Corporate Philanthropy, CSR, and Walmart's Giving Program

Introduction: The Debate Over Corporate Philanthropy

The role played by corporate giving and corporate philanthropy in society today is immense; yet even so, the concept remains a subject of debate. Consensus has yet to be reached, particularly regarding whether companies should engage more or less in charitable programs. Proponents of organizational philanthropy hold that corporations should engage more actively in charitable giving because it helps improve the social welfare of the communities in which they operate. The opposing faction, while not disputing the fact that such giving improves social welfare, contends that organizations should engage only minimally in corporate giving programs because such programs are unfairly oriented toward furthering the personal interests of managers at the expense of shareholders.

The two factions, however, find common ground when corporate philanthropy simultaneously improves social welfare for the community and maximizes shareholder wealth. This paper seeks to demonstrate how the giving program at Walmart Inc. is structured to achieve this balance, and how the company's engagement in philanthropy has benefited the organization.

What Is Corporate Philanthropy?

Corporate giving and philanthropy is a form of corporate social responsibility (CSR) in which 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 take the form of sponsorships, grants, or direct contributions, whereas non-monetary support typically includes services, products, property, use of company facilities, and employee time (Tonello, 2011). The funds that go into corporate giving programs often come from individual donations and the company's own contributions (Tonello, 2011). Accordingly, such programs are regarded and treated as business expenses (Tonello, 2011).

The Case Against and For Corporate Giving

The agency theory postulates that executives (agents) are likely to act in ways that enhance or reinforce their own utility, even when their behaviors do not further the interests of shareholders — the principals (Tonello, 2011). When managers pursue interests other than maximizing shareholder wealth, an agency problem is said to have arisen. Agency problems are relatively more common in areas of business characterized by little monitoring and large expenditures (Tonello, 2011).

Corporate philanthropy is one such area. Managers are the primary decision-makers regarding how the company's slack resources are allocated, and there exists a kind of tension — sometimes called the halo effect — in which even executives who privately view corporate giving as wasteful refrain from questioning management's spending decisions, because the company does derive long-term reputational benefits from philanthropic activity (Tonello, 2011). With such limited monitoring, a manager could extract personal gain from corporate giving in several ways: (i) receiving accolades, honors, and awards that elevate their social standing, even when the giving program is funded entirely with company money; (ii) advancing personal preferences by supporting charity programs associated with people close to them or those sharing their ideological agenda; and (iii) using corporate giving programs as a platform to gain favor with members of the executive board (Tonello, 2011).

Even though corporate giving programs can present unfair opportunities for managers to reap personal benefits from company resources, researchers contend that such programs remain a common and valuable form of CSR (Caviola et al., 2014; Amato & Amato, 2007). Properly designed and well-executed giving programs can serve as a valuable source of competitive advantage (Tonello, 2011). They can build a company's reputation and increase brand recognition among consumers (Tonello, 2011). For instance, following the implementation of its community giving program — in which it partnered with an online charitable initiative to fund educational programs in selected schools across the country — Crate and Barrel Inc. reported a 16% increase in sales (Tonello, 2011). While the entire increase cannot be attributed solely to the corporate giving program, the company's improved reputation clearly contributed.

Moreover, when a company engages in charitable programs, it improves the well-being of the surrounding community, enabling managers to build strong relationships with community leaders and government officials, which in turn helps reduce special-interest-group and regulatory obstacles (Council on Foundations, 2008). A company can also 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 bearing a positive philanthropic reputation will typically find it easier 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).

For a corporate philanthropy program to succeed, these two perspectives need to be reconciled so that the company's economic orientation aligns with its social orientation (Tonello, 2011). Milton Friedman argued that the primary responsibility of any commercial entity is to generate profit, not to oversee the social welfare of the community (Bowie, 2012). He posits that the free forces of demand and supply will naturally adjust to allocate resources in a manner that maximizes societal welfare (Bowie, 2012). Corporate executives therefore have a direct responsibility only to shareholders and must conduct business and make decisions in their best interests — while conforming "to the basic rules of the society, both those embodied in law and those embodied in ethical custom" (Bowie, 2012, p. 2).

This paper adopts Friedman's view — that although corporate philanthropy is an integral component of organizational success, the profit motive is the foundational building block that underpins all other aspects of business (Bowie, 2012). Companies ought to engage in philanthropic programs provided that such engagement does not hurt or strain company profits (Bowie, 2012). All activities must also remain in line with applicable law and the ethical framework of society, as demonstrated in Carroll's pyramid of corporate social responsibility:

Carroll's CSR Pyramid (from base to apex):

Economic responsibilities → Legal responsibilities → Ethical responsibilities → Philanthropic responsibilities

(Source: Wei, 2013, p. 112)

Walmart's Philanthropy Program: Structure and Initiatives

Walmart's CSR mission — "save money, live better" — is defined across ten core areas, including giving, sustainability, women's empowerment, U.S. manufacturing, hunger relief, veteran support, jobs and opportunities, and renewable energy. It is executed through a variety of long-term partnerships, grants, diversity and inclusion initiatives, and healthier food access (Walmart Global Sustainability Report, 2013). Through its "Everyday Low Prices" strategy, Walmart strives to help people stretch their paychecks and offer their families a better quality of life (Walmart Global Sustainability Report, 2013). The company's "Live Better" initiative extends beyond its store walls, into communities and societies around the world — driving meaningful change through access to affordable goods, women's empowerment, hunger relief, and environmental preservation (Walmart Global Sustainability Report, 2013). The Walmart Foundation seeks to further this mission by helping communities live better through philanthropy (Walmart Global Sustainability Report, 2013). The philanthropy program primarily targets persons from low-income backgrounds, especially marginalized groups, with the overriding goal of nurturing innovation and responsible leadership (Walmart Global Sustainability Report, 2013).

Walmart commits to supporting educational programs that encourage youth from marginalized and disadvantaged backgrounds to excel both in school and in after-school programs (Walmart Global Sustainability Report, 2013). In 2013, 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 (Walmart Global Sustainability Report, 2013).

Walmart's philanthropy program demonstrates a commitment to improving safety and quality of life for the communities in which the company operates (Walmart Global Sustainability Report, 2013). Core activities in this area include controlling and ultimately eliminating hazards on highways, at home, and in the workplace; lobbying for sustainability in healthy food production; and supporting health programs that help people disabled by injury or disease return to productive lives both on and off the job (Walmart Global Sustainability Report, 2013). In October 2013, for instance, the company, through the Walmart Foundation, extended a $2 million grant to aid in the establishment of the Sustainability Consortium office in China, through which the company seeks to mobilize organizations and local communities to advocate for the production and consumption of healthy foods (Walmart Global Sustainability Report, 2013).

Walmart's giving program supports art and cultural programs, as well as economic and community development initiatives (Walmart Global Sustainability Report, 2013). Helping communities recover after disasters is one prominent activity in this area — $3.8 million in cash and in-kind support from the Walmart Foundation was directed to restoration programs across the U.S. in 2013 (Walmart Global Sustainability Report, 2013).

The Walmart Foundation contributes the greater proportion of its funding to programs within the United States (Walmart Global Sustainability Report, 2013). In 2013, approximately 87% ($273 million) of the company's total cash giving of $311 million was contributed to U.S.-based programs (Walmart Global Sustainability Report, 2013).

There are a number of additional activities the company supports but does not provide philanthropic funding for, including programs by individuals; grant-making foundations; religious entities seeking financing for sectarian activities; political, social, or fraternal organizations; forums and conferences; and any organization that has received funding within the past twelve months (Walmart Inc., 2014).

Youth: The Walmart Foundation invests a significant proportion of its funding in youth development programs, with particular attention given to after-school and mentoring programs for youth from disadvantaged backgrounds and marginalized groups (Walmart Global Sustainability Report, 2013).

Persons with Disabilities: The Walmart Foundation supports programs and organizations that advocate for the inclusion and fair treatment of persons with disabilities (Walmart Diversity and Inclusion Report, 2013). This support is guided by the company's diversity vision statement: to be a global leader in inclusion and diversity appreciation (Walmart Diversity and Inclusion Report, 2013). The company's corporate mission — to save people money and help them live better — is rooted in founder Sam Walton's idea that success is best achieved by leveraging an inclusive workplace and fostering diversity (Walmart Diversity and Inclusion Report, 2013). The company's diversity and inclusion mission is built around three fundamental pillars: diversity at the workplace, diversity in the workforce, and diversity in the marketplace (Walmart Diversity and Inclusion Report, 2013). Walmart joined the U.S. Business Leadership Network (USBLN) and the American Association of People with Disabilities (AAPD) as a founding partner for the New Disability Equality Index program — a tool "that offers businesses the opportunity to objectively measure their full inclusion of people with disabilities as employees, suppliers, and customers" (AAPD, 2014, n.pag.).

Women: Walmart has demonstrated its commitment to increasing the representation of women and people of color at all levels of management (Walmart Diversity and Inclusion Report, 2013). At the time of reporting, "more than half of Walmart's U.S. business unit presidents, divisional senior vice presidents, and regional vice presidents are women and/or people of color" (Walmart Diversity and Inclusion Report, 2012, p. 8). The Walmart Foundation provides training and opportunities for women to empower themselves, with priority given to low-income women in Central America, Bangladesh, the U.S., and India (Walmart Diversity and Inclusion Report, 2013). In 2012, the company provided economic training for more than 73,000 women from disadvantaged groups, and more than one million women have benefited from the women's empowerment program since its inception (Walmart Global Sustainability Report, 2013).