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)

Jet Li:

I am a survivor of the Indonesian Tsunami. My family was on vacation in the Maldives the day when Tsunami came. The Maldives are composed of islands that are less than 1.8 meters high. During the 30 seconds of the Tsunami, sea water flooded the whole island we stayed. My little daughter was washed away; I was holding the hand of my elder daughter standing in the water with water above my ears. I felt the despair of death… Afterwards, I thought with introspection: in face of disaster, money and names are meaningless; lives are all equal. What should we – the lives that survived, do to live a meaningful life?

“Public Charity” (公业)

With the idea to set up a charity foundation, I visited and researched the NGOs and charity operations in Taiwan, India, Thailand and America. Then a special idea came to me: I wanted to set up a sustainable foundation. Why?

Perhaps you’ve noticed, the most popular response in the world to a disaster is a business/economic model, or a fashionable model. Mainstream media and newspapers start to report, people express their emotion and love in a very short time intensively. Emotions explode with intensity and foundations start to raise funds for relief. But after two weeks’, people are become more ignorant to issues relating to the disaster. In two months, people are no longer talking about the disaster. For example, we don’t know what happened to the people suffered in the snow disaster in early 2008. We don’t know if those people really get any help today.

My model is different–it is a kind of “Public Charity.” My ideal foundation is a fundamental charity facility much like the water and electricity utilities to a city. It can support a relief of a disaster for two or three years. The “public charity” is not driven by the influence of trends, but is driven by a custom of giving.

Eggs without Chicken 没有鸡也生蛋

I didn’t find the right model even after research into the current foundation models in the world. I would like to talk about my preliminary impression on global foundations. I grouped them into two types. One is “big foundation.” It uses the interest (investment income) of the fund’s endowment to provide for annual program funding. These foundations are more popular in US and usually have over hundred years’ history. They are like chicken that can lay eggs each year. The other type is regional foundations, such as Tzu Chi Foundation (慈济) from Taiwan and Christian foundations in the world. People’s religion believes are the basis of these foundations.

But both models are not going to work in China. I don’t want to complain about the regulations. Maybe the Chinese government is also considering if people will accept public foundations. I am willing to think in the shoes of the government. Anyway, the reality is: there are very few public foundations. And according to regulation, 70% of the funds must be used for relief annually, only 10% is allowed to use for profitable investment; otherwise, the legal person (法人) must pay back the loss himself/herself. As a result, the rate of growth of foundations in China is highly constrained. The regional foundations have very limited coverage in China.

My question is: can I have eggs without chicken?

One Yuan starts to spread the disease of LOVE 壹元钱启动爱的传染病

I have found this model: all from ONE.

One, is a mysterious number in China. “The Tao begot one. One begot two.”(道生一，一生二)

One Foundation is oriental.

One Foundation, One Family. The Earth is a family, the Earth is one

One foundation is beyond religion, politics, culture and language. If an alien visited the Earth, he/she would not see a specific person, but Humanity as One. So the Earth is one family. We are one, not two. We are global.

One means “from zero to one”. If “zero” is doing nothing, “one” is doing something. It is a fundamental difference. So, we are advocating each person to donate one yuan every month:

One Person + One Yuan/Month = One Family

Assume that we have 500 million cell phone users among 1.3 billion population in China. If everyone gives away 1 yuan per month, we will have 6 billion a year. If each Chinese gives away one yuan a month, we will have 15 billion a year. One yuan is not an economic liability to anyone, but it reflects the liability as a citizen to the sociality.

We don’t need money from big corporations. For example, when I visited Microsoft, they felt very relieved when I told them, “we don’t need your money.” But then I would ask them to give away 1 yuan from each employee’s monthly salary, or donate 1 percentage, or .1 percentage of the profit of selling one product.

That’s right; we are starting a movement to spread the disease of love, as a Harvard economic Professor said.

This is not an easy step in China. We want to change “do a good deed a day”(日行一善) in Chinese traditional culture into “do a good deed a month”. Of course, we won’t disagree if you want to donate 1,000 Yuan at once, but we don’t encourage it. We hope you can do it every month.

Why 1 Yuan? It is the easiest step from psychological research. Once a donor makes the first movement, he/she will be rewarded psychologically. Thus, it can cultivate our own Chinese charity culture and our citizen consciousness. We don’t want enterprises to donate too much cash each time there is a disaster. It is not sustainable.

Root in China, Help the World 立足中国, 救助全球

One foundation’s model is 1 person + 1 dollar/yuan + 1 month = 1 big family. We have invested 2 million in two years to research the right model.

During the research, we found four problems:

1. There are no NGOs with high credibility in China.
2. There is not a very transparent system in operation.
3. There is no a clear and long term vision for most NGOs.
4. There is too much hassle for a Chinese to donate.

Every step in our operation is designed to address the above problems. We have Deloitte as our global auditor. We enable donation via cellphone. We set our goal to help the global one family thus to build our credibility in public.

You are the best judge on this model. According to our research: the potential donation capability is 34 RMB/year for high school graduates, 400 RMB/year for college graduates. In the past one year, we accepted donations from 710,000 individuals of total amount 47.6 million RMB, i.e. average 65 RMB/person.

We have partners around the world. BBDO, Ogilvy, Disney…are all our partners. Our consulting firm suggested that it is acceptable for business to donate 0.1 percentages of profits psychologically. Since One Foundation was founded on April 17, 2007,there were five major disaster in the world, and we have helped them all. Root in China but help the globe, One Foundation is the only one.

Our own Rules

Maybe some people don’t understand Chinese charity system, but One Foundation is not coming (to you) to complain. We never suggest anything, never complain or criticize. We only do what need to be done. We work under the current system, that’s why we found Jet Li One Foundation Project under the name of China Red Cross. Any donation to One Foundation via Red Cross are managed by One Foundation, Red Cross can’t use a penny. But we have to get Red Cross’s consents and approval whenever we want to use the fund. It is a two-way surveillance which is designed under China’s current system. We want to cooperate with Red Cross and maintain a platform to work together.

We have 15 full time workers (13 before the earth quake). We raised 63 million RMB from over 700,000 individual and get links from over 100,000 web pages to our website. A dozen major portals, such as Tecent.com, Taobao.com and MSN Live are our partners.

In the meanwhile, One Foundation has provided a platform for 70+ grassroots NGOs to work together. We leverage our legal identity (under China Red Cross) in China to aggregate grassroots strength. Therefore, One Foundation is organized under western style rules – hard ware, but operated in Chinese style management arts – software.

What can a grassroots NGO do?

My biggest learning in Sichuan earthquake rescue on what ONE Foundation or other grassroots NGOs can do is: Helping the government in the blind spots. Governmental relief is not always detailed oriented. For example, the government might only responsible for shipping the relief materials to towns with a certain population, but not to remote smaller villages. So we organized people to carriage food and water to the remote villages. We need helps from local grassroots NGOs to accomplish this mission and they made it. I was moved by them.

Grassroots NGOs have their unique features: independent and allying. A grassroots NGO can’t be as big as giant government organization or cooperation, but need to be flexible and located wide-spread. They should not be merged. Once merged, they are no different from governmental organizations. One foundation’s role is an assistant to the government, who makes public’s voice heard as a coordinator, but not a trouble maker.

Problem in Relief 

As China has special regions for economy development (such as Shenzhen), there should be some “special regions” for commonweal. One Foundation wants to be one of these special regions. During the Sichuan earthquake relief, One foundations Project’s relationship with China Red Cross is a special case. We are under the China Red Cross HQ directly. The leaders in Red Cross are very wise and open. They accepted some of our suggestions very quickly. A privated owned foundation changed state-owned  Red Cross. But  regional Red Cross chapters are usually under double supervisions from: local government and China Red Cross HQ, which will create conflicts. For instance, China Red Cross HQ wanted to ship a batch of important relief materials to Shifang(什邡), but the province government wanted to ship them to Jiangyou (江油). At the end, local Red Cross had to follow the lead of local government. Another problem is not enough man power. For example, the traffic to our website and Red Cross website  increased 10 times on the first day after earthquake. We have the support to solve the server overload problem very quickly. But Red Cross doesn’t have the right resource to fix it,  rumor saying the site was hacked very soon.

So One Foundation never rants. If complaining helps, we will do it. Have you ever seen a situation where rants can change the system and regulation?  Rants about China have never stopped, but there are still plenty of enterprises thriving in such a problematic environment. Why some people can achieve their goals in such hard conditions?

A Global Family

The total amount of charity fund raised in China is RMB 2 billion in 2002, 10 billion in 2006 and 30 billion in 2008. But it only accounts for 0.075% of our GDP. In US, the number is several hundred billion USD, 2.75% of US GDP. Differ from other NGOs in China; we want to build a healthy recycle of fund raising and relief, we committ to a long term charity, a sustainable and responsible model.

Currently, natural disaster relief is still our number one focus. We also focus environmental protection, medical treatment, education, poverty problems. We will hold an annual global charity forum in BoAo Asia Forun forwww.boaoforum.org/. It will be like a temple fair, or a trade show, or a speed date. All we want to do is allow NGOs from the world to share their visions, and let Politian’s, entrepreneurs, managers and NGOs to meet up.

One foundation, one family. This is our vision. Not just what we say, but what we do.

 (END)

(For original Chinese interview see: http://www.1bao.org/?p=530 This English translation is adopted fromhttp://cnreviews.com/life/charity-donations/jet_li_one_foundation_chinese_ngo_spreading_the_disease_of_love_20080611.html)

Self-Discipline Declaration of China Private Foundations

（July 3rd, 2009. Beijing）

Under the direction of China Social Organizations Management Bureau of the Ministry of Civil Affairs,  China Social Organization Promoting Association, Narada Foundation, China Social Entrepreneur Foundation, Peking University Education Foundation, Sun Yefang Foundation, Beijing Vantone Foundation, Beijing Western Sunshine Rural Development Foundation co-organized the first Forum of China Private  Foundation on September 1st, 2008.

July 2-3,2009, with the participation of more than 110 domestic foundations，the 2009 annual conference of ” China Private Foundation Forum ” was held in Beijing. This meeting with “The Growing China Private Foundation” as its theme has discussed the issues on “Ways to Giving”, “Ways to Management” and “Ways to Conduct Self-discipline”, which fully demonstrated the great development China private foundation has achieved ever since “Foundation Management Ordinance” has been officially implemented on June 1st, 2004, especially after we involved in 5.12 earthquake relief work. In this annual meeting, we have shared work experience with each other, and also had a wide range of dialogue with government departments, academic institutions, and the media as well.

During the meeting, the forum organizing committee held a “China Private Foundation Leaders Roundtables”. The leaders of private foundation agreed that the conditions are favorable enough for us to do a good job of internal governance, professional management, and by means of its capital, we could contribute a lot in optimizing the ecological environment for social charity and then guide and promote the social charity to healthy, standardized and sustainable development.

To this end, forum organizing committee issued Self-discipline Declaration of China Private Foundation in accordance with “The Outline of The Eleventh Five-Year Plan for National Economic and Social Development of People’s Republic of China” and “Decisions of CPC Central Committee on major issues including building a harmonious socialist society ” ：

First, private foundation shall comply with the “Foundation Management Ordinance” and the provisions of relevant state laws, and consciously regulate the organization and activities of the Foundation, maintain the legitimate rights and interests of donors and beneficiaries, play an exemplary role in guiding and promoting the social forces to participate in public welfare.

Second, private foundation take serving the public interest as its mission and objectives, make strategic planning and conduct work in accordance with its missions and goals.

Third, the personal interests of private foundation council and execution team members should not be a potential conflict of the interest of foundation. When the personal interest of the foundation council members or other members is associated with the interest of foundation, they shall not participate in matters relating to the decision-making; foundation council, supervisors and their close relatives may not trade in the Foundation where they work with. Transactions and related business should be done in conformity with the best interests of the foundation.

Fourth, private foundation charter should prescribe that the foundation council is the decision-making bodies, and should explicitly stated the establishment of the Council , the appointment and removal of members, their responsibilities, and operational procedures. Members of the Council should ensure the normal and effective operation of foundation and the operation is in accordance with the quorum.

Foundation Council should have the power to decide the appointment and removal of the executive team members, and should make periodic assessment on the performance of team leaders to ensure that the strategic planning is conducted on the basis of the mission of the Foundation.

Private foundation council should audit foundation’s annual budget and final accounts and decide whether to pass them or not.

Fifth, financing of fund sources and ways of financing should be consistent with the private foundation’s missions and values. Relevant information and data provided by financing activities should be authentic and reliable. Private foundation will not raise funds publicly from non-specific objects. Financing should respect the legitimate interests of donors, including donor wishes, privacy and the right to know.

Private foundation should use funds in accordance with the wishes of the donor, special fund for special use. The use of contributions should be recorded, and foundation should regularly inform donors about that, and provide donation receipts to donors.

Sixth，the use of the funds in private foundation should be in line with the foundation’ missions and goals, foundation should carry out the work according to the annual budget adopted by the council.

Private foundation should implement the State Accounting System, carry out accounting job legally, establish a sound system of internal accounting controls and conduct internal audit in order to improve financial management within the organization.

The financial sector should provide a financial statement which can clearly reflected the financial information in every work.

Private foundation should accept the audit which is done by the independent audit institutions. The selection criteria of an audit institution should be formulated by the Council. No qualified opinion in audit reports should be involved in matters of principle.

Every year, private foundation should announce the annual financial accounting report, accept monitoring and questioning from the public.

Seventh, the project design and feasibility studies of private foundation should comply with the foundation’s missions and objectives, and should have a complete project program (or project proposal), which will point out the objective of the project, the audiences, plans, outputs and budgets. Private foundation should have open and complete procedures in funding a project.

Private foundation should have self-monitoring and evaluation on its projects. Project evaluation should be based on the views of beneficiary groups, and also reflect comments and suggestions of other stakeholders.

In accordance with the needs of the project，Private foundation could determine whether to invite external assessment, or third-party assessment. Project evaluation and monitoring process should be open, transparent and fair.

Eighth, Private foundation should establish standardized personnel and human resources management system, in order to attract, manage, nurture and inspire talents, so that they can provide high-quality and efficient services. Employment should be conducted in the principles that are open, equitable and without conflict of interest.

Private foundation should sign a standardized contract with their employees. At the same time, the Foundation should have an open, realistic assessment on staff performance and incentive mechanisms.

Foundation should carry out the recruitment and management of volunteers on the basis of mutual respect and mutual benefit, and should have the foundation’s missions and values accurately and clearly understood by volunteers. Foundation should let volunteers be well aware of their work, skill requirements, time investment, working environment (including hardware and software environment), as well as the possible risks involved, and clearly show that the voluntary nature of this work as well as the possible subsidies.

Ninth, Private foundation should establish a good partnership with other philanthropic organizations, especially with those who share common areas of concern with them.

Private foundation respect and uphold the reputation, intellectual property rights and trademark rights of peers. The logos, trademarks and achievements protected by IPR from other philanthropic organizations should not be used without permission.

Tenth, Private foundation should disclose authentic information of the foundation to the public in an appropriate way, which should include: mission, services; the council membership and their background; financial information, including complete audited annual financial report and financial information that is promised to be displayed to the public ; project information, in addition to the respect for the wishes of donors and the protection of intellectual property right, projects information (including project evaluation report) should be shown in an open and transparent way, and supervised by the public and the media.

Eleventh, Private foundation is willing to be supervised and managed by the Registration and Management Authorities and the Business Departments in charge of Supervision and Management, and accept the supervision, management and annual inspection.

Supplementary Provisions:

This declaration rests on the achievements of the “Self-discipline Guidelines of  China’s Non-profit Organizations” , co-developed by China Foundation For Poverty Alleviation, China Youth Development Foundation, Amity Foundation and China NPO Network.

(Translation at the courtesy of the Organizing Committee of China’s Private Foundation Forum. For original Chinese version, see http://www.chinadevelopmentbrief.org.cn/newsview.php?id=773)

At the Forum, leaders from China’s Private Foundations will gather for the first time, to review the achievement of China’s private foundations since China’s promulgation of Regulation of Foundations in 2004, share experiences, and have conversations with the governmental agencies, academia, and the media.

The agenda items of the forum include:

1. Keynote speeches
2. Unveiling 2008 Development Report of China’s Private Foundations
3. Publishing the China Private Foundation Self-Discipline Vow
4. An round table for leaders of private foundations
5. An exhibition of the philanthropic activities of China’s private foundations
6. An fair of philanthropic projects and grants

For more details see (in Chinese) http://www.cpff.org.cn/Default.html.