CSR and Government UNIT 4 CORPORATE FOUNDATIONS Programmes Structure 4.1 Introduction 4.2 What is Corporate Foundation 4.3 Role of Corporate Foundations in Corporate Philanthropy 4.4 Types of Non Profit Organization 4.5 Establishing a Trust 4.6 Establishing a Society 4.7 Establishing Section 8 Companies 4.8 Success Stories of Corporate Foundations in CSR 4.9 Let Us Sum Up 4.10 Keywords 4.11 Bibliography and Selected Readings 4.12 Check Your Progress – Possible Answers 4.1 INTRODUCTION India has the world’s richest tradition of corporate social responsibility. Though the term CSR is comparatively new, the concept itself dates back to over a hundred years. CSR in India has evolved through different phases, like community engagement, socially responsible production and socially responsible employee relations. One of the most significant reasons for a business to get involved in corporate philanthropy is their own survival. The Council on Foundations has pointed out that without healthy communities, healthy companies simply cannot exist. Nowadays business organizations have put corporate giving and CSR at top priority because it helps the organization to connect with community. Corporate foundations are a good approach to organize and manage philanthropic activities for business giants who participate actively in such activities. The role of foundations in corporate philanthropy is constantly evolving. A corporate foundation increases the visibility of a corporate brand by creating its distinct image in the mind of a community. Foundations have two primary benefits. They can improve the local community through charitable programmes or corporate giving to nonprofits, and they can also improve the company’s financial results. All companies are interested in increasing profits. Forming a corporate charity can be a great way to improve the bottom line by generating goodwill in the community and benefiting from the positive marketing that can come from it. 1 After reading this unit you will be able to: Differentiate between trusts, societies and Section 8 companies Explain the role of corporate foundations in CSR Discuss about the establishment of a trust Discuss the establishment of a society Discuss the requirements of establishing a Section 8 Company 53 Stakeholders’ Engagement 4.2 WHAT IS CORPORATE FOUNDATION? “We have been doing CSR since the 80s, but when the mandate came we decided to set up a foundation because it helps bring in better corporate governance as it requires one to set up a separate board dedicated to this entity,” Sanjutha Sharma, CSR head of the SBI Foundation. Opening Cases AKSHAYA PATRA FOUNDATION The Akshaya Patra Foundation has implemented the Mid-Day Meal Scheme in the government schools and government-aided school to satisfy appetite of the students. In the same direction, it also focuses upon the food nutrition and supports the poor children in getting education. Since 2000, Akshaya Patra has been putting all its efforts towards providing fresh and nutritious meals to children on every single school day. For this purpose it is taking help of latest technology to have just-in-time approach. It has partnership with the Central Government and various State Governments, along with the persistent support from corporate, individual donors, and well- wishers. Today, Akshaya Patra is the world’s largest (not-for-profit run) Mid-Day Meal Programme serving wholesome food every school day to over 1.8 million children from 16,856 schools across 12 states and 2 Union territories of India. Initially the figure was just 1,500 children in 5 schools in 2000. (For more details visit https://www.akshayapatra.org/) AXIS BANK FOUNDATION Axis Bank Foundation (ABF), a registered trust was formed in 2006 to contribute to society much more than just providing trustworthy and excellent bank services. ABFs initial programmes focused on education and highway trauma care. Over the years, the Foundation has evolved its approach to meet the contemporary needs of society and aligned all its activities under a unified programme aimed at creating sustainable livelihoods. Under this, ABF creates opportunities for small, marginal farmers and landless to generate incomes sources from agri and agri allied activities, and natural resource management. ABF also emphasizes on developing vocational skills for disabled and unemployed youth of the country. ABF has partnership with several not-for-profit organizations who also think in the same way to co- create need based programmes. (For more details visit: http://www. axisbankfoundation.org/) Corporate foundations in India are not a new phenomenon. The wealthy of the pre independence era, prompted by the traditions of their community or encouraged by the Gandhian principle of Trusteeship, were generous in giving back to society. Their humanitarian contributions were not limited to donating to the poor; some 54 goodhearted persons were also involved in setting up some of the most famous institutions in the country – for example: Jagannath Shankarshet (1803–65), Corporate Foundations Jamsetji Jeejeebhoy, or ‘J J’ (1783–1859), Sir Jamsetji Tata (1839 -1904) and G D Birla (1894 – 1983) have contributed towards setting up institutions such as Elphinstone College, JJ School of Art and Mahim Causeway, Indian Institute of Science and Birla Institute of Technology respectively. Over the years, foundations established by companies in India have assumed various forms in terms of their legal status, focus, funding, operations and activities. But the stated focus remains the same: social development, and empowerment of the poor and disadvantaged, in many cases, in the areas where the companies operate. Several companies have their foundations as the social arm of the company to undertake their Corporate Social Responsibility (CSR) activities and programmes.2 Corporate Foundation is a charitable foundation which serves as a channel for distribution of a firm’s profits into non-profit activities.3 A corporate foundation is a private foundation that gets its funds from a company or corporation. It is independently created for the purpose of making grants. Corporate foundations: frequently assume responsibility for the company’s philanthropic giving typically start with a single gift endowment that the company can add to as it wishes are often governed by company owners or key executives are subject to the same tax regulations as private foundations. Corporate foundations are distinct from “corporate giving programmes” that are administered within a corporation. Corporate giving programmes make grants for limited purposes closely associated with the interests of the company.4 The term “corporate foundation” is used to refer to either a private foundation controlled by a corporation, or a public charity associated with a corporation. Most corporate foundations are of the private foundation type. This is because they are created by a single corporation, funded by that corporation’s money, and controlled by that corporation’s employees or directors. 5 Corporate foundations “are philanthropic organizations that are created and financially supported by a corporation. The foundation is created as a separate legal entity from the corporation, but with close ties to the corporation” (Council of Foundation, n.d.).6 A Company Foundation is a legally registered not-for-profit organization/ society/ company/ trust established and promoted by the company/business for implementing its CSR commitments, and can be said to fulfill the following criteria7: 1) The majority of its funding is from the Company 2) It is a foundation based in India (Head office in India) 3) The foundation’s governance body comprises company staff and management 4) The website and annual report of the company mentions the foundation as the primary vehicle through which it undertakes its CSR activities. — Prakruthi, 2015 55 Stakeholders’ Engagement A foundation is a non governmental entity that is established as a nonprofit corporation or a charitable trust, with the principal purpose of making grants to unrelated organizations, institutions, or individuals for scientific, educational, cultural, religious, or other charitable purposes. This broad definition encompasses two foundation types: private foundations and grant making public charities. 8 A private foundation derives its money from a family, an individual, or a corporation. An example of a private foundation is the Ford Foundation. Private foundations must meet a “payout requirement,” meaning they have to give away a certain amount of their assets every year. 8 In contrast, a grant making public charity (sometimes referred to as a public foundation) derives its support from diverse sources, which could include foundations, individuals, and government agencies8. An example of a grant making public charity is the Akshaya Patra Foundation in which an individual or organization can be involved by donating their money or other efforts for its work. 4.3 ROLE OF CORPORATE FOUNDATIONS IN CORPORATE PHILANTHROPY Corporate Philanthropy refers to the investments and activities a company voluntarily undertakes to responsibly manage and account for its impact on society. It includes investments of money, donations of products, in-kind services and technical assistance, employee volunteerism, and other business transactions to advance a social cause, issue, or the work of a nonprofit organization. Corporate philanthropy has an opportunity to redefine the purpose and value for corporate foundations and giving