Human: The Philanthropy Conundrun

The Philanthropy Conundrun

India’s tycoons may have huge appetites for lavish lifestyles — but a strange distaste for corporate social responsibility, finds SHANTANU GUHA RAY

Rs 1648 crore was earned by three companies of the Anil Dhirubhai Ambani Group for the third quarter (Oct-Dec) of 2008

Rs 15 crore is spent by ADAG on various charitable activities that include some free beds in their hospital and running an old age home

ILLUSTRATIONS: UZMA MOHSIN

TILL A few days ago, close to the majestic Antilla (named after the legendary island off the coast of Portugal), is the 27- floor skyscraper Reliance Chairman Mukesh Ambani is constructing for his family on Altamount Road in posh south Mumbai. Here, priests conducted rituals — prompted by Reliance employees — around a fire in order to ward off evil spirits so that one of the world’s most powerful billionaires can have a trouble-free entry into his new home. No one knows when India’s richest man will shift base from his current home at Cuffe Parade’s Sea Wind, but passer-bys look at the daily ritual with surprise and at the imposing building — enough to house more than 600 — with awe.

As perhaps did readers when they read about London-based steel magnate Lakshmi Narayan Mittal hiring a French chateau to host his daughter Vanisha’s wedding in 2004. A host of Bollywood stars performed during the six-day extravaganza, which was reputed to have cost an estimated $60 million. The sheer opulence of the wedding overtook other notable examples of conspicuous consumption such as Donald Trump’s wedding: Forbes called it the grandest wedding affair of the century, with 20-page invitations in silver boxes, not to mention flying out over 1,000 guests to France.

These are India’s newly-anointed royals, the magnificent four who have just figured in the Forbes list of the world’s most powerful billionaires, the men who wield a staggering authority and influence far beyond their actual riches — astounding as they may be — Mukesh Ambani, who heads India’s largest company by market cap, his younger brother Anil, steel magnate LN Mittal and telecom czar Sunil Bharti Mittal. The fab four are part of the Forbes top 10 list.

Forbes notes that Ambani produces oil, gas, petrochemicals and textiles; younger sibling Anil runs a clutch of companies in sectors as diverse as telecom, power and financial services; Mittal owns the largest steel conglomerate in the world, Sunil Mittal controls India’s largest telecom company.

But even as the pink papers celebrated the success of the fab four, many wondered what the richest people in India — often criticised for their opulent displays of wealth — have actually done for the nation’s poor, estimated at a staggering 350 million? Mumbai, where Ambani is personally funding the world’s largest private residence, is also home to Dharavi, Asia’s biggest slum, that shelters over 1 million people.

“Philanthropy is a lost word for the Indian rich and corporate social responsibility (CSR) has miles to go,” says Shankar Venkateswaran, advisor, Sustainability Limited. He refers to non-sector investments like the one IT major Dell Inc, as part of its philanthropic efforts in India, recently announced: Over $2.57 million for organisations promoting education, a move that will directly benefit one lakh children up to 17 years of age. Dell said the amount would be marked to 10 Indian institutions working toward child labour rehabilitation, educating daughters of sex-workers and an initiative to impart information on climate change. “That is a away-from-the-line investment. India needs to have more of that,” adds Venkateswaran.

That India’s high net worth individuals don’t make such investments is clear from the anguish expressed by Prime Minister Manmohan Singh, who urged corporate captains last year to display a greater interest in shouldering social responsibilities. “Eschew conspicuous consumption, save more and waste less and care for those who are less privileged and less well-off and be role models of moderation and charity,” Singh had told a seminar organised by the Confederation of Indian Industry, the country’s most powerful trade body.

Rs 1947.41 crore was earned as profit by Sunil Mittal-led Bharti Airtel Group for the third quarter (Oct-Dec) of 2008

Rs 210 crore has been pledged to educate nearly 2 lakh children in 550 schools, of which 78 schools will be operational this April

Venkateswaran says that for a nation mired in an economic downturn, job losses, low growth projections and abysmal healthcare, Singh’s remarks hold truth for both Mumbai — home to some of the country’s richest industrialists and largest slum population of 6.5 million — and India, where the distinction between the haves and have-nots is wide, appalling and growing.

Agrees Rajeev Chandrasekhar, Rajya Sabha MP: “The biggest mistake media makes about CSR and philanthropy is that they presume all companies will work on similar lines. That’s a false way of looking at life because it does not work that way, at least in India. There are many who keep asking me about my billion dollar business deals in 2008 because they love to celebrate success. But there is also an inherent need to put pressure on corporates to increase their spending for the poor because the rich hardly do that.”

FORGET WHAT corporate India as a whole is doing — because it certainly isn’t much — and let’s concentrate on the level of philanthropy visible from the fab four only. It’s extremely difficult to seek answers from the Ambani family. Company insiders merely say that the bulk of Reliance’s social awareness work happens in and around Jamnagar, where it has built the world’s biggest grassroots refinery. Decades ago, Dhirubhai Ambani had upped the capacity of the desalination machines at the Jamnagar plants, ostensibly because he also wanted the entire city of waterstarved Jamnagar and its people to benefit from his commercial decision to provide water for his refinery.

While the senior Ambani sibling, whose net profit for the third quarter of 2008-09 — despite volatility in oil prices — was still $778 million, doesn’t seem to have a high philanthropic profile, his younger brother’s Anil Dhirubahi Ambani Group (ADAG) manages an old age home in Mumbai and has recently pledged 25 percent of beds at the newly constructed, Rs 500-crore, state-of-the-art Kokilaben Dhirubhai Ambani hospital and medical research institute in Mumbai, for poor patients. “We are contemplating opening up more silver homes (read old age shelters) across India,” says an ADAG insider, adding: “There are efforts to develop areas that fall within the purview of our power plants.”

Do these efforts signal a serious effort at achieving CSR goals? Check out the numbers: helped by its mutual fund, life insurance, brokerage and financial products distribution businesses, Reliance Capital posted an 11 percent rise in its net profit to Rs 131.5 crore, for the third quarter ending December 31, 2008. During the same period, Reliance Power had a net profit of Rs 106 crore while Reliance Communications (R-Com) posted a net profit of Rs 1,410 crore. Figures for the philanthropy may not be available, but it’s obvious they are a miniscule proportion of the profits.

$2.63 billion was the net loss posted by Lakshmi Mittal-led Arcelor Mittal for the third quarter (Oct-Dec) of 2008

$1 billion is the group’s annual budget for CSR and philanthropic activities across the world, but India’s share is virtually negligible

The Sunil Mittal-led Bharti Airtel, whose net profit for the third quarter of 2008 rose by 38.34 percent to Rs 1,976.41 crore, against Rs 1,428.56 crore for the same quarter in the last fiscal, has straddled the Indian telecom growth story, adding customers and marketshare despite intense competition. His Bharti Foundation was recently set up to help underprivileged children gain access to quality school education across India. The flagship Satya Bharti School programme spans primary and senior secondary level education. “Our programmes are meant to act as a catalyst for educational reforms,” says a Bharti spokesperson of the project.

THE FOUNDATION, which intends spending Rs 10 lakh per 200 children and Rs 20 lakh per school, will set up 236 primary schools and 10 senior secondary schools in the first phase of operations. Of this, 78 new schools will be operational by April-June 2009, reaching out to more than 30,000 children. “We are not only constructing our own schools, but also adopting government schools. We are currently managing and running 49 schools in Rajasthan,” says the spokesperson. But in an economy mired in recession and low growth, these figures, even if they looked generous in isolation, look ludicrously less against the kind of profits these corporations make. Or against the opulent display of wealth from India’s top corporate honchos.

Lakshmi Mittal, ranked third on the global billionaire list, who controls 10 percent of the world's steel production through his company Arcelor Mittal, was “born in India but lives in London, where his political clout often incites controversy,” says Forbes, noting, “In 2002, then British Prime Minister Tony Blair reportedly wrote a letter to the Romanian prime minister hinting that a sale of the country's steel company to Mittal would facilitate its entrance into the European Union.” That is the power and clout of the world’s richest Indian.

And what does Arcelor Mittal, the world’s biggest steel maker, do for the poor? Company spokesperson Abhinav Kanchan would not offer any amount for India but says the Group’s CSR activities started with the merger of Arcelor and Mittal in September 2006. “In certain countries (South Africa and Brazil for instance), it’s mandatory to have corporate social investments to the level of one percent of post-tax net profit of the local unit. In some other countries, social commitment can be driven by shares purchase agreement or other side agreements signed with vendors or governments. A rough estimation of all CSR related expenses can be around $1 billion,” says Kanchan. Ironically, the group remains silent on social investments in Jharkhand and Orissa where it has proposed steel plants. They are all currently on paper.

“The spending of all Indian companies on CSR and philanthropy is laughable. Indians have a tendency to take but not to give. Corporate India does not have a heart, it has a mind,” says a tycoon tracker, speaking on condition of anonymity. He illustrates his point by describing what happened after the 2001 Gujarat earthquake that — for the first time in India — had various companies rushing in to pledge money. “The biggest donation was a mere Rs 5 crore and the publicity 10 times that amount.”

“Philanthropy doesn’t exist in India. The IPL showed that Indian companies have the money (look at the amounts the Ambanis or liquor baron Vijay Mallya spent in acquiring stars for their respective teams) but would not spent on malnourished children,” says social commentator and author Jerry Pinto, who expects the divide between the rich and poor to grow manifold in India. “The poor have lived with it for long and do not expect anything. Perhaps that’s the reason why I do not see any resentment among the poor, no class wars,” he says.

Columnist and social commentator Praful Bidwai disagrees with the view that the poor are indifferent to the apathy of the rich. “People are very agonised and soon resentment against the rich will spread all over the country,” he says.

$778 million was earned by Mukesh Ambani’s Reliance Industries as net profit for the third quarter (Oct-Dec) of 2008

RIL’s CSR and philanthropic activities primarily revolve around Jamnagar, home to one of the world’s largest grassroots refinery

MANY COMMENTATORS say lack of concern for the poor is a major issue in India and this highlights the globalisation debate, over whether its benefits are deceptive: its benefits are enjoyed by a tiny minority of the world’s richest while the rest struggle to survive. Time magazine’s Africa bureau chief Alex Perry talks of the unjust distribution of wealth all over the world in Falling Off the Edge: Travels Through the Dark Heart of Globalization. The author travels to Shenzen, a huge economic zone across the Chinese border from Hong Kong that is the world centre for piracy and which has created staggering new wealth. “Shops displayed perfect replicas of Armani suits, Gucci handbags, Nike trainers, Rolex watches, Cartier jewellery,” writes Perry, adding how drug traffic abounds in the city where impoverished labourers lose limbs due to unsafe workplace conditions while others sell their babies.

Interestingly, the next chapter of Perry’s book focuses on Mumbai — and squarely nails the lie in India’s supposed unstoppable march of progress into the 21st century. The author finds out that while 1.63 million have found outsourcing jobs in India, there were 40 million unemployed, 900 million earned less than $2 a day and 380 million earned less than a dollar.

But in that maximum city, he also found serious levels of conspicuous consumption: he attended a party for 2,000 thrown by Vijay Mallya, the undisputable king of “good times”. Mallya is certainly India’s most flamboyant tycoon: apart from his flagship United Breweries, he owns Kingfisher Airlines, has two helicopters, two private jets, penthouses in London, Monaco, New York, Johannesburg and Los Angeles, a Scottish castle, several South African game lodges, not to mention a house on the most happening beach in Goa. He owns a stud farm and a stable of 250 thoroughbreds, as well as a 165-foot yacht. And he usually wears $100,000 worth of jewellery. If he decides to throw a party, he doesn’t think it odd to fly a planeload — or two — of guests from major metros to the host city.

This is the world without a middle class, says Perry, in which — he has 2006- 07 statistics to back him up — one percent of the world’s adults own 40 percent of all global assets. And those figures get even more rarefied as you climb the money pyramid: the richest 10 percent own 85 percent of the assets, while the poorest half own less than one percent.

Commentators say that Indian corporations do as little as they need to for CSR. “Companies in India are into risk management and not charity or corporate social responsibility,” says Parul Soni, associate director, aid and development services, KPMG Advisory Services. Soni says donations have dried up across the country because very corporates are keen to take charge of society.

“What India needs today is not charity, but responsibility,” says Soni, citing the example of London-based steel czar Lakshmi Mittal, whose Mittal Foundation is setting up nearly 1,000 schools all over the country. “But India also has 6,69,000 government schools and a large number of them need help because of their crumbling infrastructure,” says Soni, adding that CSR has much broader implications for the nation since it reduces dependency on the government for social change. “Most governmental programmes quickly become embroiled in political manipulation, corruption, communal overtones, and bitter infighting. There is a need for public-private partnership with well-defined controls and processes for the best use of resources for social change,” adds Soni.

And that is where the big gap exists, with corporations unwilling to take responsibility for such initiatives. These are activities that are gaining pace across the world, however. As Forbes points out, many of the new mega rich in Asia are earmarking sizeable portions of their fortunes for charity. Examples are the family of entertainment moghul Run Shaw, the Kadoorie family, Australia’s Myer Foundation, to name a few.

While some good work is certainly happening in India as well, unfortunately it’s far too little. And when compared to either the profit or even the expense on lavishness of lifestyle, the figures spent on CSR programmes seem miniscule. Compare the lack of figures from Reliance on philanthropy with the very visible profligacy: a 27 floor glass palace, of which six levels are dedicated to exclusive parking for 170 cars; one floor for car maintenance; one for an entertainment centre with a mini-theatre that will seat 50; three floors of terrace gardens, three floors of health club, gymnasia and swimming pool; two floors of guest apartments; living floors for the family; and an air space floor as control room for choppers landing on the helipad above. Staff stre - ngth required is 600 and cost of construction (global firm Leighton’s reported fee is $110 million.) Charges for interior design, for which another foreign firm has been contracted, are extra.

And Mukesh Ambani is hardly alone: the combined price paid by LN Mittal for his three homes (for himself, his son Aditya and his daughter Vanisha) on London’s Billionaire Row — Kensington Palace Gardens — was just under £250 million. Since the rich have all the luck, their investment has virtually doubled over four years.

When CEOs deny themselves, it’s usually saying no to a new corporate jet — or giving one as birthday gift to one’ss wife, a la Mukesh Ambani. “Being a CEO isn’t what it used to be. Crackdowns on corporate frills like private jets and overthe- top offices have become the norm, taking some of the fun — but none of the stress — out of running billion-dollar businesses,” says Forbes, adding: “While some chief executives’ jobs may be in peril, these 10 have stuck it out long enough to partake in what’s left of the global economy. These have made our annual list of the world’s wealthiest CEOs.”

Would that they also made the list of the world’s most generous CEOs. But then, perhaps for the uber rich, charity really begins at home.

From Tehelka Magazine, Vol 6, Issue 8, Dated Feb 28, 2009