Corporate Philanthropy Is Good for Business
For the largest corporations in the world, charitable giving and higher shareholder value go hand-in-hand.
That’s one conclusion from a working paper for the European Corporate Governance Institute, based on a study of more than 2,000 firms from 2004-2013.
Other findings include:
- Charitable giving “is positively correlated with current and future measures of firm value and profitability”
- The connection between philanthropy and profitability is stronger for in-cash contributions than in-kind donations
While some shareholders question the wisdom of corporate philanthropy (they don’t like to see the company’s money “given away”), the fact that company donations “serve the purpose of passing through individuals’ donation” and have a bigger impact to society, mean investors may view philanthropic giving more favorably.
Corporate giving can also “function as a kind of marketing tool, indirect cost saving mechanism, community-oriented investment, or mechanisms [sic] to bond employees to the company, and as such improve corporate financial performance.”
Political contributions, defined as “‘corporate attempts to shape government policy in ways favorable to the company,’ can generate positive outcomes for the firm.” (But political giving that merely reflects managers’ “personal political preferences” can come at a cost to shareholders.)
The evidence continues to mount: Corporate philanthropy — CSR and all the rest — is good for the bottom line.
Video Files: CSR Insights