McDonald’s received little recognition for delivering all those chicken nuggets to the rescue workers at the World Trade Center after the Sept. 11th terrorist attacks.
A television news program picked it up and there was a brief flash about McDonald’s generosity, but that was quickly displaced by the continuing saga of tragedy in New York and around the world. McDonald’s didn’t spend any money bragging about their contribution and it went relatively unnoticed.
On the other hand, Phillip Morris launched a $250-million advertising campaign touting its charitable activities. Many people found the ad campaign offensive. They wished Phillip Morris had spent more on philanthropic projects and less, much less, on proclaiming their own generosity.
Almost unanimously, the public says it wants to know about a company’s charitable undertakings. But, as was learned the hard way by Phillip Morris, informing the public about such matters is tricky public relations. Quietly supporting charitable activities can result in unfair criticism that the company isn’t sensitive to its community responsibilities. However, proclaiming ones philanthropic investments can appear to be bragging and carry the smell of profiteering. It is indeed a fine line to walk.
A New York research group, the Reputation Institute, conducted a survey through the market research firm Harris Interactive, Inc. last October to determine how Americans feel about corporate philanthropy. That survey, which included 21,630 respondents, found a general skepticism about corporate charitable contributions. Respondents felt that corporations donate to achieve some financial goal rather than from pure generosity. Thus, companies are criticized if they are quiet about their contributions and considered suspect if they announce their philanthropic programs. But yet, the public wants to know who is giving and who is not. What’s a body to do?
Why do corporations donate? Corporations have no conscience and exist solely to further their mission, which is to create value for their shareholders. Since customers consider a company’s reputation for community support when making buying decisions, philanthropy is essential to maintain market share. Thus, the survey respondents have correctly perceived the reason for corporate giving. There is most assuredly a profit motive. In essence, corporate giving is just another element of their advertising budget. Were it not for the public’s demand that companies donate, no donations would be forthcoming.
I suspect that many will disagree with my conclusions. However, let us be mindful that a corporation is merely a legal entity created for the organized conduct of business. It is owned by shareholders who may number as few as one to as many as a multitude of people. No one has ever seen a corporation because there is nothing to see. Admittedly, shareholders are subject to having a soul and a conscience and may direct the corporate officers to support certain causes. Thus the profits are lessened and, in essence, the shareholders have contributed themselves to the chosen charities.
For those who do wish to let the public know about their good works, the survey provided some suggestions. Most respondents seem to favor using press releases rather than advertising. There just seems to be something cheapening about buying expensive advertising space to proclaim one’s virtue. Corporate annual reports are another place that seems appropriate to let shareholders and the public know what the company has done in the charitable arena.
I can’t close this column without raising a point that has been troubling to me for years and years: Why do regulated public utilities contribute money to charity?
In effect, they are forcing their customers to pay more for electricity to cover the cost of the donations and the customers have no choice about the matter since electricity is a monopoly and only available from one source. Suppose I don’t agree with the charities they choose?
What can I do? Be unhappy I guess.
Well, what should we do? The public expects corporations to support community and charitable endeavors. Since your competition is doing it, you really have no choice. However, publicize corporate charitable endeavors quietly and professionally or you risk creating more ill-will than goodwill.
There is no such thing as a tax on business since all business costs are passed through to the consumer. Similarly, there is no such thing a true corporate philanthropy since corporations are merely legal entities and have no emotions or conscience about community matters. In the end, all taxes and real charitable contributions come from individuals.
Thought for the Moment — Some doctors say that cheerful people resist disease better than grumpy ones. The surly bird catches the germ.
Joe D. Jones, CPA, is publisher of the Mississippi Business Journal. His e-mail address is firstname.lastname@example.org.