Cicero Policy Briefer

Issue 13, June 2007

Gifts that keep giving: the benefits of corporate philanthropy

By James O’Shaughnessy, Head of Research, Policy Exchange

Switch computers off at night. Tick. Establish working from home policy. Tick. Make charitable donations. Tick. Bored yet? Companies that took on the check box demands of the early corporate social responsibility (CSR) agenda certainly seem jaded, but are we seeing the emergence of a new enthusiasm about the role of business in society?

The challenge is to take social responsibility into the heart of corporate strategy without compromising the core duties of maximising profits and fulfilling fiduciary responsibilities. But while it is possible to assess how switching energy providers or changing distribution strategies can impact economic and environmental performance, it is much tougher to quantify the economic benefits of philanthropic giving.

Advocates of corporate giving mention improving employee pride or enhancing the company brand, both of which feed into the bottom line. But philanthropic gifts can be hard to justify unless they are relevant to a company’s business or strategy, like HSBC’s US$50 million plus gift to an ‘Investing in Nature’ programme which was a significant component of its strategy to go ‘carbon neutral’.

For many red-blooded capitalists, any gift of public company profits or funds to recipients who are not shareholders or employees can jar; but innovative strategies are beginning to emerge to help those who realise the wider social role of the corporate sector. When technology fund Eurovestech listed on AIM in 2004, its prospectus stated that each year it would gift a fixed number of shares to charities of its choice. This was company policy at the outset. And for equity market gurus out there, the number of shares gifted is a small enough percentage of the company that the board does not deem the dilutive effect material.

But Eurovestech is unusual. Companies would be more likely to unleash the philanthropic component of their social responsibility agenda at the employee and institutional levels if the right incentives were in place to help them do so. This does not mean more regulation or extra taxes diverted to state-run social enterprise funds. Instead we need a mix of carefully structured tax incentives, payroll giving made easy, comprehensive matching schemes, and the development of a new philanthropic culture.

James O’Shaughnessy is the Head of Research at Policy Exchange and can be contacted here.

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