its contents forced its cancellation, while Li Dan found himself temporarily detained by police.

Realizing the enormous difficulties in directly operating in an area highly sensitive to the government, Li Dan revised his strategies in 2007. He started to focus on human rights awareness, promoting knowledge among college students and those most susceptible to AIDS in urban settings. He has focused on this new approach until now. Li believes that once more people know about the problems, the government can no longer detain more from knowledge and prevent actions to solve these issues.

Li Dan’s case is an interesting grassroots attempt of humanitarian activism important to those interpreted in the development of non-profits in China. Like many other grassroots NGOs, Li Dan’s organization was unable to successfully register as a government-recognized non-profit organization under the Ministry of Civil Affairs. Instead, he was only able to register as a corporate entity, which caused many problems: it provided the organization no tax-exemption status, and no protection of law for any non-profit activities. The organization could have been shut down anytime by the government, according to Li Dan. Additionally, many potential donors were reluctant to fund a non-profit organization registered as a corporate entity.

Li Dan acknowledged that he did not think much about sustainability when he first set up his organization. He barely paid his staff in the organization’s first years of operation: it had no stable source of funding and stayed in debt until the prize from the Reebok award paid it off. Additionally, because the organization was then funded by foreign foundations, it met many difficulties in continuing its operations in China.

Li Dan’s case deserves much sympathy. Meanwhile, some audience questioned why some other organizations aiding AIDS orphans have the government’s support.  Some asked if he made any efforts in winning the government’s support.  Li Dan said since their organization was on the “black list” of the government, he did not think it was useful to try to win support from the official source. It is therefore one worthy of reconsideration: should a Chinese grassroots non-profit organization set itself as a sharp critic of government policies when it realizes that government support in many areas are inadequate? The gesture, though noble in nature, may be a sign too idealistic to fulfill the organization’s intended responsibilities in China. Li Dan’s emergence as an activist may have, ironically, hindered his very own ability to assist more AIDS orphans in need.

(By Hong of Harvard University)