By Jennifer Milam
Graduate Student, Center on Philanthropy at Indiana University
Corporate giving or corporate philanthropy is the act of corporations donating a portion of their profits or resources to various non-profit organizations. The function of corporate giving can be handled directly by the corporation or through a company foundation. The most common resource that corporations donate is cash; however, corporations also donate the use of their corporate facilities; property (such as used computers, buildings or land); gifts of products, services and equipment; advertising support; executive loans; and many corporations have employee volunteer groups that donate their time. Corporations give to a wide variety of nonprofit organizations, which include education, the arts, human services, health, the environment, public benefit and many others.
The concept of corporate giving dates to the turn of the century and the rise of the modern corporation. In its early decades, corporate philanthropy was uneven in practice, limited in scope, and subject to legal and populist dispute. Since World War II, however, the debate has shifted from whether or not to give to how much to give, and most major corporations now engage in regularized giving programs.
(Useem, 1987, p.340)
It was accepted for the wealthy to spend their money on philanthropy in the late 19th and early 20th centuries; however, it was harder for corporate philanthropy to legitimize itself (Himmelstein, 1997, p.15). Most felt that corporations had an obligation to maximize profits for their shareholders and that was their only duty; some economists still feel this way. Roosevelt's 1936 tax act was the first time that corporations were permitted to deduct charitable contributions up to 5% of pretax profit from their federal income taxes. Prior to 1936, donations typically had to be a legitimate business expense; there had to be a direct benefit to the business or the employees. After 1936, more leeway was given to corporate giving; however, giving was still tied to direct benefit, and there was still a great deal of ambiguity as to what qualified. Another reform that intended to encourage corporate giving came in 1981 when the amount of charitable contributions that corporations could deduct increased from 5% to 10%. The 1981 tax reform has not had the effect that it intended; corporate giving remains around 2% of pretax profit.
In 1953, the New Jersey Supreme Court heard the case A.P. Smith vs. Barlow. A.P. Smith Manufacturing Company gave Princeton $1,000 and was sued by a stockholder. The ruling in favor of Smith eliminated the rule that corporate giving had to provide a "direct benefit" to the company, instead, corporations had social responsibilities to the whole community. This justified giving to higher education since it was a societal benefit; today education receives the largest portion of giving from corporations.
Importance and Ties to the Philanthropic Sector
According to Giving USA, corporations' charitable contributions totaled approximately $8.5 billion or 5.6% of the total giving to the nonprofit sector in 1996 which is an increase of 8% over giving in 1995. This figure does not account for money that was given out of marketing, sales, advertising or public relations budgets. Additionally, the value of donations of corporate volunteer's time, gifts of products or other non-cash gifts are not included in these figures. Corporations are able to contribute their business expertise to nonprofits. Even though corporate giving makes up the smallest percentage of contributions to non-profits, 5.6% compared to 79.6% by living individuals, 6.9% from bequests and 7.8% by non-corporate foundations, the non-cash gifts that corporations give have an additional unmeasured impact on nonprofits.
Ties to K-12 Social Studies
One of the most obvious and most difficult questions concerning corporate giving is why they give. For many ".corporate giving raised the distinct issue of whether or not the managers of corporations may donate money not belonging to them personally but to shareholders" (Himmelstein, 1997, p.16).
A theory that attempts to explain why corporate giving makes economic sense is neoclassical or corporate productivity theory. Based on this theory, making a profit is what motivates corporations to make contributions. An improved bottom line is how the corporation can tell if its philanthropy has been successful. An example of this theory at work is when railroad companies in the early 20th century supported the YMCA in building facilities at terminal points along the construction route to house the workers.
A theory that addresses the concerns that corporations' only responsibilities are to their stockholders is stakeholder theory. This theory proposes that corporations have responsibilities to other groups that have a stake in their operation. This group can include customers, employees and communities to name a few. This model is the argument that corporations use most often today to justify why it is in their interest to have a corporate giving program.
Another theory as to why corporations give is that it is their civic duty to do so. James Joseph states that "Some businesspeople argue that businesses are corporate citizens, with rights and duties of citizenship. Some even argue that the corporate charter makes corporations trustees of the public good" (Shannon, 1991, p.9). This puts forth the idea that corporations should be doing more than simply making a profit: that they should be good corporate citizens.
Important Related Nonprofit Organizations
There are several nonprofit organizations that serve as a source of information for corporate giving officers. These organizations frequently provide training, host conferences, and provide legal services and technical assistance. Listed below are some of these organizations as well as a brief description of their function.
1828 L. Street NW
Washington, DC 20036
Their mission is to promote responsible and effective philanthropy by assisting existing and future grantmakers. Corporate grantmakers are particularly involved with their Corporate Grantmakers Committee.
79 Fifth Avenue
New York, NY 10003
(212)620-4230 Fax (212)691-1828
The Foundation Center provides direct links to corporations' giving programs and to company-sponsored private foundations.
1400 Street NW Suite 800
(202)729-8000 Fax (202)729-8100
This organization is primarily concerned with volunteerism and they have a section devoted to corporate volunteerism as well as staff that offer courses and help with corporations starting their own volunteer programs.
845 Third Avenue
New York, NY 10022
Corporate giving officers tend to be involved with the Contributions Council. This council has meetings and focuses on the contributions made by corporate giving programs.
Another useful source of information about corporate giving programs is often the corporations' web page. Frequently, information about the focus of their corporate giving can be found under community or other similar titles. Some examples of companies where one can learn about their community relations and corporate giving programs by accessing the corporate web page are Clorox, Eastman Kodak, BankAmerica, The Gap, and Chrysler.
Burlingame, Dwight F. and Young, Dennis R., 1996. Corporate Philanthropy at the Crossroads. Bloomington and Indianapolis, IN: Indiana University Press.
Council on Foundations, 1982. Corporate Philanthropy: Philosophy, Management, Trends, Future, Background. Washington, DC: Council on Foundations.
Himmelstein, Jerome L., 1997. Looking Good and Doing Good: Corporate Philanthropy And Corporate Power. Bloomington and Indianapolis, IN: Indiana University Press.
Kaplan, Ann E. (ed.), 1997. Giving USA 1997: The Annual Report on Philanthropy For the Year 1996. New York, NY: AAFRC Trust for Philanthropy.
Shannon, James (ed.), 1991. The Corporate Contributions Handbook: Devoting Private Means to Public Needs. San Francisco, CA: Jossey-Bass.
Ussem, Michael, 1987. "Corporate Philanthropy," in Powell, Walter W. (ed.), The Nonprofit Sector: A Research Handbook. New Haven, CN: Yale University Press.
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