Philanthropy and Social Responsibility - Report Example

Running head: Philanthropy and Social Responsibility Business Name Institute Date Philanthropy and Social Responsibility Introduction Corporate philanthropy has been the focus of much debate and particularly become profoundly of great significant to not only managers but also scholars. Though this phenomenon has gained interest of many, studies have indicated that while managers appear to have increasingly come to see the dire need to integrate or fit corporate philanthropic activity with the company’s core mission and strategy, the actual practice of such philanthropy seems to be weak. There is scant information to understand why this is so. Again, not many studies have been channeled to this topic. The few have always been inconclusive particularly on the relationship between corporate giving priorities and its core value of profitability. Proponent of this corporate philanthropic priorities have argued that it positively influence the corporate’s financial performance when decisions regarding charitable contributions are strategically formulated towards raising the companies’ image and reputation as well as increasing the value of its moral capital( Porter & Kramer, 2002; Hess et al. 2002; Godfrey, 2005; Amato, L.H. & Amato, C.H. 2007). In addition, evidence from previous studies do suggests that corporate philanthropy has a strong tendency to retain customers as well as enhance their strong commitment to the organization. This can be exemplified by the a survey carried by Maignan et al. (1999) who established that 88% of customers revealed as more probability to purchase from a publicly accountable firm, whereas 76% showed a readiness to change products to sustain publicly accountable corporations. On the other hand, those opposed to corporate art of giving as brought forth by Valor, C. (2007) have reasoned along the lines where philanthropy is seen as an illegal diversion of corporate funds from shareholders. The paper, therefore, is an attempt to fill the existing information gap while exploring the dynamics of corporate giving, its strengths and weaknesses as well as suggesting appropriate strategies which is able to reconcile the two opposing arguments in so far as corporate philanthropy is concerned. The starting point will be a review of reasons for giving more or less in any corporate philanthropic priorities. Secondly it will give the linkages between philanthropic plans and the organization’s statement of mission and core values. This paper will also explores the relationship between diversity and development of philanthropy as well as suggesting ways in which organization deal with legal and ethical issues of bias. Lastly this paper will show how corporate philanthropy enhance the organization’s social responsibility as well as highlighting implications on the ethics of giving if the organization receives substantial good will and or preferred relationships from its beneficiaries. Reasons for giving more or less in organization philanthropy Definition Philanthropy etymologically means "the love of humanity" that is, caring for, nourishing, developing, or enhancing; humanity in the sense of "what it is to be human “or” human potential." However in the in modern practical terms, it is "private initiatives for public good, focusing on quality of life” in the context of the present study, Corporate philanthropy simply entails gifts or monitory contributions given by firms to social and charitable causes for instance support for education, minority, health care, relief care among others (Seifert et al., 2004; Godfrey, 2005). Reasons for giving more in organization philanthropy There are a range of reasons for giving more in organization philanthropy which range from enhancing moral capital, to cultivating good relations with the primary shareholders. Many are times philanthropy has been employed as a type of promotion, and sometimes improving or advertising a corporation’s image through high-profile sponsorships. But most importantly, firms can utilize their charitable efforts to enhance their competitive environment settings. This entails the quality of the business environment their area of operation. It has been argued that utilizing philanthropy to improve competitive environment lines up social and economic objectives and enhances a corporation's lasting company’s prospects (Porter, M.E., & Kramer, M.R. 2002). Giving more in organization philanthropy is a way of enhancing moral capital which is very vital to the firm’s survival. The moral capital model is a good illustration for this notion. Its Godfrey (2005) argues that “the major link between the shareholder value and philanthropy is through creation of moral capital that tends to provide insurance-like protection for the firm’s relationship-based intangible assets”. He continues to say that by creating reputational capital, stakeholders would develop a perception of the firm which will in the long run affect relationship they hold with the firm and in turn, this moral capital will act as insurance for the organization in case it of “bad” acts; deterioration of the firm’s relational wealth will be minimized and that “the negative sanctions will be minimized”. With this argument, it is not surprising that most firms are currently actively involved in philanthropy. This is a good model however it is very vulnerable two major weaknesses namely: internal and external inconsistency attributed majorly to the discretionary nature of philanthropy and by the virtue of that is often carried out in a pluralistic setting. In order to have a positive moral capital, organizations’ philanthropic plan should exhibit internal consistency. In simple terms, where or what the firm does in other activities should be inline with those of its philanthropy. Again, in a bid to respect external consistency, organization cannot afford to contradict values and preferences of its stakeholders lest it will result in a negative moral capital. Again, by giving more, an organization is simply able to achieve a more cordial relation with its stakeholders or shareholders. In addition, it is a means to achieving increased participation and support. This is in line with Stakeholder’s theory and social responsibility model which have both illustrated the reason why organization should be involved more in charitable activities. According to these models, corporate philanthropy is a means towards an end, in the firm’s better relations with the primary stakeholders (Saiia et al, 2003). Berman and his colleagues have argued that better relations usually elicit positive response manifested through increased participation and support especially in regards to employee’s perception of the firm’s virtuous nature (Berman et al,.1999). Reasons against/ for giving less in organization philanthropy Debates against organization philanthropy basically revolved around two major arguments. One, that it is a violation of the stewardship principle, as it simply redirecting profits/income to an activity that may not create value for shareholders. It therefore follows that in some circumstances charitable activities can associated with poor financial performance of the organization. In this situation there is need to only give less if it is unavoidable or totally refraining of such activities. Philanthropy can only be allowed if it has several constructive bearing on the outcome and does not decrease company performance (Shaw and Post, 1993). The second reason why organization should engage only to a minimal extent in charitable activities is due to the fact it is less capable of solving social problems than state-organized efforts. By engaging in philanthropy, corporate can be said to be taking an illegitimate role of the government in distribution of wealth and resources yet it is obvious that companies lack not only democratic attribute but also accountability to do so hence will undoubtedly fail to accomplish the objective of maximizing welfare, since strategic philanthropy is oriented to maximizing shareholder value. For a most corporate, philanthropic gesture is mainly profit-oriented their implementation is limited to the strategic interests of the firm and therefore may not be able to achieve the wider public good; (Campbell et al., 2002; Godfrey, 2005). It is clear that the two arguments for only minimal or zero engagement philanthropy by organizations relates to the varying perspective of the organization motive for philanthropy, nevertheless, the common ground remains the rejection of the whole idea as being illegitimate. Reconciling the two Basically two themes have emerged in the foregoing prepositions which include corporate objectives as well as societal needs. First, an appropriate philanthropic plan is that which is able to embrace firm’s mission, objectives as well as strategy so at to achieve sustainability and efficiently just like it has been corroborated by Godfrey (2005) who has argued that actions driven by core corporate values will be genuine, efficient, and will be sustained over time. Secondly, the proposed philanthropic plan is that characterized by a continuous dialogue with all stakeholders, both internal stakeholders (e.g. employees, chiefs of the involved functional and business units) and external ones (e.g. customers, suppliers, retailers, charities, and public authorities) to designing the strategic plan; this includes Third, the proposed philanthropic plan should be able to accommodate a continuous monitoring of results, both economic and social impacts of the projects implemented in the corporate philanthropy strategy and in so doing, it will then be able to foster value for not only its stakeholders, but also shareholders. Finally, there is need for the company to report the results of its corporate philanthropic priorities and be able to specify the resultant economic and social performance. Corporate philanthropy in Bank of America Just like many other organizations, philanthropy may be very crucial to bank of America particularly where there may be absence of efficient market structures as well as rigid contractual laws associated with too much routine compliance and enforcement. The best strategy to go by is by having political allies in her negotiation and enforcement of contracts. This can be facilitated when the bank is engaged in philanthropy. In addition, where the bank may lack political link, it may utilize philanthropy in fostering good will and therefore gaining authenticity and access to political resources. The proposed philanthropy plan is very relevant to Bank of America as an organization since its core mission is to offer lending and investment products that are able to accommodate low- and moderate-income individuals and families , be able to improve underserved low- and moderate-income communities as well as creating sustainable practices for the long haul. Sustainability of bank of America therefore depends largely in the upholding of its core mission and objectives while also monitoring if actually the outcome is in line with the core values of this organization. Again this can be effectively achieved when there is a continuous dialogues and feedback from all the stakeholders. Role of diversity in development to philanthropy Diversity is indeed very imperative in development of any philanthropy for a variety of reasons. First, by embracing diversity, an organization can be able to attract, develop and even retain a skilled and motivated work force that are very important in actualization of the enterprise set objectives. In addition, the organization will be able to provide equal opportunity for everyone to compete through well-understood and constantly applied employment and performance standards and management systems within the organization while also facilitating a culture that encourages personal development and growth in an inclusive environment that maximizes each individual’s contributions to the enterprise. Externally, by embracing diversity, an organization is able to develop and maintain effective relationships with diverse communities, associations, institutions and agencies to further the organization’s objectives for instance in philanthropy (Anheuser-Busch, 2005). How to avoid legal and ethical issues of bias in developing philanthropic and corporate giving plans In developing philanthropic plans, there is need to adhere and follow ethical principles which in turn will help in avoiding legal and ethical issues of biasness’. All stakeholders should have an impression that they form an important component of the organization. This will give them a lot confidence in giving plans. There is also the need to avoid giving with strings attached. More often than not, contributions occasionally may enforce duties that are actually contentious maybe calling for democratic changes. Such conditionality may be seen to interfere with the autonomy of the recipient. It can also be seen as unethical where it interferes in the self-determination of giving body among other things. There is therefore urgent need to avoid or minimize where possible philanthropic gestures seen to be tied with one or more conditions. Corporate philanthropy and organization’s social responsibility There are various ways in which corporate philanthropy can enhance organization’s social responsibility. To many firms, philanthropy in itself is viewed as one component of corporate social responsibility, albeit an important, highly visible component and therefore companies have a moral obligation to assist the communities in which they do business. Corporate philanthropy in organization’s social responsibility may take various forms ranging from small donations to larger projects for social welfare sustainable practices which may vary from one firm to another one to depending on the resources available to that firm undertaking philanthropic practices. Again, Business practices of big and successful companies, with plenty of resources at their end, have set the trend for being committed to sustainable practices. Such company houses around the world demonstrate their dedication to social task (Tripathi & Reddy, 2006) Fostering global and universal education is one sector in which corporate philanthropy can be directed. Despite the benefits which accrue from education including economic growth, healthier communities, and peace and security, the needs remain strikingly high in poor and marginalized parts of the world particularly developing countries. Studies done in the US based corporations have revealed an enormous potential to better use their unique assets and minimize their liabilities when directing their philanthropic efforts toward global education. Apart from offering understanding, concrete expertise sets and economic development to citizens and governments of third world countries, the most important asset “Corporate America” can contribute to worldwide education is innovation (Saiia, et al 2003). Corporate philanthropy can also increase the name recognition and reputation of the organization among consumers and the community at large. Other strategies may be geared towards improvement of the quality of the community at large where the firm does its business. This in turn helps firms build relationship with government and community leaders and the same strategy can be used to reduce regulatory and special interest groups’ obstacles. (Archie Carroll, 2004) The efforts of most companies to contribute to the public good has its limits but one of the most obvious one is that most firms are certainly more inclined to make a contribution to education and any philanthropic gesture geared towards improving of community life if and only if the contribution or rather act of contributing is able to advance the company’s mission and goals, in most cases which revolves around maximizing profits. Implications on the ethics of giving if the organization receives substantial good will and or preferred relationships from its beneficiaries The implication on the ethics of giving if the firm receives substantial good will and or preferred relationship from its beneficiaries paints a picture of the significant role of philanthropy in the corporate world. However the type and size of giving depend on various factors among them the size of the firm. Again, this also gives an important managerial implication where the firm level difference in the giving culture also influence the giving behavior of a particular firm In the philanthropic world, organizations may also create an environment that requires them to meet or exceed competitor philanthropy all in the name of maintaining customer and community goodwill. There is an adequate indication or demonstration that corporate philanthropy in deed enhances financials performance by enabling firms to elicit better stakeholders as well as beneficiaries’ responses. Conclusion This paper endeavored to examine corporate philanthropy and social responsibility exploring the dynamics involved in philanthropy, reasons for and against philanthropy while coming up with a plan to reconcile the two opposing views on corporate philanthropy. In conclusion, it is clear that corporate philanthropy if well managed can result in competitive advantage of the firm though it is still faced with various challenges. Reference Amato, L.H. & Amato, C.H. (2007). The Effects of firm size and industry on corporate Journal of Business Ethics, 72(3), 229-241. (Document ID: 1249533201).  Anheuser-Busch, (2005). The Diversity Councils Best Practices Study, The GilDeane Group, Inc., Archie Carroll, (2004). 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