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The SAGE Encyclopedia of Business
Ethics and Society
Strategic Philanthropy
Contributors: Archie B. Carroll
Edited by: Robert W. Kolb
Book Title: The SAGE Encyclopedia of Business Ethics and Society
Chapter Title: "Strategic Philanthropy"
Pub. Date: 2018
Access Date: June 4, 2018
Publishing Company: SAGE Publications, Inc.
City: Thousand Oaks,
Print ISBN: 9781483381527
Online ISBN: 9781483381503
DOI: http://dx.doi.org/10.4135/9781483381503.n1131
Print pages: 3276-3279
©2018 SAGE Publications, Inc.. All Rights Reserved.
This PDF has been generated from SAGE Knowledge. Please note that the pagination of
the online version will vary from the pagination of the print book.
Strategic philanthropy is an approach by which corporate or business giving and other
philanthropic endeavors of a firm are designed in such a way that it best fits with the firm’s
overall mission, goals, and values. This implies that the business has a carefully articulated
strategy and that it understands how to integrate its philanthropic initiatives with this strategy
in actual practice. A major characteristic of strategic philanthropy is that the motivation is not
solely altruistic. Strategic philanthropy is intended to help both the company and the society,
so it is a vital topic in the business and society relationship. To understand how strategic
philanthropy has become an everyday practice, it is useful to trace this concept as it has
unfolded in business history. Cause-related marketing is a practice that has been termed
strategic philanthropy by many, and thus it merits attention. In the 2010s, the business case
for strategic philanthropy has become a central topic in rationalizing business giving.
Beginnings of Corporate Philanthropy
The concept of philanthropy evolved through business history even before the broader
corporate social responsibility movement had taken shape. The concept of business
responsibility that prevailed in the United States during most of its history was fashioned after
the traditional, or classical, economic model of the firm. Dominant in the late 1800s and early
1900s, the economic model of the firm thought of the marketplace as the primary determinant
of what business firms did in their communities and in society. The pattern of corporate
philanthropy in Europe and other parts of the Western world paralleled its development in the
United States. Unfortunately, though the marketplace did a reasonably good job in deciding
what goods and services should be produced, it did not fare as well in ensuring that business
always acted generously, fairly, and ethically. In addition, business created many social
problems, and the view was developing that business had some responsibility for these social
problems that extended beyond just producing goods and services.
Years later, when laws began to be passed constraining business practices, it might be said
that a legal model emerged. Society’s expectations of business changed from being strictly
economic in nature to encompassing issues that previously had been at business’s discretion.
Over time, a social model of the firm emerged. What this social model did, in effect, is
embrace both the economic and legal emphases and add yet another layer of expectations by
society that business would assume some role in addressing social problems and issues that
had arisen. Philanthropy became one of the principle avenues by which companies helped
society with problems and issues.
In the late 1800s and early 1900s, initial indications of business’s willingness to contribute to
the community were localized efforts toward meeting community needs through philanthropy,
or business giving, and paternalistic practices. It is evident that businesspeople did engage in
philanthropy—contributions to charity and other worthy causes—even during the periods that
were dominated by the traditional economic view. Voluntary activities to improve, beautify, and
uplift the community were evident. One very early example of this was the cooperative efforts
between the railroads and the Young Men’s Christian Association (YMCA) immediately after
the Civil War to provide community services in areas affected by the railroads. These
initiatives, in hindsight, can now be seen as early examples of strategic philanthropy, because
they benefited both the communities and the railroads.
The emergence of large corporations during the late 1800s played a major role in hastening
the movement away from the strict classical economic model of the firm in society. As the
economy transitioned away from one dominated by small, powerless companies to large
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corporations with more concentrated power, questions of business responsibility began to be
raised. By the 1920s, community service had become much more important for business. A
most visible example of this was the Community Chest movement, which received its impetus
from business.
One example of early progressive business ideology was reflected in Andrew Carnegie’s 1889
essay, “The Gospel of Wealth.” Carnegie asserted that business must pursue profits but that
business wealth should also be used for the benefit of the community. Philanthropy turned
out to be one of the best ways in which firms could benefit the community. A prime example of
this was Carnegie’s funding and building of more than 2,500 libraries for communities.
Corporate philanthropy continued to grow into the 20th century and by the late 20th century
had become one of the institutionalized ways by which businesses could aid communities, the
growing number of nonprofit organizations, and other national and international groups.
Today, corporate philanthropy is considered to be one of the foremost means by which
companies fulfill their discretionary social responsibilities and come to be regarded as good
corporate citizens.
More on What Philanthropy Means
Before developing the concept of strategic philanthropy further, it is useful first to examine the
concept of philanthropy itself. The word philanthropy has generally been defined as a concern
for or love of humankind. Philanthropy has been linked to efforts to demonstrate this fondness
or concern for humankind through charitable gifts, aid, or donations. Though most people
would not philosophically disagree with the concept of philanthropy, throughout history some
have. Friedrich Nietzsche, for example, objected to it as a concept of universal good because
he thought it represented the weak parasitically living off the strong. Ayn Rand is another
major philosopher who held a similar view. Political views on philanthropy have also been
present. Most governments have been supportive of philanthropic efforts on the part of
companies and individuals and have supported these efforts through tax incentives and tax
breaks. Though the term philanthropy seems to imply some altruistic expression, as in “love of
humankind,” today the concept more nearly refers to the giving of resources for the benefit of
others without specifying the motive.
Conceptually, today, philanthropy is frequently seen as a part of companies’ corporate social
responsibility or corporate citizenship initiatives. Archie Carroll has argued that philanthropy
fulfills businesses’ discretionary responsibilities to be good corporate citizens. These
philanthropic activities are voluntary, guided only by businesses’ desire to engage in social
activities that are not mandated, not required by law, and not generally expected in an ethical
sense. Philanthropy is “desired/expected” in most societies. The public has an expectation
that business will engage in philanthropy, in part because it has become so much a part of
business tradition and in part because many believe it is part of the social contract between
business and society, especially between business and the local community. Others believe
that business should engage in philanthropy to partially offset some of the social harm or
social problems business has engendered.
By the first decades of the 2000s, philanthropic initiatives included corporate giving, matching
programs in which companies matched contributions given by their employees, product and
service donations, employee volunteerism, partnerships with local governments and other
organizations, and any other kind of community involvement on the part of the organization
and its employees. These philanthropic initiatives are in response to ongoing needs in the
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community in areas such as education, culture and the arts, health/human services, and civic
and community activities. In addition, special needs arise due to emergencies such as the
tsunami in Southeast Asia in 2004 and Hurricanes Katrina and Rita in the United States in
2005, and Hurricane Sandy in 2012.
Strategic Philanthropy Evolves
The concept of strategic philanthropy has evolved out of traditional forms of business giving.
Early on, corporate giving was more focused on the needs that had arisen in the community
and so philanthropy was more altruistic in nature—more focused on an exclusive
consideration of the needs of others. With the passage of time and the heightened
competition and cost pressures that have characterized the business environment in the past
several decades, corporate executives have begun looking more carefully at the kinds of
impacts philanthropic efforts might have. It has become evident that business can not only
help others but help itself at the same time, and this germ of thought is what has produced
the modern strategic philanthropy emphasis. At the same time, corporate giving has become
institutionalized and professionalized, and as it has been turned over to professional
managers, top management has come to view the giving function as one that should deliver
more specific, direct, tangible benefits to the company, and thus, the idea of strategic
philanthropy has been born and cultivated in a business climate that has been more driven by
profitability and accountability toward the financial bottom line.
Strategic philanthropy is an approach to business giving that seeks to achieve goals for the
community or recipient of the giving and for the business itself as well. Strategic philanthropy
is more carefully focused. It does not just address any legitimate need in the community but
rather concentrates on those needs or issues that are consistent with or aligned with the firm’s
overall mission, objectives, programs, or products/services. A classic example of strategic
philanthropy is the Ronald McDonald Houses sponsored by McDonald’s hamburger chain.
The Ronald McDonald Houses are facilities usually built near children’s hospitals to help
families that want to be close to their children who may be receiving longer term treatment at
the hospital. The Ronald McDonald House Charities maintains hundreds of houses in more
than 44 countries around the world, where families can stay together for free, or for a modest
charge, when traveling for a sick child’s treatment. McDonald’s also has dozens of rooms
within hospitals for the same purpose. McDonald’s, which has long viewed children as one of
its target markets, thus is able to generously contribute to children and their families, thus
enhancing its own interest or strategy at the same time. The children and their families win
and McDonald’s as a corporation wins. In a sense, then, this is an ideal example of strategic
philanthropy in that McDonald’s gets high name recognition and publicity for the charity, even
though the company is just one of the many supporters of the charity.
In using strategic philanthropy, companies strive to align their corporate giving or community
relations initiatives with their own goals, objectives, or markets. The idea is to have a double
impact—a positive impact on the recipients of the philanthropy and specific positive impacts
on the businesses’ bottom line or strategies.
Strategic management expert Michael Porter has argued that the term strategic philanthropy
has begun to be used to explain virtually any type of charitable giving that has some definable
theme, focus, or approach that builds bridges between the businesses that are giving and
needs in the community. Porter has been critical of strategic philanthropy, arguing that the
link between the companies and the charities are often weak, tenuous, or semantic. He
suspects that most of these initiatives really do not have anything at all to do with corporate
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strategy but are aimed at achieving positive publicity or goodwill for the companies and for
improving employees’ morale. His belief is that for strategic philanthropy to be viewed as
genuine or valid, it needs to effectively integrate social and economic goals in such a way so
as to produce legitimate social impact in the community. He has called this idea creating
shared value. Of course, his criticisms may be broadened to embrace any corporate
citizenship initiatives on the part of business, not just philanthropy.
Cause-Related Marketing
One of the variations that strategic philanthropy has taken on is that of cause-related
marketing, or cause marketing. Many critics claim that this is more marketing than
philanthropy, but others have held that it is an extreme form of strategic philanthropy in that
the link between the businesses’ interest and some social or public cause is tightly linked
together. In cause marketing, each time a consumer uses a service or buys a product, a
donation is given by the company to the charity. Thus, cause marketing has sometimes been
referred to as “quid pro quo philanthropy.”
One of the earliest examples of cause-related marketing was in the early 1980s, when
American Express Company introduced a program whereby it would contribute 1 cent to the
restoration of the Statue of Liberty each time one of its credit cards was used to make a
purchase. This initiative generated $1.7 million for the restoration of the historical monument
and a substantial increase in the use of the company’s cards. Today, American Express
coordinates its philanthropic and marketing efforts with its community business program and
cause-related marketing campaign to help small business owners acquire access to the credit
and resources they need to start or grow their businesses. So the company now gives a
portion of credit card charges to three national nonprofit organizations specializing in
community economic development when American Express Community Business Card
customers use their cards. Today, many different companies have linked using their products
or services to the amount they would then donate to some worthy charitable cause.
Just as Porter has been critical of strategic philanthropy, he has especially been critical of
cause-related marketing. He thinks these efforts are more targeted toward improving the
companies’ reputations than doing good in the community and, thus, fail as authentic efforts
toward strategic philanthropy. The benefactors of businesses’ strategic philanthropy, however,
may look more kindly on the practice.
The Business Case for Strategic Philanthropy
The impetus behind the movement toward strategic philanthropy has been the expectation by
chief executive officers and top echelon executives that for corporate giving to continue, the
“business case” for it has to be established. The business case is the argument or rationale
as to how the business is specifically benefiting from the philanthropic endeavors. It is the
clarification of reasons why business is believed to be benefited by the philanthropy. One of
the leading business groups supporting the idea of strategic philanthropy is Business for
Social Responsibility, a nonprofit association of firms and executives who support the idea of
integrating business’s social role with its economic objectives. Business for Social
Responsibility has assembled research that indicates that companies, through their
philanthropic giving, may
increase customer loyalty and enhance brand image,
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strengthen employee loyalty and productivity,
enhance corporate reputation, and
expand into emerging markets.
In short, specific business advantages that strengthen the companies’ bottom lines are
achievable through carefully designed philanthropic initiatives.
An interesting aspect of strategic philanthropy is that two firms in the same industry may
decide to pursue divergent philanthropic projects and initiatives while both are focusing on the
bottom-line benefits to the company as well as helping the community. In the home
improvement/products industry, for example, The Home Depot supports sustainable forestry,
community impact grants, and volunteerism, while Lowe’s, its major competitor, supports
Habitat for Humanity, sponsorship of American Red Cross disaster relief, and community
college scholarships. Executives in these two firms made strategic choices to engage different
philanthropies but with doubtless similar objectives in terms of strategic impact on the
company’s profitability and reputation.
Since strategic philanthropy is a part of corporate social responsibility initiatives, it follows that
these same benefits accrue due to these efforts. Also, it can readily be seen that most of
these reasons are business related, not philanthropy related. Thus, the business case is
strengthened. Finally, it is worth noting that Paul Godfrey has developed and presented an
analysis of literature and research that supports the idea that (a) corporate philanthropy can
generate positive moral capital among stakeholders and communities, (b) this moral capital
can provide business owners with insurance-like protection for a firm’s relationship-based
intangible assets, and (c) this protection contributes to shareholder wealth. Thus, through
logic and research, he has added to the business case for corporate philanthropy, especially
strategic philanthropy.
See also Cause-Related Marketing; Corporate Philanthropy; Corporate Social Responsibility
(CSR) and Corporate Social Performance (CSP); Strategic Corporate Social Responsibility;
Volunteerism
Archie B. Carroll
http://dx.doi.org/10.4135/9781483381503.n1131
10.4135/9781483381503.n1131
Further Readings
Burlingame, D. F., & Young, D. R. (Eds.). (1996). Corporate philanthropy at the crossroads.
Bloomington: Indiana University Press.
Carroll, A. B., & Buchholtz, A. K. (2015). Business and community stakeholders. In A. B.
Carroll & A. K. Buchholtz (Eds.), Business and society: Ethics, sustainability, and stakeholder
management (
9th ed.
, pp. 462–488). Stamford, CT: Cengage Learning.
Carroll, A. B., Lipartito, K. J., Post, J. E., & Werhane, P. H. (2012). Corporate responsibility:
The American experience (K. E. Goodpaster, Executive Ed.). Cambridge, England:
Cambridge University Press.
Carroll, A. B., & Shabana, K. M. (2010). The business case for corporate social responsibility:
A review of concepts, research and practice. International Journal of Management Reviews,
12(1), 85–105.
Epstein, K. (2005, Summer). Philanthropy, Inc.: How today’s corporate donors want their gifts
to help the bottom line. Stanford Social Innovation Review, 3(2), 21–27. Retrieved from
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https://ssir.org/articles/entry/philanthropy_inc
Godfrey, P. C. (2005). The relationship between corporate philanthropy and shareholder
wealth: A risk management perspective. Academy of Management Review, 30(4), 777–798.
Kania, J., Kramer, M., & Russell, P. (2014, Summer). Strategic planning for a complex world.
Stanford Social Innovation Review, 12(3), 26–37. Retrieved from
https://ssir.org/up_for_debate/article/strategic_philanthropy
Logsdon, J., Reiner, M., & Burke, L. (1990). Corporate philanthropy: Strategic responses to
the firm’s stakeholders. Nonprofit and Voluntary Sector Quarterly, 19(2), 93–109.
Porter, M. E., & Kramer, M. R. (2002, December). The competitive advantage of corporate
philanthropy. Harvard Business Review, 80, 57–68.
Saiia, D. H., Carroll, A. B., & Buchholtz, A. K. (2003). Philanthropy as strategy: When
corporate charity begins at home. Business & Society, 42(2), 169–201.
doi:http://dx.doi.org/10.1177/0007650303042002002
Smith, C. (1996). The new corporate philanthropy. Harvard Business Review, 72(3), 105–115.
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