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Growing Charity in China

Growing Charity in China. What legal changes would help?. American Evaluation Assoc. Meeting on October 19, 2013. Presentation by Karla W. Simon. Formerly Catholic University of America Now Chair at ICCSL; www.iccsl.org

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Growing Charity in China

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  1. GrowingCharity in China What legal changes would help?

  2. American Evaluation Assoc Meeting on October 19, 2013

  3. Presentation by Karla W. Simon Formerly Catholic University of America Now Chair at ICCSL; www.iccsl.org Blogs at http://philanthropynews.alliancemagazine.org/author/karla-simon/ Civil Society listserv manager on ICCSL

  4. Relationship to this conference This presentation discusses the issue of changing the legal environment for CSOs in the context of evaluating them As of now there are few mechanisms for the public, stakeholders, and boards to actively monitor and evaluate the activities of CSOs Most monitoring is done by the state That will lessen as the government ramps up plan for direct registration So there is an urgent need to address these issues

  5. Evaluation related topics Many foundations in China are operating foundations because they do not “trust” the CSOs This is not a good way to support the development of charity at the grass roots The mix of foundations in China should begin to be more weighted toward the grant-making type How to accomplish that?

  6. Legal issues for a better evaluation system This will be discussed both from negative and positive aspects I will look first at the proposed “charity law” to see the extent to which the necessary rules will ensure that grass roots CSOs can be trusted I will also look at the regulations either as they exist or as they will be proposed I will then look at what changes should be made

  7. Current discussion of “charity law” • This may or may not be a good thing • Timing may be off because it should come after the regulations are well in place • Draft really not very good – not well-thought-out • It needs to reflect more international experience

  8. Fiduciary responsibility should be a pre-condition to charity certification One thing that common law countries (US & Canada) have is the concept of “fiduciary responsibility” This does not exist in civil law countries unless it is legislated For example, in Germany, the concept of “Treuhand” is in the law (trustor) This need to be imported to China as a precondition to charity certification

  9. What is “fiduciary responsibility?” It requires both board and management to act only in the best interests of the organization This is ensured by common law in common law countries In Germany, for example, legislation requires this

  10. Conflict of interest In addition to the general concept of fiduciary responsibility some greater clarification may be needed For example, good CSO governance practices in places like the US and UK require special conflict of interest rules to be added to the charter or bylaws These might specify, e.g., that only two blood relatives may serve on the board Japan has this as well

  11. The current law in China fails in these respects Regulations and draft charity law both fail to address these items They seem to imply that “charities” can be certified (as in Shenzhen), but they do not discuss crucial aspects of what “charity” implies in common law countries that use the terminology As stated, these are fiduciary responsibility and conflict of interest

  12. Non-distribution of assets The other important legal change is to absolutely require “non-distribution of assets and earnings” of charities This issue is left very unclear in current regulations although it seems to be implied More specificity and clarity is needed

  13. Failure to address these issues is not good for charity development in China The best model in East Asia is Japan In 2006/08 there was a radical reform of the laws affecting charity or public benefit organizations Imported was the concept of a charity commission (of British extraction) Such an entity can certify that organizations meet the described standards And they work well, as English practice tells us

  14. What should China do? 1. Put together a team to visit various countries to study their systems (England, Japan, Australia (which has a new commission)) 2. Convene an international symposium to discuss ideas both inside and outside government 3. Encourage officials of good will both at MoCA and Legislative Commission of State Council and NPC to attend the symposium

  15. Address a new legal framework by developing new ideas The deficiencies in the existing regulations and draft charity law need to be discussed A new team will help to address them and propose new ideas for China But this must be a learning experience and ideas from other countries adapted to China’s specific situation

  16. Adding three concepts will improve legal framework • Charity in China needs a boost, and foundations need to be encouraged to trust CSOs • Adding three concepts will help in this regard: • Fiduciary responsibility • Conflict of interest rules • Clear non-distribution constraint

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