What’s in a corporate foundation name? An Indian perspective

 

Cristiana Peruzzo

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Cristiana Peruzzo

The topic of what name to give to a corporate foundation has great relevance in an Indian context since creating trusts and foundations still remains the favourite route to CSR practised by Indian companies. According to recent studies, 55 per cent of large Indian companies have established foundations working mainly in the areas of education, health and rural development. Their number has increased steadily in the last few decades and it is set to increase with the passing of the New Companies Act with its much discussed clause of 2% mandatory CSR spending.

Across the globe, there are two schools of thought in relation to foundation naming. On the one hand, there is a strong argument for keeping the name of the foundation ‘slightly separate’ from the core brand and name of the company, while others espouse the benefits of closely aligning the foundation brand with that of the company for branding and reputation benefits.

Many corporate foundations in India have been officially established with the intent to provide a more formal structure for a company’s charitable giving or to set out the founding family’s vision. Family businesses have always been an integral part of the Indian economy and they account for more than 85% of all businesses in the country. As a result naming a corporate trust or foundation after a family member allows for some sort of separation while giving increased ‘social responsibility’ recognition to the corporate counterpart.

With such a rich history of family business in India there is no better example than that of the Tata Trusts, holders of 66% of the shares of Tata Sons, the promoter holding company of one of the largest Indian conglomerates where all trusts have been named after different members of the Tata Family.

Such naming strategy has multiple advantages that go beyond the tax saving benefits, including the reputational benefits for the Tata brand which have been enormous. Throughout India, the Tata name has been synonymous with philanthropic giving for many decades, an association which has come in quite handy, particularly with the recent telecommunication graft scandals in which the group chairman was involved.

The drawback of such an approach is the fact that the majority of corporate trusts and foundations keep working at arm’s length from the company, allowing for underserved CSR co-branding, when in fact there is no formal interaction between the two entities and thus no mainstreaming of socially and environmentally responsible activities in core business processes.

Having a well-known brand as part of the charity’s name and using its logo can help to attract interest and allow for an increased amount of media exposure for the charity and its activities. However, there can be negative implications.

In sharing the parent company’s name, corporate foundations must be mindful of wider reputational risks that could arise from such close branding affiliation in the event of a corporate scandal, as in the case of the DLF company’s involvement in a much talked about controversy involving the concession of land at a very reduced price in exchange for political favour. The corporate reputational damage was so great that it also affected the DLF Foundation’s image in the eyes of many Indians.

Cristiana Peruzzo is Head of CSR at Innovaid Advisory Services in Mumbai, India.

Tagged in: CSR India New Companies Act


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