Corporate giving and the bottom line

Should we be skeptical of corporations that use charitable donations as marketing?

Standing in line at my local Chapters store, I noticed a sign promising that Chapters would donate a portion of the proceeds from the sale of gift card bags to a charity that provides books to Canadian elementary schools. This is a great cause and the support of local communities is a key part of corporate social responsibility (CSR) programs. So why was I skeptical?

Most business leaders now believe (at least in public) that corporations have responsibilities not just to their shareholders but to other stakeholders as well. They dispute Milton Friedman’s view that CSR is "a fundamentally subversive doctrine" that interferes with the contractual duty of management to maximize value to shareholders. But does the motivation for spending money on CSR matter? Is it a good thing or a bad thing if corporations make decisions about their CSR initiatives based on maximizing the bottom line?

Chapters could simply have made a cash donation to charities that support education. By structuring the donation around gift card bags, it is presumably reaping several additional benefits. First, more gift card bags will undoubtedly be sold (Do I really need a bag to put my gift card in? Of course I do — it’s for a good cause) and Chapters will keep some of the profits from selling additional bags. So the donation may not actually cost Chapters anything and might even result in net additional profit. It is also delivering a message about the company’s dedication to helping children read more books, which is intended to make me feel good about buying from Chapters (and not ordering from Amazon).

This is of course not unique to Chapters. It is why corporations generally assign responsibility for overseeing donations to their marketing departments. It is why they seek to channel their charity dollars to causes supported by their customers, and to events where they can be the "platinum" sponsor to maximize recognition. They also involve their employees in donations of time and money, and reap benefits in employee engagement. Executives receive personal benefits as well — their names appear in association with the causes, they attend flashy fundraisers (some would say this is a duty and not a pleasure) and they get to network with other like-minded executives. They also feel good about supporting important causes without having to spend their own money.

Does the motivation for supporting good causes matter if the result is more money channelled to organizations that need help? Charities, governments and donors alike recognize that donations increase when the donors get something in return. Charities provide name plaques on theatre seats or hospital rooms. Governments grant tax benefits. Donors apparently give more to charities that send them unsolicited holiday cards. (Note to charities, I don’t need any more address labels). It is not unethical to offer donors a $10 stuffed toy if it means the donor gives $100 instead of $50 to the charity.

I suspect we are all getting more skeptical about corporate giving. The problem arises if we detect a whiff of self-congratulation on the part of the corporate donor (check out the public outcry over Lululemon’s recent donation to the Dalai Lama Center for Peace and Education). Friedman was especially dismissive of executives who dress up self-interest as corporate responsibility, which he called "hypocritical window dressing." I don’t usually agree with Friedman, but I think he has a point.

What we should be asking corporate donors such as Chapters is what else they are doing as part of their CSR initiatives. Are they hiring employees from disadvantaged communities and spending money to train them and help launch their careers? Are they taking the time to find (and perhaps pay more to) overseas suppliers who can guarantee safe working conditions? Are they investing in equipment that will reduce their carbon footprint? Those initiatives may have less PR value, but they are the truer test.