Spreading Wealth

There is a trend towards a socialized Capitalism, qualifying Milton Friedman’s simplistic definition that corporate social responsibility (CSR) meant corporations maximizing value for their stockholders. Today profit-minded business is converging with social service/value, the former finding validation in the latter.

It’s an emerging rethink on how Entrepreneurs are doing business. If John Gokongwei’s donation (some Php10 billion), or hotel magnate William Hilton’s pledging 97% of his $2.3 billion fortune to the Hilton Foundation is any indication, it is related to the businessman’s total view, something we are only beginning to understand.

Had this trend prevailed in 21st century Wall Street, instead of greed, America – and the world – wouldn’t be in this mess. Ironically, as capitalists attributed the fall of communism to thievery and greed, the same thing has shaken capitalism. Said John Kenneth Galbraith: “Under capitalism, man exploits man. Under communism, it’s just the opposite.”

It’s at least something Corporate America is doing to ease subprime-caused pain. Corporate donations, reaching $12.72 billion in 2006 ($295 billion including individual contributions), exceeded $15 billion in 2007, totaling $306.4 billion with individual contributions – nearly half the TARP fund! And individual giving is unaffected by recession. Microsoft’s Bill Gates pledged $3.8 billion, from $3.3 billion, to the Bill and Melinda Gates Foundation in 2009.

As the Financial Crisis shatters economies, corporate philanthropy is Private Sector’s crucial contribution to social assistance, especially to the Crisis’ victims.

Reorienting Corporate Citizenship

Despite better footing, the Financial Meltdown will slow the Philippine Economy. Worst-case forecasts Q1, 2009 GDP growth slowing to 3.5% (worsening to 0.5% in Q2, 2009, per Barclays Capital). Our 27.6 million (2006) poorest of the poor (30%) will inevitably suffer most.

It might be time to redouble efforts lessening the low and middle-income classes’ financial burdens. A program perhaps named “Tulay sa Pag-Unlad,” would help bridge the gap between their income, and necessary spending.

Increasing food subsidy efforts, perhaps through food coupons for poor schoolchildren, is one possibility. This, however, doesn’t ensure quality education – the role of teachers who, paid extra, may establish “honors” sections administered an extra hour of daily instruction.

With CHED’s assistance, 400 more science high schools could be established across all districts creating “magnet schools”, attracting the talented with quality teaching, and generating construction jobs. The Federation of Filipino-Chinese Chambers of Commerce in the Philippines and School Building Program estimates P481,500 per 45-student classroom. At eight classrooms per school, this would entail a capital expense of Php1.54 billion. Per teacher earning Php12,000 (inclusive of a 20% premium for “quality”) would entail an operating expense of Php156,000 annually. At one teacher per assumed classroom, that would require a summary teacher salary budget of Php500 million annually. Total cost is Php2.04 billion, sans of course utilities, indirect overhead expenses, and others.

Further, the national Government can study to exempt for the next two years all students enrolled in their final year in state universities and colleges (more than the 140,000 tracked by CHED in school year 2003/2004), from paying tuition, instead of a direct doleout or reimbursement (that may be diverted to other essential expenses).

Estimated at only Php2.6 billion (1997-2007), Private Sector philanthropy must clearly step up in these economically-turbulent times. Aside from education, CSR efforts today must look at restoring what the Financial Meltdown threatens: jobs. Global recession, slowing local and international businesses, will increase Filipino unemployment (projected at 9% in 2009).

CSRs developing livelihoods – from skills training to jobs – will tool Filipinos for employment here and abroad. Called creative capitalism, it extends markets and improves welfare through business with the needy. It makes sense. The “mass” middle-class market constituted 20% of the population, versus the upper class’ 0.2% (NSCB, 2003). Annually earning Php251,283 to Php2.05 million (and augmented by Filipino Expat remittances), an estimated up to 85% is spent.

True Value

CSR needn’t be world-shaking. Bangladesh’s Grameen Bank offers micro-financing to poor people desirous of starting businesses. Of 2008’s about $7 billion disbursed, 98% was repaid. Local banks – like BDO – could offer similar loans to low and middle-class income Filipinos, bundled with professional Entrepreneurial guidance, helping ensure business success and loan repayment.

The most significant CSRs provide long-term social development. For example, a leading Marine Technology company is propagating coral growth around Boracay and Zambales waters, with a patented, pH-neutral artificial reef. Its goals: rehabilitate marine biodiversity, beautify tourist areas, and ultimately, provide food security and lasting livelihoods for fisherfolk. It incidentally comprises the country’s first, valid response to the UN Coral Triangle Initiative (CTI), which espouses marine resource protection for food security and livelihood.

As the Economic Crisis worsens, our poor may face increased hardships. Private sector must intercede; joining forces with Government to uplift their lives.