Corporate philanthropy: Altruism or badge of honour?

During my interaction with students, one of them wondered why Ratan Tata’s name did not figure in the list of richest Indian billionaires which otherwise had the names of Mukesh Ambani and Gautam Adani. This thought never crossed my mind whenever I went through the list published by agencies like Forbes or Hurun or Bloomberg.

Going through many sources of information, I gathered valuable information about Ratan Tata, the former chairman of Tata Sons. While Mukesh Ambani and Gautam Adani own a substantial stake in the equity capital of their group companies and both, especially the latter, have seen a surge in their net worth in 2021 thanks to the rise in the market cap of their companies. Ratan Tata does not own shares in Tata companies in his individual capacity. Most of the shares of Tata group companies are held by Tata Sons Pvt Ltd as the principal holding company of the Tata group.

Just to understand the extent of the stake of the Tata group in the shareholding structure of their companies which are present in almost all sectors from FMCG to steel to software, Tata sons own 72% of equity capital in TCS Ltd. And Sir Dorabji Tata Trust and Sir Ratan Tata Trust together as the two biggest shareholders of Tata Sons have a combined stake of around 50% in Tata Sons. This explains why Ratan Tata is not one of the richest Indians.

It is also interesting to note that Ratan Tata and other Tata trusts are involved in philanthropy in a big way supporting education, health, poverty alleviation et cetera, and are doing it without any fuss and publicity. While thousands of individuals are involved in a charity that focuses on providing short-term relief, Tatas are focussing on philanthropy which involves identifying the root cause of systemic problems like poverty, hunger, illiteracy, pollution polio et cetera and providing lasting solutions.

Talking about philanthropy, an increasing number of new-age billionaires and the super-rich are committing billions of dollars to the philanthropic foundations that they are setting up across the world working for causes like education, healthcare, poverty, and arts and even sports and influencing the way governments function. A few of these billionaires are into philanthropy for the sake of fame and recognition. A few others are in it because it fulfils their deepest basic needs.

What has prompted the super-rich to donate liberally in the last two decades? Is it because of the genuine concern for the poor by the affluent few? Is it a sense of duty to give back to society? Is it the by-product of their belief systems and religion? Is it because it gives them a sense of power? Or do the billionaires have a vested interest in giving? The answer to most of these questions is yes. For a few of them, philanthropy gives them a sense of direction and purpose in their lives, for most of them it’s a medium through which they hope to influence and mobilise public opinion on many burning social and even political issues.

For the record, of the thousands of philanthropic foundations set up in the world, most of them were set up in the US with the UK coming second. In the UK, more than 60% of the donations went to education with Oxford and Cambridge Universities receiving the major share. In the US, the biggest giver was Warren Buffet owned Berkshire Hathaway which donated nearly $4 billion last year- a majority of which went to the Bill and Melinda Gates Foundation. But the philanthropic work that Mackenzie Scott, the ex-wife of Jeff Bezos, the founder of Amazon is doing is exceptional. She has donated more than $7 billion so far during her lifetime to charities and organisations. She has no foundation of her own and makes impromptu and secret donations without attaching any strings or publicity or giving details of who received the donations.

At the other end of the spectrum, there are foundations like the Open Society foundations of George Soros which recently pledged $25 million to launch the Ukraine Democracy Fund to support civil society in Ukraine which “aims to build vibrant and inclusive democracies whose governments are accountable to their citizens”. The foundation, while pledging the amount said that President Putin’s invasion of Ukraine is an assault on democracy.

Incidentally, the foundation funds groups working for human rights movements, equality and anti-discrimination and has inter alia, encouraged dissent behind the iron curtain in 1984, fostering open societies in the former Soviet bloc in 1989 and the Shaheen Bagh protests in Delhi in 2020.

It is debatable whether the increase in philanthropic work in the last few decades reduced income inequalities and empowered the underprivileged. Philanthropic work should benefit society at large like the work that the Bill & Melinda Gates Foundation is doing in research on malaria, polio, or vaccinations. Philanthropy may be dubbed philanthrocapitalism if it is used by the new age billionaires as a badge of honour or to legitimise capitalism or if it is used by the plutocracy to alter public policy or influence an ideology.

(The writer is a chartered financial analyst and a former banker. He currently teaches at Manipal Academy of Banking, Bengaluru)