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oogle, like most organizations with operational expertise and other core competencies, can also focus on implementing social responsibility and satisfying stakeholder groups. From a social responsibility perspective,

the key challenge is how an organization assesses its stakeholders’ needs, integrates them with company strategy, reconciles differences between stakeholders’ needs, strives for better relationships with stakeholders, achieves mutual understandings with them, and finds solutions for problems. In this chapter, we explore com- munity stakeholders and how organizations deal with stakeholder needs through philanthropic initiatives. We explore the relationship with communities and the economic, legal, ethical, and philanthropic responsibilities that must be addressed by business. We define strategic philanthropy and integrate this concept with other elements of social responsibility. Next, we trace the evolution of corporate philanthropy and distinguish the concept from cause-related marketing. We also provide examples of best practices of addressing stakeholders’ interests that meet our definition of strategic philanthropy. From there, we define social entrepreneur- ship and explain how it relates to strategic philanthropy and social responsibility. Then we consider the benefits of investing in strategic philanthropy to satisfy both stakeholders and corporate objectives. Finally, we examine the process of implementing strategic philanthropy in business. Our approach in this chapter is to demonstrate how companies can link strategic philanthropy with economic, legal, and ethical concerns for the benefit of all stakeholders.

Community Stakeholders The concept of community has many varying characteristics that make it a challenge to define. The community does not always receive the same level of acceptance as other stakeholders. Some people even wonder how a company determines who is in the community. Is a community defined by city or county boundaries? What if the firm operates in multiple locations? Or is a community prescribed by the interactions a firm has with various constituents who do not fit neatly into other stakeholder categories? For a small restaurant in a large city, the owner may define the community as the immediate neighborhood where most patrons live. The restaurant may demonstrate social responsibility by hiring people from the neighborhood, participating in the neighborhood crime watch program, donating food to the elementary school’s annual parent-teacher meetings, or sponsoring a neighborhood Little League team. For example, JPMorgan Chase & Co. has instituted a program called Corporate Challenge, a global initiative that invites employees and others to participate in running events for charity. Today, participants in the Corporate Challenge include teams from many other organiza- tions although employees of JPMorgan Chase still produce the largest participa- tion from a single company. One of the events, which took place in Syracuse, New York, hosted over 28,000 runners and walkers from more than 350 companies. The proceeds supported the local nonprofit Hillside Work-Scholarship Connection. Now in its 43rd year, the challenge recently included 9,000 JP Morgan Chase employees in seven countries and provided donations to causes around the world. In the last few years, causes included support for indigenous Australians, a youth foundation in China, sports in South Africa, and veterans.2 For a corporation with facilities in North and South America, Europe, and Africa, the community may be viewed as virtually the entire world. To focus its social responsibility efforts, the multinational corporation might employ a community relations officer in each facility who reports to and coordinates with the company’s head office.

Under our social responsibility philosophy, the term community should be viewed from a global perspective, beyond the immediate town, city, or state where

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a business is located. Thus, we define community as those members of society who are aware of, concerned with, or in some way affected by the operations and output of an organization. With information technology, high-speed travel, and the emergence of global business interests, the community as a constituency can be geographically, culturally, and attitudinally quite diverse. Issues that could become important include pollution of the environment, land use, economic advantages to the region, and discrimination within the community, as well as exploitation of workers, natural resources, or consumers.

From a positive perspective, an organization can significantly improve the quality of life for people in a community through employment opportunities, eco- nomic development, and financial contributions for educational, health, cultural, and recreational activities. Quality of life is a broad concept, typically associated with the social, physical, economic, and environmental health conditions that affect an individual or group. U.S. News and World Report conducts an annual survey of 20,000 citizens of 80 countries to determine its Best Country rankings. Part of the survey relates to quality of life, which considers the quality of healthcare and public education, political and economic stability, and other factors. Table 10.1 lists the highest- and lowest-rated countries for quality of life.3

Countries with the highest ratings are known for their social safety nets, progressive policies, and commitment to public health and education. Countries at the bottom of the list have experienced years of strife, often brought on by war, corruption, and unemployment. As discussed in earlier chapters, business both affects society and is affected by it. The intersection of business and society, as well as managerial attention and actions toward the intersection, lie at the heart of the social responsibility orientation discussed in this book. Even a company with a past reputation for damaging the quality of life in its community may be able to overcome criticism and begin to forge a healthier relationship with its stakeholders.

The story of Asia Pulp & Paper (APP) demonstrates the power that stakehold- ers have in changing corporate perspectives. Based in Indonesia, APP is one of the largest producers of pulp and paper products in the world, with operations in 120 countries spread over six continents. For many years, critics of the company pointed to its supply-chain practices and lack of consideration for the environment and communities in which it operated. The Indonesian company was named in a scathing report issued by Greenpeace about illegal logging activity in Indonesia and its devastating effects on rainforests. The report, Partners in Crime, also took aim at the companies that purchased from APP. When Greenpeace activists learned that Mattel was using APP paperboard generated from rainforests to package its popular Barbie doll, they draped a banner of Ken, Barbie’s love interest, from the roof of Mattel’s headquarters in California. Ken wore a disapproving look amid the phrases, “Barbie, it’s over. I don’t date girls that are into defor- estation.” These efforts, and many more, led hundreds of companies to stop doing business with APP. Before long, company executives committed to a host of sustainability policies and action plans, including the involvement of the local community. Today, APP has a full-fledged management approach to social responsibility. While some critics still ques- tion the company’s motives and outcomes, other observers point to evidence of APP’s turnaround. For example, APP has established schools in several towns and cities to serve

community members of society who are aware of, concerned with, or in some way affected by the operations and output of an organization

quality of life a measure of social, physical, economic, and environmental health conditions affecting an individual or group

Table 10.1 Highest- and Lowest-Rated Countries for Quality of Life 1. Canada 2. Sweden 3. Denmark 4. Norway 5. Switzerland

76. Angola 77. Jordan 78. Lebanon 79. Iran 80. Iraq

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local children, many of whom would have gone without much formal education. The school curriculum includes science, engineering, forestry, and computing. While the APP schools certainly change lives through education, they also ensure the company is developing a strong future workforce.4

Through long-term efforts, a firm may become a neighbor of choice, an orga- nization that builds and sustains trust with the community.5 To become a neighbor of choice, a company should strive for positive and sustainable relationships with key individuals, groups, and organizations; demonstrate sensitivity to community concerns and issues; and design and implement programs that improve the quality of community life, while promoting the company’s long-term business strategies and goals.6 Merck’s Neighbor of Choice program interacts with organizations and initiatives that are in line with the company’s mission on well-being. The program is dedicated to finding solutions to health and social issues where the company is located, improving healthcare quality, and increasing access to care for underserved populations in the areas of Alzheimer’s disease, cancer, diabetes, heart disease, hepatitis C, HIV/AIDS, and maternal health. The company awards grants to local nonprofit organizations in health, education, social services, and international issues. In one year alone, 130 grants infused $3.1 million, along with a cadre of employee volunteers, into communities around the world.7

Similar to other areas of life, the relationship between a business and the com- munity should be symbiotic. A business may support educational opportunities in the community because the owners feel it is the right thing to do, but it also helps develop the human resources (HR) and consumer skills necessary to operate the business. Customers and employees are also community members who benefit from contributions supporting recreational activities, environmental initiatives, safety, and education. Many firms rely on universities and community colleges to provide support for ongoing education of their employees, as well as advances in research. The Dow Chemical Company, for example, committed to an annual investment of $250 million over the course of 10 years to universities for research purposes. For example, Dow partnered with University of California, Santa Barbara, to design a laboratory safety program that applies to both university settings and corporate laboratories. Beyond that, the company has working relationships with faculty, students, and other academicians to apply the research and create useful solutions to pressing issues, including renewable energy.8

To build and support these initiatives, companies may invest in community relations, the organizational function dedicated to building and maintaining relationships and trust with the community. In the past, most businesses have not viewed community relations as strategically important or associated them with the firm’s ultimate performance. Although the community relations depart- ment interacted with the community and often doled out large sums of money to charities, it essentially served as a buffer between the organization and its immediate community. Today, community relations activities have achieved greater prominence and responsibility within most companies, especially due to the rise of stakeholder power and global business interests. The function has gained strategic importance through linking to overall business goals, professionalizing its staff and their knowledge of business and community issues, assessing its performance in quantitative and qualitative terms, and recognizing the breadth of stakeholders to which the organization is accountable.9 Community relations also assist in short-term crisis situations, such as disaster relief. The humanitarian aid organization Direct Relief was given an Excellence Award by the Committee Encouraging Corporate Philanthropy (CECP) for its collaboration with FedEx to bring health services to people and places stricken by disaster. When a typhoon hit the Philippines, more than 250,000 people received needed medical supplies. Direct Relief and FedEx brought medications and other relief to Paraguay after flooding left 70,000 people without shelter, food, and water. Additionally, the partnership

neighbor of choice an organization that builds and sustains trust with the community through employment opportunities, economic development, and financial contribution to education, health, artistic, and recreational activities of the community

community relations the organizational function dedicated to building and maintaining relationships and trust with the community

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Table 10.2 Community Mission Statements Organization Community Mission Statement

Capital One At Capital One, we have always believed that as business leaders, we have a unique opportunity to create value in the communities where we live and work. Applying the same principles we use in our business of innovation, collaboration, and empowerment to our investments in the community helps leverage our investment of time and money to fuel new ideas and inspire others to act.

Education Advisory Board (EAB)

EAB’s mission to make education smarter and our communities stronger infuses everything we do—especially our active, intentional approach to corporate social responsibility. It’s by design that our work with our members and our communities intertwine: it allows us to have an outsized, positive impact. This service orientation strengthens our own organization, too—by ensuring we hire staff attuned to our members’ missions, by creating skill- development opportunities beyond our office walls, and by giving employees the fulfillment of serving communities where they live and work.

Eli Lilly and Company

We have a long, proud heritage of strengthening the communities where we work and live. We do this through giving, volunteering, and focusing on key issues that affect our business, such as education. At the heart of our efforts to strengthen communities are our employees, who donate their time, talent and treasure in countless ways. As a company, we actively encourage our employees to volunteer and give, and we develop programs that allow them to help improve communities at home and around the world. We view this as an important investment that connects us more deeply with the people we serve, which helps make us a better company.

Pinnacol Assurance

We have a policy of serving people. It’s pretty simple. We love our community. For more than 100 years, our job has been all about protecting the health and safety of!people on their jobs. And that sense of caring extends to the communities where we live and work. We donate time, money and support through grants, sponsorships, our employee volunteer program and the Pinnacol Foundation’s scholarship program.

UnitedHealth Group

The people of UnitedHealth Group are working together in support of local communities. UnitedHealth Group’s year-round giving!program supports employees’ desires and efforts to give back to the communities where they live and work, across the nation and around the world. Through charitable contributions and volunteering, our people are deeply and personally involved in improving the health and welfare of their neighbors. The United Health Foundation matches employee contributions, dollar for dollar, to nearly all nonprofit organizations, doubling their impact. Employees have the ability to give whenever, wherever and however they choose.

Volvo Group For the Volvo Group, creating shared value involves moving both our business and society forward. We enhance our competitiveness while simultaneously advancing the economic, environmental and social conditions of the societies in which we operate. The highest potential for mutual benefit is where our business significantly interacts with society. Therefore, our selected focus areas are: • Education and skills development • Traffic and worksite safety • Environmental sustainability

Sources: Capital One, “Capital One Community Involvement Report,” https://www.capitalone.com/media/doc/about/ capitalone-sustainability-report.pdf (accessed June 30, 2019); EAB, “Corporate Citizenship,” https://www.eab.com/ careers/corporate-citizenship (accessed June 30, 2019); Lilly, “Strengthening Communities,” https://www.lilly.com/caring/ strengthening-communities (accessed June 19, 2019); Pinnacol, “Community Relations,” https://www.pinnacol.com/ community-relations (accessed June 29, 2019); UnitedHealth Group, “Our People,” https://www.unitedhealthgroup.com/ social-responsibility/giving.html (accessed June 15, 2019); Volvo Group, “Societal Engagement,” https://www.volvogroup. com/en-en/about-us/csr-and-sustainability/moving-business-and-society-forward.html (accessed June 29, 2019).

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has provided over 10 million Americans with approximately $400 million in necessary medications.10 Progressive companies manage community relations with partnership in mind. They seek out community partners for a range of interests and activities—philanthropy, volunteerism, creating a quality educational system and a qualified workforce, appropriate roads and infrastructure, affordable housing, and other community assets.

Over the past two decades, corporate support for philanthropy has been steadily growing. According to Giving USA Foundation, corporate giving totaled more than $20 billion in 2018. This number increased by 5.4 percent from the year before. The sluggish recovery of the economy since the Great Recession had an effect on corporate giving, but as the economy recovers corporate giving has begun to increase once more. PepsiCo, for instance, has a matching gifts program and is involved in a number of sustainability initiatives. The company donated a $1 million grant to Kiva, a nonprofit organization that provides small loans to entrepreneurs in developing countries to start their own businesses.11 Even before the economic downtown, corporate giving was becoming more effective and strategic. Companies are working to align their stakeholder interests and develop partnerships that are more closely aligned to busi- ness goals, community interests, and sustainable activities.12

In a diverse society, however, there is no general agreement as to what constitutes the ideal model of business responsibility to the community. Businesses are likely to experience conflicts among stakeholders as to what constitutes a real commitment to the community. Therefore, the community relations function should cooperate with various internal and external constituents to develop community mission statements and assess opportunities and develop priorities for the types of contributions it will make to the community. Table 10.2 provides several examples of company missions and programs with respect to community involvement. As you can see, these missions are specific to the needs of the

Table 10.3 Community Needs Assessment

Community Issues Exceptional Adequate Inadequate Don’t Know

Parks 3 2 1 0

Culinary water system 3 2 1 0

Street maintenance 3 2 1 0

Garbage collection 3 2 1 0

Snow removal 3 2 1 0

Fire protection 3 2 1 0

Police protection 3 2 1 0

Ambulance service 3 2 1 0

Building inspection 3 2 1 0

Animal control 3 2 1 0

Other code enforcement (weeds, junk cars, etc.)

3 2 1 0

Arts 3 2 1 0

Street lighting 3 2 1 0

Other issues that can be evaluated: grocery stores, pharmacies, clothing stores, fast-food restaurants, entertainment, hardware/lumber stores, auto services, banking/financial services, affordable housing, business offices, warehouses, convenience stores, community colleges, higher education satellite campuses.

Source: Community Tool Box, “Community Needs Assessment Survey Guide,” https://ctb.ku.edu/en/table-of-contents/ assessment/assessing-community-needs-and-resources/conducting-needs-assessment-surveys/main (accessed June 27, 2019).

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people and areas in which the companies operate and are usually aligned with the competencies of the organizations involved and their employees.

Community mission statements are likely to change as needs are met and new issues emerge. For example, as the Japan-based Takeda Pharmaceutical Company Ltd. continues to expand operations throughout the world, their community involvement also expands to meet the needs of each community. In Brazil, the company focuses on renovating orphanages, while in South Africa, they have initiatives teaching children to make blankets. When global communities experi- ence unexpected disasters, such as flooding in Australia, Takeda has been there to assist with the recovery. On its website, Takeda proudly displays recognition as a top employer in most countries where it operates, including awards granted in Ecuador, Spain, Russia, Ukraine, and the United States.13 Thus, as stakeholder needs and concerns change, the organization will need to adapt its community relations efforts. To determine key areas that require support and to refine the mission statement, a company should periodically conduct a community needs assessment, like the one presented in Table 10.3.14

Responsibilities to the Community It is important for a company to view community stakeholders in a trusting man- ner, recognizing the potential mutual benefit to each party. In a networked world, much about a company can be learned with a few clicks of a mouse. Activists and disgruntled individuals have used websites to publicize the questionable activities of some companies. Target and Ryanair have been the focus of “hate” websites that broadcast concerns about the company’s treatment of employees, pricing strategies, and marketing and advertising tactics.15 Because of the visibility of business activities and the desire for strategic social responsibility, successful companies strive to build long-term mutually beneficial relationships with relevant communities. Achieving these relationships may involve some trial and error. Table 10.4 illustrates some of the common myths about community relations. A positive example, on the other hand, is Lilly Pharmaceuticals’ strong support for the Indianapolis Symphony Orchestra. In return, the orchestra stages private concerts for Eli Lilly employees. Dell Computer has a similar relationship with the Round Rock Express, a minor-league baseball team. A community focus can be integrated with concerns for employees and consumers. Chapter 1 provided evidence that satisfied customers and employees are correlated with improved organizational performance.

Table 10.4 Common Myths About Community Relations Support of political and regulatory officials is not needed.

We will cause a problem for our company if we engage in community relations.

The community has no expertise on our decisions and actions.

Engaging the community will delay us in finding the right solution.

Community officials have no concern for the cost of solutions to issues.

We serve the community simply through employment opportunities and paying taxes.

Our only focus is national and global relationships.

Community relationships involve only public relations.

The local community does not impact our success.

Spending time with the community distracts from the economic success of the firm.

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Economic Issues From an economic perspective, business is absolutely vital to a community. Companies play a major role in community economic development by bringing jobs to the community and allowing employees to support themselves and their families. These companies also buy supplies, raw materials, utilities, advertising services, and other goods and services from area firms; this in turn produces more economic effects. In communities with few employers, an organization that expands in or moves to the area can reduce some of the burden on community services and other subsidized support. Even in large cities with many employers, some companies choose to address social problems that tax the community. In countries with developing economies, a business or industry can also provide many benefits. A new company brings not only jobs, but also new technology, related businesses, improvements to infrastructure, and other positive factors. Conversely, globalization has incited criticism regarding the effects of U.S. businesses on other parts of the world, namely developing countries. For example, Sig Sauer, a New Hampshire-based manufacturer of a full range of firearms and ammunition, has been condemned in the media for continuing to sell weapons in Mexico. The company is the largest seller of firearms in Mexico and its customers include federal, state, and local police. Given the rate of violence, organized crime, and police corruption in the country, critics question why neither the U.S. government nor Sig Sauer have put an end to shipping thousands of weapons across America’s southern border. Similarly, Nestlé has been criticized for marketing baby formula to nursing mothers in Turkey, claiming that their offspring will receive more nutri- tion from the formula than from their mothers; aggressive selling of bottled water in developing parts of the world, which is said to be expensive for consumers and works as a deterrent to governments to solve water sanitation issues; and for child labor accusations in African cocoa farms. The company has committed to “The Nestlé Cocoa Plan,” which involves building schools and providing cocoa trees to farmers with the aim of contributing to the betterment of the local community.16

Interactions with suppliers and other vendors also stimulate the economy. Some companies are even dedicated to finding local or regional business partners in an effort to enhance their economic responsibility. For example, Starbucks, in an unprecedented move for the company, began franchising locations in Europe. By having locals run the coffee chains’ stores, the company hopes to further its influence in the region.17 Furthermore, there is often a contagion effect when one business moves into an area: By virtue of its prestige or business relationships, such a move can signal to other firms that the area is a viable and attractive place for others to locate. There are parts of the United States that are highly concentrated with automotive manufacturing, financial services, or technology. Local chambers of commerce and economic development organizations often entice new firms to a region because of the positive reputation and economic contagion it brings. Finally, business contributions to local health, education, and recreation projects not only benefit local residents and employees, but also may bring additional revenue into the community from tourism and other businesses that appreciate the region’s quality of life. AT&T, for example, has hosted the Pebble Beach National Pro-Am golf tournament for more than 30 years. The annual event honors influential groups each year and has raised more than $110 million that the Monterey Peninsula Foundation provides to local charities in the counties that surround Monterey, California. After the event, tournament banners are upcycled into backpacks, then stuffed with school supplies for area schoolchildren in need.18

Just as a business brings positive economic effects by expanding in or relocating to an area, it can also cause financial repercussions when it exits a particular market or geographical location. Thus, workforce reduction, or downsizing—a

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topic discussed in Chapter 8—is a key issue with respect to economic responsibility. The impact of layoffs due to plant closings and corporate restructuring often extends well beyond the financial well-being of affected employees. Laid-off employees typically limit their spending to basic necessities while they look for new employment, and many may ultimately leave the area altogether. Even employees who retain their jobs in such a downsizing may suffer from poor morale, distrust, guilt, and continued anxiety over their own job security, further stifling spending in a community.

Because companies have such a profound impact on the economic viability of the communities in which they operate, firms that value social responsibility consider both the short- and long-term effects on the community of changes in their workforce. Today, many companies that must reduce their workforce—regardless of the reasons—strive to give both employees and the community advance notice and offer placement services to help the community absorb employees who lose their jobs. Quad/Graphics, one of the largest printers in the United States, closed plants in Illinois and Minnesota. The company offered to transfer affected employees to other plants in the nation. However, for those who did not want to transfer, Quad/ Graphics agreed to offer a severance package including pay, career placement assistance, and extension of benefits.19 Depending on economic circumstances and business profitability, companies may choose to offer extra compensation commensurate with an employee’s length of employment that gives laid-off employees a financial cushion while they find new work. However, the realities of economic turmoil mean that many employees receive little compensation.

Legal Issues To conduct business, a company must be granted a “license to operate.” For many firms, a series of legal and regulatory matters must be resolved before the first employee is hired or the first customer is served. If you open a restaurant, for example, most states require a business license and sales tax number. These documents require basic information, such as business type, ownership structure, owner information, number of expected employees, and other data.

On a fundamental level, society has the ability to dictate what types of organi- zations are allowed to operate. In exchange for the license to operate, organizations are expected to uphold all legal obligations and standards. We have discussed many of these laws throughout this book, although individual cities, counties, and munici- palities will have additional laws and regulations that firms must obey. For example, a construction company in Destin, Florida, was charged with repeated safety violations that have endangered employees. The leading cause of fatality in the construction industry is falling, and the company was found liable for neglecting to provide employees with protections against this well-known danger. Despite widespread news stories and regulatory education about fatal falls, engineering and construction companies con- tinue to receive penalties. Two contractors were assessed penalties of over $150,000 after two workers were killed when scaffolding collapsed on an Orlando hotel project.20

Other communities have concerns about whether and how businesses fit into existing communities, especially those threatened by urban sprawl and small towns working to

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preserve a traditional way of life. Some states, cities, and counties have enacted legislation that limits the square footage of stores in an effort to deter “big-box stores,” such as Walmart and Home Depot, unless local voters specifically approve their being allowed to build. In most cases, these communities have called for such legislation to combat the noise and traffic congestion that may be associated with such stores, to protect neighborhoods, and to preserve the viability of local small businesses.21 Beyond big-box stores, online competition is another threat to local businesses. In New York City, the owner of Gold Leaf Stationers realized the power of community relations when a decrease in annual sales meant that his store could no longer afford rent of $12,500 per month. The store is housed in a co-op building controlled by a board of directors. The board, which included many customers of Gold Leaf, voted to reduce the monthly rent to $9,500 and capped the store’s share of annual real estate taxes due on the co-op property. In this case, New York law allows the co-op board to make such significant decisions. After the decision, the co-op president remarked, “This type of store adds value to the fabric of the community.”22 Although the importance of preserving small business, paying living wages, which we discussed in Chapter 8, and restricting store locations may be ethical issues for some communities, consumers, and businesses, the legal environment may facilitate or restrict these issues, as well.

Ethical Issues As more companies view themselves as responsible to the community, they will contemplate their role and the impact of their decisions on communities as they make managerial ethical decisions. Many companies have opted to be proactive on important issues, such as minimum wages and benefits for employees. While legislative bills have been proposed on raising the minimum wage, it may take time before any changes to federal law are made in this respect. Amazon, Target, and Cox Communications, however, raised the minimum wage for employees in all U.S. locations to $15 per hour because they believe it is the right thing to do. Employees of Disney’s theme parks are also offered a starting wage of $15 per hour. Other companies such as Costco have followed suit, raising its minimum wage to $14 per hour.23 In 2018, Walmart raised wages so that new employees will receive $11 per hour. The retail giant had been paying $9 to $10 per hour to new hires, although long-term employees often make more than $14 per hour. According to a recent social responsibility report, Walmart store managers in the U.S. earn an average of $175,000 per year.24

Business leaders are increasingly recognizing the significance of the role their firms play in the community and the need for their leadership in tackling community problems. Bill Daniels, founder of Cablevision, was an extremely successful entrepreneur. His approach to ethical decision-making in Cablevision had a positive impact on the communities. He established the Daniels Fund, which has a significant impact on business ethics education and other social concerns in the states of Wyoming, Colorado, New Mexico, and Utah. Millions of dollars have been donated to causes such as ethics and integrity, education, youth development, and amateur sports.25

These examples demonstrate that the ethical dimension of community responsibility can be multifaceted. This dimension and related programs are not legally mandated but emanate from the particular philosophy of a company and its top managers. Because many cities have not mandated a living wage, the actions of Target, Amazon, and Costco are based on an ethical obligation felt toward employees and the community as well as competition for the best employees. There are many ways that a company can demonstrate its ethical commitment to the community. As Bill Daniels’s commitment to business ethics illustrates, a common

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extension of “doing the right thing” ethically provides a role model for all political and civic leaders.

Philanthropic Issues The community relations function has always been associated with philanthropy, as one of the main historical roles of community relations was to provide gifts, grants, and other resources to worthy causes. Today, that thinking has shifted. Although businesses have the potential to help solve social issues, the success of a business can be enhanced from the publicity generated by and through stakeholder acceptance of community activities. For example, Colorado-based New Belgium Brewing Company donates $1 for every barrel of beer brewed the prior year to charities within the markets it serves. The brewery divides the funds among states in proportion to interests and needs, considering environmental, social, drug and alcohol awareness, and cultural issues. Donation decisions are made by the firm’s coworker grants committee that, since 1995, has been the backbone of the philanthropic program. The committee is open to all coworkers and takes on the task of researching, reviewing and allocating funds to worthy organizations. To date, the company has provided over $10.5 million in grants to support efforts in climate change, social equity, smart growth, and sustainable agriculture.26 However, New Belgium belongs to an industry that some members of society believe contributes to social problems. Thus, regardless of the positive contributions such a firm makes to the community, some members will always have a negative view of the business.

One of the most significant ways that organizations are exercising their philanthropic responsibilities is through volunteer programs. Volunteerism in the workplace, when employees spend company-supported time in support of social causes, has become a routine expectation in companies of all sizes. Each year, approximately 77.4 million Americans spend nearly 6.9 billion hours supporting formal volunteer activities. The estimated value of these volunteer efforts is over $166 billion. The four main activities that volunteers perform are fundraising, collecting and distributing food, helping with general labor needs, and tutoring or teaching. These activities are performed for a variety of organizations, with religious, education, and social service agencies topping the list. Recent research has examined the factors that either promote or inhibit volunteerism, with shorter commute times, home ownership, and higher educational levels associ- ated with higher rates of volunteerism.27 Figure 10.1 shows the states with the

volunteerism when employees spend company-supported time in support of social causes

Figure 10.1 States with Highest Volunteerism Rates

Source: Corporation for National and Community Service, “Volunteering in America: States,” https://www.nationalservice. gov/serve/via/states (accessed June 25, 2019).

51.0% 40.6%

41.5%

43.2%

45.1%

Utah Minnesota Oregon Iowa Alaska

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highest percentage of their populations who are actively engaged in volunteer activities.

People who volunteer feel more connected to other people and society and ultimately have lower mortality rates, greater functional ability, and lower rates of depression later in life than those who do not volunteer. When volunteering is a result of employment, benefits of volunteering accrue to both the individual, in terms of greater motivation, enjoyment, and satisfaction, and to the organization through employee retention and productivity increases.28 Communities benefit from the application of new skills and initiatives toward problems, better rela- tions with business, a greater supply of volunteers, assistance to stretch limited resources, and social and economic regeneration.29 Philanthropic issues are just another dimension of voluntary social responsibility and relate to business’s contributions to stakeholders.

Chicago-based Exelon Energy, for example, instituted their Powering Communities volunteer engagement program that offers incentives to encourage employees to volunteer. One of the incentives is the Dollars for Doers program in which an employee can volunteer either 10, 20, or 40 hours per year at an organization of his or her choice, and Exelon awards a corresponding grant to the organization. In 2018, Exelon provided $1.1 million to recognize the volunteer efforts of its employees. Employees who volunteer more than 50 hours per year are nominated for the Exelon Employee Volunteer Award, and the recipients are then recognized during National Volunteer Week. In the most recent year, employees volunteered for over 240,000 hours, including 5,200 employees who participated in National Volunteer Week and topped 18,000 hours of service.30

There are several considerations in deciding how to structure a volunteer program. Attention must be paid to employee values and beliefs; therefore, political or religious organizations should be supported on the basis of individual employee initiative and interest. Some companies will partner with nonprofit organizations as a means to give their employees more options for volunteerism. For example, World Vision humanitarian organization partners with corporations for financial, volunteer, and product donations, as well as opportunities for cause- related marketing. Volunteer opportunities exist in education, sanitation, economic development, and related areas all over the globe. World Vision even provides guidance to corporate partners on how to integrate volunteerism and philanthropy with their business goals.31

Another issue is what to do when some employees do not wish to volunteer. If the company is not paying for the employees’ time to volunteer and volunteering is not a condition of employment or an aspect of the job description, it may be dif- ficult to convince a certain percentage of the workforce to participate. On the other hand, if the organization is paying for one day a month to allow the employee exposure to volunteering, then individual compliance is usually expected.

Philanthropic Contributions Philanthropy provides four major benefits to society. First, it improves the quality of life and helps make communities places where people want to do business, raise families, and enjoy life. Thus, improving the quality of life in a community makes it easier to attract and retain employees and customers. Second, philanthropy reduces government involvement by providing assistance to stakeholders. Third, philanthropy develops employee leadership skills. Many firms, for example, use campaigns by the United Way and other community service organizations as leadership- and skill-building exercises for their employees. Philanthropy helps create an ethical culture and promotes the values that can act as a buffer to

philanthropy acts such as donations to charitable organizations to improve quality of life, reduce government involvement, develop employee leadership skills, and create an ethical culture to act as buffer to organizational misconduct

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organizational misconduct.32 In the United States, charitable giving has stagnated at 2.1 percent of gross domestic product (GDP) annually.33

The most common way that businesses demonstrate philanthropy is through donations to local and national charitable organizations. Corporations gave more than $20.5 billion to environmental, educational, and social causes in a recent year. Individual giving, which is always the largest component of charitable contribu- tions, was an estimated $292.09 billion, or 71 percent of the total. Figure! 10.2 displays the sources of charitable giving. Figure 10.3 displays the major recipients

Figure 10.3 Recipients of Charitable Giving

Source: “Giving USA 2019,” Giving USA, https://givingusa.org/giving-usa-2019-americans-gave-427-71-billion-to-charity-in- 2018-amid-complex-year-for-charitable-giving/ (accessed June 27, 2019).

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Figure 10.2 Sources of Charitable Giving

Source: “Giving USA 2019,” Giving USA, https://givingusa.org/giving-usa-2019-americans-gave-427-71-billion-to-charity-in- 2018-amid-complex-year-for-charitable-giving/ (accessed June 27, 2019).

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of the $427 billion in philanthropic donations made in 2018. Religious organiza- tions received about 30 percent of all contributions, with educational causes col- lecting 13 percent of the funds While many areas experienced declines, donations to nonprofits devoted to international affairs, the environment, and animals grew year over year.34

In a general sense, philanthropy involves any acts of benevolence and goodwill, such as making gifts to charity, volunteering for community projects, and taking action to benefit others. For example, your parents may have spent time on nonwork projects that directly benefited the community or a special population. Perhaps you have participated in similar activities through work, school groups, or associations. Have you ever served Thanksgiving dinner at a homeless shelter? Have you ever raised money for a neighborhood school? Have you ever joined a social club that volunteered member services to local charities? The Rockefeller Philanthropy Advisors is a nonprofit group that provides guidance to individuals on selecting and supporting nonprofits, including the key questions to ask before making these plans. The first question, “Why are you giving?” sets the stage for uncovering motivations, values, and interests. Figure 10.4 explores nine primary motivations for philanthropy. In most cases, philanthropists have multiple reasons for giving, including those driven by both intrinsic motivation and extrinsic motivation.

According to the Rockefeller group, individuals within families are increas- ingly interested in giving as a collective group. Often, the family is motivated by an ancestor or core values and beliefs. In other cases, philanthropists may be motivated by recognition and the rewards of being associated with specific efforts and good works. Still others are looking for ways to minimize taxes and enable future generations to benefit from estate planning.

Most religious organizations, educational institutions, and arts programs rely heavily on philanthropic donations from both individuals and organizations. Philanthropy is a major driver of the nonprofit sector of the economy, as these organizations rely on the time, money, and talents of both individuals and orga- nizations to operate and fund their programs. Consider the partnership between Pampers and UNICEF. These two organizations have had a successful decade-long partnership, in which Pampers donated a portion of their profits to UNICEF to

intrinsic motivation wanting to take action based on internal factors

extrinsic motivation wanting to take action based on external factors

Figure 10.4 Motivations for Philanthropy

Why Are You Giving?

Family Legacy Experience Faith Values

Heritage Analysis Financial Recognition

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Chapter 10 Community Relations and Strategic Philanthropy 289

provide tetanus shots for babies around the world. This partnership fits well with the company’s core product and target market.35

Strategic Philanthropy Defined Our concept of corporate philanthropy extends beyond financial contributions and explicitly links company missions, organizational competencies, and various stakeholders. Thus, we define strategic philanthropy as the synergistic use of an organization’s core competencies and resources to address key stakehold- ers’ interests and to achieve both organizational and social benefits. Strategic philanthropy goes well beyond the traditional benevolent philanthropy of donating a percentage of sales to social causes by involving employees (utilizing their core skills), organizational resources and expertise (equipment, knowledge, and money), and the ability to link employees, customers, suppliers, and social needs with these key assets. Strategic philanthropy involves both financial and nonfinancial contributions to stakeholders (employee time, goods and services, and company technology and equipment as well as facilities), but it also benefits the company.

Organizations are best suited to deal with social or stakeholder issues in areas with which they have some experience, knowledge, or expertise. From a business perspective, companies want to refine their intellectual capital, reinforce their core competencies, and develop synergies between business and philanthropic activities. The process of addressing stakeholder concerns through philanthropy should be strategic to a company’s ongoing development and improvement. For example, SAP, a global software company, has made financial and product investments in developing economies such as Mexico and Swaziland. These investments are beneficial to both parties, as the technology aids economic, educational, and health advancements for the communities. However, it also allows the company to identify emerging talent and become established in these economies for their own growth.36

Some critics would argue that this is not true philanthropy because SAP will receive business benefits. However, social responsibility takes place on many levels, and effective philanthropy depends on the synergy between stakeholder needs and business competencies and goals. Thus, the fact that each partner receives unique benefits does not diminish the overall good that results from a project. As global competition escalates, companies are increasingly responsible to stakeholders in justifying their philanthropic endeavors. This ultimately requires greater planning and alignment of philanthropic efforts with overall strategic goals. Table 10.5 provides additional examples of philanthropic activities.

strategic philanthropy the synergistic use of an organization’s core competencies and resources to address key stakeholders’ interests and to achieve both organizational and social benefits

Table 10.5 Examples of Strategic Philanthropy Target donates 5 percent of its pretax income to charity.

Patagonia donates 1 percent of profits to 1 Percent for the Planet, a global movement that donates the proceeds to environmental organizations.

Salesforce.com donates 1 percent of its technology, 1 percent of its resources, and 1 percent of its people (employees can take off six days a year to volunteer) to nonprofits and to their communities.

Home Depot has a strong partnership with the nonprofit Habitat for Humanity, spending significant time and resources in its mission to build homes for those in need.

New Belgium Brewing engages in extensive philanthropy grants, product donations, and sponsorships to support the community.

Whole Foods holds a number of community giving days in which 5 percent of the day’s net revenue goes toward nonprofits or education.

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