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Corporate philanthropy or corporate social responsibility is a commitment to improve community well being through discretionary business practices and contributions of corporate resources (Aras & Crowther, 2010). It is a voluntary commitment made by a business to implement practices that benefit both the business and society (Kotler & Lee, 2005).
How an organization discharges its responsibilities under corporate philanthropy is an important manifestation of what it stands for and also determines whether employees, retirees, and share owners can proudly tell their friends about the organization’s good works. When a company aligns itself with the aspirations and beliefs of its employees, powerful sources of energy are unlocked and common bonds are discovered (Reynold, 1999).
Corporate philanthropy is distinct from private foundation and individual giving in a number of ways. Whilst an organization can authorize the use of its facilities, donate surplus or state-of-the-art equipment, and stimulate continuous interaction between the beneficiary and the donor, neither foundations nor individuals can so readily harness these powerful sources of assistants to nonprofits organizations (Reynold, 1999).
This paper looks at the extent to philanthropy can make a difference to the society or to an organization.
Ethical Frameworks for the Evaluation of Philanthropic Motives
Ethical issues arise in philanthropy based on the premise that companies are given the right to exist by society and as such, they have a social obligation to do what is right for the greater good (Burlingame, 2004). Ethical frameworks therefore play a big role in encouraging management to advocate for contributions that will maintain the business as a partner in addressing societal needs.
According to research, India has had a strong tradition of business and corporate philanthropy with education and other social welfare activities being funded by companies since pre-independence days (Fernando, 2010). Although Indians are inclined to believe that they are highly ethical than most other nations, there is still a challenge in maintaining high ethical standards in philanthropic activities with corruption being associated with poor leadership (Fernando, 2010).
Companies have put in place codes of conduct that vary in content and quality from company to company, to ensure that corporate philanthropy is carried out correctly.
The codes cover some or all of the following issues: the treatment of workers, consumer reliability, supply chain management, community impact, environmental impact, human rights commitments, health and safety, as well as transparency and dealings with suppliers (Fauset, 2006).
Some codes are monitored by external verifiers which are usually large accounting firms such as Ernst & Young or Price Water House Coopers. Critics have, however, argued that there is a very high likelihood of these monitors placing the aims of the company, and not the environment or society, at the forefront when carrying out their assessment.
Can Philanthropy Really Make a Difference?
Corporate philanthropy is one of the hot corporate strategies of the present business world. The question that needs to be answered, however, is whether companies should be trusted to live up to their new ideals.
The concept of corporate philanthropy evolved as a response to the threat anti-corporate campaigns pose to companies’ license to operate (Fauset, 2006). The idea of corporate philanthropy is, however, a contradiction considering that companies are legally bound to maximize profits to shareholders.
This duty to make money above all other considerations means that corporations can only be socially responsible if they are being insincere. Any social benefits from corporate philanthropy are often outweighed by losses suffered by the society in other areas.
According to Fauset (2006), corporate philanthropy is an effective strategy for: boosting a company’s public image; avoiding regulation; gaining legitimacy and access to markets and decision makers. To a large extent, corporate philanthropy enables businesses to propose ineffective, voluntary, market-based solutions to social and environmental crises under the guise of being responsible.
This deflects blame for problems caused by corporate operations away from the companies, and protects companies’ interests while hampering efforts to tackle the root causes of social and environmental injustice. Donating to charity, presents companies with a simple way to enhance their reputation.
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McDonald’s network of Ronald McDonald Houses to improve the health and well being of children, and BP’s sponsorship of the National Portrait Award are two high profile examples that show how a company’s image can be enhanced through corporate philanthropy (Fauset, 2006).
According to proponents, when well executed, the process and outcome of contributing to nonprofit institutions strengthen the donor as much, if not more, than the recipient. Philanthropy can be no less than a source of sustainable competitive advantage difficult to attain by any other means. It can energize, enrich, and sustain nonprofit causes in ways simply unavailable to private foundations and individuals (Reynold, 1999).
Apparently, claims that corporate philanthropy can greatly benefit companies are not intuitively obvious to most business executives who believe otherwise. Giving money away to nonprofits is thus still viewed by some business executives as a distraction from the central mission of a business which is to increase the value of the shareholders’ investment (Griseri & Seppala, 2010).
Although organizations stand to benefit, the arguments presented in this paper indicate that corporate philanthropy can not really make a difference to the society. Clearly, the motivation for companies is to gain a competitive advantage and make profits. Any attempts to be socially responsible will therefore be met by a lot of suspicion. It is very hard to figure out how a company can genuinely be involved in corporate philanthropy while at the same time it intends to maximize its earnings (Rhode, 2006).
Aras, G & Crowther, D., 2010. A Handbook of Corporate Governance and Social Responsibility. Farnham, UK: Gower Publishing, Ltd.
Burlingame, D., 2004. Philanthropy in America: A Comprehensive Historical Encyclopedia, Volume 3. Santa Barbara, CA: ABC-CLIO.
Fauset, C., 2006. What’s wrong with Corporate Social Responsibility? London, UK: Corporate Watch. Available from: <https://corporatewatch.org/?lid=2688> .
Fernando, A. C., 2010. Business Ethics and Corporate Governance. New Delhi, India: Pearson Education India.
Griseri, P & Seppala, N., 2010. Business Ethics. Hampshire, UK: Cengage Learning EMEA.
Kotler, P & Lee, N., 2005. Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause. Hoboken, NJ: John Wiley and Sons.
Reynold, L., 1999. Give And Take: A Candid Account of Corporate Philanthropy. Boston, MA: Harvard Business Press.
Rhode, D. L., 2006. Moral Leadership: The Theory and Practice of Power, Judgment, and Policy. Hoboken, NJ: John Wiley & Sons.