Introduction traditional philanthropy

Second, traditional philanthropy would be mainly driven by altruistic motives with which firms

allocate percentage of sales donations to social causes (McAlister & Ferrell, 2002). Philanthropy that is

created through pure donations, however, makes it difficult for a business to actually change what it

wants to change. How was traditional philanthropy viewed by businesses historically and why did it

emphasize moral obligation? Past research has suggested that institutional and industry newsletters,

including Corporate Philanthropy Report and the Chronicle of Philanthropy website, place heavy

emphasis on the social and ethical obligations to industry (Shaw & Post, 1993). This institutional rule

forced firms to engage in altruistic and morally-driven philanthropy. In addition, executives seem to be

more favorably disposed to act upon philanthropic requests that reflect contemporary perceptions of the

duty of the corporation to the community to become a good corporate citizen (Shaw & Post, 1993).

Vartorella (1992) found that when executives were asked why they engage in corporate philanthropy, the

dominant response was corporate citizenship (91%), followed by enhancing image (65%), media

coverage (35%), production promotion (28%), and increasing sales (20%). This evidence suggests that

firms engage in traditional philanthropy motivated by virtue and ethics in order to become a good

corporate citizen.

Firms aim to accomplish measurable business activities (e.g., plan for philanthropic engagement)

that are good for society. Firms might inappropriately spend time and resources when engaging in

traditional philanthropy. Past research has suggested that philanthropic practices are diffused and

unfocused so they are disconnected from the firm’s core business and their targets are outside the firm

(Porter & Kramer, 2002). Therefore, executives have started to think how their firms can maximize the

effect of philanthropic activities and ensure some form of economic return. They want to have a

guarantee that their firms’ giving activities can align with organizational goals and business strategies so

as to benefit the firm as well as the society. Strategic philanthropy involves systematically integrating

philanthropic activities into the formal organizational processes, systems and structure (McAlister &

Ferrell, 2002). Large firms have developed “formal organizational units or structures to manage their

social responsibilities so that they view philanthropy related expenses as no different from budget

allocations for advertising, human resources and other expenses” (McAlister & Ferrell, 2002, p. 3).

Brammer and colleagues (2006), in their study of philanthropic activities of British firms, observed that

most firms in their sample tend to have formal budgeting procedure, direct involvement by the board of

directors as well as dedicated staffs. From this phenomenon, it can be said that unlike traditional

philanthropy, strategic philanthropy is part of systematically formalized corporate strategic plans.

The Benefits of Corporate Philanthropy

Firms reap the benefits of corporate philanthropy in a variety of settings in business, including

company image, credibility in the local community, development of corporate and community alliances,

and positive publicity (Logsdon et al., 1990; McAlister & Ferrell, 2002; Ricks Jr, 2005). All the benefits

of corporate philanthropy can provide shareholders with insurance-like protection for a firm’s

relationship-based intangible assets (Godfrey, 2005) and generate a firm’s competitive advantage (Porter

& Kramer, 2002). The main reasons for engaging in corporate philanthropy is building a positive

reputation and developing political connections (Fombrun & Shanley, 1990; Williams & Barrett, 2000).

For example, firms might gain political legitimacy from government officials through corporate

philanthropy, which enables them to get access to political resources often critical to their development

(Wang & Qian, 2011). Firms practice philanthropy to gain and hold power and legitimacy in the political

and institutional sense (Sánchez, 2000). For instance, Wang and Qian (2011) argue that firms that are

“politically well-connected could have benefits more from philanthropy, as gaining political resources is

more critical for firms” (p. 1159). Firms often engage in corporate philanthropy as a means by which

they reasonably restore good name following the commission of illegal acts. Past research has supported

that corporate philanthropy might offset the negative impact of illegal activities on reputation to some

extent and help reduce the negative repercussions (Muller & Kräuss, 2011; Williams & Barret, 2000). In

sum, traditional philanthropy can be conceptualized as quite contrary to strategic philanthropy in its

intent and implementation. Strategic philanthropy is part of systematic and formalized corporate

strategic plans. In addition, the literature suggests that the main reasons for engaging in corporate

philanthropy are building a positive reputation, making political connections, and offset the negative

impact of corporate wrongdoing, all of which help increase business legitimacy.

2.3 Antecedents & Consequences of Corporate Philanthropy The managerial,

firm and industry level antecedents of corporate philanthropy have been extensively explored in

literature. The major discussion of “what leads to giving” has been on the managerial (Bear, Rahman &

Post, 2010; Buchholtz et al., 1999; Chin, Hambrick & Treviño, 2013; Choi & Wang, 2007; Dennis et al.,

2009; Marquis & Lee, 2013; Wang & Coffey, 1992), organizational (Adams & Hardwick, 1998;

Brammer & Millington, 2006; Seifert et al., 2003), and industry level drivers (Amato & Amato, 2007;

Chiu & Sharfman, 2009). Corporate philanthropy requires firms to allocate their limited resources to

important societal causes that also meet shareholders’ concerns, including maximizing business interests.

Therefore, “why should a firm give?” is the most commonly examined research question in the

corporate philanthropy literature (Brammer & Millington, 2005; Gautier & Pache, 2015; Godfrey, 2005).

The specific consequences of corporate philanthropy have been on financial performance and reputation

(Lev et al, 2010; Seifert, Morris & Bartkus, 2004; Wang, Choi & Li, 2008; Wang & Qian; 2011). In the

following section, I will extensively review the antecedents and consequences of corporate philanthropy.

I will specifically emphasize the role of leader characteristics as important managerial antecedents of

corporate philanthropy. Following that, I will review other organizational and industry level antecedents

and consequences of corporate philanthropy.

2.3.1 Managerial Antecedents of Corporate Philanthropy

Organizations are social entities where decisions are made by actors with various interests

(Gautier & Pache, 2015). Specifically, corporate social activities should be met by corporate goals

determined by organizational leaders (Wood, 1991; Godfrey, 2005). Therefore, it can be argued that

organizational leaders have played a crucial role in influencing corporate philanthropy. In addition, since

CSR has emerged as significant theme in the business community (Porter & Kramer, 2002),

organizational leaders have begun to consider CSR as an important consideration in their formulation of

corporate strategy. What drives organizational leaders to engage in corporate philanthropy? First,

organizational leaders believe that corporate philanthropy can be modeled as profit maximization

(Boatsman & Gupta, 1996; Fry, Keim & Meiners, 1982). They want to make sure that the benefits from

corporate giving outweigh the costs. Second, corporate philanthropy is part of strategies that

organizational leaders implement to gain approval and respect from local business elites (Atkinson &

Galaskiewicz, 1988). Corporate philanthropy can be used as a tool that organizational leaders use to

manipulate business environment (e.g., supporting charitable giving to gain government support). The

predominant discussion of organizational leaders and corporate philanthropy has been on CEOs (Dennis

et al., 2009; Chin et al., 2013; Jiraporn & Chintrakarn, 2013; Li, Song & Wu, 2014; Zu

& Song, 2009), board of directors (Bear et al., 2010; Brown, Helland & Smith, 2006; Coffey &

Wang, 1998; Ibrahim & Angelidis, 1995; Kabongo, Chang & Li, 2013; Wang & Coffey, 1992; Williams,

2003), and top managers in general (Choi & Wang, 2007; Pedersen & Neergaard, 2009).

Importantly, the CEO is widely recognized as the primary decision maker of the organization. As

such, understanding the CEOs’ attitude toward corporate philanthropy can explain what leads them to

determine corporate philanthropy. First, CEOs engage in philanthropic initiatives to the extent that the

potential direct and indirect economic benefits of such action outweigh the anticipated costs. For

example, past research found that the CEOs’ economic attitude toward philanthropy is positively related

to the level of corporate philanthropy in their firms (Dennis et al., 2009). Second, CEO network can

explain what drives CEOs to engage in corporate philanthropy. For example, CEOs serving on outside

boards as part of their network might have a similar norm and interest with serving firms’ philanthropic

decisions. Network among organizations within a field can drive organizations toward isomorphism

(DiMaggio & Powell, 1983; Galaskiewicz & Burt, 1991; Zucker, 1987) and “individuals in structurally

similar positions are expected to express similar perceptions and attitudes” (Galaskiewicz & Burt, 1991.

p. 89). Past research also suggests that corporate philanthropic engagement can diffuse through

executive networks, as executive mimic the philanthropic practices of their peers (Atkinson &

Galaskiewicz, 1988).

To what extent do CEOs implant their values or motives into charitable giving decisions? This

question is practically important because it emphasizes the importance of CEOs’ preferences in shaping

corporate philanthropy. It is suggested that the CEO's personal values and priorities often shape the

giving practices in many public companies such that CEOs’ influence over the specific of corporate

giving is very much alive and well (Chin et al., 2013; Choi &

Wang, 2007). In addition, having business legitimacy is important part of corporate strategies so CEOs

value it the most. It has been suggested that CEOs view corporate philanthropy as a legitimate perquisite

of leadership (Barnard, 1996). Past research examined the relationship between CEOs and corporate

philanthropy (Dennis et al., 2007; Jiraporn & Chintrakarn, 2013; Zu & Song, 2009). What they found

was that the extent to which firms engage in corporate philanthropy depends on CEO instincts of gaining

economic benefits, the degree of CEO authority, and the degree to which CEOs identify themselves as

philanthropist.

Boards of directors (BODs) have traditionally held a prominent role in determining their firms’

philanthropy particularly by requiring greater strategic accountability in the firms’ giving program (Saiia

et al., 2003). There is a well-established understanding among researchers that corporate boards’

exercise influences the type and magnitude of corporate philanthropic efforts (Bear et al., 2010; Coffey

& Wang, 1998; Ibrahim & Angelidis, 1995). Past research has explored how the composition and

structure of corporate boards affect the decision to involve in philanthropic activities and the intensity of

such efforts (Wang & Coffey, 1992; Marquis & Lee, 2013). Drawing primarily from the Resource

Dependence (Pfeffer & Salancik, 1978) and Stakeholder (Freeman, Harrison, Wicks, Parmar & De

Colle, 2010) theories, these studies have mainly argued that the extent to which firms build the

relationship with certain stakeholders is closely tied to the personal and social background of board

members who in turn influence how firms allocate resources to their philanthropic engagement.

Board composition/diversity has been explored to examine the relationship between BODs and

corporate philanthropy. It has been suggested that board insiders have less discretionary authority to

pursue their own interests at the expense of shareholders (Wang & Coffey, 1992). Past research also

found that as the number of insiders increase, so will the philanthropic behavior of the firm (Coffey &

Wang, 1998). Therefore, having more board insiders rather than outsiders would function as an internal

motive influencing corporate philanthropy to improve the firms’ long-term relationship to its different

constituents. In addition, female director representation on the board of directors has been identified as

important predictor of the level of corporate philanthropy (Wang & Coffey, 1992; Williams, 2003).

Others have empirically explored the broader diversity construct in investigating its relationship with

corporate philanthropy (Bear et al., 2010; Kabongo et al., 2013). These studies have argued that board

resource diversity (professional background and experience) and managerial control of the board would

be a possible predictor of corporate philanthropy. In addition, having large board membership can be a

motive that influences corporate philanthropy. For example, it has been found that larger boards can

make the firm likely to give more, having ties to the external environment, and responding to different

stakeholders’ expectations (Marquis & Lee, 2013).

Top managers determine strategic actions, including corporate philanthropy, mainly depending

on what they value the most. Past research has argued that “the values of top management have an

imprint on the firm, influencing decision-making processes, stakeholder salience, and corporate social

performance” (Pedersen & Neergaard, 2009, p. 1263). Choi and Wang (2007) argue that “top managers

with benevolence and integrity values are more likely to spread their intrinsic concern for others into the

wider society in the form of corporate philanthropy” (p, 345). It has been suggested that the most

common rationale provided by top managers is that their firms have a moral obligation to the

communities in which they operate (Galaskiewicz, 1997). In addition, top managers make philanthropic

decisions under significant institutional pressures. For example, the more top managers are connected

with social network, the stronger institutional pressures influence charitable contributions in return for

organizational legitimacy (Galaskiewicz, 1997). Furthermore, corporate philanthropy can help top

managers attain a higher social status while simultaneously enhancing the firm’s reputation among

consumers (Lev et al., 2010). Therefore, it can be suggested that having a higher social status can

motivate top managers to engage their firms’ philanthropy.

In sum, three major groups of organizational leaders – CEOs, board of directors (BODs), and top

management teams – can influence corporate philanthropy. The major motives for them to engage in

corporate philanthropy are to maximize profit and gain government support. CEOs’ economic attitude

toward philanthropy can be a driver of engaging in corporate philanthropy and understanding CEO

network structure can explain how firms gain business legitimacy through corporate philanthropy. In

addition, understanding board composition/diversity can explain why certain firms engage in more

corporate philanthropic activities than others. Furthermore, top managers with benevolence and integrity

value can motivate firms to engage in corporate philanthropy. Institutional pressures from social network

with which they are connected can motivate them to engage in corporate philanthropy. Table 2 below

indicates a summary of research on organizational leadership and corporate philanthropy.

2.3.2 Organizational Antecedents of Corporate Philanthropy

Although corporate philanthropy can be mainly determined by organizational leaders

(such as CEOs, BODs, and top management teams), it is also partly influenced by organizational

factors. The commonly examined organizational factors are organizational visibility, ownership

structure, firm size, organizational slack and advertising intensity. Past research has argued that

bigger firms with more slack resources and advertising intensity are more likely to be engaged in

corporate philanthropy (Alakent & Ozer, 2014; Amato & Amato, 2007; Dennis et al., 2009;

Seifert et al., 2004; Wang & Qian, 2011; Zhang, Zhu, Yue & Zhu, 2010). Since the last three

factors (such as firm size, organizational slack, and advertising intensity) have been examined as

moderators rather than antecedents in several studies, I will explain these factors as a

contingency view of corporate philanthropy later on in this chapter. In this section, I will focus

more on the relationship between organizational visibility and ownership structure and corporate

philanthropy.

Three fundamental assumptions (Campbell & Slack, 2006, p. 5) explain the

relationship between organizational visibility and corporate philanthropy: (1) the more visible a

firm is, the more intense range of societal stakeholder concerns a firm needs to manage, (2)

charitable giving is one way in which this wide range of stakeholder ‘societal’ concerns can be

managed, and (3) the giving enables a firm to enhance its image (reputation) among a variety of

group of stakeholders. From these assumptions, it might be anticipated that more visible

organizations may generate a general propensity for organizations to be more highly sensitive to

social and political stakeholders (Brammer & Millington, 2006). Past research suggested that

corporate philanthropy influences the perceptions of the firm in the eyes of variety of

stakeholders, including investors, customers, suppliers, and potential employees (Saiia et al.,

2003; Smith, 1994). Therefore, it can be said that organizational visibility functions as an

antecedent that influences corporate philanthropy. In addition, corporate philanthropy can be

motivated by a need to appeal to the public such that it can have more impact in business-

toconsumer industries (Chiu & Sharfman, 2009). For example, past research suggested that

organizational visibility stimulates philanthropy within consumer-orientated industries, such as

retail, media, telecommunications, and insurance (Amato & Amato, 2012; Fry et al., 1982). From

these phenomena, it can be argued that the more visible firms are, the higher the likelihood of

philanthropic engagement.

The ownership structure of firms can be an antecedent that influences corporate

philanthropy. Agency perspective indicates that the more dispersed the ownership, the more

discretionary power for managers to use resources for preferred expenditures, including

corporate philanthropy (Bartkus, Morris & Seifert, 2002; Navarro, 1988). For example, firms less

likely engage in corporate philanthropy if the CEOs or other individual owned a significant

percentage of total stock (Atkinson & Galaskiewicz, 1988). In addition, recent research suggests

that as opposed to state-owned firms, non-stated owned firms need to develop a long-term-based

reciprocal relationship with the government to overcome resource disadvantages (Li et al., 2014).

This can be achieved by cooperating with or addressing the government’s call by engaging in

corporate philanthropy. Recent research also suggests that non-state-owned firms are more

strategically motivated to engage in corporate philanthropy (Li et al., 2014; Wang & Qian, 2011).

2.3.3 Industry-Level Antecedents of Corporate Philanthropy

Corporate philanthropy may differ across individual firms; meanwhile, it also varies

across industries. For example, it has been suggested that institutional factors, such as a firm’s

relations with other organizations and its environment, shape its philanthropic endeavors (Amato

& Amato, 2007; Useem, 1988). Past research suggests that there are important concerns that

pressure firms within an industry to adopt similar giving patterns, which create inter-industry

difference in giving strategies (Amato & Amato, 2007; Seifert et al., 2004). Therefore, industry

differences are important antecedents that influence corporate philanthropy. Amato and Amato

(2007), for instance, argue that there are “differences across industries in the perceived need for

firms to pursue socially responsible outcomes and the differences in public exposures” (p. 231).

Such differences may create inter-industry differences in corporate giving policies. Past research

suggested that firms from industries with high levels of public contact, including retailing or

banking, typically give more than firms from low contact industries, including manufacturing

firms (Brammer & Millington, 2006; Useem, 1988). Differences in public contact can account

for much of the inter-industry differences in corporate giving strategies. The examples are

included that commercial banks give disproportionately to health and human services while

manufacturers of electrical equipment focus on their giving on education (Useem, 1988).

Particularly, some firms are more susceptible to potentially adverse public exposure as a result of

their products and operations. This has been termed as “public relation vulnerability” (Amato &

Amato, 2007) and “social externalities” (Brammer & Millington, 2006).

Corporate philanthropy may offer firms a mechanism to atone for social externalities and

repair corporate reputation (Williams & Barrett, 2000). Specific industries, including alcohol and

tobacco, may be especially vulnerable to accusations of negative externalities (Brammer &

Millington, 2005). Firms within these industries attempt to engage in corporate philanthropy to

mitigate these ‘negative externalities’. A good example in this case can be firms in the

pharmaceutical and petroleum industries that often face high but adverse visibility stemming

from product liability lawsuits, workplace discrimination and environmental pollution allegations

(Chen, Patten & Roberts, 2008; Williams & Barrett, 2000). Due to the nature of their product

markets as well as higher propensity for public relation vulnerability (Amato & Amato, 2007),

some firms exhibit a more aggressive philanthropic activity than other firms. The primary

argument in this case is that firms in these industries aggressively engage in corporate

philanthropic activities in order to mitigate the adverse impact of unfavorable public exposure or

use it as an “insurance” (Chiu & Sharfman, 2009; Godfrey, 2005).

2.3.4 Consequences of Corporate Philanthropy

Despite of some criticisms on corporate philanthropy (Devinney, 2009; Friedman, 1970),

the majority of firms engage in corporate philanthropy strategically because it has a positive

impact on consumer attitudes and employee productivity, reputation and financial performance,

and local community welfare (Brammer & Millington, 2005; Lev et al., 2010; Luo, 2005;

McAlister & Ferrell, 2002; Porter & Kramer, 2002; Rick Jr, 2005; Su & He, 2010; Wang & Qian,

2011). In addition, firms discover the performance benefits of corporate philanthropy, including

increased customer loyalty, strengthen employee commitment and productivity (Mandhachitara

& Poolthong, 2011; McAlister & Ferrell, 2002; Luo, 2005; Rick Jr, 2005). For example, Luo

(2005, p. 339) offers empirical evidence that “as drug stores put more emphasis on philanthropic

activities as perceived by customers in the community, customers will have stronger social ties

with the store and be more loyal to the store.” In other words, when philanthropic activities that

do benefit a particular segment that firms is likely to target for business, corporate philanthropy

does have an overall positive effect on consumer perceptions of corporate associations (Rick Jr,

2005). Furthermore, it is commonly believed that corporate philanthropy is a source of

productivity among incumbent staff which would in turn benefit the organization in the long run

(Turban & Greening, 1997). Therefore, corporate philanthropy may contribute to firms’

attractiveness as employers, giving them a competitive advantage in strategic human resource

management.

Another important consequence of corporate philanthropy is local community welfare in

the long term. Campbell and Slack (2007) found that firms engage in philanthropic projects near

their facilities because they expect to improve the living conditions in their community and to

raise awareness about its commitment, thereby benefiting from positive effects on their business.

Porter and Kramer (2002, p. 58) argue that “businesses’ ability to compete depends heavily on

the circumstances of the locations and market sophistication.” In addition, having government

supports with political access can be a consequence of corporate philanthropy. For example,

corporate philanthropy helps “gain political access (e.g. political legitimacy and approval from

local government)” (Wang & Qian, 2011, p. 1160). Furthermore, corporate philanthropy can

create favorable business climates, including protecting firms from higher taxes and increasing

barriers to entry into foreign countries. For instance, Su and He (2010) suggest that firms engage

in philanthropic activities to better protect property rights and nurture political connections and

in turn, lead to better enterprise profitability.

The most examined consequences of corporate philanthropy are reputation and financial

performance. Empirical evidence suggests that the relationship between corporate philanthropy

and financial performance is somewhat inconclusive. For example, Seifert et al (2004) using a

sample of 191 firms did not find a significant philanthropy-financial performance relationship.

Wang et al (2008) using a panel data set of 817 U.S. firms from 1897 to 1999 found an inverse

U-shaped relationship. However, the predominant discussions on this relationship have provided

that corporate philanthropy helps to generate more positive stakeholder responses that are crucial

for financial performance (Godfrey, 2005; Lev et al., 2010; Wang & Qian, 2011), as well as

reputation (Adams & Hardwick, 1998; Brammer & Millington, 2005; Williams & Barrett, 2000).

For example, Lev et al (2010) using 251 U.S. firms found that corporate philanthropy help a

firm’s revenue growth. Wang and Qian (2011) using 1,453 Chinese firms found that corporate

philanthropy have a positive and significant relationship with financial performance (measured

as return on assets).

In sum, answering the questions, “what leads to corporate giving and why a firm should

give,” can explain the antecedents and consequences of corporate philanthropy. In addition, it

can be argued that organizational antecedents (organizational visibility and ownership structure)

and industrial antecedents (public relation vulnerability and externalities) play important factors

that influence corporate philanthropy. Furthermore, it can be argued that firms engage in

corporate philanthropy because it helps lead to consumer attitudes (loyalty) and employee

productivity, local community welfare, government supports, all of which can enhance financial

performance as well as reputation. Table 3 below indicates summary of studies in antecedents

and consequences of corporate philanthropy.

The Benefits of Corporate Philanthropy

Firms reap the benefits of corporate philanthropy in a variety of settings in business,

including company image, credibility in the local community, development of corporate and

community alliances, and positive publicity (Logsdon et al., 1990; McAlister & Ferrell, 2002;

Ricks Jr, 2005). All the benefits of corporate philanthropy can provide shareholders with

insurance-like protection for a firm’s relationship-based intangible assets (Godfrey, 2005) and

generate a firm’s competitive advantage (Porter & Kramer, 2002). The main reasons for engaging

in corporate philanthropy is building a positive reputation and developing political connections

(Fombrun & Shanley, 1990; Williams & Barrett, 2000). For example, firms might gain political

legitimacy from government officials through corporate philanthropy, which enables them to get

access to political resources often critical to their development (Wang & Qian, 2011). Firms

practice philanthropy to gain and hold power and legitimacy in the political and institutional

sense (Sánchez, 2000). For instance, Wang and Qian (2011) argue that firms that are “politically

well-connected could have benefits more from philanthropy, as gaining political resources is

more critical for firms” (p. 1159). Firms often engage in corporate philanthropy as a means by

which they reasonably restore good name following the commission of illegal acts. Past research

has supported that corporate philanthropy might offset the negative impact of illegal activities on

reputation to some extent and help reduce the negative repercussions (Muller & Kräuss, 2011;

Williams & Barret, 2000). In sum, traditional philanthropy can be conceptualized as quite

contrary to strategic philanthropy in its intent and implementation. Strategic philanthropy is part

of systematic and formalized corporate strategic plans. In addition, the literature suggests that the

main reasons for engaging in corporate philanthropy are building a positive reputation, making

political connections, and offset the negative impact of corporate wrongdoing, all of which help

increase business legitimacy.

2.3 Antecedents & Consequences of Corporate Philanthropy The

managerial, firm and industry level antecedents of corporate philanthropy have been extensively

explored in literature. The major discussion of “what leads to giving” has been on the

managerial (Bear, Rahman & Post, 2010; Buchholtz et al., 1999; Chin, Hambrick & Treviño,

2013; Choi & Wang, 2007; Dennis et al., 2009; Marquis & Lee, 2013; Wang & Coffey, 1992),

organizational (Adams & Hardwick, 1998; Brammer & Millington, 2006; Seifert et al., 2003),

and industry level drivers (Amato & Amato, 2007; Chiu & Sharfman, 2009). Corporate

philanthropy requires firms to allocate their limited resources to important societal causes that

also meet shareholders’ concerns, including maximizing business interests. Therefore, “why

should a firm give?” is the most commonly examined research question in the corporate

philanthropy literature (Brammer & Millington, 2005; Gautier & Pache, 2015; Godfrey, 2005).

The specific consequences of corporate philanthropy have been on financial performance and

reputation (Lev et al, 2010; Seifert, Morris & Bartkus, 2004; Wang, Choi & Li, 2008; Wang &

Qian; 2011). In the following section, I will extensively review the antecedents and consequences

of corporate philanthropy. I will specifically emphasize the role of leader characteristics as

important managerial antecedents of corporate philanthropy. Following that, I will review other

organizational and industry level antecedents and consequences of corporate philanthropy.

2.3.1 Managerial Antecedents of Corporate Philanthropy

Organizations are social entities where decisions are made by actors with various interests

(Gautier & Pache, 2015). Specifically, corporate social activities should be met by corporate

goals determined by organizational leaders (Wood, 1991; Godfrey, 2005). Therefore, it can be

argued that organizational leaders have played a crucial role in influencing corporate

philanthropy. In addition, since CSR has emerged as significant theme in the business community

(Porter & Kramer, 2002), organizational leaders have begun to consider CSR as an important

consideration in their formulation of corporate strategy. What drives organizational leaders to

engage in corporate philanthropy? First, organizational leaders believe that corporate

philanthropy can be modeled as profit maximization (Boatsman & Gupta, 1996; Fry, Keim &

Meiners, 1982). They want to make sure that the benefits from corporate giving outweigh the

costs. Second, corporate philanthropy is part of strategies that organizational leaders implement

to gain approval and respect from local business elites (Atkinson & Galaskiewicz, 1988).

Corporate philanthropy can be used as a tool that organizational leaders use to manipulate

business environment (e.g., supporting charitable giving to gain government support). The

predominant discussion of organizational leaders and corporate philanthropy has been on CEOs

(Dennis et al., 2009; Chin et al., 2013; Jiraporn & Chintrakarn, 2013; Li, Song & Wu, 2014; Zu

& Song, 2009), board of directors (Bear et al., 2010; Brown, Helland & Smith, 2006; Coffey &

Wang, 1998; Ibrahim & Angelidis, 1995; Kabongo, Chang & Li, 2013; Wang & Coffey, 1992;

Williams, 2003), and top managers in general (Choi & Wang, 2007; Pedersen & Neergaard,

2009).

Importantly, the CEO is widely recognized as the primary decision maker of the

organization. As such, understanding the CEOs’ attitude toward corporate philanthropy can

explain what leads them to determine corporate philanthropy. First, CEOs engage in

philanthropic initiatives to the extent that the potential direct and indirect economic benefits of

such action outweigh the anticipated costs. For example, past research found that the CEOs’

economic attitude toward philanthropy is positively related to the level of corporate philanthropy

in their firms (Dennis et al., 2009). Second, CEO network can explain what drives CEOs to

engage in corporate philanthropy. For example, CEOs serving on outside boards as part of their

network might have a similar norm and interest with serving firms’ philanthropic decisions.

Network among organizations within a field can drive organizations toward isomorphism

(DiMaggio & Powell, 1983; Galaskiewicz & Burt, 1991; Zucker, 1987) and “individuals in

structurally similar positions are expected to express similar perceptions and attitudes”

(Galaskiewicz & Burt, 1991. p. 89). Past research also suggests that corporate philanthropic

engagement can diffuse through executive networks, as executive mimic the philanthropic

practices of their peers (Atkinson & Galaskiewicz, 1988).

To what extent do CEOs implant their values or motives into charitable giving decisions?

This question is practically important because it emphasizes the importance of CEOs’

preferences in shaping corporate philanthropy. It is suggested that the CEO's personal values and

priorities often shape the giving practices in many public companies such that CEOs’ influence

over the specific of corporate giving is very much alive and well (Chin et al., 2013; Choi &

Wang, 2007). In addition, having business legitimacy is important part of corporate strategies so

CEOs value it the most. It has been suggested that CEOs view corporate philanthropy as a

legitimate perquisite of leadership (Barnard, 1996). Past research examined the relationship

between CEOs and corporate philanthropy (Dennis et al., 2007; Jiraporn & Chintrakarn, 2013;

Zu & Song, 2009). What they found was that the extent to which firms engage in corporate

philanthropy depends on CEO instincts of gaining economic benefits, the degree of CEO

authority, and the degree to which CEOs identify themselves as philanthropist.

Boards of directors (BODs) have traditionally held a prominent role in determining their

firms’ philanthropy particularly by requiring greater strategic accountability in the firms’ giving

program (Saiia et al., 2003). There is a well-established understanding among researchers that

corporate boards’ exercise influences the type and magnitude of corporate philanthropic efforts

(Bear et al., 2010; Coffey & Wang, 1998; Ibrahim & Angelidis, 1995). Past research has explored

how the composition and structure of corporate boards affect the decision to involve in

philanthropic activities and the intensity of such efforts (Wang & Coffey, 1992; Marquis & Lee,

2013). Drawing primarily from the Resource Dependence (Pfeffer & Salancik, 1978) and

Stakeholder (Freeman, Harrison, Wicks, Parmar & De Colle, 2010) theories, these studies have

mainly argued that the extent to which firms build the relationship with certain stakeholders is

closely tied to the personal and social background of board members who in turn influence how

firms allocate resources to their philanthropic engagement.

Board composition/diversity has been explored to examine the relationship between

BODs and corporate philanthropy. It has been suggested that board insiders have less

discretionary authority to pursue their own interests at the expense of shareholders (Wang &

Coffey, 1992). Past research also found that as the number of insiders increase, so will the

philanthropic behavior of the firm (Coffey & Wang, 1998). Therefore, having more board

insiders rather than outsiders would function as an internal motive influencing corporate

philanthropy to improve the firms’ long-term relationship to its different constituents. In addition,

female director representation on the board of directors has been identified as important predictor

of the level of corporate philanthropy (Wang & Coffey, 1992; Williams, 2003). Others have

empirically explored the broader diversity construct in investigating its relationship with

corporate philanthropy (Bear et al., 2010; Kabongo et al., 2013). These studies have argued that

board resource diversity (professional background and experience) and managerial control of the

board would be a possible predictor of corporate philanthropy. In addition, having large board

membership can be a motive that influences corporate philanthropy. For example, it has been

found that larger boards can make the firm likely to give more, having ties to the external

environment, and responding to different stakeholders’ expectations (Marquis & Lee, 2013).

Top managers determine strategic actions, including corporate philanthropy, mainly

depending on what they value the most. Past research has argued that “the values of top

management have an imprint on the firm, influencing decision-making processes, stakeholder

salience, and corporate social performance” (Pedersen & Neergaard, 2009, p. 1263). Choi and

Wang (2007) argue that “top managers with benevolence and integrity values are more likely to

spread their intrinsic concern for others into the wider society in the form of corporate

philanthropy” (p, 345). It has been suggested that the most common rationale provided by top

managers is that their firms have a moral obligation to the communities in which they operate

(Galaskiewicz, 1997). In addition, top managers make philanthropic decisions under significant

institutional pressures. For example, the more top managers are connected with social network,

the stronger institutional pressures influence charitable contributions in return for organizational

legitimacy (Galaskiewicz, 1997). Furthermore, corporate philanthropy can help top managers

attain a higher social status while simultaneously enhancing the firm’s reputation among

consumers (Lev et al., 2010). Therefore, it can be suggested that having a higher social status can

motivate top managers to engage their firms’ philanthropy.

In sum, three major groups of organizational leaders – CEOs, board of directors (BODs),

and top management teams – can influence corporate philanthropy. The major motives for them

to engage in corporate philanthropy are to maximize profit and gain government support. CEOs’

economic attitude toward philanthropy can be a driver of engaging in corporate philanthropy and

understanding CEO network structure can explain how firms gain business legitimacy through

corporate philanthropy. In addition, understanding board composition/diversity can explain why

certain firms engage in more corporate philanthropic activities than others. Furthermore, top

managers with benevolence and integrity value can motivate firms to engage in corporate

philanthropy. Institutional pressures from social network with which they are connected can

motivate them to engage in corporate philanthropy. Table 2 below indicates a summary of

research on organizational leadership and corporate philanthropy.