Corporate Philanthropy: The Business Case
Is there a business case for corporate philanthropy? The Conference Board’s Matteo Tonello, in an academic article also posted on Harvard Law School’s Corporate Governance blog, believes the case is solid. Corporate philanthropy has its critics. Some naysayers insist that corporate philanthropy is a distraction from some of the more nefarious practices in which a business may engage. Shareholder groups also have attacked corporate philanthropy as open checks that divert resources from those who own shares in the company, or an unfair “tax” that subsidizes a CEO’s reputation. But attacks on corporate philanthropy, at least here in the United States by some in the corporate social responsibility crowd, are short-sighted when you look at the big picture. The fact is that corporate philanthropy has contributed to “American Exceptionalism” and built America’s strength the past 120 years. Walk into a library, and it could be one of 3,000 Carnegie Libraries (like the one in Grass Valley, CA, pictured above left, click to expand). Cultural, policy, and academic institutions received seed money from other names like Ford, Rockefeller, Mellon, and Stanford. Currently names like Broad, Gates, and Buffett have launched work that will reach far beyond US borders. But beyond the motives, do philanthropic programs add to the bottom line? Tonello points out that some programs succeed more than others. Excesses like former Tyco CEO’s giving US$43 million of the company’s funds in his own name, or RJR Nabisco’s Ross Johnson’s largess to pet causes, are examples of what frustrate opponents of corporate giving. But other programs have succeeded, and Tonello points out Crate and Barrel’s DonorsChoose.org and Microsoft’s community involvement as cases that not only did good, but increased employee engagement, sales, or both. Tonello makes the following recommendations for companies, their executives, and boards considering new or ramped up philanthropic programs:
- Make sure the company’s business and giving programs have synergy: a building supplies company or engineering firm could donate to community housing programs; Tonello provides the analogy of publishing companies assisting literacy programs.
- The roles of executives and directors should be absolutely clear: strong oversight can avoid using corporate funds as a personal piggy bank for having a CEO’s name adorn his or her child’s private school gymnasium. According to Tonello, the board or a committee of directors and executives can ensure donation’s align with the company’s mission.
- Ensure board members’ independence: Are corporate gifts going to a non-profit closely tied with one of the board’s directors? Self-regulation organizations like the New York Stock Exchange or NASDAQ offer guidance on corporate philanthropy--many companies actually have standards that are even stricter.
- Measure both the financial results and social benefits. As that statistics professor reminded you, correlation is not causation. Regular monitoring and a strong framework like that of the Committee Encouraging Corporate Philanthropy can keep these programs as track.