Azim Premji has raised the bar for philanthropic commitment by allocating the economic ownership of 34% more of the equity base of Wipro to the endowment that supports the activities of the Azim Premji Foundation, which works extensively in the field of education. Already, about 33% of Wipro’s equity has been allocated to the endowment. This leaves Premji with about 7% ownership in the company directly and through entities other than the trust. The trust would now own and be entitled to the economic benefit from 67% of Wipro’s shares, about 26% of the equity being held by the public. Premji has allocated sizeable other assets as well to the Foundation, bringing the value of its corpus to Rs 1,45,000 crore.
The Azim Premji Foundation works extensively with state governments in improving the quality of education. This has a multiplier effect, as compared to ploughing a lonely furrow and hoping others would learn from the success of the Foundation’s solitary ventures. This benefit is significant in India’s context, where State schools are dysfunctional for the most part and children receive education that fails them and the nation. Strengthening the Foundation’s work would augment and extend this benefit. At the same time, this has a downside, which cannot be ignored. Taking 67% of Wipro’s stake out of any possible contest for ownership would take Wipro outside the market for corporate control. This is potentially a dampener for Wipro’s share price and even for the company’s eventual performance under whoever succeeds the promoter. A functional market for corporate control is one of the guarantors of high corporate performance.
That said, we hope more of India’s captains of industry would come forward to follow Azim Premji’s example and spend more money and time on philanthropic activity. Given the limited reach of the State in many sectors of development, there is much that private foundations that deploy business savvy to developmental work can contribute to society. Premji shows how corporate social responsibility transcends a statutory obligation.
This piece appeared as an editorial opinion in the print edition of The Economic Times.
via Bravo, Azim Premji! CSR gets big boost