Study: Women Inspire Corporate Philanthropy

Is corporate philanthropy a good use of shareholder money, or is it simply a perk given to senior people in the company? And what influences how much a company gives to charitable causes? A new paper from Christopher Marquis and Matthew Lee of Harvard Business School provides some insights.

Corporate philanthropy, as high-flying as it may sound, has been the subject of controversy at least since the 1970s. The most basic charge is simply that corporate giving is a waste of shareholder money. If corporations have 'extra' money lying around, the theory goes, that money should be reinvested in the business or paid out as dividends to shareholders. Another objection is that corporate philanthropy is merely a perk given to senior execs, who can then fund their pet causes on shareholder' dimes.

Marquis and Lee conducted a study of Fortune 500 companies to see which factors influence the generosity of corporate giving. Their findings:

• Companies with newer CEOs tend to give more than companies whose CEOs have been in office for a while. This was perhaps the most surprising finding. It's not that longer-tenured CEOs don't give or that they cut giving. Instead, it turns out new CEOs tend to boost corporate giving soon after assuming the top slot. This meshes well with other research showing that new CEOs, in general, are more likely to experiment with big strategic changes. An increase in corporate giving may be part of this.
• Companies with more female senior managers give more money to charity. In one sense this is not surprising: A study from the Center for Women's Business Business Research found that more than half of women business owners with companies of more than $1 million in assets give at least $10,000 to charity annually, compared to only 40% of men. It's not clear if having a woman CEO would make a difference, because there aren't enough big companies with female CEOs to do a statistically valid survey of them. It's also worth noting that corporate foundations themselves tend to be run by women.
• Companies with more female board members give more money. The explanation here could be similar to that of companies with more female senior managers: Women tend to give more in general, and women board members, like senior managers, are in a position to influence their company's giving. It could also be that women board members are more likely to come from the nonprofit world than are male board members, so they're more aware of non-profits' initiatives and the impact of corporate giving.
• A bigger board equals more corporate giving. A bigger board means there are more people at a high level getting more requests for money. But bigger boards are also generally associated with worse governance, so it may also be that members of bigger boards are more able to use 'corporate' giving to fund their own pet projects.
• As the size of the corporate foundations increase, board members have less influence over corporate giving. But the influence of senior managers remains-it is not affected by the corporate foundation. That could be because senior managers are better able to influence folks in the foundation on a regular basis.
• Companies whose headquarters are located in lower-income areas give more.

Do you give to philanthropic causes? Why or why not?

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