Corporate Philanthropy Now Part of Business Strategy
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Corporate Philanthropy Now Part of Business Strategy

Corporate philanthropy has become part of virtually every major company’s business strategy, according to a new study from The Conference Board, but contributions were nevertheless down last year despite record corporate profits.

Paul Holmes

Corporate philanthropy has become part of virtually every major company’s business strategy, according to a new study from The Conference Board, but contributions were nevertheless down last year despite record corporate profits and record lows in inflation and unemployment, largely because of the impact of mergers and acquisitions.
 
Although the total volume of corporate giving has skyrocketed during the past five decades, the proportion of giving in relation to profits has see-sawed and has lately been on a downward trend. In fact, U.S. corporate contributions had declined to 1.1 percent of pretax income by 1997. In 1986, U.S. contributions stood at 2.36 percent.
 
“The frequency of corporate mergers will undoubtedly accelerate the contributions decline,” says Sophia Muirhead, senior research associate in The Conference Board’s Global Corporate Citizenship Center. “But corporate giving, once viewed as an ill-advised practice, has evolved during this century and is now a government-embraced, integral component of corporate accountability to society.” The study, Corporate Contributions: The View from 50 Years, shows how corporate giving has evolved from the 1870s to today. Fifty years ago, it was illegal for companies make gifts for non-business purposes, while contributions— including many non-cash gifts—are now predominantly driven by long-term business concerns.
 
Says Muirhead, “Contributions budgets are now regarded as no different from budget allocations for wages, raw materials, advertising, and other sources of corporate expense.”
 
Another trend is that companies are finding new ways to contribute to their communities by donating products and equipment, lending executive talent to nonprofit organizations, and expanding opportunities for direct employee involvement in volunteer and nonprofit work. And while many companies say these noncash contributions are more cost-effective and meet the needs of beneficiaries best, they are often difficult to measure, and are often reported as business expenses rather than contributions.
 
“As corporations have moved beyond traditional philanthropy, their interest in pressing local social problems also has grown in a manner not reflected in the contributions budget,” says Muirhead.  “With the advent of strategic philanthropy and a return to tying giving to some aspect of the business, corporations are increasingly integrating their contributions programs into their overall strategic plans.”
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