Towards greater corporate social responsibility
By Foqia Sadiq Khan and Zehra Aftab
Bill Gates with a current net worth of $53 billion was sitting on it like a gold digger till the late 1990s. The size of his personal wealth rose and rose and eventually the media began to take notice, and some even pointed fingers at him, saying that he should part with some of his wealth for philanthropic purposes. The argument was that he had played a big role in shaping the virtual world and in enriching himself in the process but that meant also shouldering some social responsibility. It all changed in 2000 with the establishment of the Bill and Melinda Gates Foundation. The king of Microsoft now donates 52 per cent of his wealth to various philanthropic endeavours through the foundation.
The Gates archetype fits well with the well established traditions of philanthropy in America. Names like the Carnegie Endowment or the Ford Foundation are known worldwide. Charity and philanthropy is also an intrinsic part of Islamic traditions of ‘giving’. The Aga Khan Foundation has set up the Pakistan Centre for Philanthropy (PCP) to study this issue in a systematic manner. According to a study commissioned by the Aga Khan Foundation, Pakistanis from diverse economic backgrounds contributed Rs41 billion (including cash and in-kind) in 1999. A significant 28 per cent was given by the lowest economic strata. In comparison, corporate philanthropy severely lags behind.
A 2005 report by the centre titled ‘Corporate Philanthropy in Pakistan – 2005’ examined the role played by the public-limited companies from 2000 to 2003. According to it, 500 listed companies gave Rs227 million for philanthropic purposes in 2000. By 2003 this almost doubled to Rs496 million suggesting an improvement in the trend, but still remains significantly low compared to the overall philanthropy receipts. Average annual donations hovered around Rs0.9 million in 2003, as compared to Rs0.5 million in 2000. It is pertinent to qualify here that public-listed companies do not represent the entire universe of the business sector; they only represent the organised sector. Therefore, private companies and/or semi-formal and informal business sector’s contribution put together would be higher than this.
Within the organised sector, the top 25 public listed companies account for almost two-thirds of the total donations in 2003. According to the rankings of public listed companies by volume of donations as a percentage of profit before tax (2000-2003), the majority of these companies are domestic, other than two foreign-owned: Pakistan Tobacco Company and ICI. A closer look at the data reveals 19 out of the 25 companies give less than 8 per cent of their profit before tax for philanthropic causes (no comparison with 52 per cent of profits being donated by Bill Gates). PCP data curiously does not list contributions made by the banking sector. The National Bank of Pakistan made over eight billion of profit in the recent past. There is little information available about its donations towards corporate social responsibility (CSR). Interestingly the figures show that if all public listed companies were to provide an additional one per cent of their profit before tax to CSR, the total volume of corporate sector contribution would increase three-fold.
However, the real question is who is receiving these donations? Is it individuals, institutions, government, non-profit? Is it going to disaster-mitigation, health, education, poverty alleviation or just random acts of ‘kindnesses? It is difficult to determine this crucial information from companies’ annual reports. They do not provide the breakdown of recipients of their philanthropic contributions. According to a survey of 211 private companies conducted for PCP report, more than 50 per cent of the companies would prefer to give directly to individual beneficiaries, rather than making donations to institutions. In terms of sectoral breakdown, 60 per cent respondents of these 211 companies reported a preference for the health and education sectors. Within the education sector, the principal focus is on primary education.
It clearly shows that the private sector is not seriously getting involved in the higher education, learning and research. There are a few exceptions: the Lahore University of Management Sciences has been set up and run by the private sector; the Aga Khan University is in its formative stage; the Institute of Business Administration, Ghulam Ishaq Khan Institute of Engineering Sciences and Technology, and the Hussain Ebrahim Jamal (HEJ) Institute of Chemistry at the University of Karachi are among the few higher education and research institution that were able to attract some funding from the private sector. However, the norm is indifference and apathy. Public universities like Quaid-i-Azam University, University of Punjab, University of Karachi (excluding the HEJ institute) and/or independent research institutes do not get any funds from the business sector.
It is in contrast with the role of the private sector in the developed world where primary research, publications and conference are supported by the private sector. Even if the private sector does fund some quasi-learning activities in Pakistan, it remains limited to donations made to the government as opposed to independent research. Anecdotal evidence suggests that government ministries and officials arm-twist the private sector to fund quasi-research and publicity oriented activities. The so-called CSR is sporadic and one-off event rather than a consistent, well thought of plan. The Chambers of Commerce rather donate for high visibility activities than funding research.
There is an obvious disconnect between business development and research. LUMS was initially geared to produce good managers and marketing specialists. The upper echelon of industry and services sector needed them desperately. Hence, Pakistan got its first reputable business school in the mid 1980s. Could there be no other area of research other than ubiquitous marketing and sales hawkers that could benefit the private sector?
Economics, sociology, philosophy, physics, mathematics do not attract private sector attention. The Gates Foundation endowed the University of Cambridge with $210 million for the Gates Cambridge Scholarships. In Pakistan, a multinational oil marketing company sends a limited number of students abroad for education. Undergraduate education is a crucial area in the development of higher education. Other than ‘count-on-your-fingers’ elite private sector undergraduate schools, learning and research for the majority of people does not seem to be a priority for the private sector. Small islands of specialised knowledge are being created amongst the sea of ignorance.
The quality of human resource can hardly be improved unless traditions of creativity, learning, innovation and research are not institutionalised and nurtured across the board. Public sector higher education institutes and research centres cater to the over-whelming majority of people of this country. Industry, services and business cannot flourish unless the quality of human input, skills and knowledge is improved. The government alone cannot do it. The private sector needs to loosen its purse strings and step forward in a pro-active and organised manner to promote quality under-graduate education and independent research.
The writers are visiting fellows at the Pakistan Institute of Development Economics (PIDE) in Islamabad.
Ismailimail 