Changes in the Development of Private Foundations

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This article covers the inaugural session of the Private Foundation Development Forum held on July 3, 2009. The Forum was held to showcase the rapid rise of private foundations in China, and promote discussion of challenges facing private foundations in their early stages of development. These challenges include not having a clear sense of mission, funding areas which already receive significant government support, the lack of independent governance structures, and an unwillingness to disclose information. The Forum was organized by several private foundations that have taken the lead in encouraging other foundations to tackle these challenges and promoting industry-wide norms for transparency and self-regulation.

Over the past two years, private foundations have gained a rising profile among NGOs, gradually becoming more active. In addition to operating programs, private foundations have also provided funding to support grassroots NGOs, with their efforts in aiding the May 12, 2008 Sichuan earthquake relief earning special recognition.

Private foundations are on the rise. In comparison with social organizations and civil non-enterprise units, private foundations got a later start but have been growing quickly. Beginning in 2004 with the passing of the national “Regulations for Foundation Management,” the number of private (literally, “non-public fundraising”) foundations increased rapidly, out-pacing public (literally, “public fundraising”) foundations. According to the “2008 Civil Affairs Development Statistics” released by the Ministry of Civil Affairs, by the end of 2008, China had a total of 1,597 foundations, 643 of which were private foundations, accounting for 40.2 percent of all foundations ((Editor’s Note: There are three kinds of organizations registered with Civil Affairs as “social organizations” (shehui zuzhi), the Chinese term for nonprofits: Social Organizations (shehui tuanti); Civil Non-enterprise Units (minban feiqiye danwei), and Foundations (jijinhui). According to the 2004 Regulations for Foundation Management, foundations are further divided into public fundraising foundations (gongmu jijinhui) and nonpublic fundraising foundations (feigongmu jijinhui). Throughout this issue, we refer to them as public foundations and private foundations respectively.))

With the expansion of private foundations, a few people have led the effort to create a better development environment for private foundations, while also promoting greater institutionalization in the foundation sector. In addition to the extraordinary earthquake relief effort, the Private Foundation Development Forum (中国非公募基金会发展论坛) is the first major initiative aimed at creating greater awareness about private foundations.

This forum was jointly organized by seven domestic private foundations and the recently-established China Association for the Promotion of Social Organizations (中国社会组织促进会).  Narada Foundation(南都基金会), YouChange Foundation (友成企业家基金会), Vantone Foundation (万通基金会), among others, stand out among China’s private foundations because of their “alternative” nature.  Unlike the majority of foundations, they have not limited themselves to traditional charity projects. Instead, their focus has been on strengthening grassroots organizations access to funds to enable these organizations to provide public services and goods in line with their broader missions.

The forum’s theme was “the Maturation of China’s Private Foundations.” The aim of the conference was threefold: first, to showcase the successes in the development of private foundations in recent years. Second, information and experience sharing, as well as opening up a dialogue with other sectors. Finally, working together to promote an institutionalized, and sustainable development plan for the popular (minjian) philanthropy sector.

The forum opened on July 2, 2009 after more than half a year of preparation, with around 500 organizations and individuals from academia, government and the NGO sector attending to show their support.

That day, the “China’s Private Foundation Development Report” (hereafter, “Development Report”, 中国非公募基金会发展报告) also made its debut. This report is the first of its kind among Chinese NGOs, and is the product of private foundations’ research about their own industry. The Development Report is one sign that private foundations are serious about moving toward greater institutionalization.

The report noted that the majority of private foundations lack a clear sense of direction about their mission, and do not seem to be aware of areas where non-governmental philanthropy could make the biggest impact. Currently registered private foundations’ have relatively one-dimensional objectives, the majority of which focus on education and disadvantaged social groups. These programs, however, are the very areas that the government focuses on.

In addition, many private foundations still experience difficulty in setting up independent governance structures. The fundamental problem rests with the relationship between the founder of the private foundation, the board of directors, and the organization. Problems in foundation governance, particularly establishing a board of directors and creating rules of procedure, are relatively prominent. Private foundations also do not show much awareness of the need for specialization. In addition, private foundations do not yet recognize the need for specialization within the organization.

In fact, the group of experts that wrote this report encountered difficulties in the process that reflected yet another problem in the development of private foundations: an unwillingness to disclose information about the organization. The editor-in-chief of the “Development Report”, Jin Jinping, is also the director of Peking University Law School’s Nonprofit Law Research Center (北京大学法学院非营利组织法研究中). At the forum, Jin expressed disappointment at the difficulties he faced in writing the report. He had hoped to be able to collect enough information for the report, but found that it was difficult to find information on what ought to be fully transparent private foundations.

As the “Development Report” notes, “the lack of information disclosure on the part of private foundations” was fully evident when “after sending out hundreds of questionnaires, not even 20 were returned.” [This small sample] explains why the “report was unable to provide effective data.” The inability to collect key data in an intra-industry report shows that philanthropy has a long way to go in China.

The Forum is About Communication

The Forum organized two additional sessions on “Public Welfare Partnerships and Public Welfare Project Funding”, and a “Dialogue Between the Leaders of Public Welfare Organizations and Entrepreneurs”. Both were designed to promote communication, and improve business participation in the public welfare sector. Generally speaking, however, neither the representatives of public welfare organizations, nor the entrepreneurs, showed a true understanding of the terms “exchange” and “dialogue.” They spent most of their time expressing their own views and rarely listened to the opinions of others.  Even those who were ostensibly in charge of facilitating discussion between the two sides often deviated from their role as “mediator,” using the podium to express their own point of view.

From this perspective, the Forum was not used to address the key themes. There was no discussion of a “path for aggregating funds” or a “path for distributing funds” for private foundations. Instead it was mainly used to showcase the projects of participating organizations. Entrepreneurs were clearly no exception. When it was their time to present, they also engaged in self-promotion while ignoring the difficult issues.

Premature Moves to Self-Regulation

The Forum also focused on “the path to self-regulation,” to promote the growth of China’s private foundations. The issue of NGO self-regulation has been around for a while. Several NGOs and foundations have called for creating guidelines or norms for the self-regulation of NGOs.  In April 2008, the NPO Information Center (NPO信息咨询中心) and the China Youth Development Foundation (中国青少年发展基金会) published “China’s Public Welfare NPO Guidelines for Self-Regulation” (hereafter “NPO Guidelines”) in April 2008. Although organizations within the industry recognize the need for self-regulation and even call for the standardization of regulations, these specific guidelines have been controversial and ultimately have not been effective in creating an industry-wide norm.

Self-management has always been a common topic of discussion, but now private foundations are raising the issue independently.

The acting chair of the Forum organizing committee, Xu Yongguang, was confident about the potential for private foundations to formulate rules of self-regulation. Xu has stated that previous NPO Guidelines were too broad, and included multiple constituencies such as community groups, public and private foundations, private non-enterprise units, and social organizations. This time, Xu wants to put forth regulations only for private foundations.  During the Forum, leaders of different organizations gathered for a round table discussion on the issue of self-regulation.

Participants used the above-mentioned NPO Guidelines to formulate a “Declaration of Eleven Articles for Self-Regulation” for private foundations. It is still unclear how these new guidelines will affect private foundations, and whether it will become more accepted within the industry than the NPO Guidelines.

In addition, a planned Private Foundation Alliance for Self-Regulation was put on hold.  One participant explained that forming an alliance might require more time considering the development of private foundations is still at an early stage.  Even so, the “Declaration for Self-regulation” is a strong first step toward institutionalizing self-regulation. Xu Yongguang hoped that by 2012 it would be possible to formally enact self-regulation standards within the private foundation industry.

The development of private foundations has been very uneven, but private foundations still need sufficient time and patience to mature. Eventually they will be able to develop in a more standardized and regulated fashion.

According to the most recently released information, the Forum’s secretariat has already begun planning for the second session of the Forum. There is also a plan to send a delegation to the United States to learn about experiences in foundation development from their peers overseas ((Editor’s Note: The second session of the Forum was held on October 28-29, 2010. For articles about the second session in this special issue, see “Different Opinions at the Second Private Foundation Forum,” and “Develop Philanthropy Through Cooperation and Debate.” )).

In Brief

This article covers the inaugural session of the Private Foundation Development Forum held on July 3, 2009. The Forum was held to showcase the rapid rise of private foundations in China, and promote discussion of challenges facing private foundations in their early stages of development
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