Journal of Business and Behavioral Sciences Volume 23, Number 1 issn 1946-8113 Spring 2011 inthis issue
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- STRATEGIC AND ALTRUISTIC PHILANTHROPY: DIFFERENT ROLES, DIFFERING MOTIVATIONS Bryan S. Dennis
- INTRODUCTION
- The Progression toward Strategic Philanthropy
- HYPOTHESES Strategic Orientation-CEOs
- Strategic Orientation: CEOs vs. Corporate Giving Managers
- METHOD Sample
- RESULTS Hypothesis 1
- Hypothesis 2
CONCLUSION Unlike Chang et. al. (2002) and Furstenberg et. al. (1986), the results of this study indicate a mutual causation between government expenditures and tax revenues. Perhaps this is partially due to the notably larger sample size employed here. Chang et. al., with annual data, had a sample of 45 observations; Furstenberg et. al., using quarterly data, had a sample size of 112. Darrat, using all available data on Turkey, still had only 27 annual observations, while this study had 210 after losing 6 due to the introduction of the lags. The results of the current study are supported by the bidirectional causality findings by Manage and Marlow (1986). The notion that government spending causes increased taxes and that increased taxes cause higher government spending should be of considerable interest to both economic and political strategists. Any further examination of the empirical relationship between government expenditures and government revenues cannot but help to provide additional insight and understanding into the future direction of the budget deficit. In light of the present economic environment, combined with the policy objectives of the current administration, it seems clear that U.S. deficits, not to mention statutory tax rates, have nowhere to go but up.
Anderson, William, Myles S. Wallace, and John T. Warner (1986). ―Government Spending and Taxation: What Causes What?‖ Southern Economic
Respond to Budgetary Disequilibria?‖ Southern Economic Journal, October, pp. 311-22. Chang, Tsangyao, Wen Rong Liu, and Steven B. Caudill (2002). ―Tax-and- Spend, Spend-and-Tax, or Fiscal Synchronization: New Evidence for Ten Countries,‖ Applied Economics, (34), London, August, pp. 1553-61. Darrat, Ali F. (1998). ―Tax and Spend, or Spend and Tax? An Inquiry into the Turkish Budgetary Process,‖ Southern Economic Journal, (64), Stillwater, April, pp. 940-56. Ewing, Bradley, T., James E. Payne, Mark A. Thompson, and Omar M. AL- Zoubi (2006). ―Government Expenditures and Revenues: Evidence from Asymmetric Modeling.‖ Southern Economic Journal, (73), July, pp. 190-200.
57 Deck, Bundy, Ward and Ward Furstenberg, George M. von, R. Jeffrey Green, and Jin-Ho Jeong (1986). ―Tax and Spend, or Spend and Tax?‖ The Review of Economics and Statistics, (68), Cambridge, May, pp. 179-88. Hoover, Kevin D., Steven M. Sheffrin (1992). ―Causation, Spending, and Taxes: Sand in the Sandbox or Tax Collector for the Welfare State?‖ The American Economic Review, (82), Nashville, March, pp. 225-48. Manage, Neela and Michael L. Marlow (1986). ―The Causal Relation between Federal Expenditures and Receipts,‖ Southern Economic Journal, (64), Stillwater, April, pp. 940-56. Wolff, Edward N., and Ajit Zacharias (2007). ―The Distributional Consequences of Government Spending and Taxation in the U.S., 1989 and 2000.‖ Review of Income and Wealth, Series 53, No. 4, December, pp. 692-715. Zapf, Matthew, and James E. Payne (2009). ―Asymmetric Modeling of the Revenue-Expenditure Nexus Evidence From Aggregate State and Local Government in the U.S.‖ Applied Economic Letter, (16), pp. 871-6. 58 Journal of Business and Behavioral Sciences Vol 23, No 1; Spring 2011 STRATEGIC AND ALTRUISTIC PHILANTHROPY: DIFFERENT ROLES, DIFFERING MOTIVATIONS Bryan S. Dennis University of South Carolina Beaufort ABSTRACT Social issues in management scholars have consistently argued that corporate philanthropy is one key component of a firm‘s discretionary responsibilities. In this paper, an overview of the motivations behind corporate philanthropy is presented. Strategically, managers engage in philanthropy with the intent of furthering the firm‘s economic or political goals. On the other hand, managers may engage in philanthropy with the altruistic intention of furthering the wants and needs of external stakeholders, regardless of whether or not such actions benefit the firm. In a survey of CEOs and corporate giving mangers, it was found that CEOs have a strategic orientation toward philanthropy. Furthermore, CEOs have a more strategic orientation toward philanthropy, as compared to corporate giving managers. Suggestions for future research are offered. INTRODUCTION Milton Friedman, one of the most prominent critics of discretionary activities as well as the concept of social responsibility in general, contends that the sole responsibility of the firm is to maximize returns to the firm‘s shareholders and so managers should only engage in activities that will result in increased profits (1970). Drucker (1984, p. 59) concurs, stating that ―business can discharge its ‗social responsibilities‘ only if it converts them into ‗self- interest‘‖ as managers must allocate the firm‘s resources with the express intent of maximizing profits. In this sense, decisions to engage in corporate philanthropy should be evaluated in a purely instrumental basis and corporations should give only if it is highly probable that such actions will result in enhanced financial return. Thus, if managers are to engage in corporate philanthropy, this type of activity is acceptable to the extent that the underlying motives behind such actions are economic. Others argue that organizations have a responsibility to engage to philanthropy that precludes any self-interested financial considerations. In this sense, a moral rationale is the primary driver of corporate giving. According to Shaw and Post (1993, p. 745): Dennis
Since corporate philanthropy advances our cultural quality of life so enormously, we think that it is important to articulate a moral basis that will sustain it, nurture its growth, and move it beyond the realm of a thinly-disguised public relations activity. From this perspective, corporations are granted power by society and so they have a responsibility to ―pay back‖ for the privilege of being a member of the business community (Buhl, 1996). Firms should engage in corporate philanthropy with the intent of improving the overall welfare of society as a whole (Shaw & Post, 1993). However, corporate giving is not a purely altruistic activity. Because the firm and its members are part of the society, decisions to engage in corporate philanthropy can bestow benefits upon both the organization and its employees. The Progression toward Strategic Philanthropy: In recent years, the concept of strategic philanthropy has emerged as a means to somewhat satisfy the arguments of opponents and proponents of corporate philanthropy. Strategic philanthropy can be defined as corporate giving intended to ―serve direct business interests while also serving beneficiary organizations‖ (Logsdon, Reiner, & Burke, 1990, p. 95). In a broad sense, strategic philanthropy can be considered a ―win-win‖ activity as the firm may receive both tangible and intangible benefits from such activities. Philanthropy may result in direct benefits, such as increased sales and tax deductions, as well as indirect benefits, such as an enhanced image and reputation (Young & Burlingame, 1996). In addition, the recipients of corporate philanthropy benefit to the extent that they receive increased consideration from the firm. However, some observers are concerned that this new enlightened self-interested perspective fails to consider a moral component that is inherent in decisions to engage in corporate philanthropy (Shaw & Post, 1993). Researchers have documented the transition of charitable giving toward a more strategic nature (Young & Burlingame, 1996; Marx, 1999; McAlister & Ferrell, 2002). In one recent study, Saiia, Carroll, and Buchholtz (2003) found that managers believe that the practice of philanthropy is becoming more strategic in nature. HYPOTHESES Strategic Orientation-CEOs: The social contract between corporations and the community is a complex relationship that is constantly evolving (Buhl, 1996). In regards to corporate philanthropy, the expectations of society upon business have changed (Marx, 1999). From a strategic perspective, the firm should only allocate resources with the pure intent of maximizing firm profits. Milton Friedman‘s ―the only responsibility of the firm is to earn profits‖ argument best supports this view (Friedman, 1962, 1970). Alternatively, the altruistic 60 Journal of Business and Behavioral Sciences perspective holds that firms have a responsibility to engage in corporate philanthropy regardless of any bottom-line considerations. From this perspective, firms have a moral obligation to engage in philanthropy as a payback for the privilege of being in business (Buhl, 1996), and this moral obligation to engage in philanthropy trumps any self-interested considerations (Shaw & Post, 1993). In recent years, the nature of corporate philanthropy has evolved toward a more strategic nature (Logsdon et al., 1990; Marx, 1999; Saiia et al., 2003). Defined by one researcher as ―an overt effort to link corporate giving with the firm‘s objectives‖ (Wood, 1990, p. 549), strategic philanthropy mandates that the primary consideration of a firm‘s giving should be the potential impact upon the firm‘s bottom-line, image, or other firm performance measure. In this respect, any moral obligation of the firm toward the community is superceded by utilitarian considerations of maximum firm benefit. CEOs are required to earn economic rents for the firm if the firm is to remain in business or if the CEO is to remain in power. They are hired, fired, rewarded, and penalized based on the firm‘s financial performance during their tenure. Due to this consideration and the recent evolution of philanthropy toward a more strategic nature, we expect to find that the orientation of CEOs toward philanthropy will be of a strategic nature. H1: CEOs will have a strategic orientation toward corporate philanthropy. Strategic Orientation: CEOs vs. Corporate Giving Managers: In larger corporations, there is an individual (or individuals) responsible for the day-to-day administration of the giving function (Himmelstein, 1997; Saiia et al., 2003). This position is commonly referred to as the corporate giving manager. The placement of the philanthropy decision into a centralized administration function allows the CEO and top management team to spend more of their time making decisions that pertain to the firm‘s core business (Jones, 1996). Although firms are increasingly more likely to have a centralized giving function operated by a corporate giving manager, the CEO is still invaluable to the decision-making process. In particular, CEOs are responsible for contributions of a larger nature (Jones, 1996). Giving managers have a great deal of interaction with the organizations that are vying for corporate funding. Their daily routines may entail such decisions as the distribution of scholarships toward educational purposes and the allocation of resources to improve inner-city living conditions. Giving managers are inclined to see the interests of the company and community as coequal and codependent (Buhl, 1996). According to Buhl (p. 138): 61 Dennis
More pertinent to the essential integrity of [corporate giving] is to understand that its fundamental and unique nature is to operate in the borderland between company and community. As a key agency for defining a significant part of the social contract for corporate social responsibility, its program officers act as intermediaries between the interests of the company and those of the community. Working properly, they translate company and community to one another and work to find common ground and interests each has for a healthier, more just social order. Thus, it stands likely to reason that the corporate giving manager will identify with the recipients of corporate giving and better understand the ―plight‖ of those organizations that are seeking corporate philanthropy. CEOs, in contrast, are more focused on those activities and operations that are core to the firm as the CEO is ultimately evaluated on the overall profitability of the firm (Finkelstein & Hambrick, 1996). The nature of the CEO‘s working environment is quite different from that of the corporate giving manager. The CEO has less contact with and is further removed from the recipients of corporate giving. Thus, it stands to reason that the CEO is less likely to be as empathetic as the corporate giving manager. Along the proposed strategic orientation continuum, we expect to find that CEOs will have a more strategic orientation toward corporate philanthropy as compared to CEOs. H2: CEOs will have a more strategic orientation toward corporate philanthropy as compared to corporate giving managers. METHOD Sample: The sample for this study consisted of the corporate giving managers from the publicly held firms listed in Taft‘s (2004) Corporate Giving Directory. Of the 499 firms that were surveyed, 92 corporate giving managers and 86 CEOS responded. This sample was largely chosen as a matter of convenience, as the Directory contains information for Corporate Giving Managers as well as information regarding CEOs. Measures: A new survey was created to capture the strategic orientations of CEOs and corporate giving managers. In order to ensure that the instrument was applicable to both groups of respondents, it was necessary to ensure that the language of the survey was of sufficient generalizability. Several previous studies (Edmondson & Carroll, 1999; Galaskiewicz, 1985; Marx, 1999; Neiheisel, 1994) have studied the various rationales behind managerial decisions to give. However, each of these studies utilized independent measures (such as Likert scales). Previous researchers have noted 62
that this methodology may result in the artificial inflation of scores, particularly when the scales are designed to capture a component of an individual‘s values (Baron, 1996; Ravlin & Meglino, 1987). The respondent‘s orientation toward philanthropy is a reflection of the values held. Thus, it is likely that the use of independent measures to capture this orientation may result in inflated measures. Forced-choice items have been suggested as a means to control for response biases often found in normative scales (Baron, 1996). This methodology does not allow the respondents to score all the items either high or low. Also, the ipsative structure requires respondents to make a choice between the alternatives. This is similar to the essence of philanthropic decision-making as managers can‘t be ―everything to everyone.‖ There are times when the CEO is forced to choose between a philanthropic project that is geared toward the betterment of the community and a project that will benefit the firm more directly. Similar to other studies that have examined ethical orientations (Aupperle, Carroll, & Hatfield, 1985), the survey for this study used a forced-choice format. A literature review of the strategic philanthropy literature revealed several key differences between strategic and altruistic orientations toward philanthropy (Galaskiewicz, 1985; Logsdon et al., 1990; Marx, 1999; Neiheisel, 1994; Saiia et al., 2003; Sanchez, 2000). Based upon this literature review and the questions used in these previous studies, the following items were created to capture an altruistic orientation toward philanthropy: 1a-When evaluating philanthropy, it is important to assess the benefits society receives. 2a-It is important for firms to make the world a better place. 3a-It is important for firms to recognize that their moral obligation is to the communities in which they operate. 4a-It is important to remember that ―those who have more should give more.‖ 5a-It is important that firms focus on the betterment of society. Similarly, the following items were developed to capture a strategic orientation toward philanthropy: 1s-When evaluating philanthropy, it is important to assess the benefits the firm receives. 2s-It is important for firms to maximize shareholder wealth 3s-It is important for firms to recognize that their moral obligation is to the firm‘s shareholders. 4s-It is important to remember that ―what‘s good for a firm is good for its community.‖ 5s-It is important that firms focus on shareholder wealth maximization. 63 Dennis
Each item was matched (a-s) in a forced choice format. Respondents were asked to allocate up to 10 points to each response. RESULTS Hypothesis 1: Hypothesis 1 stated that the CEOs will have a strategic orientation toward philanthropy. As this construct was measured on a 0-10 scale, we would expect scores of 5 to represent an orientation that is neither strategic nor altruistic. Thus, a t-test was performed using 5 as the test value. The t statistic of 5.497 was significant at the p <.001 level. Thus, this hypothesis was supported. Hypothesis 2: Hypothesis 2 stated that the philanthropic orientation of CEOs will be more strategic as compared to the philanthropic orientations of corporate giving managers. A one-way ANOVA was performed and the F-statistic of 15.988 was significant at the p < .001 level. Thus, this hypothesis was supported and the results indicate that CEOs have a more strategic orientation as compared to corporate giving managers. DISCUSSION Hypothesis 1 explored the orientations of CEOs as they pertain to corporate philanthropy. As corporate philanthropy has evolved toward a more strategic nature (Logsdon, et al., 1990; Marx, 1999; Saiia et al., 2003), we expected to find that the CEOs would have a strategic orientation toward corporate philanthropy. Additionally, as the CEO is ultimately held accountable for the financial performance of the firm, we would further expect the CEOs to have a strategic orientation in regards to corporate giving. As discussed earlier, this hypothesis was strongly supported. Hypothesis 2 suggested that CEOs, as compared to corporate giving
accountable for the overall financial performance of the firm and the giving manager is not. This hypothesis was supported and the results indicate that CEOs have a more strategic orientation toward corporate philanthropy as compared to corporate giving managers. 64 Journal of Business and Behavioral Sciences The results of this study have some practical value to charitable organizations. Perhaps this information will provide those fund-seeking organizations that have direct CEO contact with a means to potentially improve their giving programs by presenting funding proposals in a manner that will appeal to the CEOs‘ strategic nature. Additionally, those organizations that have contact with both the CEO and the corporate giving manager may choose to alter their fund-seeking strategies to reflect the different orientations between these groups. REFERENCES Aupperle, K. E., Carroll, A. B., & Hatfield, J. D. (1985). An empirical examination of the relationship between corporate social responsibility and profitability. Academy of Management Journal, 28(2): 446-463. Baron, H. (1996). Strengths and limitations of ipsative measurement. Journal of Occupational and Organizational Psychology, 69(1): 49-57. Buhl, L. (1996). The ethical frame of corporate philanthropy. In D. Burlingame, & D. R. Young (Eds.), Corporate philanthropy at the crossroads: 127-143. Bloomington: Indiana University Press. Drucker, P. F. (1984). The new meaning of corporate social responsibility. California Management Review, 26(2): 53-63. Edmondson, V. C., & Carroll, A. B. (1999). Giving back: An examination of the philanthropic motivations, orientations and activities of large black-owned businesses. Journal of Business Ethics, 19(2): 171-180. Finkelstein, S., & Hambrick, D. C. (1996). Strategic leadership: Top executives and their effects on organizations. St. Paul, MN: West Publishing Company. Friedman, M. (1962). Capitalism and freedom. New York: Free Press. Friedman, M. (1970). The social responsibility of business is to increase its profits, New York Times Magazine, Sept 13: 122-126. Galaskiewicz, J. (1985). Social organization of an urban grants economy: A study of business philanthropy and nonprofit organizations. Orlando, FL: Academic Press. Himmelstein, J. L. (1997). Looking good & doing good. Bloomington: Indiana University Press. Jones, J. 1996. Doing good while doing well, Black Enterprise, Vol. 26: 178-183. Landon, S., & Smith, C. E. (1997). The use of quality and reputation indicators by consumers: The case of bordeaux wine. Journal of Consumer Policy, 20(3): 289-323. Logsdon, J. M., Reiner, M., & Burke, L. (1990). Corporate philanthropy: Strategic responses to the firm's stakeholders. Nonprofit and Voluntary Sector Quarterly, 19(2): 93-109. Marx, J. D. (1999). Corporate philanthropy: What is the strategy? Nonprofit and Voluntary Sector Quarterly, 28(2): 185-198. 65 Dennis McAlister, D. T., & Ferrell, L. (2002). The role of strategic philanthropy in marketing strategy. European Journal of Marketing, 36: 689-706. Neiheisel, S. R. (1994). Corporate strategy and the politics of goodwill: A Political analysis of corporate philanthropy in America. New York: Peter Lang Publishing Inc. Ravlin, E. C., & Meglino, B. M. (1987). Issues in work values measurement. In W. C. Frederick, & J. E. Post (Eds.), Research in Corporate Social
When corporate charity "begins at home". Business and Society, 42(2): 169-201. Sanchez, C. M. (2000). Motives for corporate philanthropy in El Salvador: Altruism and political legitimacy. Journal of Business Ethics, 27(4): 363-375. Shaw, B., & Post, F. R. (1993). A moral basis for corporate philanthropy. Journal of Business Ethics, 12(10): 745-751. Wood, D. J. (1991). Corporate social performance revisited. Academy of Management Review, 16(4): 691-718. Young, D. R., & Burlingame, D. (1996). Paradigm lost: Research toward a new understanding of corporate philanthropy. In D. Burlingame, & D. R. Young (Eds.), Corporate philanthropy at the crossroads: 158-176. Bloomington: Indiana University Press. 66 Journal of Business and Behavioral Sciences Vol 23, No 1; Spring 2011 Directory: files files -> Answer True False 2 points Question 2 files -> Integer programming and game theory files -> 4 Integer Programming files -> Bpa vehicle Window Repair Scenario #1 task: Procure vehicle window relacement. Objective files -> Pop Warner History files -> North Carolina Inclusion Initiative Mapping Where Children with ieps are Being Served Purpose files -> Fall 2013 Spring 2014 Program Data: Standard 1 Exhibit 4d files -> Hanban – asia society confucius classrooms network 2010 request for proposal files -> Northern England’s set-jetting locations Download 1.4 Mb. Share with your friends:
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