Family Unity Through Philanthropy: A Case Study of Sun Hing Group in Hong Kong

Though not a large-sized family business in Hong Kong, Sun Hing Group defined its uniqueness by uniting the family through philanthropy.
 

Though philanthropy has long been accepted as a way of giving back to society, the majority - about 63% - of philanthropic organizations in Hong Kong have a relatively short history. The number of philanthropic organizations there nearly doubled between 2003 and 2012, while the amount of endowments also showed a two-fold increase. However, due to historical reasons, most endowments were from private sources and were poorly managed. By 2012, there were 7,194 registered philanthropic organizations in Hong Kong which collectively contributed HK$9.45 billion to various charitable undertakings. 
 

Family philanthropy has played a critical role in resolving social problems in Hong Kong. The charitable efforts of family businesses are generally driven by the following factors: first, to establish a family tradition that will ensure family values are passed on; second, to develop a sustainable family tradition; third, to impart family values to the younger generation.
 

Most family-based philanthropic organizations in Hong Kong are committed to education and poverty alleviation causes. These organizations often follow traditional ways of doing good by financing charitable activities that closely match their personal aspirations. Family philanthropy became better managed in the late 2000’s in order to make more strategic contributions and exert a bigger influence. An increasing number of family businesses chose to set up family foundations for charitable purposes. By 2012, family foundations had donated a total of HK$2.24 billion, accounting for 33% (the largest proportion) of the total endowments made in Hong Kong.
 

The Legacy of Simon Lee Kwok Yin

Sun Hing Hong, the predecessor of the Sun Hing Group, was founded by Lee Chi Hung in Hong Kong in 1945. In its early days, the company provided support and distribution services to local and international shipping firms. Lee Chi Hung had three sons, and only the youngest, Simon Lee Kwok Yin, assumed a full-time job at Sun Hing. Lee Chi Hung passed away in 1967, and Simon succeeded him as Chairman and became the majority shareholder. Simon’s two brothers became minority shareholders.
 

Under Simon’s leadership, Sun Hing Group expanded rapidly to cover a wide range of logistics businesses such as warehouse leasing, transportation and trucking. It has also developed partnerships with shipping firms around the world. In addition to logistics, Sun Hing operates an insurance agency, a logistics brokerage house and a real estate company. It further diversified in the 2000s, entering the fields such as IT management solutions, financial investment, training, and conference facilities management.
 

Simon joined the company in its early days. His dream at the age of 18 was to be a lawyer, which, unfortunately, was smashed as his family could only afford the college tuition of his elder brother Lee Chung Yin. Recalling these early hard times, Simon was determined to give back to society, and he remained active in public service and philanthropy throughout his life.
 

In the 1950s, Simon served as a volunteer on the Hong Kong Auxiliary Police Force and became an active member of the Hong Kong Lions Club in 1958. After his son, Lee Ka Yiu, lost his hearing at age 2, Simon got involved with the cause of educating hearing-impaired children. He was a founding member of the Hong Kong Society for the Deaf, and in 1979 began what became a 20-year stint as chair of the organization. Inspired by his personal life experience, he also initiated several other philanthropic organizations including The Hong Kong Liver Foundation and the Hong Kong Digestive Foundation.
 

In the mid-1980s, his elder brother Lee Chung Yin suggested that he sponsor the student residential building expansion project at The University of Hong Kong. Simon agreed. His tax advisor proposed setting up a foundation so that Simon could make the endowment (in his own name rather than Sun Hing Group) in the most tax-efficient way.
 

Established in 1985, the Simon K.Y. Lee Foundation was one of the earliest family-based philanthropic organizations in Hong Kong. In 1990, Simon decided to run all personal charitable activities through this foundation. He hoped to contribute 10 percent of Sun Hing’s profits annually to charity. He said that this amount of money could be regarded as the annual compensation bonus he could have taken from the company. His two elder brothers, as directors of the company, agreed to his plan.
 

The Foundation set up its statutory Board and four board directors were assigned, including Simon, his wife Lee Fung Kung Wah, his eldest son Philip Lee Kar Fai and a family friend Chan Kow Tak (an orthopedist). Simon believed that a non-family director with a medical background would broaden the Foundation’s horizons, but in fact he was always the ultimate decision maker of the Board.
 

Since the 1990s, the Foundation has supported numerous education and healthcare-related projects in Hong Kong, Canada and mainland China. These include the establishment of three student residential halls and one senior care room, dozens of medical research studies, and scholarships and medical chairs. Simon was indeed a generous giver, but he did little to follow-up on how his endowments were actually used and what their effect was. 
 

On the occasion of his 80th birthday, Simon decided to establish the Elderly Fund as a subsidiary of the Foundation and allocated HK$100 million for its future activities. He asked his grandson Edwin Lee and daughter-in-law Mable Lee to handle the Fund’s daily operations while he himself remained as the sole decision-maker of the Foundation, and all other philanthropic initiatives, until 2007. Recognizing the importance of a well-knit organizational structure, the younger family members, Edwin, Mabel and Mabel’s husband Philip, together convinced Simon to set up an advisory committee for the Fund. They invited academics as well as medical and public service experts with a special focus on the elderly to serve on the committee.
 

It took a year for the Fund to prepare for the launch of its first batch of projects in early 2008. The Foundation and the Advisory Committee defined two project themes: transitional care for discharged elderly persons and dementia care. For the first project, the Fund worked together with the United Christian Medical Service to provide transitional care for discharged elderly persons; the second project identified elderly persons with mild cognitive impairment, with the idea that early intervention could hopefully slow down their cognitive deterioration and reduce the risk of dementia.
 

Since its establishment, the Advisory Committee has been assisting the Foundation in developing funding strategies and philanthropic activities. One member of the Committee suggested that the Foundation should concentrate its resources on flagship projects, work out plans to promote social innovation and advancement, and provide benchmarking for other large groups. In the meantime, he also warned that the Foundation should avoid funding the same project again and again. Simon and Edwin thought highly of his advice and decided to include it into the Foundation’s funding strategy.
 

The Foundation aims to identify social issues which are neglected or not well-funded by public welfare and private non-profit organizations, then develop relevant solutions that can be recommended to the government for long-term implementation. Once an issue is taken over by the government, the Foundation will turn its focus to a new issue. It generally takes five or six years for a social issue to be well addressed, depending on the complexity of the issue itself.
 

The Lee Family determined that the Foundation should be committed to developing evidence-based service models, i.e., social service plans with solid theoretical grounding and statistically proven efficiency. With a “service-research-public education” approach and support from its Advisory Committee, the Foundation generally begins its projects with extensive research on needs and service gaps by partnering with academic and non-profit entities. From that research, the Foundation selects an area where it believes it can generate the most significant impact. The Foundation then appoints a Principal Investigator, together with a non-profit organization, to design an evidence-backed service program that will address the issues in an influential and efficient way. The program must pass a series of academic inspections and tests to ensure practicality and efficiency for pilot adoption. Community and public education is conducted throughout the process to promote the relevant message and knowledge, thereby extending the impact. Once the service program is proven to be effective, the Foundation will select proper non-profit organizations to execute it among larger groups of people. The purpose is to create evidence-based models that can be scaled up and replicated across Hong Kong. This approach didn’t take shape until 2010. Unfortunately, Simon didn’t have a chance to witness the significant role it would play in boosting the development of the Foundation, an undertaking he had been devoted to for nearly half a century.
 

Family Meeting

Simon passed away in February 2010. He requested in his will that his family continue an annual endowment to the Foundation (10% of Sun Hing’s annual profit, as Simon had been donating since 1990) for the next decade. They could then decide themselves whether to continue this tradition. He hoped that the Foundation would help to bind the generations of the family together.
 

Edwin and Carmen convened a family meeting in September 2010 to discuss the future of the Foundation. Previously, only a few were seriously involved in the philanthropic activities. The one-and-half-day meeting was a challenge for the whole family and there were two major subjects under discussion: the Foundation’s future orientation and governance structure. A senior advisor from The Philanthropic Initiative with years of philanthropic expertise was invited to help facilitate the interaction between family members, and help the Foundation draft long-term strategies.
 

The first subject was to establish family values to drive future initiatives of the Foundation. Having been influenced by Simon, the family members knew that they should carry forward the family tradition of giving back to society.
 

Instead of just funding the charitable programs Simon had participated in, the Lee family decided to focus on some bigger programs so that all family members would strive for a common goal. But first of all, they should decide a mission for the Foundation.
 

They unanimously endorsed continuing support to the Elderly Fund that had been set up by Simon. It would remain an independent fund supported by the Foundation. Sun Hing would continue to contribute 10% of its annual profit to the Foundation, and the Foundation would also enjoy a stable capital flow from a HK$ 100 million investment in dividend paying stocks. Besides the Elderly Fund, the Foundation would support the activities of a new fund that family members set up to replace the various philanthropic activities that Simon had been sponsoring. 
 

Family members spent most of the time during the meeting identifying a common philanthropic interest to support. They finally chose early childhood education as the target area of the new fund. In early 2011, The Simon K. Y. Lee Children’s Fund was launched. It targets children from low-income families at and above the age of six to help them develop a strong foundation in learning, and enhance their prospects for success. In this way, the Fund aims to reduce the learning gap between rich and poor.
 

The second subject to be tackled at the meeting was to rebuild the management infrastructure for the Foundation. Before Simon passed away, the Foundation had set up a formal Board of Directors, but he was actually the sole decision maker. They decided at the meeting that all family members, regardless of gender, kinship and generation, should hold a seat on the Board. To obtain a board seat, a family member must be aged 18 or above and be willing to serve the Board. Except for Karen Lee’s husband Barry Ip, all the family members agreed to join. Ten eligible family members took charge of the operations of the Foundation, including Simon’s wife, Simon’s four children (Philip, Carmen, Karen and Lawrence), Philip’s wife Mable, Lawrence’s wife Loretta, and Philip’s three children (Edwin, Jason and Jessica). Lawrence’s two daughters were too young to serve the Board. Philip was assigned Chairman of the Foundation.

Board meetings are held two to three times a year to discuss the future development of the Foundation and its subsidiary funds. Decisions are made through anonymous voting. Each vote has the same value. The rule of majority is observed. In the event of a tie, a second round of voting is required.
 

Edwin pointed out that because of the low frequency of board meetings it would be impossible to leave all issues to be addressed by the Board. Therefore it was decided at the family meeting that a Secretariat should be put in place, with Secretariat members acting as administrative directors responsible for executing the decisions of the Board. In addition, the Secretariat should also be responsible for preparing alternative solutions and providing suggestions for the Foundation, so it has some influence on the strategic direction of the Foundation. Three family members were selected to serve as the Secretariat on a rotating basis. Edwin was appointed standing member of the Secretariat due to his active participation in philanthropic activities. The other two seats were given to Mabel and Lawrence for a one-year term. Family members who have already served the Secretariat can be re-appointed in future.
 

Six months after the family meeting, the Lee family decided to engage a full-time project manager to handle philanthropy-related administrative affairs. In order to further inspire family members’ personal interests, creativity and contribution to charities, the Foundation decided in 2011 to reserve some small grant programs initiated by Simon and allocate a six-figure sum of money for charity programs not covered by the Elderly and Children’s Funds.
 

With the concerted efforts of all family members, the Foundation developed three major charitable programs by 2013. The Transitional Care for Discharged Elderly Persons Program funded by the Elderly Fund has been particularly successful in its mission. It has been expanded throughout Hong Kong and been recognized by the government for wider adoption.
 

Joint Efforts towards Philanthropy

The Simon K.Y. Lee Foundation has brought enormous benefit not only to communities in Hong Kong, but to Simon’s family members. Philanthropy has become a tradition of the Lee family. Since their childhood, Simon taught his sons and daughters the importance of “contributing to the community” since their childhood. He brought them to charitable parties, helped them build a strong sense of social identity and responsibility, gave them a western education and urged them to pursue their own dreams.
 

Philip received his Bachelor of Law degree. Karen holds a DBA (management) degree and taught in a university. Lawrence was an accounting major and Carmen received a PhD in Library Science in England and then worked in the US as a research fellow. All of them have, to some extent, devoted time and attention to various charitable activities. For example, Philip succeeded his father as Chairman of the Hong Kong Society for the Deaf. Carmen began participating in charitable activities when she was still a little girl. She joined Amnesty International at a young age, and has continued to care about social issues. When she lived in Boston, she was an active participant in local charity activities. During the family meeting, she explained the difference between short-term charitable programs and sustainable charity plans.
 

Philanthropy as a family tradition is also valued by the spouses of Simon’s children, and his grandchildren. Philip’s wife Mable is an attorney and provided legal consulting services for Simon and his Foundation. In fact, she is the only family member who participated in Simon’s charitable programs before the establishment of the Elderly Fund, taking care of the legal structure of the Foundation. As a member of the Secretariat, she is frequently involved in the daily operations of the Foundation and has been regarded as a key member. After Lawrence’s wife Loretta became a director of the Foundation, it was expected that Edwin’s fiancée Jennifer Cheng would soon join the Foundation Board.
 

Edwin and Jason are the youngest Board members. They have played an active part in charitable activities since their adolescence. Edwin won the Community Service Award when he was still in middle school. He received his bachelor’s degree from the Wharton School, and in 2005 he gave up a promising job at an international consulting firm to fully devote himself to charities in Hong Kong. He was Charity Manager of the Hong Kong Jockey Club, the largest philanthropic organization in Hong Kong, for three years, then earned a charity-related MBA degree at Yale University. In addition to providing individual and group donors with consulting services, he has been a director of the Simon K.Y. Lee Foundation and the only standing member of its Secretariat since 2011. Jason studied ethics, politics and economics in the US and then went to England to study law with the goal of becoming a politician in Hong Kong. As a member of the Pan-democractic camp, he pays particular attention to welfare issues. He holds a seat on the Foundation Board and is also a volunteer of several non-profit education entities. Jessica, who is currently earning her PhD in chemistry in the US, is also a member of the Foundation Board.
 

The Simon K.Y. Lee Foundation has continued to have a positive influence on family cohesion, especially after Simon passed away. It is regarded as a carrier of family values, as well as a platform for family members to address problems and make decisions together. Family members hold equal positions on the Foundation Board, and take seats in the Secretariat on a rotating basis, which has facilitated positive interaction among family members. The Foundation is the glue that binds generations of the family together building mutual understanding and common goals.
 

Involvement in the Foundation’s operations has enhanced the influence of Edwin, Mable and Carmen on family affairs. Traditionally, the younger a family member is, the less voice he/she has in family affairs. But due to his philanthropic expertise, Edwin’s views are valued by the family when a foundation-related issue is under discussion. Similarly, with her professional legal experience and deep understanding of charities, Mable has also made a great contribution to the Foundation. For Carmen who has lived abroad, philanthropy has long been a part of her life. She is willing to shoulder some responsibilities in the Foundation and share her experience with other family members. As a result, the younger generation has become the backbone of the Foundation.
 

Though their views may diverge, Board members will try hard to reach a consensus by the end of every meeting. They aim to reach the best solutions without being trapped by group thinking, and preserving family harmony. Whenever divergent opinions arise, they will consider what Simon would do if he were faced with the same situation, and what family tradition they should follow. In this way, all disagreements can be solved. As Chairman of the Foundation, Philip always tries his best to ensure that an agreement is reached before dinner time.
 

The Lee family convened a second family meeting focused on Foundation issues in early 2015. The specific vision, mission and core values of the Foundation were defined, and the new focuses of charitable programs were discussed. There was a heated debate on a program proposal which finally received a majority approval. Despite a few opposing votes, the family believed the dispute was healthy and would benefit the Foundation. It showed the degree of care and involvement that family members have towards charity.
 

Though Sung Hing is not a large family business in Hong Kong, its dedication to philanthropy has established a new model for family business succession and has become a remarkable feature of this family business. Philanthropy can help a family augment its influence, carry forward the spirit of the elder generation and bind generations of the family together. The practices of Sun Hing offer valuable lessons for Chinese family businesses regarding the succession of family values.
 


 (Adapted from Chinese Philanthropists, written by Peng Qian)