Introduction: giving is no longer a privilege. It's December again. Requests for donations are in full force. But why should you give to charity? This month we're talking with three local experts about why corporate and individual giving is not only a responsibility, but the only viable business model for those corporations wishing to flourish now and in the future.
For our first installment Susan Stoltenberg, the Executive Director of Portland’s YWCA, got real about some of the stigma plaguing those in need and misconceptions about not only the have-nots, but the have-plenty's. This week we'll hear from Lester Thompson, Fully’s CFO about the perceived barriers to charity and why it can be difficult for a business to understand the long-term value of giving generously.
Part three: Giving is Good Business
Many companies feel conflicted about charitable giving
There is a lot of room for companies to misstep.
The legal responsibility of corporate managers is to maximize shareholder value, so there can be legal risks of spending too much money on charitable endeavors or if a donation to an organization creates negative press which would adversely impact company value. And the risk is not that they give too much—it is that they are PERCEIVED by investors as giving too much. That leads to lawsuits, which are expensive even if the company comes out on top. This intangible risk constrains the giving of some companies, even if they think that reduced giving is all about “keeping costs down.”
Also, companies fear the risk of making donations to organizations that could place them in contrary positions with respect to the values of their employees. Or their customers. Think Chik-fil-A.
Why is the value to corporate donations an elusive concept?
Some companies have a very narrow view of the value proposition of charitable donations. If a company takes a very narrow view, many donations appear to have no corporate payoff. Paying money to a third party to help someone else does not seem to have a high internal rate of return.
However, there are differing views on what the value proposition is. For some companies, donations represent an opportunity to obtain favorable press or PR. In other cases, particularly related to sponsorships, there is express public visibility and advertising available. Some companies take a longer view and recognize that stronger communities build stronger economies and therefore more robust business environments. The more citizens who read, the more read books, have higher incomes, buy lattes, buy books, etc.
Donating is an investment
Many companies recognize that giving to the community is a form of investment. Smart investments pay-off in the form of future returns. Reduced poverty leads to more customers. Higher levels of education lead to stronger more effective workers. But like most smart investments, the payoff does not occur within a month or a year. It can take much longer for the benefits to be visible. And many businesses (and their shareholders) aren't eager to look that far into the future.
If you're interested in reading more on this, here is a great article about the relationship between tax deductions and giving. There's a crazy study that shows giving to charity reduces stress and boosts the donor’s immune system. Thus, there may be unintended health benefits to charitable giving. So there's a feel-good angle to giving, but that's not the reason Fully matches many of their employee's year-end giving. We're one among many businesses (I'm looking at you Portland B Corps and beyond) who recognize that donations and charity are savvy strategies for staying a business. We’re confident that time will prove this to be not only sustainable, but plain good sense.
—Lester Thompson, Fully’s CFO
Stay tuned for our third installment: next week's discussion with Fully’s Social Responsibility Manager, A’Quila Ettien on tax reform, why taxes are rad and the long-game to generosity.