Giving 2.0™ Guide: Corporate Philanthropy Motivations and Incentives

Overview

Corporate philanthropy involves both internal and external stakeholders, each with their own motivations and incentives. Internally, corporate leadership (e.g., C-suite, board members, investors) and employees’ motivations influence which philanthropic models or approaches a corporation utilizes. Externally, companies must consider the possible impact their philanthropic decisions will have on shareholders and community members. For example, companies will likely assess how their philanthropic efforts may affect the communities around their headquarters, manufacturing plants, sales offices, etc. In 2019, the Business Roundtable and 181 CEOs redefined the roles and responsibilities of a corporation by integrating the same principles that have motivated corporate philanthropy for decades.

“Almost every individual or institution has a motive or self-interest involved in giving—and as you’ve highlighted, that is especially clear for corporations, given their fiduciary duty to maximize returns. The question we must ask ourselves is whether motivations or having a self-interest matters, or whether we believe some motives are better or worse than others.

Is corporate philanthropy with selfish intent better than no philanthropy at all? What is the right way to balance corporate benefit with public good—if there IS a right way?”

-Laura Arrillaga-Andreessen, Stanford GSBGEN 580, 2021

The following is a nonexhaustive list of possible motivations and incentives behind a corporation’s philanthropic decision-making.

Employee-Based Motivations and Incentives

  • Employee goodwill and loyalty: Corporate philanthropy can improve a corporation’s reputation, and in turn, cultivate stronger loyalty—from both employees and customers—to the company.

    Employee psychological benefits: A 2017 study from the Indiana University Lilly Family School of Philanthropy found that giving to charitable organizations is positively correlated with increased happiness and satisfaction.

    Job retention: A 2018 Benevity study that examined the online activity of more than 2 million users on the Benevity platform found that turnover dropped by an average of 57 percent when employees felt more deeply connected to their company’s giving and volunteering efforts. In particular, millennials increasingly cite social impact, cause engagement and mission alignment as important to their career decisions.

    Working environment: According to Deloitte’s “2017 Volunteerism Survey,” 89 percent of working Americans believe that companies that sponsor volunteer activities offer a better overall working environment than those that do not. In fact, 77 percent of respondents reported that “volunteering is essential to employee well-being.”

    Skills and leadership capacities: Deloitte’s “2016 Impact Survey” found that volunteering develops essential leadership skills, both tactical (e.g., prioritization, goal-setting, confidence) and technical (e.g., industry-knowledge, creativity).

    Team-building and networking: Research shows that when employees come together to help others, they can develop deeper camaraderie.

  • Financial outcomes: A recent study examining the relationship between corporate social responsibility and financial performance found that CSR increases employee productivity, which in turn positively influences a firm’s financial performance.

    A recent study examining the relationship between corporate social responsibility and financial performance found that CSR increases employee productivity, which in turn positively influences a firm’s financial performance.

  • Investment in educational programming: Salesforce’s charitable foundation giving helped the San Francisco Unified School District become the first district in the country to have a computer science curriculum for every grade. These investments improved access to STEM education in the Bay Area and have the potential to increase the quantity and quality of local, diverse tech talent. To date they have donated $110 million to San Francisco and Oakland schools.

  • Employee matching programs: An estimated 84 percent of donors are more likely to make a charitable contribution if their gift is matched by their employer. In 2018, the Committee Encouraging Corporate Philanthropy found that employee matching programs generate an estimated $2 billion to $3 billion in total gifts each year.

Market-Based Motivations and Incentives

  • Tax deductions and/or benefits: According to the IRS, a corporation can claim a deduction of up to 10 percent of its taxable income for charitable contributions made in cash or other property.

  • Customer base credibility: The “2017 Cone Communications CSR Study” found that 87 percent of Americans would purchase a product because a company advocated for an issue they cared about, while 76 percent would refuse to purchase a company’s products or services upon learning it supported an issue contrary to their beliefs.

  • Product spotlight: From Warby Parker’s inception, the eyewear company committed to donating one pair of glasses for each pair the company sells through its “Buy a Pair, Give a Pair” program. Warby Parker initially featured the Buy a Pair, Give a Pair branding on the front page of its website. As the company has grown and customers have become more familiar with Warby Parker’s offer to try five styles for free, Buy a Pair, Give a Pair moved off the homepage and is now available in the social impact section of the company’s website. Customers also receive an insert about the program when they purchase a new pair of glasses.

  • Underserved populations: According to the “2018 State of Women-Owned Businesses Report,” women started an average of 1,821 new businesses per day in the U.S. between 2017 and 2018, and generated over $1.8 trillion in revenue. Despite growth in the number of female entrepreneurs globally, women have historically struggled to secure funding from traditional banking institutions. Recognizing this gap, Bank of America created the Tory Burch Foundation Capital Program to increase the number of women-owned businesses in the U.S. by connecting women entrepreneurs to affordable loans. Through this program, Bank of America has committed $50 million in loans since 2014, supporting more than 1,400 women entrepreneurs across 16 states.

  • Research and development: Kimberly-Clark is a founding member of the Toilet Board Coalition, a business-led coalition and platform aiming to address the global sanitation crisis. Through its involvement, Kimberly-Clark has both supported and benefited from research on achieving universal access to sanitation by including innovative and renewable resources in its supply chains and disseminating new information about human health and hygiene.

  • Points of opportunity: P&G laundry scientists and the U.S. Centers for Disease Control and Prevention invented a water purification packet that allows individuals anywhere in the world to purify dirty water in an affordable and simple way. By creating more water availability, P&G has created an opportunity for its products to reach new markets while addressing a critical social need.

  • Loss leaders: Google’s Chromebook initially struggled in the marketplace, but in 2012, Google decided to sell Chromebooks to schools at a rate 60 percent lower than its competitors. In 2016, Chromebooks made up 58 percent of all shipments of mobile devices to primary and secondary schools. Additionally, as of February 2019, more than half of all U.S. primary and secondary schools use Google education products (e.g., Gmail, Docs, Sheets, etc.). Data collected from schools has also allowed Google to iterate its products to ensure the company meets student and teacher needs.

Politically-Based Motivations and Incentives 

  • Aligning interests: The late mayor of San Francisco, Ed Lee, met with technology executives and engineers on a weekly basis to discuss their vision for the city. Lee made national headlines for the “Twitter tax break” that allowed companies like Twitter, Yelp, Airbnb and Zendesk to avoid approximately $34 million in city payroll taxes to keep their headquarters and the jobs that they create in San Francisco.

    Building goodwill: Goldman Sachs, Monsanto and other large corporations have all donated to a Partnership for a Drug-Free Iowa and the University of Northern Iowa Foundation, two nonprofits for which Iowa Senator Chuck Grassley serves as an honorary advisory board member and a board trustee respectively. The companies making these charitable donations also receive tax breaks which they would not receive for direct political donations.

  • Control the narrative: The appearance of strong local and/or global philanthropic ties can limit a company’s risk of public backlash after critical media coverage. In 2018, ExxonMobil established a public track record after contributing $77.8 million to civic and community service organizations in countries around the world.

  • Reputational capital: As part of its effort to counter claims that Amazon’s headquarters increased rent costs and homelessness in the surrounding areas, Amazon has pledged over $2 billion to its Amazon Housing Equity Fund addressing cost of living in the Puget Sound Region, Arlington and Nashville.

  • Positive outcomes through partnership: The Kaiser Permanente Labor Management Partnership, the longest-running labor management partnership in the U.S., covers over 115,000 union-represented workers, 14,000 managers and 19,000 physicians. The partnership's two employee education trusts have helped more than 104,000 union coalition-represented workers enhance their job skills and advance their careers.

  • Quid pro quo: In 2011, when the Federal Communications Commission was reviewing a merger between AT&T and T-Mobile, the NAACP, the Gay & Lesbian Alliance Against Defamation, a homeless shelter in Louisiana and the Asian Pacific Islander American Scholarship Fund submitted comments in support of the merger to the FCC. All of these groups had received over $100,000 donations from AT&T, and had little or no stake in the merger decision. AT&T and the nonprofits denied any wrongdoing. While AT&T’s brand did not suffer from the controversy, GLAAD’s reputation was seriously damaged, and the president and a number of board members were forced to resign.

Community Relation-Based Motivations and Incentives 

  • Unmet needs: After learning that transportation costs prevented over 15 million people from voting in 2016, Lyft offered 50 percent discounts to people going to the polls and provided free transportation to voters from marginalized communities on Election Day in 2018.

  • Cause engagement: Patagonia mobilizes its customer base to protect wilderness areas where its products are used, which helps build brand loyalty among environmentalists and hikers. When Patagonia decided to donate 100 percent of its 2016 Black Friday profits to grassroots environmental organizations, the company raised $10 million and signed up 24,000 new customers that same day.

  • Greater inclusivity: The Chevron International REACH Scholarship Program was established to support children of Chevron’s non-U.S. payroll employees. The program provides up to $2,500 per year for students who demonstrate financial need and are matriculating at a university in a STEM field.

  • Long-term social/economic returns: In 2013, the Center for Employment Opportunities, a New York-based nonprofit, raised over $13.5 million from Bank of America Merrill Lynch, the Rockefeller Foundation and the Robin Hood Foundation to train 2,000 formerly incarcerated people who were at high risk of recidivism. The Center conducted intensive employment training and provided work placement assistance for a period of four years in Rochester and New York City. The social impact bond was designed such that if the program was successful, New York state would save money that would have otherwise gone toward funding the criminal justice system, and the private investors and foundations would receive a financial return on their investments. New York state would not contribute financially to the program unless recidivism was reduced by a minimum of eight percent or employment was improved by a minimum of five percent.

References:

 To learn more about corporate philanthropy models, consult LAAF.org’s Corporate Philanthropy Models and Programs Giving 2.0™ Guide.

 “Business Roundtable Redefines the Purpose of a Corporation to Promote ‘An Economy That Serves All Americans,’” Business Roundtable, August 19, 2019, https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans,  (August 4, 2021).

 Emel Esen, “The Influence of Corporate Social Responsibility (CSR) Activities on Building Corporate Reputation,” Advances in Sustainability and Environmental Justice: 11, January 2013, https://www.researchgate.net/publication/284353408_The_Influence_of_Corporate_Social_Responsibility_CSR_Activities_on_Building_Corporate_Reputation (August 4, 2021). 

 “Giving to charity makes everyone happier, especially when women lead or participate in family decisions,” Indiana University Lilly Family School of Philanthropy, October 17, 2017, https://philanthropy.iupui.edu/news-events/news-item/giving-to-charity-makes-everyone-happier,-especially-when-women-lead-or-participate-in-family-decisions.html?id=240 (August 4, 2021). 

 “Benevity Study Links Employee-Centric Corporate Goodness Programs to Big Gains in Retention,” Benevity, May 31, 2018, https://benevity.com/media/media-releases/benevity-study-links-employee-centric-corporate-goodness-programs-big-gains (August 4, 2021). 

 “10 Years Looking Back: The Millennial Impact Report,” The Case Foundation, 2019, https://casefoundation.org/resource/10-years-of-the-millennial-impact-report/ (July 7, 2022).

 Ryan Scott, “Worker Passion: How a Culture of Giving Back Inspires Something Better Than Engagement,” Forbes, October 4, 2017, https://www.forbes.com/sites/causeintegration/2017/10/04/how-a-culture-of-giving-back-inspires-something-better-than-engagement/ (August 4, 2021)​​. 

 “2016 Deloitte Impact Survey: Building leadership skills through volunteerism,” Deloitte, June 2016, ​​https://www2.deloitte.com/content/dam/Deloitte/us/Documents/us-deloitte-impact-survey.pdf (August 4, 2021). 

 “Giving in Nu​​mbers: 2018 Edition,” Committee Encouraging Corporate Philanthropy, October 30, 2018, https://cecp.co/whats-trending-giving-in-numbers-2018-edition-is-out/ (August 20, 2021). 

 Jask Jayakody et al., “The Relationship between Corporate Social Responsibility and Financial Performance: The Effect of Easy Access to Capital and Managerial Ownership,” Sri Lankan Journal of Management, 2018: 22:2, https://www.researchgate.net/publication/322592920_The_Relationship_between_Corporate_Social_Responsibility_and_Financial_Performance_The_Effect_of_Easy_Access_to_Capital_and_Managerial_Ownership (August 4, 2021).  

 Caitlin Reilly, “A Tech Leader Doubles Down on Its ‘Big Bet’ on Local Schools,” Inside Philanthropy, September 12, 2017, https://www.insidephilanthropy.com/home/2017/9/11/a-tech-giant-doubles-down-on-its-big-bet-on-local-public-schools (August 4, 2021). 

 Jill Tucker, “ $110 million and counting: Salesforce CEO Marc Benioff plans to give millions more to S.F. and Oakland schools,” SF Chronicle, September 19, 2022, https://www.sfchronicle.com/sf/article/110-million-and-counting-Salesforce-CEO-Marc-17447766.php (October 19, 2022)

 “Giving in Numbers: 2018 Edition,” loc. cit. 

 “Publication 542 (01/2019), Corporations,” Internal Revenue Service, ​​January 2019, https://www.irs.gov/publications/p542 (August 4, 2021). 

 “2017 Cone Communications CSR Study,” Cone Communications, 2017, https://www.conecomm.com/research-blog/2017-csr-study (August 4, 2021). 

 “Buy a Pair, Give a Pair,” Warby Parker, https://www.warbyparker.com/buy-a-pair-give-a-pair (August 4, 2021). 

 “The 2018 State of Women-Owned Businesses Report,” American Express, 2018, https://ventureneer.com/wp-content/uploads/2018/08/2018-state-of-women-owned-businesses-report_FINAL.pdf (August 20, 2021).  

 Jena McGregor, “Why it’s smart to invest in female-led companies,” The Washington Post, August 3, 2017, https://www.washingtonpost.com/news/on-leadership/wp/2017/08/02/why-its-smart-to-invest-in-women-led-companies/ (August 4, 2021). 

 “Connecting women entrepreneurs in the U.S. to affordable loans,” Bank of America, March 8, 2019, https://about.bankofamerica.com/en-us/partnering-locally/tory-burch-foundation-partnership.html (August 4, 2021). 

 “About the Toilet Board Coalition,” Toilet Board Coalition, https://www.toiletboard.org/about (August 4, 2021). 

 “A Simple Way to Clean Water,” Procter & Gamble, https://csdw.org/pg-purifier-of-water-packets (August 4, 2021).

 Natasha Singer, “How Google Took Over the Classroom,” The New York Times, May 13, 2017, https://www.nytimes.com/2017/05/13/technology/google-education-chromebooks-schools.html (August 4, 2021).

 Marissa Lang, “Companies avoid $34M in city taxes thanks to ‘Twitter tax break’,” SFGate, October 19, 2015, https://www.sfgate.com/business/article/Companies-avoid-34M-in-city-taxes-thanks-to-6578396.php (August 4, 2021). 

 Eduardo Porter, “Charitable Giving by Corporations Is Also About Getting, a New Study Finds,” The New York Times, April 3, 2018, https://www.nytimes.com/2018/04/03/business/economy/charitable-giving-corporations.html (August 4, 2021).

 “Worldwide Giving,” ExxonMobil, https://corporate.exxonmobil.com/community-engagement/worldwide-giving (August 4, 2021).

 https://www.aboutamazon.com/news/policy-news-views/amazon-joins-a-new-coalition-to-reduce-homelessness-in-seattle

 “About LMP,” Labor Management Partnership, https://www.lmpartnership.org/about/how-partnership-works (August 4, 2021). 

 Rebecca Greenfield, “The Advocacy Groups Under Fire for Supporting AT&T,” The Atlantic, July 15, 2011, https://www.theatlantic.com/technology/archive/2011/07/advocacy-groups-under-fire-supporting-t/352897/ (August 4, 2021).

 “The Ride to Vote: Use Lyft to Exercise Your Rights,” Lyft, August 23, 2018, https://www.lyft.com/blog/posts/get-out-the-vote (August 4, 2021). 

 Jeff Beer, “How Patagonia Grows Every Time it Amplifies Its Social Mission,” Fast Company, February 21, 2018, https://www.fastcompany.com/40525452/how-patagonia-grows-every-time-it-amplifies-its-social-mission (August 4, 2021). 

 “Chevron International REACH Scholarship,” Institute of International Education Inc., https://www.iie.org/programs/chevron-international-reach-scholarship-program (August 4, 2021).

 “Increasing Employment and Improving Public Safety in New York State,” Social Finance, https://socialfinance.org/focus-areas/nys-pay-for-success-financing/ (July 7, 2022).