By Kim Tae-jong
The nation’s conglomerates have increased donations to charities in recent years, but nearly 40 percent of those contributions went to affiliated foundations, a report revealed Wednesday.
Some experts warned that charitable foundations affiliated to conglomerates are used to make illegal transfers of wealth, and are demanding more transparent management of such organizations.
According to the Federation of Korean Industries (FKI) and the Korea Corporate Governance Service (KCGS), donations by the country's top 500 companies reached 1.25 trillion won in 2010, up from 741 billion won in 2005.
However, it turned out that 37.6 percent of their donations went to their own foundations in 2010, down from about 50 percent in 2005.
“Conglomerates have donated a large quantity of their stock to affiliated charitable foundations,” said Kim Sung-ho, head of the Sustainable Social Responsibility Forum. “But if their stocks generate little in dividends, the donation can be seen as a means for corporate heads to protect their management position or transfer wealth to younger family members.”
He suggested that conglomerates should liquidate certain portions of their stock when donating them so that they can be used for needy causes.
The remarks come amid a growing demand for corporate social responsibility (CSR) activities, which can provide the socially-neglected with necessary support.
Major conglomerates have established non-profit foundations in a bid to share their growth and support of people in need, which are usually named after the company’s chairman or founder.
Overall, such foundations have earned positive responses because they have reached out to the needy neglected by government organizations.
But critics argue that most of such foundations receive donations in the form of corporate stocks and the actual effect of such donations is limited.
Many such foundations rely on relatively small amounts of stock dividends to conduct charitable activities without actively managing their assets to earn profits.
According to the Citizens’ Coalition for Economic Justice (CCEJ), the average dividend rate of stocks that 45 charity foundations affiliated with conglomerates had stood at only 1.59 percent at the end of last year.
CCEJ also revealed that those foundations all had stocks in affiliate firms, which accounted for about 30 percent of their stockholdings on average, while the portion of affiliate firms’ shares of 30 foundations out of 45 stood at over 90 percent.
Experts claimed that current policies and laws regarding such foundations should be revised to guarantee transparent management of charity funds.
“Foundations are required to reveal what business they are engaged in,” Kwon Oh-in, official from CCEJ, said. “But stricter regulations are needed to make sure where the donated money comes from and what it is spent on.”
Others also said charitable foundations should cooperate with other charity foundations to be free from criticism on fund management.
But the business sector expressed discontent over negative views on their CSR foundations, saying they can hurt the spirit of good-will and philosophy of the foundations.
“Each foundation has its own purpose and programs to contribute to society,” an official from a corporate foundation said. “If regulations are too strict they will only hurt our sincerity in CSR programs.”