James Chen’s father grew up in Qidong, Jiangsu Province, then a very rural, poor part of China. Once he had made it in business terms, he started giving back to his home village, building schools, infrastructure, hospitals and clinics. ‘The thing that really drove my interest in philanthropy,’ says Chen, ‘was the work my father did. I could see the tremendous impact it was having in his home community and I just thought it was a very wonderful family legacy.’
James Chen is Chairman of the Chen Yet-Sen Family Foundation and of the family business, Wahum Group Holdings, since his father Chen Yet-Sen died, unexpectedly and prematurely, in November 2003, just a month after the foundation was established. He now spends more than half his time on philanthropic matters.
But his father didn’t work through a foundation. Instead, he had a local representative who was a former mayor. ‘I think having the right person in place really helped to make his giving effective. This person understood how the whole system works in China and acted as a very effective screening mechanism to figure out what the good projects were and how to go about doing them. He also made sure that the projects ran well.’
In the late 1990s, when he decided he should step back owing to his age, the family realized just how much he had done for them, not just in making their giving effective but also in insulating the family from ‘a lot of the nonsense that you typically run across in China, well, probably in most parts of the world!’ As well as ‘nuisance requests’, this included ‘all kinds of silly things that he would have dealt with without us even knowing’, for example other people hijacking the name of the very successful kindergarten that his father built and named after his mother, thus gaining ‘brand equity’.
About five years ago, says Chen, without the former mayor’s intervention, his parents were getting tired of all the nuisance requests and were reaching the point where they were seriously thinking of calling a halt. And this is where he jumped in. ‘I just thought, it’s a great legacy for the family, and it would be a shame to lose it.’
Setting up a foundation
In deciding to set up a family foundation doing strategic philanthropy, says Chen, he was drawing on what he saw as best practice at family office and family business conferences he attended in the US. ‘The thinking within this whole family business/family office world is that philanthropy is one of the key components of a family enterprise,’ he explains. ‘I was exposed to the idea of strategic philanthropy and really thinking about the outcomes and impacts of giving, not just making emotional decisions to give or decisions based on a “you scratch my back, I’ll scratch yours” approach.’
His first step was to hire a consultant. Initially, he considered some groups like The Philanthropic Initiative (TPI) in the US, but ‘I felt that, number one, they were too far away and, number two, they were less sensitive to the cultural context. I was really hoping to find someone local.’ By chance he came across a consulting firm called Farris Associates, a nascent Hong Kong version of TPI founded by Terry Farris, now the Asian Philanthropy Adviser at UBS. Farris assigned one of his consultants, Cynthia Brown, to the Chen family. She is now philanthropy adviser at HSBC but still involved with the Chen Yet-Sen Family Foundation as a board member.
James Chen admits it would have been difficult without her help. In fact, the hardest thing was trying to come up with a mission statement. ‘That alone took us a year! It was very difficult to come to a consensus among the family members. Different people had different ideas and different interests and it was hard to reconcile them, particularly given the lack of information and of any feel for what the real community needs were.’ Only James, his parents and his sister were involved in this year-long negotiation over the mission statement, but they apparently had ‘some very heated discussions, which was really an eye-opener, I think for all of us’.
Even after a year, they couldn’t come up with a very clear, tightly focused mission statement; it was more that ‘we did know what we didn’t want to work on’ and had set some geographic limits.
The next step was to set up a board. Out of seven members, three would be non- family members, including Cynthia Brown, but under the deeds the family will always retain majority control.
Becoming more focused
One thing that has changed over the five years is that they have become much more focused. Initially, lacking a very tightly focused sense of what they wanted to support, they made grants in a number of different areas. ‘Through the process of feeling around and seeing what’s out there, you really start to get some sense of community needs and where we could make an impact. It was always at the back of ours minds that to have an impact you have to narrow your focus and support something that you really can become quite knowledgeable about.’ Now the foundation is supporting library programmes and early child literacy in China, Hong Kong, and Lagos, Nigeria where the family manufacturing enterprise is based.
They have now supported over 150 libraries of different sorts and James Chen does feel the family foundation has gained a lot of insight into its area of focus. ‘It was something we felt we could put our hands around. Quite frankly we continue to uncover new and innovative library programmes so I expect we’ll always be in the learning phase, but certainly we’ve learnt a lot in the last three or four years. We get the feeling that we are making a very significant impact in our area of interest in tackling a problem that is really a nationwide issue. At this point we are probably recognized as a thought leader in library programmes in China.’ Last year they held the first conference on school libraries in China.
Another thing that has changed is their mode of operating. Initially, Chen explains, they were more like a traditional foundation. ‘We were more of a relatively passive grantmaker, trying to get organizations to submit a proposal and then make grants.’ The problem they encountered in China was that ‘there are not a lot of good organizations that are up to standard’. As a result, they have become ‘much more proactive in helping some of these organizations raise their game, so to speak. I guess it’s different in places where the NGO community is much more developed. In a place like China, we find that we frequently add a lot more value to the organization by putting them through the process of applying to us for a grant. We don’t expect to give them money just for a specific programme. We are also, in a sense, building their infrastructure and capacity.’
While approaching a traditional foundation for funding could be likened to going to a bank and asking for a loan, their foundation is more like a venture capitalist. ‘We not only provide high-risk money but we also provide expertise and know-how and other types of support to make sure that the organization itself grows as well as the programme getting done.’ In one case, they set up a separate NGO to meet a need that wasn’t being met.
Chen feels this approach to philanthropy resonates well with the very entrepreneurial background of his family, and of many other Chinese families, being more proactive rather than just sitting back and waiting for grant proposals to come in.
Is there anything that would have helped them along the way? ‘Our biggest constraint is that there are not enough NGOs out there that can really do the job,’ Chen reiterates. Even though they’ve been going for four years, they haven’t yet managed to spend the whole of the annual budget set aside for philanthropy.
What would be useful, though, is a network of other donors interested in the area that they work in – though they do ‘come across them haphazardly in our work’. In fact, he says, that was one of the reasons they put on the conference last year. As it turned out, they were much more successful in meeting good NGOs who were doing interesting things than in identifying other donors.
What was Chen’s personal reason for setting up the foundation, as opposed to the family one? ‘I guess it very much has to do with my children,’ he says. ‘My worry is that they will grow up without a sense of values, family values and personal values. And it occurred to me that having the philanthropic arm to our family enterprise is really a very powerful way of transmitting values.’
His children are still very young – seven and a half, five and one – but the older two have already been participating in their philanthropic work, going on trips to their home village, visiting schools, even fundraising for a project they set up in Hong Kong called Bring Me a Book. ‘It’s pleasantly surprising to see how involved they are. You know it sticks to them, even at this young age, I find.’