To ensure the effectiveness of corporate giving programs, executives should apply the same prudence to giving decisions as they do to other business activities, a new report from the Conference Board argues.
Although most companies have charitable contribution programs, philanthropy remains a controversial component of corporate social responsibility initiatives, not least because giving programs consume resources and often reflect the interests of management rather than the goals of shareholders. Indeed, some critics of corporate giving programs deride them as a waste of shareholder money.
The report, Making the Business Case for Corporate Philanthropy, examines how companies and boards can ensure the legitimacy of their giving programs, highlights examples of success and failure, and discusses the role of institutional investors and questions related to disclosure. To bolster the effectiveness of giving programs and minimize the existence or appearance of opportunistic behavior, the report's authors recommend that executives align their company's philanthropic activities with other business activities; clarify the role of officers and directors by providing them with the resources and tools necessary to implement a giving program and establish internal controls; establish standards of independence for board members that take into account stock exchange rules on the effect of corporate giving on director independence; and measure financial and social performance to determine whether to continue a giving program.
"A coherent corporate contribution program is a formidable way for a corporation to enhance its business strategy and reward loyal stakeholders," said Matteo Tonello, research director of corporate leadership at the Conference Board. "In some cases, the link between corporate philanthropy and shareholder value is undisputed. In others, however, charitable giving mostly furthers the goals or aspirations of those managers who get to decide on its recipients. For this reason, it is essential for the corporate board to scrutinize the motives of charitable contributions, demand a strategic rationale, and establish adequate transparency safeguards."