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 Whyte is not the first person to liken corporate philanthropy to thievery. Daniel Indiviglu, a writer for The Atlantic, wrote an article in January 2010 in response to Glaxo-SmithKline’s decision to release a large amount of intellectual property concerning anti-malarial research to the public domain. The intellectual property presented the public with details on about 13,500 chemical compounds that were identified to have the potential to act against the parasite that causes malaria in sub-Saharan Africa. Indiviglu questioned the integrity of this decision, stating the intellectual property had been financed as an investment by the company’s shareholders. He made the argument that the “Glaxo management [had] decided to take investor dollars and donate the profit that may come from it”—the profit that shareholders had perhaps invested in. Ultimately, he states that without “explicit shareholder approval, [it is] unclear how this is different from taking investors’ money and misappropriating it”. Many, however, claim that corporate philanthropy works to the shareholders’ benefit. A study conducted by Paul Godfrey at the Brigham Young University in 2005 concluded that corporate philanthropy actually adds to shareholder wealth, acting as an insurance policy for the company and protecting the shareholders’ investment in the event of a misfortune. While companies may be giving funds away to charitable organizations, they are also benefiting the shareholder’s interests by enhancing their company’s image. In some cases, this image enhancement plays a role in the company’s revenue increase, ultimately benefiting the shareholder. A 2008 study entitled “Is Doing Good Good for You?” concluded that corporations who were sensitive to consumer perception (usually when an individual is the predominant consumer), were very likely to see their charitable contributions significantly associated with future revenue. A 2010 social responsibility perceptions survey from Burson Marsteller and Penn Schoen Berland found that 55 percent of consumers say they are more likely to purchase products that support a certain cause. In certain cases, corporate philanthropy can attribute to increased revenue, thus serving the shareholder’s interests. This notion is an extension of a theory presented and evaluated in a 2006 study by Claremont McKenna College researchers titled “Corporate Philanthropic Practices.” The idea that corporate philanthropy actually helps the shareholder by adding value to their investment is called the “Value Enhancement Theory.” The other theory, called the “Agency-Cost Theory,” complements Whyte and Indiviglu’s arguments that corporate philanthropy indulges the management directing the funds while incurring an opportunity cost on shareholders. The study’s evidence supported the latter theory chiefly because it found the total amount donated by a corporation was positively correlated with the absolute size of the corporation’s board. Amidst the contention remains a finite fact: corporations are a significant contributor to the total giving in the United States. The most recent GivingUSA report shows corporate philanthropy and foundation giving represented 17% of the total $303.75 billion contributed in 2009. We want to hear from you: Is Corporate Philanthropy the same as stealing from shareholders, or is it a triple-win for bottom line, dividends, and communities? Do you know of corporations who engage shareholders in making grant determinations? If you like this kind of content, sign up for an NCoC.net account and we'll customize your homepage recommendations based on your interests..
By Drew Stelljes at 10:58 AM on Jul 23rd, 2010
We need corporate giving. Couldn't survive without it. Still it seems to be a dirty way for non-profits to stay in business. Not to say it's sleeping with the enemy but more it's taking money from people that might have insincere intentions. We need to push corporations harder to include philanthropy with issue education.
For corporations to give excess revenue to a charity reeks of the have's handing over just enough of their stash in their deep pockets to help the poor. It's a way to feel good, right? How often have all of us thought about how simple it would be if we all just got along, if everyone walked in another's shoes, and if we acted peacefully. But humans do not. Never have. May never do it. In The Tipping Point, by Malcolm Gladwell there is a passage by S.L. Washburn, an evolutionary biologist. He writes: Most of human evolution took place before the advent of agriculture when en lived in small groups, on a face-to-face basis. As a result human biology has evolved as an adaptive mechanism to conditions that have largely ceased to exist. Man evolved to feel strongly about few people, short distances, and relatively brief intervals of time; and these are still the dimensions of life that are important to him. Gladwell goes on to write about the human capacity for empathy. He uses Dunbar's argument that as brains evolve, they get bigger, in order to handle more complex social groups. We have evolved to be able to handle more complex relationships that any other species. Humans socialize in the largest groups because we are able to handle the complexities but still we are limited based on neocortex size. If you plug in the neocortex ratio for humans you get a group estimate of roughly 150 people. In other words we can have relationships with about 150- knowing, meeting with and relating to them. Turns out this magic number 150 is seen consistent in 21 hunter-gatherer societies. Ok, so all of that leads me to question the usefulness of our work. We talk a good game about: -moving from charity to justice, -considering the root causes of social problems, -working to alleviate suffering, -working to solve the social concerns in communities, near and far, -building compassion (some would agree), -developing active citizens, -working to solve problems such that our work is not longer needed. That we put ourselves out of business. No longer a need for aid and relief programs. So we talk the good talk. Have we ever done anything so bold that we actually accomplish this goal? Do we really have the capacity to do what we say we will do? Is corporate giving a way to keep other groups from invading the US comfortable lifestyle? Are we setting up systems of service to ensure the current mode of operation survives? To make sure classism persists? Are we actually quieting a voiceless crowd by giving others just enough to make it appear that we have empathy? Are we, the non-profit sector, the line of defense against real systemic change? By providing a little do corporations keep the voiceless content enough not to fight for revolution? We need the money but we also need to push really hard against handing out money to quiet the crowds or to make the problem go away. Good article. Thanks for sharing. By Kristen Cambell at 11:07 AM on Jul 23rd, 2010
Drew, thanks so much for this thoughtful comment. I particularly like your ending questions about giving voice to real change and taking a holistic approach to problem-solving. Do you think it's possible for nonprofits and the business sector to have equal voice at the table, or will cash always speak loudest? Can true collaboration exist and how can it be supported?
By Jamie Kemmerer at 11:25 AM on Jul 23rd, 2010
This article opens up a huge number of issues, to many to cover thoroughly in a comment, but I'll raise a few:
1. If donating to charity is stealing because it takes away from the shareholder profit, then are bad business decisions stealing? Is a smoke break in front of the building stealing? Is talking about the football games over the weekend stealing? They all take away from shareholder profit. 2. Is shareholder profit all that really matters? I mean to even posit the question if charity is theft indicates a serious twisting of the American psyche. Is profit really that important? 3. If a shareholder invests in a company that makes charitable contributions, isn't that part of their investment? ie doesn't the shareholder derive some of the benefit or credit for the good works they are investing in? 4. Isn't profit itself a form of theft? If you really boil it down, how can profit be derived other than convincing consumers to pay more for a good or service than it is actually worth? It is the perceived value, not the actual value that yields profit. So doesn't charity offset some of the perceived value profiteering? 5. Examples like the BP Gulf catastrophe show in very stark terms how corporations can exact huge costs and penalties to a society and to the world. When viewed from this angle, the discussion of whether a corporation that decides to give back a little of their profit might be stealing from it's shareholders seems even more absurd. I don't mean to be extremely anti-business. I'm only trying to point out that there may be something other than profit. Furthermore, if you were to look at the total amount of money made by corporations and put that against the 17% those same corporations donate, one would be better served to ask the question if corporations are stealing, er I mean giving enough. By Gabe Chesman at 1:41 PM on Jul 23rd, 2010
I have to agree with Jamie. "I mean to even posit the question if charity is theft indicates a serious twisting of the American psyche. Is profit really that important?"
It's a terrible thing that shareholders, essentially, hold profit higher than people's well-being. I almost feel these cold-hearted, corporate big-wigs should be obligated to give away a small piece of their bloated salaries. If donating money is stealing, how do classify Bernie Madoff? Are these one in the same? To have the ability to help others but not act is stealing. Shareholders may have a "God-Complex" or pure greed driving their business decisions. I just hope someone is letting them know how it looks from the outside. By Drew Stelljes at 1:59 PM on Jul 23rd, 2010
Kristen, My take on it is this...the corporate sector could take a big leap and increase impact by either hiring or seeking consultation on justice oriented education. Asking their staff to ask themselves about their role in their community.
Most corporations list the number of executives that sit on boards and give money-- both important. Additionally though they need the freedom to learn and then ask real questions about justice rather than charity. To be invested in community right now largely means to make a financial investment annually rather than to learn about, listen and understand the social problems that are plaquing our communities. A corporate culture shift from giving to being with? With all the 20-somethings that went to college with this education it might work. Might also be a good time with corporate giving down, education on issues could have a place in corporate life. Do you know of places that this is happening? By John Friedman at 2:00 PM on Jul 23rd, 2010
I don't see the connection between corporate giving and stealing... rather I think that one might make the connection between corporate giving and ill-advised decision making (although I would argue when done well it is a sound long-term business strategy to enhance reputation and build brand.)
To me the use of the word 'stealing' is nothing more than an attempt to be edgy and provocative. The real question are corporations making decisions based on maximizing investment in the community, making a linkage between their products and services with the benefits those products and services have in peoples' everyday lives or are they just using the corporate checkbook to support causes that they find personally fulfilling and rationalizing the choices they're making? @johnfriedman By Celesa Horvath at 2:16 PM on Jul 23rd, 2010
This article nicely makes the case, however inexplicitly, of the need for and importance of aligning corporate philanthropy with strategic business objectives. To be mindful of shareholder interests, a corporation should have clearly articulated objectives for its philanthropic activities (e.g., to enhance reputation, build social capital, or meet a specific strategic need) and clear criteria by which donation decisions are made. For example, a corporation may choose to direct charitable dollars to an organization that provides education and training in disciplines relevant to the corporation's business focus. Thus, the community benefits, the organization benefits, the students benefit, and the corporation (and its shareholders) benefit, the latter from having better access to a greater number of more qualified workers. Such clarity and transparency around corporate philanthropy would serve all parties.
@celesahorvath By Kristen Cambell at 2:19 PM on Jul 23rd, 2010
So glad to see such a discussion generating on this.
Jamie and Greg, thanks for posing these important questions to add to the discussion. Drew, John, and Celesa: your comments really get at the heart of a new initiative NCoC is currently in development of called the "Civic 100." It aims to look at the way corporations are institutionalizing civic engagement into their corporate culture to go beyond metrics like "dollars invested" or "volunteers mobilized." We hope this will help better understand how corporations are aligning business purpose with civic action on community issues. By Alex at 3:54 PM on Jul 27th, 2010
Drew, I certainly agree that corporations (like all of us) should be investing in solutions that address the root of the problems we face. But I take issue with the idea that there is something inappropriate about "charity" or that there could someday no longer be a need for aid or relief. I see nothing unseemly about the "haves" extending a helping hand to the "have nots". The "haves" can and should do more, absolutely, but as long as there are haves and have nots that need will always exist.
So when you talk about one day having no need for charity and finding structural changes to address our root problems, are you talking about one day no longer having anyone who is poor or suffering? Eliminate charity by eliminating anyone with need of it? It would seem that your idea to do that is for the government to step in and "fix" this problem. It seems that your solution to this situation is communism. You use many nice sounding buzz words, but communism is your goal. You worry that charity will "keep the voiceless content enough not to fight for revolution". As bad as things are for the poor in this country, communism is no solution. It has been tried again and again, and it has failed again and again. The trouble with poverty is that it arises from two causes. One is circumstance and the other is choice. We absolutely should be doing what we can to address the circumstantial causes for poverty. Charity and non-profit work is a key weapon in the fight for this. But we have to recognize that choice also plays a role. People make bad choices and bad decisions. Obviously we need to do what we can to educate people about better choices, but ultimately we have to trust them to decide and manage their own lives. When those decisions lead to bad results, we give them sympathy, charity and compassion, but must still accept their decisions. Communism seeks to eliminate both circumstance and choice through force. Since people make poor choices, communism simply prevents them from making choices at all. You speak of justice instead of charity, but a world without choice is a world of slavery and there is nothing just about it. By mike mcgrath at 4:53 PM on Jul 27th, 2010
Short answer to an easy question:
Is corporate philanthroping stealing? No. It's giving. By Drew Stelljes at 10:25 PM on Jul 31st, 2010
It appears that we have the makings of a good debate. I need to make one point very clear. I am not advocating for socialist economics. I am not an economist and would not claim to really understand economic theories. For the basis of this response I would suggest that, at its core, socialism as an economic policy is rooted in shared ownership, little interest in profit making but rather in profit sharing. When we talk about socialism we talk of national or governmental control of the capital within a market. I am not referring to socialism when I write about genuinely trying to ameliorate need. I am talking about finding ways to really have an impact instead of pretending we are making good progress. Need is growing and people are getting richer. Doesn't make a ton of sense to me. People throw billions of dollars at need each year, but it's not working.
According to economist Edward N. Wolff at New York University (2010) wealth in the US is highly concentrated in a relatively few hands. As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one's home), the top 1% of households had an even greater share: 42.7%. I am not suggesting that the US become a socialist economy. To my points: the economic class divide has grown over time, mainly since the late 1960's. At some point (maybe not for a long time) if there is not substantial and real intervention or a shift in culture the powerless will likely revolt. Could be decades or longer. Second point: charity might be a band aid to a really big problem. Makes people feel good and castes away the real humanitarian problem to the non-profits or the church (the charities) to work on. In other words if a person gives money on a regular basis he/she/group need not really be concerned. Third point: Time and again academics, politicians, non-profit leaders and others have reported that the biggest cause of homelessness is lack of affordable housing. Seems simple but affordable housing is a tough sell in almost every US community. Is that a "not in my backyard" mentality? Could be. Finally, I would not suggest greater government intervention. Instead I recommend a change in the way that the non-profit sector is managed. A friend of mine, Robert Egger of DC Central Kitchen regularly reminds me that funding to the non-profit sector exceeds that of the GDP of almost every nation in the world. There is opportunity in the 300 billion dollars that are given to charitable causes each year. That the US tax code encourages giving is a golden opportunity for the sector. I do not suggest that the US Government obtain greater control of the sector but rather that the sector get together and find a way to make the money work for the cause. By Anonymous at 1:07 PM on Aug 23rd, 2010
It's a specious question.
Shareholders invest in the business. The board governs the business. The managers run the business. Donating to charity is one of many decisions those managers make every day. If they give company money to charity and the share price goes down because of it, the board will fire the managers and hire managers who make different decisions. There's no question of theft or misappropriation here. The managers are entrusted with the management of the company. That's their JOB. The question of whether corporate philanthropy is a good or bad tactic from a business standpoint--that's an interesting one for debate. Tax benefits, influence on reputation, doing good, influence on recruitment and retention... all open for debate. But theft? Buzz, buzz. By Jamie Kemmerer at 9:23 AM on Feb 2nd, 2011
I know it's been a while since this conversation has been active, but I recently found this article that has an interesting perspective on this issue: http://www.huffingtonpost.com/perry-yeatman/doing-good-and-making-mon_b_814101.html
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