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05 Aug. 2011 | Comments (0)

Based on the economic news of the past week, it’s probably not a good time to bring up corporate philanthropy. But then again, maybe it is. Corporate charitable giving has become an even more important part of doing business over the past five years as corporate citizenship has moved up the board agenda. With a sell-off  in the equity markets under way since last month amid the controversy over the U.S. government debt ceiling debate and sovereign debt worries overseas, many public companies may not have charitable contributions high on their to-do list.DN-V3N15-11 Cover With that said, it is worth noting that charitable giving by corporations will most likely be flat in 2011 [See Chronicle of Philanthropy,  Corporate Giving Slow to Recover as Economy Remains Shaky, July 24]. However, according to a survey from the Chronicle, cash giving rose by 13 percent in 2010 after there was a 7.5 percent decline in 2009 during the recession. The Chronicle article quotes the head of the Association of Corporate Contributions Professionals as saying he expects it will take at least two more years for companies to reach the level of contributions it had before the recession in 2007. Another point made in the Chronicle article is that many corporations are aligning their corporate giving with their business objectives as well as giving more products and services instead of cash as they deal with economic pressures. Better corporate contribution alignment is one message in a recent Director Notes report from The Conference Board (Making the Case for Corporate Philanthropy) co-authored by Baruch Lev, an accounting and finance professor at the NYU Stern School of Business; Christine Petrovits, accounting professor at George Washington University School of Business; and Suresh Radhakrishnan, accounting professor at the University of Texas at Dallas School of Management. “With the decline in government funding of the nonprofit sector, companies face increasing expectations to step up their support,” Petrovits said. “Corporate philanthropy programs can improve social welfare, but some financial return from these programs is essential for corporate giving to continue in the long run. Officers and directors should not treat charitable giving as a peripheral activity or an after-the-fact distribution of profits.” The report concludes that “in order to make a business case in support of corporate philanthropy, executives should integrate giving with other business activities, institute controls to limit management opportunism, and develop procedures to measure and evaluate financial and social outcomes.” It goes on to say that “it is no longer sufficient for corporate philanthropy to simply ‘do good.’ If corporate giving is to succeed in the long run, it must provide a financial return. Acknowledging the economic benefits of corporate philanthropy does not negate its power to alleviate social problems and enhance communities.” For a look at the recommendations made in the Director Notes report, check out The Conference Board press release issued earlier this week.
  • About the Author:Gary Larkin

    Gary Larkin

    Gary Larkin is a research associate in the corporate leadership department at The Conference Board in New York. His research focuses on corporate governance, including succession planning, board compo…

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