PAUL HOLMES: Corporations must consider how shareholders are impacted by strategic philanthropy efforts

There was a time when corporate philanthropy was merely a reflection of the CEO's personal interests. Just as CEOs who enjoyed golf would likely direct sponsorship dollars toward golf events, CEOs who had survived a battle with prostate cancer would likely donate philanthropic dollars toward cancer charities.

There was a time when corporate philanthropy was merely a reflection of the CEO's personal interests. Just as CEOs who enjoyed golf would likely direct sponsorship dollars toward golf events, CEOs who had survived a battle with prostate cancer would likely donate philanthropic dollars toward cancer charities.

Aside from a few shareholder activists, who questioned if managers had the right to dispense their owners' wealth according to personal whim, this approach attracted little scrutiny. But philanthropy has grown more strategic over the years. Smart companies now align such activities with their business interests (pharma companies supporting science education, for example) or their values. In such cases, philanthropy has become an extension of PR (although few companies herald it as such), a vehicle for the company to demonstrate to its stakeholders that it shares their concerns about the society in which it operates. As philanthropy has grown more strategic, it has also become increasingly controversial. A decade or so ago, giant companies like AT&T and Dayton Hudson found themselves mired in controversy over grants given to Planned Parenthood. More recently, companies such as Levi Strauss have terminated grants to the Boy Scouts of America because of its discrimination against gays and atheists. There's even a DC-based group called the Capital Research Center, which exists "to end the liberal bias in corporate philanthropy" and objects to company donations to anti-business charities such as the National Wildlife Federation. Warren Buffett's Berkshire Hathaway had taken a unique approach to philanthropy, one that seems to address the concerns about management misuse of shareholder money and to ensure that giving is aligned with stakeholder values. Through a so-called "charitable dividend" plan, the company allowed shareholders to designate $18 a share for up to three charities of their own choosing. Buffett, as a major shareholder, made large donations of his own, including many to Planned Parenthood. That's where the problems started. Anti-choice groups protested at the company's annual meetings, and this year an employee at a Berkshire subsidiary began a petition drive to put an end to the donations. As a result, the company is discontinuing the charitable dividend program. There were surely more creative solutions: perhaps one that would allow all stakeholders, including employees and customers, to have a say in how the money was distributed. But the decision should serve as a wake-up call to other companies. Philanthropic decisions need to be evaluated in terms of their impact on stakeholder relationships, and PR pros must decide what a company's values are, and how far they'll go to defend them.
  • Paul Holmes has spent the past 16 years writing about the PR business for publications including PRWeek, Inside PR, and Reputation Management. He is currently president of The Holmes Group and editor of www.holmesreport.com.

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