According to the latest policy directives issued in China, “The Tertiary Distribution” is about to be put into effect. Citing various sources, the so-called “The Tertiary Distribution” refers to the further adjustment of social income distribution through social entities’ (enterprises and individuals) voluntary, charitable donations, which is in the stage of micro-adjustment. In the meantime, the policy also clearly instructs that the country should encourage high-income groups and enterprises to give back to society to a greater extent.
There are many high-income groups, including celebrities and real estate speculators. And, high-income companies, in terms of financial reports, include leading Internet companies, China’s top five banks, and other state-owned enterprises. Here, we will discuss what Internet companies should do in “The Tertiary Distribution.”
From the view of current beneficial donations, Internet companies have played an increasingly important role. Let’s take the flood disaster that recently occurred in Henan as an example. TENCENT donated 100 million yuan, Alibaba donated 100 million yuan, and Xiaomi donated 50 million yuan... But there are problems with the current way of donating by Internet companies.
1. The burden born by Internet companies is heavy. Although the leading Internet companies have made plenty of profits, many companies are not profitable or even in the red. After the flood disaster of Henan province, Pinduoduo, the largest agriculture-focused technology platform in China, also announced a donation of 100 million yuan. It should be noted that the company is at a loss. The large-scale donation will also deliver an illusion to society: These companies are capable of donating more money.
2. There is a phenomenon of unrealistic comparison among Internet companies. The beneficial donations conducted by Internet corporates have entered the stage of comparison, which is related to Chinese cultural traditions. The donation amount of BAT (Baidu, Alibaba, and Tencent) is in one echelon, while that of XIAOMI-W and OmniVision is in another echelon. The comparison on donation amount makes companies complain, and it also makes the public feel that Internet companies are flaunting the considerable wealth.
3. Public beneficial donations are not sustainable. Tencent donated 100 million yuan to help people in Henan fight the natural calamity. What should Tencent do if there is another city suffering from disaster? How much should Tencent donate if there are more natural calamities? Global warming will give rise to more and more disasters. Therefore, the immoderate, planless donations will become a big unknown for the future operation of these enterprises.
The United States is the country that has done the best in public welfare. As a leading conglomerate in the United States, how does Apple deal with “The Tertiary Distributions?”
Apple has partly disclosed the information on its charitable donations. According to the disclosure, charitable donations completed by Apple can be divided into three parts: a. Employee Giving Program; b. Community Investment Team; c. Grant Program.
The second public welfare plan, namely “Community Investment Team,” is for NGOs across the globe. Since the amount has not been disclosed, it is estimated that the amount of donation is not much. The third plan “Grant Program” is for the locations of Apple/groups, with an annual quota of $1 million. Only the first plan is the focus of Apple’s philanthropy.
Apple’s Employee Giving Program is based on employee donations, and the company conducts a match rate of 1:1. Beyond that, Apple will also match the time spent by employees in public welfare activities at $25 per hour. Since the implementation of the project in 2011, more than $600 million has been donated by the company and its employees, benefiting 34,000 organizations worldwide, and employees have together contributed 1.6 million hours of work.
The advantages are listed as follows:
1. The company can be better protected. The company’s move of placing employees on the front line of public welfare undertakings can arouse the enthusiasm of employees and also hide the company behind them. Apple will never get caught up in public opinions like “Why don’t Apple donate as much as Alphabet?”.
2. Tax avoidance is best realized. Donations made by enterprises to public welfare undertakings will always be suspected of tax avoidance and will also be questioned by the public. However, if the donation amount of an enterprise is matched by that of employees, the company’s expenditure can be figured in the employee’s expense item (salary) in the company’s financial report, which reduces the tax base.
3. The scope of charity is wider. Apple has a large number of employees spreading widely around the world. The charity projects they seek on their own are far more than those concerned by the media. Apple’s philanthropy spreads to all corners of society, which will be pretty good for the overall image of Apple. Compared with the recently happened disaster in Henan province which attracted countless donations, there are more other public welfare undertakings that have not been reported by media and paid attention to by both individuals and companies. If employees of Tencent, Alibaba, and Xiaomi can be mobilized to explore more public welfare projects, the inclusive work for society will be much better.
To my point of view, Chinese Internet companies should learn from Apple’s experience and earnestly welcome “The Tertiary Distribution.”
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