Why to donate his huge assets? Interview with Mr. Gao Yang, the first Chinese equity donator

Written by Zhou Mo


In the spring of 2016, Shanghai Zhongjing Industry (Group) Co., Ltd. was awarded the outstanding contribution award in celebration of the thirtieth anniversary of the founding of the Shanghai Soong Ching Ling Foundation. Award - winning reason is that Mr. Gao Yang, company's founder and chairman donates all his company’s equity to the SSCLF, which “improves the foundation’s assets structure, strengthens the foundation’s hematopoietic function, broadens the foundation’s healthy development channels, and makes a useful attempt for charity industry’s funding sources diversification and capital preservation and increment marketization.


Mr. Gao Yang's equity donation not only becomes a pioneer in the charity industry, but has aroused widespread concern in society. But over the past five years, he has been unknown to the public, keeping promise, fulfilling the contract, and unwilling to make any personal publicity, and he does not accept any interviews. On the eve of Mid - Autumn Festival this year, always low-profile Mr. Gao Yang exceptionally accepted this interview, to give detailed answers to the questions interested to everyone.


Q: In China, to do charity is basically to donate money, materials or to be volunteers, and you donate all the equity of your company to a public foundation, this is something really unheard of. Moreover the company has been in a stable profit stage and the company's assets have reached 7.2 billion yuan. Almost all of the people who have heard this information are very curious, what are the reasons for you to make such a decision?


A: Actually, I just want to do something good. Under the specific circumstances of China at present, the development of public welfare industry has been restricted by some factors: Firstly, the donation has not yet become the norm. Confronted with major events, such as SARS, earthquakes, floods and other major emergencies, the people and businesses are suddenly very enthusiastic and active, but usually not many people and businesses make donations. Just like the tides, when the tides surge, high tides come forward wave after wave; when the tides recede, the sea restores silent and calm. Secondly, regulations provide that the public funds used to engage in public welfare expenditure are not less than 70% of the total income of the last year. It is very rare in the world. The restriction of time and the amount of money is bound to lead to the fact that a lot of public welfare projects can only be one-time and short-term. This is like one hammer trading, and is not conducive to its continuous development. Thirdly, regulations of foundation’s staff wages and benefits and administrative office expenses shall not exceed 10% of the total expenditure of the year. Such a provision often makes the public welfare institutions facing with an embarrassment. Faced with an emergency, more donations at concentrated time often need more manpower to spend the donated money or materials out. Handling the donations not properly or not timely, will be criticized by the donors and even questioned by the public opinion. But more manpower results in higher expenditure and management costs, probably surpassing the given standard. This kind of higher or lower phenomenon, to a certain extent, restricted the healthy operation of the project. In considering China's special environment, I think that the traditional forms of donation are not conducive to the development of public welfare institutions to a certain extent, so I made the decision to donate all my company’s equity.  I hope that through more optimized asset structure of foundations, more sustainable and predictable sources of donations, more stable charity team, the full-time dedicated charity workers can have a decent life to increase its vitality, so as to promote the sustainable development of public welfare undertakings, make it have flowers in full bloom in four seasons every year.


Q: You donated 100% of the equity, what is the reason leading to the final actual donation - 97.5% of the equity? What are the effects of equity donation on your family and employees?


A: Legally, I have donated 100% of my company equity. In 2011 we completed 97.5% of equity donation in the transfer work, but the remaining 2.5% of equity did not transfer as yet. Because of the income distribution policy, tax policy and other reasons, it hasn’t realized 100 per cent equity transfer. When the policies match exactly, we can complete the transfer procedure of the remaining equity. Just like you bought a house, though the property certificate is not fully completed, but in fact the house belongs to you and you can live in it. The charity undertaking is developing while the times are moving forward. With the implementation of China's first “Charity Act” on September 1, this year, the relevant rules will be more perfect, I believe that my desire will come true.


I have my family, as well as close friends and colleagues, I have the responsibility to provide them financial security. Their worries about their future life have been successfully resolved through the donation contract agreement. In addition to five social insurances and one housing fund paid by the company for all employees, I also buy supplementary commercial insurance for all employees (including retirees), spouses and minor children in reading through "Gao Yang’s Colleague Asset Management Company Limited". Whatever health insurance and social security are not covered will be resolved by commercial insurances.


My colleague, not everyone has high salary. When they encountered trouble or worry cases, they may face some pressure. The company will be concerned about them, so that they can maintain a suitable life level. For example, one child is so excellent that is admitted to a foreign university, but it is difficult for the family to afford the tuition. The employee can apply to the company for certain financial support. It is conducive to mobilize staff’s enthusiasm and creativity, and the company can unite colleagues to pursue company’s better development. The flames rise high when everybody adds firewood to it. High flames will illuminate the future of charity cause’s development.


Q: There are many foundations in China with some negative news in recent years. What do you consider to donate your company’s equity to the Shanghai Soong Ching Ling Foundation?


A: Through multiple in-depth understanding, I think the Shanghai Soong Ching Ling Foundation has an excellent team which is good at management and operation which is normative, open and transparent. The foundation’s first chairman, Mr. Wang Daohan’s working style and practice won very good reputation in the global Chinese. Mutual trust has been set up so many years between me and Chairman Lu Ping who passed away last year, Vice Chairman Mao Jingquan, Zhuang Xiaotian, Xia Keqiang, Xie Lijuan and Xu Dexin, Executive Vice Chairman Zou Wei and Secretary General Guan Jianhua. In addition, it is related to my life experience in foreign countries. There are two kinds of philanthropist abroad, one category, such as Gates Bill, he set up his own private foundation to do charity. Another category, such as Buffett, he donates his fortune to one foundation to operate for him. Its core is that the assets can not be sold and the earnings portion can be used to operate the public welfare projects. I prefer to choose Buffett’s method. I think it is necessary to clarify the concept that a non-profit organization is allowed to make money, but the earned money can not be used for dividends. In this way, the foundation will have a stable source of funds.


In the process of negotiations, the Shanghai Soong Ching Ling Foundation entrusted the third party professional intermediary to conduct a rigorous due diligence on the company's sources of funds, asset status, including policy implementation consultation to the government department in charge of policy, finally confirmed the donation risk does not exist, and donation is effective.


Q: After Donation it means you have turned from the boss of the company into a professional manager of the company owned by the SSCLF. How do you handle the relationship with the SSCLF?


A: The Shanghai Soong Ching Ling Foundation is a public welfare organization registered in accordance with the law. There are several aspects of intersections between SSCLF and me: 1. I am the foundation’s donor, a registered director of the foundation and also a member of SSCLF’s director nomination committee. And I participated in a number of Foundation’s important decision-making; 2. As the manager of the Zhongjing Industry Company (Group) Co., Ltd, I accept the foundation's leadership and supervision and I provide SSCLF an annual audited financial report , an annual business operation report and a working plan for next year; 3. In equity donation agreement, we agree to set up "Lu Jiaxian and Gao Wenying (my parents) Special Fund” in the foundation into which the donated fund will be annually injected according to the equity donation agreement. The SSCLF executive team will use the donated funds to operate and implement some public welfare projects in accordance with the equity donation agreement.


For example, in cooperation with Beijing Normal University Zuhai campus, we set up the first charity professional training institute in China to train professionals with ideal and capability in public welfare work and promote professional and specialized management. So far, three sessions of students have graduated and many students have been hired by well-known national foundations in China. We are now supporting their efforts to apply for the establishment of a charity college. I just take the lead in this field, and now there are other universities in China to follow up. Traditional donated funds is often changeable, most of them is usually only once, so that it is difficult to operate some long-term, continuous projects. My point is to keep doing good things that have been pursued and confirmed right, to make contributions to the public welfare projects that the government has not done at present, but the society needs urgently.


In short, both sides reach a consensus: Play our own advantages respectively to solve our common problems in doing public welfare cause. We are in pursuit of effectiveness and efficiency as the goal. We try our best to create the path to use the profit operated by a company to help the development of a nonprofit foundation, so that the public welfare undertaking is not only free donation, but people can also realize larger and more magnificent public causes based on a charitable assets benign growth. The Shanghai Soong Ching Ling Foundation is excellent and reliable. They think I am a relatively excellent business manager. Speaking a little bit more popular, I am responsible for making money, and they are responsible for spending money. I try to work hard to provide more financial support for the SSCLF’s public welfare projects, different from other foundations.


Q: You have worked in foreign countries for many years. Compared with foreign charity, what do you think of the present status of China's charity? What is the most urgent problem to be solved at present?


A: When I was in Austria, the local Red Cross and the churches always held many charitable activities. They often organize students, believers, volunteers taking some small money jars to raise money on the streets. After donation, the donor’s sleeve will be affixed with a logo. You will slowly have a clear understanding of the public welfare undertaking through participating in it for a number of times. I was gradually affected by those activities. I also hope that others will be affected by my actions, so that more people will join the public welfare undertakings.


The development of China's public welfare undertakings is not satisfactory, especially lacks of long-term effective mechanism. For example, with the release of the two child policy, pediatrician shortage appears apparently and skill training is a timely assistance for grassroots pediatricians. Last year, in cooperation with the Zhejiang University we conducted skill training for the pediatrician at county (District) level in Zhejiang province and Mount Huangshan city and county (District) level, Anhui province, to upgrade their service level, improve the basic living conditions of grass root pediatrician, optimize the local children's medical resources and improve the health level of rural children. Next, we will hold skill training for pediatrician at township level hospitals. We also have supported “farmer entrepreneurship relay baton” project and cleft lip and palate surgery project in West China. I want to explore a new model for developing public welfare undertakings. Specifically, firstly: Expand the skill training channels to improve the professional level of doctors and teachers; Secondly: Provide economic assistance every year for those receiving training and stay voluntarily at the grassroots level to serve the local people, narrowing the income gap with their colleagues at higher level units; Thirdly: As long as they are willing to stick to the grassroots to work, we will continue to provide financial support. Such public welfare training is a useful supplement to the government, an effective improvement for the individual, a strong boost to the society. To do a good project needs many years’ efforts, more ambitious vision and more refinement of goals.


Q: You have been very low-profile after donating your company equity. You decline to have media interview. Even today you also declined to take pictures for publicity, this is for what consideration?


A: There are a variety of claims about my donation, some says he is to be famous, and some says it is for tax evasion. To donate my company equity is not to be famous, and I just do what I want to do, making me feel comfortable, and I feel I have found a good place for my wealth to go. While returning my wealth to society, I find a lot of good feeling with my life. As for the tax, the state has expressly provided that pre - tax deduction is granted for my company’s donation for public welfare projects not more than 12% of the total annual profit. This is the same right of any enterprise, in which the Zhongjing Industry (Group) Co., Ltd. has not received any special care because of the equity donation.


I think there are two ways to do charity: One way is to strive to improve their popularity, through the celebrities’ effect to promote the public to participate in public welfare activities, to help people or groups in need of help, this is more common practice.  Another way is to be obscurity to do things by themselves. I may belong to the latter kind of person. If I said that my equity donation can affect some people, to drive a group of people. That is a small number of wealthy people. I hope entrepreneurs take good care of themselves, their families, friends, colleagues, they may do by themselves or entrusted public welfare institutions to do charity. For these wealthy people and the majority of enthusiastic charity people, it is not important to see my photos, because I am not handsome, just have a little bit of my own ideas. Thought is not seen through the photos. Of course, if there are some good people to offer communion or one-on-one communication, I am willing to attend.


(From SSCLF’s Quarterly “Change”, second issue in October, 2016)