G.M. Rao is the newest noted philanthropist in India. Chairman of the GMR Group, which operates in the infrastructure space, Rao recently pledged to use his entire personal share of the business for social good. In an interview with India Knowledge at Wharton, Rao shared his reasons for giving. It has nothing to do with the Giving Pledge — an initiative spearheaded by Bill Gates and Warren Buffett calling on billionaires to promise to donate the majority of their wealth to charity — he says, though the duo was in India at the time of his announcement pushing their proposal to the country’s wealthy. “More than money, it is essential that we give people a good education and the skills to earn an honorable livelihood,” Rao says.
An edited transcript of the interview appears below.
India Knowledge at Wharton: Earlier this year, you pledged to create an endowment worth US$340 million to go toward the company’s social responsibility arm, the GMR Varalakshmi Foundation. When did you first contemplate this move and what was the thinking behind it?
G.M. Rao: It goes back a long way; it has been in my mind for over two decades. Social responsibility was enshrined in our seven values and beliefs [codified] a decade back. Our vision statement formulated around the same time states our commitment to make a difference to society. In the early 1990s, a trust was formed and I started channelizing funds in a systematic manner from the profits of GMR Infrastructure Ltd. In 2004, with increasing fund flow, the [nonprofit] GMR Varalakshmi Foundation was formed…. It is a professionally run organization, with structured processes and systems, annual plans and review processes. Three months back, we completed a 10-year strategic plan for the foundation and we made ambitious plans. So that this plan is not affected by a fund shortage, I decided to pledge the entire portion of my personal part of our wealth.
India Knowledge at Wharton: Can you please share the details of the transfer of the funds?
Rao: The family holding is divided into four trusts of 25% each. The shares endowed by me to the Foundation represent half of my share of the business. Since I hold a 25% share (together with my wife), I have endowed the Foundation with a 12.5% share. Ordinarily, the shares will remain within the corpus of the Foundation. It is the earnings from these shares [the dividend] which will accrue to the Foundation. However, we have built in an exception clause for the group chairman to sell some shares, if an acute need arises. The first right of refusal to buy those shares goes to the other family members.
India Knowledge at Wharton: What are your thoughts and philosophy regarding philanthropy in general and what have been the major influences that have shaped your thinking?
Rao: I do not like the word philanthropy as it gives a sense of being on a pedestal. I get inner peace in giving in a world where far too many people need a break in life. Those of us who have been able to create significant wealth are the fortunate ones who are in a position to help those who have not been so fortunate. It is our responsibility to ensure that every single individual in the world gets an even chance at life. These are the values I received from my parents. Somehow, the joy of giving was inculcated as a value from my childhood. Even at school, I would be sharing everything from books to food. My parents had instilled this value in me.
India Knowledge at Wharton: Do you consider Warren Buffett and Bill Gates and their Giving Pledge to be your role models? What about Wipro chairman and philanthropist Azim Premji?
Rao: Of course, I admire them greatly. But to be honest, in India, giving has been a part of our culture from time immemorial. In my family, this was always a deep-rooted value. In my business, we have been giving back to society in our own small way for the past 30 years.
India Knowledge at Wharton: What have you learned from your role as a philanthropist?
Rao: I have learned that if giving is to be effective, it has to be in areas that can make the biggest difference to human development in a sustainable manner.
The second lesson I have learned is that the fund flow must be subject to the rigor of a professionally-run organization with clear responsibility, accountability and focus on long-term impact.
The third lesson is that personal involvement is crucial, even more than the money one gives.
India Knowledge at Wharton: What would you say are the key challenges for a philanthropist in India? Are the challenges different from those facing philanthropists in other parts of the world?
Rao: India is a country where there are far too many deserving causes. It is not at all easy to decide who is a more deserving beneficiary. It often breaks your heart to say no to this or that cause because you may believe the other cause is more deserving. In this sense, perhaps, the dilemmas faced by philanthropists in the developed countries are fewer.
Philanthropy can be very effective if there is focus on some critical areas like education and livelihood. Primary education, vocational training and health care are the [most pressing current] needs. More than money, it is essential that we give people a good education and the skills to earn an honorable livelihood.
India Knowledge at Wharton: What are your thoughts on the Giving Pledge of Bill Gates and Warren Buffett?
Rao: I compliment them for their really wonderful gesture; they have set a great example. I think it is a great thing and makes people commit to the idea of giving more consciously. And yes, they have indeed set a personal benchmark in this direction, which one hopes many more will take inspiration. The act of giving is a blessing and it comes with a huge responsibility.
India Knowledge at Wharton: The Giving Pledge received a rather lukewarm response from India’s business community during Gates’ and Buffett’s recent trip. Several Indian industrialists said they give, but that it is not the Indian ethos to talk about it. Do you think this is a reasonable explanation?
Rao: To be honest, this is a difficult question for me to answer. Yes, it may be true that the explicit response to the Giving Pledge was somewhat weak here. It may also be true that many of our people do contribute without talking about it.
India Knowledge at Wharton: Is the Indian culture and people’s nature of giving very different from that in the Western world?
Rao: In the Western world, owing to the concept of Social Security, it is the government’s responsibility to deal with issues like unemployment and poverty. So more often than not, philanthropy becomes more of a personal agenda wherein only selective members of society contribute to address these problems. However, in India these problems are widespread, given the large population. Indian giving is less organized and more individualistic and even informal. For example, it is not uncommon for average Indians to support the education of their domestic staff. Also, the impact in any one area is not felt sufficiently as there are so many causes. From ancient times we had a tradition of gupta danam,or confidential donations for poor people. This combined with the lack of systematic statistics makes it difficult to estimate the real extent of giving.
India has a long and creditable history of philanthropy in the corporate world — examples being the Tata Institute of Fundamental Research, the Birla Institute of Technology and Sciences, and many more. You visit religious places and see so many poor people being provided food, clothing and shelter for decades by large business houses. During the Bhuj earthquake, huge funds were donated by corporate houses voluntarily and quickly.
It is not only confined to wealthy people; other people also actively make regular contributions for various causes. The idea to give back to society is so deeply ingrained in our value system that it becomes our dharma [obligation and duty].
India Knowledge at Wharton: Do you think the laws in India need to be changed in order to encourage philanthropy?
Rao: In the past, the laws were fairly all right. But the recent draft tax code is taking away many of the incentives for giving. I think this may disincentivize the culture of giving.
India Knowledge at Wharton: The government is talking about a compulsory 2% allocation for corporate social responsibility. What are your views on this?
Rao: I am usually not in favor of mandating such measures. Such mandates often get reduced to window dressing. Giving has to be from the heart. Only taxation can be mandated; not charity.