Religious corporate donations, California renewables and Social enterprise funding

Academic round-up

Religion and Giving: the case of Chinese firms

Companies generally don’t do God. Yet evidence from China, supposedly home to the largest population of atheists on the planet, suggests otherwise. A study of 1,288 listed Chinese firms reveals that corporate giving is “significantly positively” associated with religion. The findings reflect a mild relaxation in the attitude of Chinese authorities towards religion over the past 35 years. Perhaps it’s not altogether surprising: Taoism and Buddhism both preach the value of philanthropy; Taoists and Buddhists are thus more likely to give, and the habit of giving feeds into their decisions at work.

The research follows a 2007 study (by Birmingham Business School’s Steven Brammer, Andrew Millington and Bruce Rayton) of 17,000 individuals across 20 countries, which showed a clear demarcation between personal and corporate responsibility. So why are Chinese firms different? The authors put considerable weight on social norms in specific geographies. China boasts about 6,000 Buddhist monasteries and 1,000 Taoist temples, which elicit a strong religious influence on surrounding populations. Regardless of belief, companies operating in these areas need to show due empathy and respect so as to connect with customers, employees and so forth.

This intriguing study comes with a few major caveats. First, a substantial discrepancy exists between private and state enterprises. The latter are always led by Communist Party officials, who tend to be atheists and put little store by religious considerations in their decision-making. Second, regardless of religion, Chinese companies don’t give very much. “Apathetic” is the authors’ descriptor for the general attitude towards corporate philanthropy. China’s needy may do well to pray for a religious revival.

Du, X et al. (August 2014), “Religion, the Nature of Ultimate Owner, and Corporate Philanthropic Giving: Evidence from China”, Journal of Business Ethics, 123: 235-256.

Running California on renewables

California could be running on renewables by the middle of this century. That’s if the Sunshine State hands control for its energy policy to scientists at Stanford University. An exhaustive feasibility study, led by Professor Mark Jacobson, a renowned thought leader in environmental engineering, shows that more than half (55.5%) of the state’s power needs could come from 1,200 concentrated solar power plants (each with a capacity of 100MW). About 25,000 onshore 5MW wind turbines could supply a further third or so of the total power required by Californians. The researchers calculate that a collection of 100MW geothermal plants, coupled with small-scale wave devices and tidal turbines, would suffice for the remainder.

All that is stopping California going fossil-fuel-free (other than entrenched political and commercials interests, of course) is the $1.1 trillion price tag. The paper’s authors are confident that this huge investment in new renewable power infrastructure (which would all be installed by 2020 if they had their way) would pay itself off in 11 years. The ancillary benefits, meanwhile, would be vast. The researchers anticipate the creation of 220,000 new jobs for the construction and operation of the proposed power facilities, with total employment earnings of $11.8bn per year over the next four decades. As for public health, the reduction in pollution-related disease would knock $100bn off the annual bill for healthcare costs.

Jacobson, M et al. (July 2014), “A roadmap for repowering California for all purposes with wind, water, and sunlight”, Energy, 73: 875-889.

Financing innovation for social enterprises

A raft of new legal entities has emerged in the US to help, among other things, social enterprises to raise capital. Social entrepreneurs can now set up as low-profit limited liability companies (so-called L3Cs), for instance, or as “benefit” or “flexible purpose” corporations. Yet few do. The reason is trust, the authors suggest. The problem revolves less around legal form than around finance. Owners of social enterprises need to be confident that capital providers aren’t going to compromise their commitment to a double bottom-line. With standard equity and standard debt, such trust isn’t there.

This paper makes the case for an alternative financing mechanism: flexible low-yield debt or, as the authors prefer, “Fly Paper”. The concept is similar to a convertible bond, which gives investors the right to a stream of interest payments but no role in enterprise governance. So no meddling, basically. In the event of a “triggering event” (such as the share price exceeding a certain level), convertible bonds transform into equity and investors begin to look more like your classic shareholders.

Where a Fly Paper approach differs is that purchasers agree to take long-term interest payments that deliver a below-market-rate yield. If the social entrepreneur tried to sell out, meanwhile, they can protect the social mission of the enterprise by converting their asset into equity shares and thus exercise a bigger say in the business. Fly Paper can also act as a pay-in-kind debt, with social entrepreneurs able to defer making interest payments to investors by paying these obligations in the form of more Fly Paper. Such “patient capital” is especially attractive to those social enterprises that require time to grow.

Brakman, D & Dean, S (Summer 2014), “Creative Financing for Social Enterprise”, Stanford Social Innovation Review, 12: 50-55.

From Campus

Professors Lamar Pierce and Michael Toffel won the 2014 Research Impact on Practice Award for their work on the auditing industry. The award is given by Canada’s Network for Business Sustainability and the Academy of Management.

The UK government has given six universities, including Imperial College London and the University of Cambridge, a £3m grant to fund research into energy efficiency in non-domestic buildings.


Academic news  Business School Bulletin 

comments powered by Disqus