MGMT 452 Corporate Social Responsibility Zeynep Gürhan-Canlı Community Relations and Strategic Philanthropy Chapter 9 April 21, 2010

Community Stakeholders A community includes those members of society who are aware of, concerned about, or in some way affected by the operations and output of the organization. Issues of concern include: Pollution of the environment. Land use. Economic advantages to the region. Discrimination. Exploitation of workers and consumers.

Community Relations The organizational function dedicated to building and maintaining relationships and trust with the community. Often supports local community through philanthropic activities. More strategic significance within the organization. Develops community mission statements to identify the needs of the people relative to the organization’s competence.

Responsibilities to the Community Economic issues Legal issues Ethical issues Philanthropic issues

Economic Issues Business is vital to the community. Buyer-seller interaction stimulates the economy. Companies hire, train, and buy supplies, raw materials, utilities, advertising services, and other local goods and services. A company’s departure or retrenchment from a community can be devastating to the local economy. Downsizing Plant closings

Legal Issues A company must operate within legal and regulatory parameters. Companies are granted a license to operate. Business license Sales tax number Many mega-retailers have faced rejection because people believe they threaten small “mom & pop” businesses in the US.

Ethical Issues Companies may evaluate the role and impact of their decisions on communities from an ethical perspective. Business leaders are taking greater responsibility for determining how they can assist in improving communities. Supporting education. Assisting in the development of mass transit. Supporting environmental initiatives.

Philanthropic Issues Historically this has meant providing support for worthy causes. Gifts Grants Other resources Volunteer programs Employees donate time in support of social causes (volunteerism). Communities benefit from the application of new skills and initiative toward problems, and companies develop better community relations.

Customers and Business Partners as Stakeholders Companies constantly seek to differentiate themselves in consumers’ minds. Strategic alignments with social causes of interest to customers can help to create differentiation. Companies are increasingly asking business partners for: Social audits of their companies. Adoption of industry codes of ethics. Socially responsible actions in their business practices.

Philanthropic Contributions Philanthropy- provides four major benefits to society. Improves the quality of life and helps make communities places where people want to do business, raise families, and enjoy life. Reduces government involvement by providing assistance to stakeholders Develops employee leadership skills. Helps create an ethical culture and the values can act as a buffer to organizational misconduct.

Strategic Philanthropy The synergistic use of an organization’s core competencies and resources to address key stakeholders’ interests and to achieve both organizational and social benefits. Goes beyond traditional benevolent philanthropy. Involves both financial and non-financial contributions to stakeholders. Involves employees, organizational resources, and expertise.

Examples of Corporate Philanthropy

Strategic Philanthropy and Social Responsibility Companies often consider philanthropy after meeting financial, legal, and ethical obligations. Strategic philanthropy is often viewed as an investment that is tied to business strategies and implementation. By incorporating philanthropy in strategic planning, the company can address the needs and concerns of key stakeholders. Greater organizational accountability has led to organizational concern about performance and stakeholder accountability.

Top Ten Foundations in Corporate Giving Wal-Mart Foundation Aventis Pharmaceuticals Health Care Foundation Bank of America Foundation Ford Motor Company Fund SBC Foundations The Wells Fargo Foundation ExxonMobil Foundation Citigroup Foundation Verizon Foundation The J.P. Morgan Chase Foundation GE Foundation Source: “50 Largest Corporate Foundations by Total Giving,” The Foundation Center, http://foundationcenter.org/findfunders/topfunders/top50giving.htm(accessed February 19, 2007.l

Cause-Related Marketing An organization’s products are tied directly to a social concern. Percentage of sales are usually donated to a cause appealing to a relevant target market. Overall goal is to increase product sales for a defined period of time. Charity partners often assist in promoting the alliance (e.g., Habitat for Humanity partnered with Home Depot) American Express pioneered this process in 1983 by donating a percentage of credit card sales to the Statue of Liberty and Ellis Island Restoration Fund.

Strategic Philanthropy Contrasted with Cause-Related Marketing

Benefits of Strategic Philanthropy Firms can declare up to 10% of pretax profits as tax-deductible contributions. Employees can develop a stronger sense of loyalty and commitment to their employer. Customer loyalty can increase as consumers see the synergy between a company’s core competencies and social causes. Overall reputation in the community can be enhanced and government and community relations can be strengthened.

Implementation of Strategic Philanthropy Must have the endorsement and support of the CEO and other members of top management. Top-level support allows organizational members and stakeholders to see the importance of the program to the company. Companies need to find their unique method and not clone what competitors are doing. Positioning in consumers’ minds.

Planning and Evaluating Strategic Philanthropy Research Should cover a company’s internal organization and programs, potential partnering organizations, sponsorship options, and events that might intersect with the interests and competencies of the organization. Organize and design Classifies research information according to level of need and alignment with organizational competencies. Engage Engage top management early. Spend Decide where to invest resources.