Is philanthropy strategic? An analysis of the management of charitable giving in large UK companies

Abstract

Recent evidence suggests that the level of philanthropic donations made by large UK businesses has grown significantly over the last 20 years (Arulampalam & Stoneman 1995, Campbell et al. 2002). The most recent statistics indicate that the largest 100 UK firms collectively contributed over d630m in 2002/3, a rise of 26% on the previous year, and that the proportion of profits given to charities by these companies approximately doubled between 2001 and 2003. The growing importance of corporate philanthropy is reflected in the proliferation of recent articles in the academic literature, many of which chart the chronological development of corporate philanthropy in the United States or the United Kingdom or examine the correlates of philanthropy (Arulampalam & Stoneman 1995, Moore 1995, Himmelstein 1997, Adams & Hardwick 1998, Saiia 2000, 2002, Bartkus et al. 2002, Campbell et al. 2002, Porter & Kramer 2002, Saiia et al. 2003, Siefert et al. 2003). A variety of motivations for firms making philanthropic donations have been advanced in the existing literature (see Siefert et al. 2003: 195– 196 for a useful overview). Among the alternative motivations identified in the literature for philanthropy are the maximization of managerial utility that is derived from association with good works, the altruistic desire for companies to return some of the wealth generated through economic activities to their communities, and economic motives that originate in the desire to enhance worker productivity and goodwill among consumers (Navarro 1988, Young & Burlingame 1996, Saiia et al. 2003). Within these alternative motivations, a central path paints philanthropy both as a way for companies to demonstrate their social responsiveness to the communities in which they operate (Wood & Jones 1995, Berman et al. 1999), and as an activity that stimulates goodwill towards companies within those communities. Earlier work has argued that corporate philanthropy influences the perceptions of the firm in the eyes of a variety of stakeholders including investors, customers, suppliers, actual or potential employees, and the voluntary sector (Smith 1994, Himmelstein 1997, Saiia et al. 2003). Existing research into the motivations for corporate philanthropy provides mixed evidence concerning the degree to which philanthropy is The first two authors are, respectively, Lecturer and Reader at the School of Management, University of Bath, UK. The third author is Lecturer in Economics, Department of Economics, University of Reading, UK.