Business can step up by reaching out, but it needs to adopt a new approach
THE OLD MODEL of corporate giving involves the CEO championing a particular charity, and then writing a cheque.
The old model is broken.
Broken because it relies on the whim of the CEO, who could change her priorities at any time. And, while the generosity continues to flow, the beneficiaries of this corporate largess become dependent on hand-outs rather than learning to catch their own fish.
Broken because it fiddles shareholders, who pay the CEO to reinvest profits or pay a dividend. And, if the CEO instead uses shareholder money to champion her favourite charity, then there would seem to be a problem. Would it not make more sense to pay a dividend and allow shareholders to decide which charities to support?
Supporters of the old model will tell you that it works just fine, so long as the chosen charity prominently displays the firm’s logo on the charity’s website or at a high-profile community event.
We agree. This works. But it’s not charity. It’s advertising, it’s marketing, or it’s a PR campaign.
Call it what you will.
If you care about charity, there is a better way.
Shared Value – the new approach to charity
The new approach to charity is to tie it in with what your firm already does, and to use your existing resources and capabilities to reach out to the community (people, charities, government agencies, and existing suppliers and distributors). For example, if you run a private healthcare centre, or a pharmaceutical company, then there may be opportunities to help the growing number of people who are struggling with substance abuse problems.
The naysayers will tell you that charity is for the Church and solving social problems is a role for government (and fortunately there are already public support services for addiction), but this kind of thinking is both defeatist and short sighted.
There are three good reasons why reaching out to help the community makes good business sense:
- Motivation: By giving back to the community, you can create a higher purpose for the work you do and increase employee motivation;
- Learning By Doing: As early as the 19th century, German psychologist Hermann Ebbinghaus identified that (as you would expect) people become more efficient the more times they perform a particular task. And so, by helping the community, by doing what you do best, you are actually helping your employees learn by doing;
- Connections: Friendships are valuable, and you never know who you could meet by reaching out to help others.
So, take some time to consider your core values, investigate what your competition is doing, and consider your options for embracing the new model of charity.
Who do you plan to help, and why?
2 replies on “Giving and Growing”
Tom,
I think it can make sense for CEO to give money to her pet charity still, even if there is no quid pro quo, e.g. advertising or marketing.
Shareholders need to pay personal income tax on dividends, and so company may be able to donate more money to charity at lower cost to shareholders than if the task was left to shareholders (charity debt tax shield).
What do you think?
Eric,
I agree with you that shareholders are normally subject to personal income tax. However, shareholders may not want to donate money to charity and the CEO, by doing so, robs shareholders of the option of deciding for themselves.