Rethinking Corporate Philanthropy — The Do Good Investment Company
In order to encourage listed companies to pledge for charitable purposes, potential benefits of such an approach need to be communicated. It is obviously far easier to convince prospective companies (“donors”) if the financial and reputational benefits outweigh the financial cost of a pledge.
The idea is to create an umbrella investment vehicle, named “The Do Good Investment Company”, which serves as a ‘Charity of Charities’. Listed companies (“Donors”) pledge a portion [0.5%] of their share capital or cash proceeds (whichever is more tax efficient) to this independent entity.
High level mechanics
The Do Good Investment Company receives the shares by donors and is responsible for:
- Conducting due diligence on charities
- Distributing the funds based on the preference, selected by the donor
- Monitoring how the funds are deployed by the charities receiving the funds
- Providing regular updates and reports to donors on how their share capital was distributed for charity purposes (these reports can be seamlessly included in the donor’s Annual Report / website to support CSR efforts); and
- Raising awareness for The Do-Good Investment Company, acquiring new donors and identifying new charities
Donors can allocate their funds to specific purposes based on a list of charitable purposes such as (a) fighting poverty, (b) advancement of education, (c) community development, (d) advancement of arts, culture, heritage and science
In order to increase shareholder engagement, donors can potentially enable their shareholders to vote for charitable purposes at the Annual General Meeting
Key benefits to companies (donors)
- Consolidation and outsourcing of CSR / charity efforts
> This is a novel way for companies to consolidate their efforts in charitable purposes at Group level and effectively outsource part of their CSR initiative to an independent organisation with expertise in ‘doing good’
> Companies save employee hours and reduce cost while increasing the impact of the funds
- Enhancing transparency
> By consolidating charity efforts, companies can be more transparent with public and their shareholders on how they donate money
> Different companies have different ways on (a) how much and (b) how they donate money. Using a streamlined approach, companies can increase transparency of their CSR efforts
> It also reduces reputational risk which may come from distributing funds to controversial charitable purposes
- Increasing shareholder engagement
> Companies could potentially get their shareholder to vote how the pledged [0.5%] share capital or cash proceeds are distributed. This would help them to increase awareness of their CSR efforts and shareholder engagement
- Targeting millennial as shareholders / increasing brand loyalty
> Studies have shown that millennial care deeply about sustainability and whether companies are socially responsible in the context of investments
> By being part of The Do Good Investment Company, companies can demonstrate their commitment and attract millennial as shareholders
Governance
The Do Good Investment Company is governed by an independent Board, comprising of business people and celebrities with connections to charities with the objective to (a) govern independently and (b) advance the cause through their connections
- High profile business people with a track-record in philanthropy such as Richard Branson, Tom Hunter, Lord Sainsbury, Michael Spencer
- Celebrities with connections to charities and a track-record in philanthropy such as Elton John, JK Rowling
