The Internal Value of Corporate Charitable Giving

Perhaps out of a sense of obligation (i.e., “everyone else does it and so should we”), major public corporations are usually generous to a fault with their philanthropy, funding everything from local and national arts and cultural institutions, to pure science and medical research, and education.  

            Often this corporate giving reflects the organization’s business, such as medical device manufacturer giving money to medical research and hospitals. No one questions the legitimacy or value of such munificence.  But what many businesspeople fail to ask is whether its philanthropic gifts bring a good return on investment for the company and its stakeholders. 

            In other words, are businesses realizing full value for their philanthropy? I would bet that a survey of businesses would indicate the answer is most often “I don’t know,” or “what do you mean by that?”

            When asked why their organizations engage in their chosen philanthropies, most company spokespeople fumble for an answer – as though they had never contemplated the question – and offer only vague responses along the lines of “to be a responsible member of the community,” or “to give something back.” 

            That's all well and good, but I dare say they aren't communicating anything like that internally and that few employees could verbalize the rationale for their company’s corporate giving.

            Certainly altruism – “giving something back” – is admirable, but stockholders and directors expect to see returns on the investments their companies make, beyond the mere tax break it gives them. Charitable giving is no exception.

            As cynical as that may sound, I suggest that there are valuable returns to the donors, but that many companies either are not strategic about their giving, not cognizant of the returns, not fully exploiting their philanthropy, or not measuring its impact. 

            In some instances, customers implicitly or explicitly demand charitable giving as a precondition to doing business with individual companies. So philanthropy in such cases may be seen as the price of admission to certain markets. 

            Those types of returns are numerous, but the ones I concern myself with here center on the most important stakeholder audience: employees. How are companies leveraging their philanthropic efforts to engage their employees? What are the near- and long-term internal benefits to be realized through corporate philanthropy? 

            One mid-western manufacturer provides an excellent case study.  The company makes it a policy to take an active role in the cities and towns in which it has plants. One city (where its local facility employs some 6,000 citizens) once had a reputation for crime and poverty – before the company got involved.

            Over the course of several years of determined involvement and significant monetary gifts, the company played an integral role in turning the city around. Year-over-year declining crime statistics proved its impact.

            The company’s manager in charge of community involvement said that employees are encouraged to choose community efforts and activities in which to be involved – sometimes on company time. In some instances, the employees themselves identify those projects and, in turn, solicit the company for necessary funding.

            Employees are recognized and often rewarded for their community involvement and what they are able to achieve as individual contributors or members of teams helping out in community efforts. 

            Examples of these activities have included the renovation of city parks and recreation facilities, hands-on involvement in the local Head Start program, anti-crime work in cooperation with the local police department, and the creation and maintenance of an educational nature center and preserve.

            Though the manager didn’t say so, I think that the company has realized some important long-term benefits among its employees.

            Knowing that their employer was investing in, supporting and encouraging community involvement and out-reach no doubt increased their pride in, and loyalty and commitment to the company.

            By extension, we can assume that an employee working on the production line came to understand that the quality of his/her effort would have a direct and positive impact on the company’s bottom line and, therefore, its ability to continue being a contributing member of the very community in which the employee and his/her family live. 

            In other words, if employees can see the direct link between their contributions to the success of the company and its ability to give back to the community, they win and their community wins.  Not only is this employee sustaining a family with a steady paycheck from this company; this company is helping to improve the lives of the employee, his/her family, and neighbors.  And that’s quite a return on an investment, no matter how you measure it.