Chapter 18

Strategic Philanthropy

Areas in which corporate contributions are most likely to enhance a company's competitiveness, according to a Harvard Business Review study: •Factor conditions - supply of trained workers, physical infrastructure, and natural resources. •Demand conditions - affect demand for a product or service. •Context for strategy and rivalry - designed to support policies that create a more productive competitive environment. •Related and supporting industries - strengthen related sectors of the economy, may also help companies.

Housing

Life and health insurance companies have taken the lead in programs to revitalize neighborhood housing through organizations: •Such as Neighborhood Housing Services of America. •NHS is a locally controlled, locally funded nonprofit and tax-exempt organization that offers housing rehabilitation and financial services to neighborhood residents. Similar efforts are being made to house low- and moderate-income residents. Corporations also often work with nongovernmental organizations (NGOs) such as Habitat for Humanity. •To build or repair housing.

Corporate philanthropy:

the voluntary and unconditional transfers of cash or other assets by private firms for public purposes.

Vodaphone - Corporate Giving

www.youtube.com/watch?v=eSX7e95iMPY §Why do businesses as diverse as Vodaphone, Whole Foods and Pfizer invest in community organizations, projects and charities? §Why do they contribute their money, resources and time to help others? §What benefits do they gain from such activities and are their motivations always appropriate? §

The Business Case for Community Involvement

Civic engagement: The active involvement of businesses and individuals in changing and improving communities. Reasons for community involvement 1. Major way to carry out corporate citizenship mission. 2. To win local support for business activity, be granted an informal "license to operate" in the community. 3. Helps to build "social capital." •Social capital: the norms and networks that enable collective action. •High levels of social capital enhance a community's quality of life.

Community Relations

Community relations: The organized involvement of business with the community. Community relations departments are typically involved with a range of responsibilities: •Employee volunteer programs. •Sustainability reporting. •Corporate giving. •Stakeholder engagement. •Disaster preparedness.

The Firm and Its Communities

Community | Interest _________________________________ Site community Geographical location of a company's operations, offices, or assets. Fence-line community Immediate neighbors. Virtual communities People who buy from or follow the company online. Communities of interest Groups that share a common interest with the company. Employee community People who work near the company.

Strategic philanthropy:

Corporate giving that is linked directly or indirectly to business goals and objectives. •In this approach, both the company and society benefit from the gift. •Increasingly popular approach to corporate giving.

Corporate Giving

Corporate philanthropy: the voluntary and unconditional transfers of cash or other assets by private firms for public purposes. America has historically been a generous society. •In 2017, corporate contributions totaled $20.8 billion, or about 5 percent of all charitable giving. As U.S. firms have become increasingly globalized their international charitable contributions have also grown. àExample: ExxonMobil has donated $170 million for efforts to eradicate malaria. Tax rules have encouraged corporate giving for educational, charitable, scientific, and religious purposes since 1936. •Current rules permit corporations to deduct from their taxable income all such gifts that do not exceed 10 percent of the company's before-tax income. In Europe, corporate philanthropy has lagged behind that in the United States. •Reason: tax breaks are less generous and differences in the law across countries make cross-border giving difficult. •Greater spending on social welfare by governments reduces the need for private-sector donations.

Community Relations Manager

Functions: •To interact with local citizens. •To develop community programs. •To manage donations of goods and services. •To work with local governments. •To encourage employee volunteerism.

Measuring the Return on Social Investment

Inputs: The resources companies provide. •They may include cash contributions, employee time, products and services, or logistics support. Outputs: Measures of the activities that took place. •Usually numerical counts of people and communities served. Impacts: The difference the program made - the actual benefits that accrued to the people and communities served. •It is similar to outputs, except that it tries to capture the actual results of the gift. Value creation: The benefits to the business of the program. •This is similar to the concept of enlightened self-interest.

Economic Development

Intended to bring new business into the area and develop workforce skills. à Example: AeroFarms leased a former steel mill to use as an indoor vegetable farm, using aeroponics technology, creating jobs in the community.

Disaster, Terrorism and War Relief

International relief efforts are becoming more important. •Communications improve and people around the world are able to witness the horrors of natural disasters, terrorism, and war. Corporate involvement in such efforts is an extension of the natural tendency of people to help one another when tragedy strikes. •A way to build brand loyalty.

Community Relations

Several specific ways in which businesses and their community relations departments have addressed some critical concerns facing communities are: •Economic development. •Housing. •Aid to minority, women, and disabled veteran-owned enterprises. •Disaster, terrorism, and war relief.

Aid to Minority, Women, and Disabled Veteran-Owned Enterprises

These businesses often operate at an economic disadvantage. •In some cases, they do business in economic locations where high crime rates, poor transportation, low-quality public services, and a low-income clientele combine to produce a high rate of business failure. Many large corporations now have supplier diversity programs that seek out partnerships. à Example: AT&T has operated supplier diversity programs for more than 40 years.

Three Forms of Corporate Giving

Typically, gifts by corporations and their foundations take one of three forms: 1. Charitable donations (gifts of money). 2. In-kind contributions (gifts of products or services). •Of U.S. corporate contributions in 2016: •18 percent were in-kind (noncash). •48 percent were cash. •The balance came in the form of contributions from affiliated foundations. •Under U.S. tax laws, if companies donate new goods, they may deduct their fair-market value within the relevant limits. 3. Volunteer employee service (gifts of time). •Involves the efforts of people to assist others in the community through unpaid work. •An important trend is what is known as skills-based volunteerism, in which employee skills are matched to specialized needs. •Another approach is for companies to provide employees with paid time off for volunteer service in the community.

Salesforce Case

§What evidence do you see in this case of the three kinds of corporate philanthropy discussed in this chapter: contributions of cash, in-kind products or services, and employee time? § §Do you consider Salesforce's various charitable initiatives to exemplify strategic philanthropy, as defined in this chapter? Why or why not? § §What are the benefits and risks to Salesforce of its approach to philanthropy? § §If you were a corporate philanthropy manager for Salesforce, how would you evaluate the impact of the company's giving? What kinds of impacts would you attempt to measure? §