Canadian Companies Less Charitable than US Counterparts
The last few years have seen repeated predictions that North America is entering a new golden age of philanthropy, one not seen since the days of John Rockefeller and Andrew Carnegie - famously rich businessmen remembered as much for giving away money as making it. They appeared to come true in 2006, a record-smashing year for charitable giving. Consider a few of the biggest acts: Warren Buffet donated US$31 billion to the Bill and Melinda Gates Foundation. The CEOs of Golden West Financial, Herbert and Marion Sandler, gave US$1.3 billion to their family foundation. And there were 14 other donations worth over US$100 million in the United States alone, according to the Chronicle of Philanthropy. Canada had its share of big donations, too. Real estate developers Joseph and Wolf Lebovic, for instance, gave $50 million to Toronto's Mount Sinai Hospital. The rich may be getting richer, but they're also giving more money than ever before.
Yet there's a huge disparity in the world of corporate philanthropy. While the rich founders and executives of successful companies are generous givers, the companies they run often aren't charitable at all. Companies don't donate nearly as much as individuals, nor have they been all that proficient at forging lasting, meaningful ties with non-profit groups in their communities. "Companies still have a long way to go," says John Peloza, a professor of marketing at Simon Fraser University who studies corporate philanthropy. The corporate sector agrees it should do philanthropic work, but "most still don't have a very deep understanding of how best they can work with non-profits and charities." New research by Imagine Canada, a charity and non-profit advocacy group, suggests this is changing - but it hasn't been a fast or easy shift.
Only three per cent of Canadian businesses claimed charitable donations on their tax returns in 2003, for a total of $1 billion in donations (representing less than one per cent of the companies' pre-tax profits), according to Imagine Canada. While those figures don't represent all the charitable work companies do (like volunteer work by employees on company time), only 20 per cent of charities and non-profits in Canada received corporate donations and grants in 2003, and the vast majority of corporate giving went to a small group of organizations with the biggest revenues.
This isn't a big surprise. The late economist Milton Friedman famously wrote that "the social responsibility of business is to increase profits." But in recent years, companies have found it increasingly important - essential, say some - to ally themselves with non-profits and charities relevant to their business (oil companies, for example, tend to partner up with environmental causes). Not only can they play the role of good corporate citizen, but companies can build up a cache of goodwill, boost employee moral, and improve their brands through the work they do in communities, says Peloza. The result is charity that serves to boost the company's bottom line. "It needs to be mutually beneficial," says Jennifer Semple, the director of corporate citizenship at Imagine Canada. "Philanthropy has evolved from a 'chequebook philanthropy' to this notion of building partnerships."
One of the best examples of this blending of altruism and capitalism is Microsoft. Two years ago, Microsoft Canada made international headlines for its work with the Toronto police fighting child exploitation on the Internet. After a Toronto police officer emailed Bill Gates for help, the company stepped in to lend its expertise and build a database for police forces to fight child pornography. "We're doing it because it's the right thing to do," says Michael Eisen, chief legal officer for Microsoft Canada, who was involved in the project from the start. "But the benefit to Microsoft, and all technology companies, is that the safer the Internet and the greater the trust people have in it, the more people are going to use it." Last year the program, which Microsoft continues to support, helped the police uncover an international child porn ring that led to 27 arrests in four countries. This week, the program won Imagine Canada's Business and Community Partnership Award for its sustainable and innovative approach to philanthropy.
Microsoft's corporate culture - one steeped in charitable work - may be an exception, but it reflects a new direction in corporate philanthropy. "More and more we're seeing a formalized system around community investment," says Semple. Still, this type of philanthropy is not well documented, nor is it very well developed or easy to do. Companies have been grappling with some basic questions, not only over how to make and support these kinds of ties, but how to measure and track their impact.
The idea of a mutually beneficial form of charity also raises age-old philosophical questions about whether charity, when motivated by self-interest, is really such a noble cause. Regardless, this slowly burgeoning field of corporate giving has proved a win-win situation. "If it's good for business and good for society, then everyone's happy," says Peloza. "It doesn't matter what your motive is."
Maclean's February 19, 2007