In a famous 2005 debate, Milton Friedman and John Mackey argued about the merits of corporate philanthropy.
In one corner was Milton Friedman, a Nobel Laureate, defending his long-held view that corporations really have no obligation to engage in corporate philanthropy. After all, corporations pay taxes and pay employees who pay even more taxes. In Freidman’s view, the taxes generated by companies already give us roads, police, public education, libraries, and a growing list of other things. Corporations are doing their part, because “the social responsibility of business [is] to increase its profits.”
In the other corner was John Mackey, co-founder and CEO of Whole Foods, who claimed that “the enlightened corporation should try to create value for all of its constituencies.” For Mackey this means a good corporate entity engages in corporate philanthropy, beyond any benefit of earning good PR. And while Mackey does not declare the appropriate amount that a company should give back (Whole Foods announced that it would donate 5 percent of the company’s net profits to philanthropy when it drafted its mission statement in 1985), he is clear that 0% is not acceptable and that good investors understand that.
So, who was right?
Well, it’s no small task to roll philosophy, economics, and politics into one question about corporate philanthropy. Though, while we can’t point to any widespread consensus on this question, we can see that several decades after Friedman wrote on the issue of corporate social responsibility, and seventeen years after the Friedman-Mackey debate, societal views are changing drastically.
For one thing, a growing number of employees simply expect their employer to have some sort of philanthropic element. One study found that giving back is associated with greater employee retention and higher levels of brand ambassadorship on the part of workers. Furthermore, people who believe their organizations give back to the community are 13 times more likely to look forward to coming to work when compared to employees who do not perceive their employers to be generous toward the community.
Today, then, it does not matter so much if you agree with Friedman or Mackey, as they were examining the issue by looking at the corporation’s duty to society. Whatever the answer to their question, the fact of the matter is that many of today’s employees and executives are not interested in being associated with a company that does nothing for society beyond paying taxes.
If that’s the case, the debate is largely a moot point. If low employee turnover and higher employee satisfaction make for better employees, then forget the duty to society—managers would have a duty to shareholders to spend company resources on “giving back.”
That’s not to say that every corporate entity needs to be like Whole Foods and insert a philanthropic agenda in its mission statement or make large philanthropic investments. But it does mean that corporations would do well—for their own purposes—to consider how they might forge even small partnerships and work to strengthen communities they operate in.
Here are just some ways businesses might foster more and deeper relationships to help their communities:
- Create a committee designated to increase company philanthropy. As the saying goes, “if it’s everyone’s responsibility, it’s no one’s responsibility.” At the very least, have a group of employees meet quarterly to discuss how the company can give some of its financial resources and time to the community.
- Do not make it all about money. Some companies hastily execute corporate social responsibility plans by asking employees to donate to a shared cause. Asking employees to pool money together to fund something that everyone feels strongly about is a decent start, especially if the company is also giving. But it often leaves out younger workers, or people with financial setbacks, not in a position to write large checks. Consider building a day of volunteering for your company that involves everyone (it can be a great morale booster while also forging camaraderie among your staff).
- Use the power of competition. Let’s face it, human beings are competitive by nature. If your company has multiple departments, consider making an annual company volunteer day competitive. Award the department that has the highest percentage of employees participate on your volunteering day, or hours volunteered throughout the year.
- Engage local nonprofits. Regardless of where your company is located, there are undoubtedly numerous nonprofits serving your community. They likely have the best view of the greatest financial and volunteer needs in your area. Many nonprofits have regular group volunteer experiences in place. Food pantries nearly always need groups to pack boxes of food. There is often a road race being planned that benefits a great cause (a financial contribution to help offset the costs and a group of volunteers can make all the difference).
- Know how your competitive advantage can enhance your corporate philanthropy. Writing checks and enlisting your employees to volunteer is great. But, what about your company enables it to help in ways that no one else can? If you are in tech, can you help sponsor and organize a STEM camp for local children?
- Celebrate your success. The only way to sustain and build corporate philanthropy is to recognize and celebrate the accomplishments. No business will save the world, but dedicated employees with a little motivation can truly help make their community a better place to work and live. Celebrating your success in the workplace and in the community elevates your brand, helps with recruiting, and inspires other organizations to be involved.
Of course, the responsibility to spark these partnerships does not rest squarely with businesses. We need nonprofit leaders to constantly be thinking about creative ways to include corporate entities and their employees, and to regularly invite them to play a role.
As time goes on, younger Americans increasingly want corporations to do more than simply employ people and pay taxes. A call for increased corporate philanthropy might end up redefining how we think about business and civil society—we just need dedicated people at businesses and nonprofits to put forth the effort.
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