Philanthropy And Social Responsibility: Corporate Governance Essay

Length: 10 pages Sources: 10 Subject: Business Type: Essay Paper: #43174361 Related Topics: Social Responsibility, Food Pyramid, Global Governance, Bangladesh
Excerpt from Essay :

Corporate Governance: Philanthropy and Social Responsibility

Corporate philanthropy is a form of CSR where a corporation extends monetary or non-monetary support to the community for the sake of improving its welfare and the quality of life. Despite its inherent benefits, corporate philanthropy still remains a subject of debate. This text examines the arguments presented by both sides, and examines how Wal-Mart's philanthropic program has been able to reconcile both views, and how the corporation has managed to maintain an effective giving program over the years.

Philanthropy and Social Responsibility

The role played by corporate giving and corporate philanthropy in society today is immense; but even so, the whole idea of corporate philanthropy still remains a subject of debate. Consensus is yet to be reached, particularly in regard to whether companies should engage more or less in charity programs. Proponents of organizational philanthropy hold that corporations should engage more in charity giving because it helps to improve the social welfare of the communities in which they operate. The opposing faction, on the other hand, while not disputing the fact that such giving improves social welfare, are of the opinion that organizations should only engage very minimally in corporate giving programs because such programs are unfairly geared towards furthering the interests of managers at the expense of shareholders. The two factions, however, find common ground when corporate philanthropy improves social welfare for the community and at the same time maximizes shareholder wealth. This report seeks to demonstrate how the giving program at Wal-Mart Inc. is structured to achieve this balance, and how engagement in the same has benefited the company.

What is Corporate Philanthropy?

Corporate giving/philanthropy is a form of CSR where a corporation extends monetary or non-monetary support to non-profit organizations for the sake of improving the welfare of the community within which it operates (Tonello, 2011). Monetary donations often come in the form of sponsorships, grants, or donations; whereas or non-monetary support will often take the form of services, products, property, use of the company's facilities, employee time, and so on (Tonello, 2011). The funds that go into corporate giving programs often come from individual donations and the company's contributions (Tonello, 2011). Towards this end, such programs are regarded and treated as expenses to the business (Tonello, 2011).

Why the Controversy?

Corporate Giving as an Opportunistic Undertaking by Managers

The agency theory postulates that executives (agents) are likely to act as to enhance or reinforce their own utility even when their behaviors are not in furtherance of shareholder interests, who in this case are the principals (Tonello, 2011). When managers seek to pursue interests other than maximize the wealth of the principal, an agency problem is said to have arisen. Agency problems are relatively more common in those areas of business characterized by little monitoring and huge expenditures (Tonello, 2011). Corporate philanthropy is one such area -- managers are the primary decision-makers on how the company's slack resources are to be allocated; and then there is some kind of tension (the halo effect), where even those executives who feel that corporate giving is a waste of company resources shun from questioning the spending decisions of management because after all, the company too reaps benefits from the same in the long-term (Tonello, 2011). With such little monitoring, a manager could make personal gain from corporate giving in a number of ways, which include; i) accolades, honors, and awards that elevate their social ranking, even if the giving program is funded fully using company money; ii) advancing their personal preferences by supporting charity programs of people close to them or those that seemingly share their ideological agenda; and iii) using corporate giving programs as a platform for gaining favor with members of the executive board (Tonello, 2011).

Corporate Giving as a Positive Business Strategy

In as much as they present unfair opportunities for managers to reap personal benefits out of company resources, researchers contend that corporate giving programs are still a common form of CSR (Caviola, et al., 2014; Amato & Amato, 2007). This is so because such programs are a valuable source of competitive advantage, especially if they are properly-designed and rightly-executed (Tonello, 2011). They can build the company's reputation and increase the recognition of its brand among consumers (Tonello, 2011). For instance, following the implementation of its community giving program, where it partnered with an online charity program to fund various educational programs in selected schools across the country, Crate and Barrel Inc. reported a 16% increase in sales (Tonello, 2011). In as much as we cannot attribute the entire increase to the corporate giving program, we can rightly argue that the company's improved reputation made some contribution to the same. Moreover, whenever a company engages in charity programs, it helps improve the well-being of the community; as a result, managers are able to build strong and healthy relationships with community...

...

In addition, a company can use its corporate philanthropy program as a platform for improving "the economic conditions in developing regions with the long-term goal of enhancing the size and quality of their customer base" (Tonello, 2011, n.pag). Furthermore, a company that bears a positive reputation in regard to philanthropy would often find it relatively easy to attract and retain talented employees (Council on Foundations, 2008). Finally, corporate giving programs create avenues for creativity and innovation -- grants and donations to colleges and universities, for instance, provide opportunities for collaboration in research and development, as well as increased access to technical expertise and fresh ideas (Tonello, 2011).

In order for a corporate philanthropy program to be successful, these two views need to be reconciled so that the company's economic orientation aligns with its social orientation (Tonello, 2011). Milton Friedman stated that the primary or overall responsibility of any commercial entity is to make profit and not to look out for the social welfare of the community (Bowie, 2012). He postulates that the free forces of demand and supply will often adjust accordingly to allocate resources in a manner that maximizes societal welfare (Bowie, 2012). Corporate executives, therefore, only have a direct responsibility to shareholders; and as such, they have a duty to conduct business and make decisions that are in the best interests of shareholders. In so doing, they have to conform "to the basic rules of the society, both those embodied in law and those embodied in ethical custom" (Bowie, 2012, p. 2).

This plan adopts Friedman's view -- that although corporate philanthropy is an integral component of organizational success, the profit motive is the basic building block that undergirds all other aspects of business (Bowie, 2012). Towards this end, companies ought to engage in philanthropic programs just as long as such engagement does not hurt or strain company profits (Bowie, 2012). In addition, all activities are required to be in line with the law and the ethical framework of society, as demonstrated in Carroll's pyramid of corporate social responsibility in fig 1 below.

Fig 1: The Pyramid of Corporate Social Responsibility

Philanthropic responsibilities

Ethical responsibilities

Legal responsibilities

Economic responsibilities

(Source: Wei, 2013, p. 112)

Wal-Mart's Philanthropy Plan

Wal-Mart's CSR mission 'save money, live better' is defined across ten core areas -- giving, sustainability index, women empowerment, U.S. manufacturing, hunger relief, veteran, jobs and opportunities, and renewable energy; and is executed through a variety of long-term partnerships and grants, diversity inclusion, and healthier food (Wal-Mart Global Sustainability Report, 2013). Through its 'Everyday Low Prices' strategy, Wal-Mart strives to help people stretch their paychecks and offer their families better-quality life (Wal-Mart Global Sustainability Report, 2013). The company's 'Live Better' Initiative, however, stretches beyond the walls of its stores, into communities and societies around the world -- driving meaningful change by providing access to affordable commodities, empowering women, fighting hunger, and preserving the environment (Wal-Mart Global Sustainability Report, 2013). The Wal-Mart Foundation seeks to further this mission -- helping communities live better through philanthropy (Wal-Mart Global Sustainability Report, 2013). The philanthropy program mainly targets persons from low-income backgrounds (especially marginalized groups) with the overriding goal of nurturing innovativeness and responsible leadership (Wal-Mart Global Sustainability Report, 2013).

Programs

Educational Programs

The company commits itself to supporting educational programs that encourage youth from marginalized groups and disadvantaged backgrounds to work and excel in both school and after-school programs (Wal-Mart Global Sustainability Report, 2013). In 2013 for instance, the company awarded 85,000 grants to reinforce the work of not-for-profit organizations spearheading educational projects in selected low-income regions across the country (Wal-Mart Global Sustainability Report, 2013).

Health and Safety

Wal-Mart's philanthropy program demonstrates its commitment to improving the level of safety as well as quality of life for the communities within which the company operates (Wal-Mart Global Sustainability Report, 2013). Its core activities in this regard include controlling and ultimately eliminating hazards on the highways, at home and in the workplace; lobbying for sustainability in the production of healthy foods, and supporting health programs…

Sources Used in Documents:

References

Amato, L.H. & Amato, C.H.. (2007). The Effects of Firm Size and Industry on Corporate Giving. Journal of Business Ethics, 72(3), 229-241

Balakrishnan, R., Sprinkle, J.B. & Williamson, M.G. (2011). Contracting Benefits of Corporate Giving: An Experimental Investigation. The Accounting Review, 86(6), 1887-1907

Bowie, N.E. (2012). Corporate Social Responsibility in Business. The University of Minnesota. Retrieved 3 December 2014 from http://www.leadership.umn.edu/documents/Bowie5-30.pdf

Caviola, A., Faulmukller, N., Everett, J.A., Savulescu, J. & Kahane, G. (2014). The Evaluability Bias in Charitable Giving: Saving Administration Costs or Saving Lives? Judgment and Decision Making, 9(4), 303-315.
Council on Foundations. (2008). Diversity and Inclusiveness in Corporate Philanthropy. Council on Foundations. Retrieved 3 December 2014 from http://www.cof.org/sites/default/files/documents/files/Diversity%20and%20Inclusion%20Solutions%20Brief.pdf
Tonello, M. (2011). Making the Business Case for Corporate Philanthropy. The Harvard Law School Forum on Corporate Governance and Financial Regulation. Retrieved 2 December 2014 from http://blogs.law.harvard.edu/corpgov/2011/08/20/making-the-business-case-for-corporate-philanthropy/
Wal-Mart Diversity and Inclusion Report. (2013). Diversity and Inclusion: Impact 2013. Wal-Mart Inc. Retrieved 5 December 2014 from http://bestpractices.diversityinc.com/medialib/uploads/2013/07/diversity7-15_WEB.pdf
Wal-Mart Global Sustainability Report. (2013). Global Sustainability Report. Wal-Mart Inc. Retrieved 5 December 2014 from http://corporate.walmart.com/microsites/global-responsibility-report-2013/pdf/Walmart_GRR.pdf
Wal-Mart Inc. (2014). State Giving Program: The Wal-Mart Foundation State Giving Program. Wal-Mart Inc. Retrieved 5 December 2014 from http://foundation.walmart.com/apply-for-grants/state-giving


Cite this Document:

"Philanthropy And Social Responsibility Corporate Governance" (2015, January 12) Retrieved January 18, 2022, from
https://www.paperdue.com/essay/philanthropy-and-social-responsibility-2148359

"Philanthropy And Social Responsibility Corporate Governance" 12 January 2015. Web.18 January. 2022. <
https://www.paperdue.com/essay/philanthropy-and-social-responsibility-2148359>

"Philanthropy And Social Responsibility Corporate Governance", 12 January 2015, Accessed.18 January. 2022,
https://www.paperdue.com/essay/philanthropy-and-social-responsibility-2148359

Related Documents
Corporate Social Responsibility
Words: 1051 Length: 4 Pages Topic: Physics Paper #: 715549

CSR Corporate Social Responsibility Corporate Social Responsibility (CSR) has recently reached an unprecedented level of salience with the emergence of global protests that seem to be driven in a large part by concerns over social issues such as equality as wells as environmental issues such as the regulation of greenhouse gas emissions. Although the protestors are occupying various parts of the world for a plethora of mixed motivations, it is reasonable to

Corporate Social Responsibility and Transnational Companies in
Words: 2956 Length: 10 Pages Topic: Business Paper #: 81772354

Corporate Social Responsibility and Transnational Companies In this essay, I have discussed how essential Corporate Social Responsibility (CSR) is for the success of Transnational Corporations. UN Global Compact is also being discussed. I have also included case studies to support of Nike, Primark and Microsoft. Moreover, I have included positives and negatives about CSR and the factors that exist in CSR which may lead to the success of transnational corporations. Finally,

Corporate Social Responsibility in Indian Pharmaceutical Industry
Words: 10268 Length: 32 Pages Topic: History - Asian Paper #: 62149097

Corporate Social Responsibility in Indian Pharmaceutical Industry An Exploratory Study Outlook of CSR in India History of CSR in India Philanthropy in Indian Society Modern Form of CSR in Indian Society Profile of Indian Pharmaceutical Industry Rationale for Selection CSR Activities by Indian Pharmaceutical Companies Major Influences Over CSR Activities Scope of CSR Activities Comparison of Indian & Western Pharmaceutical Companies This research paper is concerned with the recent practices of Indian pharmaceutical companies in the field of corporate social responsibility. For

Corporate Social Responsibility in High
Words: 3626 Length: 8 Pages Topic: Business Paper #: 2658230

There is nearly a constant influx of new technological developments in this industry as well, which only makes the task of staying current with them all the more challenging. The intent of this paper is to describe how Blizzard would be able to structure a Corporate Social Responsibility (CSR) program that would financially support programming courses for lower income children throughout inner cities and rural areas. The essence of

Corporate Governance and Social Responsibility
Words: 3265 Length: 10 Pages Topic: Business Paper #: 92564365

Both proposals were consequently amended and eventually accepted by the SEC. The audit committee makes sure that the books aren't being cooked and that shareholders are properly informed of the financial status of the firm. Characteristically, the audit committee advocates the CPA firm that will audit the company's books, appraises the activities of the company's independent accountants and internal auditors, and reviews the company's internal control systems and its accounting

Corporate Governance and Social Responsibility
Words: 2934 Length: 10 Pages Topic: Business Paper #: 28673365

"When Congress returned in 1934 to complete the federal disclosure tapestry, it created express private causes of action for misleading reports filed with the Securities and Exchange Commission (SEC) as part of the newly enacted continuous disclosure requirements, (3) provided private recoveries for market manipulation, (4) and authorized suits on behalf of reporting companies for short-swing profits garnered by certain insiders (Cox, Thomas, and Kiku, 2003)." The creation of the SEC