Break the Inner Circle and Embrace the New Era of Public Service

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This discussion revolved around how the public interest sector has been changed by social media and its role in publicizing recent scandals involving some of China’s largest foundations, and how the sector should respond.   Many agree that the role of social media has been positive in terms of breaking through the inner circles of personal relationships that used to dominate the sector, and opening the sector to greater public scrutiny.  But what social media has done is only a start.  Foundations, donors, the public, and the government need to change their management systems, expectations, and the legal environment if they want to further transparency and accountability in the public interest sector.

On July 28, 1981, China’s first foundation; the China Children and Teenager‘s Fund (中国儿童少年基金会) – was born.  Thirty years later, on July 8, 2011 the first anniversary of the China Foundation Center (基金会中心网) was held in Beijing under the banner of ““A Transparent Public Interest Promotes A Harmonious Society:  30 Years of Chinese Foundations”.  The 300 people in attendance included people from government departments, the international public interest community, media, business, as well as the heads of 120 foundations.  The conference focused on the themes of transparent public interest work and earning the public’s trust.  It also released “The 2011 Independent Report on the Development of Chinese Foundations,” the first ever statistical study on the work of foundations over the course of the last 30 years that will further promote foundation transparency.

Xu Yongguang, China Foundation Center’s chairman of the board, began with an analysis of the public interest sector’s influence.  After the announcement and implementation of the Regulations for Foundation Management in 2004, privately funded foundations became a new factor that changed the dynamic within the field of public interest.  According to the China Foundation Center’s figures, the number of registered private foundations (1143) has already surpassed the number of public foundations (1127) ((Editor’s Note: The legal term for private foundations is “nonpublic fundraising” foundations, while the legal term for public foundations is “public fundraising foundations”.)). Through their non-governmental character, independence, professionalism and innovation, private foundations are changing China’s philanthropic landscape.

Public foundations are responding to the new change in non-governmental public interest work and are considering reforms.  The set of structural reforms currently underway includes the establishment of “special funds”; the establishment of “incubators” and other innovative methods; providing supporting resources and capacity building to grassroots organizations; drawing on the advantages of public foundations to create ways for donors to give their money; making foundation management more transparent; and creating more effective public interest service organizations ((Editor’s Note: “Special funds” are a special mechanism set up by public foundations on behalf of private foundations and NGOs which legally cannot engage in public fundraising on their own. Through these “special fund” private foundations and NGOs are able to raise funds publicly.  In return they pay public foundations a small management fee.  The appearance of these “special funds”, in addition to the other reforms, are signs that some public foundations, the vast majority of which are GONGOs, are willing to extend a helping hand to grassroots organizations.)). On July 8 of last year, 35 foundations came together to launch the China Foundations Center’s official website.

Yuan Yue, chairman of Horizon Research, served as the conference’s emcee.  He declared that in the future China’s public interest sector will act as an important force in the transformation of China’s service sector and that integrating administrative management and public interest will provide a new model for the provision of public services.  But first, public interest organizations must prove their reliability and competence.  The question is how to promote the development of the public interest sector while adapting to these kinds of trends?

Interpreting the “Guo Meimei Incident

Just prior to the conference, the Guo Meimei Incident”  had been attracting widespread public attention ((Editor’s Note: The Guo Meimei incident refers to a young woman who microblogged about her extravagant lifestyle in June of 2011, claiming to have some connection with a commercial arm of the Chinese Red Cross.  Her claims set off a firestorm of controversy over the Chinese Red Cross which had come under closer scrutiny in recent years due to other scandals and record donations that came in during the 2008 Sichuan earthquake)). Statistics indicate that the most direct effect of this blow to public confidence was a reduction in charitable contributions.  The conference expressed hope that increasing the degree of transparency and the ability to gain public trust in foundations will promote greater transparency and public trust across the entire philanthropic industry.  This is not only a means of self regulation for the industry, but also a form of self preservation.

John Fitzgerald, The Ford Foundation’s chief representative in China, indicated in a speech that without transparency, philanthropy lacks the ability to gain the public’s trust.  Therefore, even a small scandal can cancel out the good deeds of several generations.  Without the public’s trust, you cannot attract donations, help the disadvantaged, win the trust of the people, and respond to large natural disasters.

The era of elite rule and winner takes all is over.  Kang Xiaoguang, director of the non-profit research institute at Renmin University, indicated that through this incident, we can see  that public awareness is growing and its influence is increasingly strong.  When introducing the conference’s guests, Yuan first introduced the government representatives and then representatives from overseas organizations and businesses.  The order was indicative of whose influence over Chinese foundations is strongest.  It is reasonable to say that in the last 30 years, the government and overseas organizations have had the strongest influence over Chinese foundations.  But in the last two or three years, encouraged by the rise of the Internet, another force with extraordinary strength has emerged.  Today, public opinion and the voices of  citizens have started to exert an influence that cannot easily be controlled or reigned in.

The internet is fundamentally changing China’s social and political power structure, and public interest organizations are feeling it most deeply. Recently we see that the fire storm of recrimination set off by the Guo Meimei Incident is not merely a matter for the Red Cross, but in reality has actually challenged and affected the entire public interest sector.  But this sort of thing is not necessarily bad.

Yang Tuan believes this is the people’s declaration of a new era in the public interest sector.  What makes it  a new era?  Citizens have manifested the right to choose, understand, supervise, and criticize philanthropy through more individual participation, so it is an era of transparency in the sector.  What were prevalent characteristics of the sector in the past?  Charitable organizations would dictate their own inner circle.  As a result, pretty much everyone knew each other.  Originally there was interaction primarily between the government, associations, foundations, nonprofits, including academics and celebrities.  Back then, the government and these other organizations dictated the level of transparency; if they decided not to be transparent, then there was no way to make them transparent. But now?  The public is impatient.  When news of the Guo Meimei incident hit the microblogs, it spread like wildfire, all because the public made it a hot topic.  In this new era, there is no distance between the  public and the pursuit of the public interest.   This is the inevitable result of the age of new media, the internet, and microblogs.

Yuan candidly admits to being a member of the inner circle.  “What I really want to say to everyone is that we need to break the inner circle.  We need to welcome this new era with open arms.  Though it still has many flaws and imperfections, the essence of this new era is critically important.  It is something that everyone who sincerely cares about advancing civil society in China endorses.”

What can be done to address the sector’s current challenges in the area of public confidence?  Kang says that transparency is the first step.  While debating the China Foundation Center’s strategic position, the question of how to reach the highest level emphasized transparency as the most basic starting point and a focal point for foundations’ core activities.  Indeed, transparency is a critically important step.

Public interest organizations enjoy many rights that businesses, the government, and ordinary citizens do not.  They can receive other people’s donations, people can volunteer for them, and they can command society’s respect.  It is only logical that they need to shoulder responsibility and be held accountable.  Since they enjoy rights, they must fulfill responsibilities; because they must fulfill responsibilities, they must be held accountable.  Transparency is both a demonstration of self-discipline and a necessary link in accepting, responding to, and promoting accountability.

On this point, the China Foundation Center’s work is very much in line with the times.  Kang hopes that the China Foundation Center will formulate its own response to significant matters within the industry related to building public confidence and, through such a response, promote improvement of the industry. Everyone is Responsible for the Lack of Transparency

Next, the meeting analyzed the reasons for the current lack of transparency and the responsibilities of stakeholders.

The Foundations’ Responsibility

Yuan posed the following question to Gu Xiaojin, executive vice-chair of the China Youth Development Foundation  (中国青少年发展基金会): “Compared to other foundations, which aspects of the China Youth Development Foundation relating to responsibility are praiseworthy?  Which areas do you feel need to be improved?”

Gu replied that where money is spent and who it is spent on is guaranteed.   There is still insufficient information on how much change has actually occurred for the beneficiaries.   The major reason for this, besides problems with funding and planning, is that awareness is still not strong enough.

Yuan Yue pointed to a transparency problem in procurement for the China Women Development Foundation’s Water Storage for Mothers project which is well known. Yuan Yue asked, water storage units require a good amount of building materials, and procurement is a big problem.  It’s not even that expensive for ordinary people like us. How do we control [the cost]? What’s been your experience?  Qin Guoying said that the foundation contracts management and tendering, shops around, and a decision is made by the procurement team. In addition, there is a monitoring group. Yuan asked: “Is the final price published online? I’ve participated in a lot of tenders which involve opening it to competition but instead you restrict it to people who are related to you”. Qin Guoying responded that their procurement for their “Healthy Fast Car” project is a public tender and the price is publicized openly.

The Donor’s Responsibility

NuSkin’s (如新中国) executive vice president and general manager spoke from the donor’s perspective on how to guarantee that contributions are used efficiently.  Companies hope to find a partner foundation that not only has a good reputation but also a particularly strong ability to get things done.  The business is responsible for fundraising or collecting supplies.  At the same time, foundations must have the ability to go out and, following the donor’s wishes, find those in real need of assistance.  But this is merely the first step.  The second step is to actually spend resources or money on the people or cases that actually need it.  This information is still not made public, and donors need to assume responsibility accordingly.  His data indicated that 50 percent of donors do not care where their money or resources go; they are already satisfied having made a donation.  Yuan also recounted that he once tried to get a donor to work with him to trace where the contribution went, but the donor neglected his responsibilities and said “just forget about it.”

The Public’s Responsibility

Jin Jinping, director of the Peking University Law School’s Non-Profit Law Research Center, believes that there are over 2000 foundations in China in addition to other charitable organizations.  But not all charitable organizations are good.  We need some sort of mechanism that allows the good foundations and charitable organizations to reveal themselves so that there can be a sort of ‘survival of the fittest’ in the philanthropic environment.  From this perspective, donors or volunteers are actually voters; they determine who to give their money to, and who to give their time and knowledge to, thus determining who will be successful.  Some people use their  feet to vote: when they see even the smallest bit of negative news, they say they will not donate again (though this may not be the correct method).

The standards for evaluating public interest organizations is different from those used to evaluate enterprises.   The organizations that receive the most donations are not necessarily the best.   Neither are those organizations that spend the most money.  This is related to the question of public interest’s effectiveness.  Charity has costs, fundraising has costs, implementing projects has costs, hiring professional personnel has costs.  The public tends to think everyone working in the public interest sector doesn’t need to eat, but the reality is that people do not care about whether the costs are reasonable.  The public needs to develop into intelligent and rational donors.

The public also has some long-standing misunderstandings about charity and transparency.  They feel charitable organizations should publicize all of their information.   In reality, some information should not be publicized, some individual donors do not want to reveal their identity, and even some beneficiaries may not want their identity publicized.  Like businesses, all charitable organizations also have their own internal information such as board discussions that they do not want to publicize.

The Management System’s Responsibility

Qin Guoying believes that increasing the ability to gain public trust requires synthesizing a variety of measures.  For example, with regards to laws and regulations, there are very detailed requirements on the disclosure of foundations’ information in the United States.  This can work.  Today we still have a few problems in this area, and we also have the problem of a dual management structure ((Editor’s Note: In China, social organizations (the Chinese term for NGOs or NPOs) need to be sponsored by a professional supervisory unit, which is generally a government agency working in the same sector as the organization, before they can register with the Civil Affairs office.  Thus, legally registered social organizations must submit to dual supervision from both the Civil Affairs office and their professional supervisory unit.)). Foundations are required to have a higher-level supervisory unit, and they need to maintain close cooperation with that unit, reaching a harmonious consensus.  Often when  making decisions, it is possible that you need to take the supervisory unit’s opinions into account.  Whether or not decisions are made in accordance with the laws governing the development of foundations could be a problem ((Editor’s Note: The suggestion here is that foundation decisions are not entirely within their control due to this dual management structure.)).

The Weakness of Foundations in the Social Media Environment

Social media, especially microblogs, have  had a major impact on the ability to gain the public’s trust.  Chu Songyan, professor at The  Chinese Academy of Governance, believes that the media is one of the most important factors in the environment that foundations operate in.  They not only provide information, but more importantly are also a platform for the exchange of ideas.  The internet has already formed intersections, both large and small, between people and organizations.  These intersections are used to decide who to trust and how much to trust them.  This kind of change provides a means for foundations to easily increase their transparency in order to win the public’s trust.  At the same time, the wave of enhancing transparency is already formidable.  The question is not whether foundations need to ride this wave, but how they will do it.

How much should foundations reveal in response to the public’s request for greater transparency?  Professor Chu believes that there are two main components.  First, Chinese foundations need to lay bear their aspirations and philosophies, their mission and what they hold dear while indicating their respect for donors and  the public.  Secondly, there needs to be consideration of how the government, the public, donors, and foundations can speak in unison; the sort of information that the public want to discuss and the kind of information they prefer needs to be taken into account.  The Ministry of Civil Affairs has a system of annual inspection and evaluation at every level of administration ((Editor’s Note: According to the registration and management regulations, social organizations registered with the Civil Affairs office at a particular level of administration must undergo an annual inspection by that same Civil Affairs office.  Thus, a social organization registered in Beijing at the Chaoyang district Civil Affairs office must undergo an annual review by that office.)). Yet somehow there is a giant gap between the government and the public’s evaluation of foundations.  If there is an evaluation gap, how should the public’s assessments be taken into account?China’s foundations and U.S. foundations are about the same in terms of the content they publicize.  Professor Chu compared the two.  U.S. foundations add a footnote [in their financial reports] stating that you should contact the foundation if you want to see more detailed information about revenues and expenditures.  Chinese foundation reports do not have such a statement.

Yuan Yue asked the foundations present: “in our foundation projects, do we need to publicize everything?  Failed projects, organizations that are almost on the blacklist, localities that have done bad things?  Should this information be made available through our foundation or  through media interviews?

The China Foundation for Poverty Alleviation’s (中国扶贫基金会) secretary general, Wang Xingzui, discussed his foundation’s experimentation and unforeseen results.  He said, “Our foundation needs to have all-around transparency.  We need to declare both our successes and our failures.  We have also experimented with a few things.  For instance, during the Great Sichuan Earthquake of 2008, we held several news briefings, speaking very honestly to the public at each stage.  When we reported that we were unable to locate some supplies, the media said that we had been looted, and this elicited a negative societal response and displeasure from the local government.  They said it was an issue of law and order.  Actually, under those emergency circumstances, there were problems finding things at the airports and on the roads.”  Yuan asked, “Did the media fabricate this story, or was your explanation not clear enough?” Wang   offered the following defense: “68,000 yuan worth of supplies is actually a very small sum.  It is not possible to speak in detail about each item.  But after the media report, it turned into story about looting.”

Yuan Yue directed her question to the media people.   “The traditional media tries as much as possible to help public interest groups get their positive message out, but sometimes feels it’s a sham.  Microblogs mainly broadcast mishaps that lead to controversies over someone’s credibility.  It’s as if you [traditional] media have no influence.

The Beijing Times Public Welfare Weekly’s editor-in-chief, Guo Kun, responded that this is not merely an issue for the media, but also an issue for all foundations and charitable organizations.  “The media has been transformed.  Before all of our broadcasts were relative to traditional media, complete and self-contained.  Our audiences were passive receivers of information.  Now, broadcasts are trending toward fragmentation; the content and those who deliver it are now splintered.  The channels and methods for broadcasting information have all been split up, so the central change is that our audiences can now become broadcasters of information themselves.  At the same time, with the advent of advanced search engines and other technologies, every consumer of the information can read the news that he or she wants to.  There is the possibility that he or she will not want to read information published by the mainstream media and thus choose not to.  Public interest organizations also face this issue.  Even if our relationship is good, when you reveal your finances and do not abide by the rules of broadcasting, you will not necessarily get good results.”

Everyone Appeals for Accountability to Donors

The current donor structure consists of few individuals and lots of businesses (around a 30-70 split).  The interaction between public foundations and the public is relatively small.  Guo indicated, “We often see the reports of large-scale public foundations and feel that there is a high degree of transparency, with little difference between Oxfam Hong Kong and other organizations.  What problem does this point to?   In Hong Kong we engage with Oxfam in fund raising efforts on the streets.  Once the term “public funding” comes up, a lot of foundations are prone to say that fundraising costs are particularly high and the results are not particularly good.  In Hong Kong, Oxfam annually receives over 200 million RMB in donations,  but donations from the street total only a little over two million.  So why continue to do  fundraising activities on the street?  They say that this is an excellent opportunity for direct contact between Oxfam Hong Kong and the city dwellers.

Shi Zengzhi, head of Peking University’s Civil Society Research Center, views the Guo Meimei Incident as an indication that the entire public interest sector’s right to expression is very weak in the new media environment.  This weakness is related to the sector’s development level and to how sector’s leaders are making use of the platform provided by the new media.

Wu Chong [secretary general of Shanghai’s Adream Charity Foundation (上 海真爱梦想公益基金会)], believes social media, more often than not, serves as a tool for uncovering social ills.  But after this ill is uncovered, it is less effective in coming up with an informed, rational solution.

Shi believes that when it comes to building public trust, China’s public interest leaders are in a difficult position.  She notes that American foundations have developed over the course of many years and the philanthropic industry has a 100 year history.  Compared to other countries, China’s public interest leaders are charged with a particularly difficult task because it is not merely a matter of transparency (which is most basic).  Standards, systems, and laws are most important.  Public interest leaders work within a country’s  specific environment. [Editor’s Note: In other words, these leaders work in an country where they are asked to be transparent, but where standards, systems and laws do not encourage transparency.] For them, it is extremely difficult, but also very rewarding.

In Brief

This article provides a window into a discussion among Chinese philanthropy leaders, academics and companies at a conference celebrating the first anniversary of the China Foundation Center.
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