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Disclosing of Corporate
Philanthropy Practices by
Australian Companies:
An Exploratory Analysis.
Raja Adzrin Raja Ahmad
Greg Tower
Mitchell Van der Zahn
Curtin University of Technology
Discussant: Teresa P. Gordon, University of Idaho
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An interesting descriptive study
• Corporate Responsibility Reporting
▫ Relatively new area of research
▫ Existing research doesn’t always address
corporate philanthropy
▫ No previous research in Australia
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Facets of the Field
Reporting about
corporate
philanthropy in
Australia:
256 or 18% of sample
Much more likely to
be descriptive than
numeric or monetary
•Enhancing Human
Asset
•Supporting local
communities
•Creating shared value
•etc.
Corporate
Philanthropy
Reporting
Social Responsibility
Reporting
Environmental
Impact
Reporting
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A little history: Milton Friedman, 1970
• ‘The discussions of the "social responsibilities of
business" are notable for their analytical
looseness and lack of rigor. What does it mean
to say that "business" has responsibilities? Only
people can have responsibilities. A corporation
is an artificial person and in this sense may have
artificial responsibilities, but "business" as a
whole cannot be said to have responsibilities,
even in this vague sense.’
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A little history: Milton Friedman, 1970
• “What does it mean to say that the corporate
executive has a "social responsibility" in his capacity
as businessman? If this statement is not pure
rhetoric, it must mean that he is to act in some way
that is not in the interest of his employers. For
example, … he is to make expenditures on reducing
pollution beyond the amount that is in the best
interests of the corporation or that is required by law
in order to contribute to the social objective of
improving the environment. Or that, at the expense
of corporate profits, he is to hire "hardcore"
unemployed instead of better qualified available
workmen to contribute to the social objective of
reducing poverty.”
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On the other hand, Friedman admits that
socially beneficial actions are often sound
business
• “To illustrate, it may well be in the long run interest of a
corporation that is a major employer in a small
community to devote resources to providing amenities to
that community or to improving its government. That
may make it easier to attract desirable employees … or
have other worthwhile effects.
• Or it may be that, given the laws about the deductibility
of corporate charitable contributions, the stockholders
can contribute more to charities they favor by having the
corporation make the gift than by doing it themselves,
since they can in that way contribute an amount that
would otherwise have been paid as corporate taxes.”
• Milton Friedman 1970
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My personal bias?
• I must have absorbed some of this Friedmanstyle thinking at some point in my life
• Corporate philanthropy that is inconsistent with
shareholder desires is just reducing the potential
payment of cash dividends to shareholders!
▫ Give me my cash dividend
▫ I’ll decide which charity deserves or needs my
charitable gift
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Corporations can’t be altruistic
• As Friedman points out, a corporation is an
artificial person under law
▫ But it is not a real person – we don’t put
corporations on trial for murder
• The people who work for corporations make the
decisions
▫ When they determine which charity gets a
corporate gift, they are giving away someone
else’s money to get the “warm glow” of
satisfaction that comes with philanthropy with no
personal sacrifice
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On the other hand, social
responsibility seems to be in the
public interest
•
•
•
•
•
•
•
Reducing pollution
Designing products to reduce wasteIntegrity of
Management more
Treating employees well
important than
corporate
Treating customers fairly
philanthropy?
Responding to community needs and desires
Dealing honorably with vendors, customers, etc.
Managing resources wisely
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•Beyond the “reification” issue, my second
concern is with what gets defined as corporate
philanthropy
• Again, this is not directed at just this paper –
there seems to be confusion in the field!
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Inconsistencies in what is considered
corporate philanthropy?
• Quote from page 2 of paper:
• Madden, Scaife, and Crissman (2006 p. 49) define
corporate philanthropy as “the voluntary business
giving of money, time or in-kind goods, without any
direct commercial benefit, to one or more
organizations whose core purpose is to benefit the
community’s welfare”. Scholars identify a spectrum
of activities that fall under the banner of corporate
philanthropy which include cash and non-cash
contributions, inkind donations of products,
employee volunteerism (i.e. the corporate
employees are being allowed time away from their
normal job for charitable work), sponsorships and
cause-related marketing (Wymer, 2006).
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Questionable items
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Types of corporate philanthropy –
questionable items
• Employee giving is philanthropy of the employee
• It is only when the company matches the employee’s gift
that it is really corporate philanthropy!
▫ Still problematic for shareholders since the employee’s
choice may not be consistent with desires of shareholders
▫ Still a good program since employees are arguably
stakeholders comparable to owners
• Grants are tricky
▫ Some grants produce knowledge (e.g. patents) that directly
benefit the corporate grantor
▫ Inconsistent language makes it possible that only some
grants are actually charitable
• Cause-related marketing
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Myers (2009 working paper)
Is Cause-Related Marketing More
Marketing Than Cause?
• “CRM [cause-related marketing] has the
potential to make charitable giving – the socioeconomic stopgap between business abuse and
government shortfall – not only ubiquitous, but
easy (Eikenberry, 2009). In the form of CRM,
charitable giving is now an exchange transaction
(Berglind & Nakata, 2005). The rewards are no
longer in heaven, but on earth, in our stomachs,
on our faces.”
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From Classical Philanthropy to CRM
• Traditional philanthropy was quiet.
▫ “But when you give to the needy, do not let your
left hand know what your right hand is doing…”
(Matthew 6:2-4, NIV)
• Major philanthropists like Andrew Carnegie’s
gifts of libraries were made AFTER they made
their millions in business
▫ Not so quiet
▫ Monument building?
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From Classical Philanthropy to CRM
www.gozonew.com
•$0.01 for every card transaction
•$1.00 for every new card issued
•28% increase in sales
•Spent $6,000,000 in advertising
•Donated $1,700,000 million
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Other US examples of CRM
1% of sales to protection of
wildlife
$0.10 for every lid mailed in
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Other US examples of CRM
$1 per bag toward fighting
AIDs in Africa
100% of after tax profits goes
to charity
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CRM billed as “win-win” situation for
business and charity
• 2008 Cone/Duke University Behavioral Cause
Study
▫ 85% of Americans believe CRM creates a better image
▫ 79% of Americans will choose a brand supporting a cause
▫ 9 out of 10 Americans believe businesses, NFPs, and
government should collaborate on social issues
▫ However, most Americans believe businesses do not
give enough information about their CRM efforts
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Opportunities and Abuses of CRM
• Sources of negative
publicity for the business
▫
▫
▫
▫
contradictory causes
lack of candidness
controversial causes
excessive righteousness
• Mitigation is difficult
▫ lack of metrics for
irresponsibility
▫ advertising-to-donation ratio
 1:1 = good
 3:1 = bad?
• Sources of negative
publicity for the NFP
▫ guilt by association
▫ decreased funding due to
apparent lack of need
▫ selling out
$6,000,000
$1,700,000
= 3.5:1
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Opportunities and Abuses
• Is corporate altruism oxymoronic?
▫ Most managers choose the middle ground
 full support of increased profit
 full support of cause
▫ Negative patterns
 Cherry-picking
 A market mentality
 Was Milton Friedman right?
(see Smith & Higgins, 2000).
 Do managers have the right to spend stockholder resources
on causes that don’t directly benefit stockholders?
 Do business executives have the right expertise or motives
to decide which NPOs are supported?
 Social distortions?
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Opportunities and Abuses
• Telling evidence: How
corporations measure
CRM effectiveness
(Gourville & Rangan,
2004):
▫
▫
▫
▫
willingness to buy
likelihood of purchase
overall sales
goodwill
 employees
 investors
 Public
“One thing we know for sure
– consumers are paying
more attention to cause
messages, and as a result,
are more likely to
purchase. This is clearly
great news for brand
managers, as every
percentage increase in
sales can translate to
millions of dollars in
revenue.”
Duke Fitzsimons
2008 Cone/Duke University
Behavioral Cause Study
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Opportunities and Abuses
• Confused donors? What public interest impact?
▫ Olson et al., 2003: Most consumers cannot calculate
donations
 “percentage-of-profit formats are used more than five times as
often as percentage-of-price formats”
 Even accountants overestimate profits or base on price.
▫ Bower & Grau, 2009: Most consumers (mis)construe
endorsements
 Assume NPO has endorsed the product
 The more passionate the consumer, the greater the mistake.
 Is there a placebo effect? (fake charity names generate same
response in some studies)
 Do businesses knowingly take advantage?
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Spirituality and Consumption
Pure
Altruism
http://eventviews.files.wordpress.com
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Spirituality and Consumption
Maslow’s Hierarchy as a model
of consumer needs
(Herrington, 1993)
partnership
Suppliers can “give the
customer everything, and
become a partner on the
inside, rather than a suitor
on the outside.”
supplier-developed
innovations
customer interaction
reliability and accessibility
core products and services
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Spirituality and Consumption
• The Three Waves of Branding (Pringle & Thompson,
1999)
▫ Rational – What does the product do?
 save money
 make life easier
▫ Emotional – How does the product make you feel?
 commoditization requires differentiation
 brands promote attitudes
▫ Spiritual – What does the product stand for?
 performance and attitude are no longer enough
 coincides with American Express’ Statue of Liberty
campaign
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Spirituality and Consumption
• Do consumers actually self-actualize?
▫ No metrics for progress toward self-actualization.
▫ Characteristics of the self-actualized (Brooker, 1976):
 Not part of mainstream culture.
 “…unconventional at times, are ruled by laws of their own
character rather than by rules of society…” (Brooker,
1976)
 Those who support causes have already self-actualized.
• CRM offer only an illusion of self-actualization.
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I already gave at the grocery store!
• Where does this leave the NFPs?
▫ Is being a tool of corporate marketing a necessary
evil?
▫ Will CRM ultimately reduce cash donations in
support for charities?
“It is important to reiterate a final time that CRM markets
social causes in a way that confirms, rather than
challenges, people’s social preferences, producing funds
without donators having to change or supplement their
existing behavior. They are, however, offered the illusion
of commitment.” (Smith & Higgins, 2007)