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Advance Praise for The Good Corporate Citizen
"Qualitative goals for an environment that sustains capital investment, rewards entrepreneurs, and promotes an educated and loyal workforce need to be set. Business can then determine how to improve the conditions upon which it relies for long-term profitability. Doris Rubenstein has given us a vision of those qualitative goals along with very practical suggestions for enlightened business self-interest."
From the Introduction by Stephen B. Young
Global Executive Director, The Caux Round Table
"Doris Rubenstein’s book makes sound financial sense and should be a must-read for executives of all businesses, small and large alike. She exhibits an intimate understanding of the fiscal demands and corporate concerns of business owners when first establishing relationships with charities. Rubenstein presents a sensible, ethical, and effective approach to corporate philanthropy that is much needed in today’s world. If (small) businesses are the lifeblood of a community, her book is an important guide to how they can forge a partnership to achieve civic and cultural improvement and success."
Russell Rothman, Executive Vice President
M. Rothman & Co, Inc.
"Organizations have a tendency to underestimate the value of incorporating a systematic, focused approach to practicing good corporate citizenship within their management system. This text offers a compelling philosophy, along with a practical approach to manage this important part of your management system."
Gary D. Floss, Managing Director, BlueFire Partners
Board Member of American Society for Quality
Part One: Background.
Chapter 1. Philanthropy and Corporate Citizenship.
Chapter 2. Why Conduct a Corporate Citizenship Program?
Chapter 3. Who Gives?
Part Two: Practical Guidance for Planning Your Program.
Chapter 4. Choosing the Decision Makers and Procedures.
Chapter 5. Defining the Mission.
Chapter 6. Scheduling.
Chapter 7. Budgeting and Financial Administration.
Chapter 8. Identify Internal Areas for Impact.
Chapter 9. Ways of Giving.
Chapter 10. Relating Corporate Citizenship Activities to the Company’s Products, Services, and Mission.
Chapter 11. Researching Possible Investments.
Chapter 12. Assessment.
Chapter 13. Selecting Grant Recipients.
Chapter 14. Postgrant Evaluation.
Chapter 15. Celebrations and Publicity.
Chapter 16. Review and Revision.
Part Three: Appendices.
Appendix A: Sample Plans.
Appendix B: Sample Form Letters.
Appendix C: Sample Scholarship Letters of Agreement.
Appendix D: Selected Resources for Corporate Citizenship Planning and Education.
President Calvin Coolidge stated that "The business of America is business." The truth of that statement has been debated on various levels ever since it was made. What follows is the question, "What is the purpose of business?"
Depending on your point of view, the answer can be either "To improve the conditions of the entrepreneur and the investor who created the business" or "To improve the condition of society in general." Some argue that the latter will flow from the former. Others point out that raising the general condition of society creates an atmosphere that will be better for business in the long run.
It is the rare business owner who doesn't recognize the value of meeting social responsibilities by making donations or contributing volunteer time. Charles Dickens knew that his readers would find it amusing for Scrooge to reply, "Let them die, then, and decrease the surplus population," to his associates who asked him for alms for the poor at Christmastime. Victorian England knew that charity is a part of good citizenship. Today's Americans know it just as well.
Why conduct a corporate citizenship program? Simply put, it's good for business. According to Brian O'Connell, in his 1999 book Civil Society: The Under-pinnings of American Democracy, companies thatreceived the Ad Council's Public Service Award showed annual growth in profits of 11 percent compounded over 30 years. That is three times better than the growth of the Gross National Product during the same period!
Michael E. Porter, a Harvard professor, and Mark R. Kramer, a business consultant and cofounder of the Center for Effective Philanthropy, present compelling evidence that proves the effectiveness of good corporate citizenship in "The Competitive Advantage of Corporate Philanthropy." In this report, published in the Harvard Business Review, the authors stress the importance of strategic philanthropy in creating value in the act and process of giving. Through strategic philanthropy, a company can influence what Porter and Kramer call the "competitive context" of its home and market communities.
Four elements compose what Porter and Kramer call the competitive context for business:
1. Available inputs of production: employees, material resources, infrastructure for delivery (such as roads, electricity, etc.), tax structure, and so on.
2. Demand for your company's products or services: a healthy economy that can consume them.
3. Healthy competition: to assure that there is continuous improvement and innovation.
4. Related and supporting industries: from parts suppliers to off ice suppliers.
Giving to improve the competitive context is what creates the value that translates into improved profits. Your ability to compete depends heavily on the competitive context of each location where you do business.
Beyond the competitive context, having a product or service that fills a need at a reasonable price is key. The product or service functions within the competitive context.
Affecting Your Competitive Context
There are many ways of affecting competitive context. The tax environment is one available input of production. Our many chambers of commerce lobby hard at the legislature level to create a tax code that is favorable to business. This is an exceptionally long process for effecting change. The results are measurable in terms of legislative sessions or executive terms.
In terms of creating demand and participating in healthy competition, billions are spent on advertising in our economy. Whether your company places advertising in the mass media or in trade publications and shows, this is an expensive proposition.
What produces better results? The Harvard report concludes that "[p]hilanthropy can often be the most cost-effective way for a company to improve its competitive context, enabling companies to leverage the efforts and infrastructure of nonprofits and other institutions."
Porter and Kramer pinpoint three distinct advantages that business earns by using philanthropy to affect competitive context:
1. They can use the existing programs and networks of nonprofits and educational institutions. Supporting nonprofit housing programs in inner cities helps to provide a workforce for downtown industries, such as hotels and restaurants, that have need of unskilled workers. Commercial banks and law firms support organizations such as Habitat for Humanity not because they particularly need low-skill workers, but because their business clients do!
2. They can leverage the collective actions of other companies that donate to nonprofits, enabling costs to be spread over multiple donor businesses. Capital campaigns-from giants like those at major public and private research universities to build new, state-of-the-art facilities, to small ones like the efforts of a fledgling private elementary school to purchase an inner-city landmark building for expansion-demonstrate the power of cooperation. Although the sign over the main entryway may bear the name of a beloved and respected member of the faculty, the plaques on the interior classrooms and auditoriums tell the real story of dozens of enlightened companies that pulled together to erect the infrastructure of tomorrow's corporate community.
3. They can forge partnerships among cooperating companies and nonprofits or government units. This is likely to happen because it removes the appearance of favoritism for one particular company on the part of the charity. In almost any well-designed project for nonprofit enterprise, the costs will be shared among multiple donors, and often with governmental or quasi-governmental units, in public-private nonprofit partnerships.
The Harvard report stresses the importance of strategic philanthropy to maximize the effectiveness of efforts to affect the competitive context. Porter and Kramer recommend several points to include in a strategic plan: selecting the best grantees, signaling other funders, improving performance of grantees, and advancing knowledge and practice. Companies developing these plans must weigh the benefits of concentrating their energies on any of these points.
Where most companies go wrong in planning, Porter and Kramer say, is in placing too much money and emphasis strictly on the public relations benefit of their contributions. I carry an old cause-related ad from my local newspaper in my portfolio: it certainly cost the advertiser (a public utility company) several times more to produce and print than the amount of the donation made to the charity being promoted. Often the public can see through these self-congratulatory displays, negating the good will that the donation was meant to build in the first place.
A strategic plan for corporate citizenship requires balance between communal obligation, goodwill building, and strategic giving in order to build competitive context. Improving that context, though, is the best long-term strategy to build long-term profits for business.
Understanding the Philanthropic Roots of Corporate Citizenship
Corporate citizenship goes far beyond philanthropy. Good citizenship includes things that are mandated or just good sense: paying taxes equitably and on time; providing fair benefits to employees, providing a safe and healthy workplace, and so on.
To understand corporate philanthropy, let's look briefly at the origins of philanthropy itself. Philanthropy has been around ever since humankind evolved beyond tribalism. Philosophers as far back as Aristotle in the time of classical Greece observed that giving money away is easy, but making a difference with such expenditures can be a challenge.
Magnanimity is a big word. For most of us, when we really think about it, it means making sacrifices for worthy ends. That sacrifice is usually money.
Philanthropy itself is a big word to wrap our minds around. Going back to its Greek roots, it's simply love of our fellow persons. I'm always reminded of the film version of The Wizard of Oz. When the Wizard presented the Tinman with the testimonial for his great heart, the Wizard talked about people who were "philan ... philly ... phitha ... good deed doers." The Wizard knew how to get to the "heart" of the subject! Before we talk about corporate philanthropy, let's examine philanthropy in general and how it differs from charity.
The Eight Steps on the Ladder of Charity
As we just discussed, philanthropy has been around a long time. One of the most quoted thinkers on the subject is the medieval Jewish sage, Rabbi Moses ben Maimon, commonly called Maimonides. Maimonides wanted to help those who would do good to go on to do the best they possibly could. He likened charity to a ladder. At the bottom rung was a level of charity that even Scrooge could reach. The top rung could be reached only by those who stretched not only financially, but also philosophically in their philanthropic climb.
Step One: Giving Charity Grudgingly
We can only hope that in 21st-century America, this scenario would not happen, but picture this: You are walking on a downtown street and you are approached by a sad-looking woman with a child in tow. She asks you for spare change so that she can pay for a bus ride to the social services office.
You are skeptical. Is she really going to use the money for the bus, or is she going to head straight over to the liquor store and drink up your hard-earned coins? You look at the child and decide to hand over whatever is jingling in your pocket. "I'm going to stand here and wait until you get on that bus!" you say. You watch her with a scowl on your face until the bus arrives and she boards.
Yes, you gave. But it was not with a great deal of charity in your heart or your pocket.
Step Two: Giving Less than You Should, but Giving Cheerfully
Try this exercise: Think about the last check you wrote to a charity that was not your church or your alma mater. Think about the amount of the check. Now double that amount. Would it have hurt you or your lifestyle to write a check for that sum? Now double that amount. Hurting yet? Probably not. Keep doubling the amount until you think that it would bite into your weekly grocery budget, or your monthly mortgage payment. Most of us give far less than our true capacity, whether we give grudgingly or cheerfully.
Step Three: Giving Directly to the Poor upon Being Asked
In our day and society, we are rarely asked directly for charity by a poor person. But we are asked to give indirectly all the time. In fact, most of us, in both our personal and business lives, are constantly being asked to help the poor or some other worthy cause.
Professional fundraisers know the statistics: It takes 11 asks to get a first donation from a new prospect. Even with donors who have already given, it takes seven asks to get each additional contribution. They also know that most people will not give unless asked.
Business owners get requests from every corner of their operation: employees, customers, suppliers, partners, community organizations. It boggles the mind to think how many times a week the owner of a $30 million business gets asked for contributions. And you will continue to be asked until you give or you say a definite no for all time.
Step Four: Giving Directly to the Poor without Being Asked
Having taken us this far on the ladder of charity, Maimonides now puts us in a position to look at three different modalities of giving: Reactive, Active, and Inactive.
Step Three demonstrates the Reactive Mode: You are asked to give, and you react by giving. The way in which you are asked can vary tremendously. You may get a phone call (and we all know how irritating it is to get a telemarketer's call right during dinner, or even the Super Bowl!), or a letter in the mail. The explosive growth of the Internet has brought a concomitant explosion in online solicitations, many of which are scams. You can respond cheerfully with a few coins when you see your fellow Rotarian volunteering at the Salvation Army's red kettle at Christmastime. You may give more generously when that same Rotarian comes knocking on your door for the Rotary Scholarship Fund. All this giving is the reaction to being asked.
Step Four addresses the Active form of giving: giving without being asked. There are a lot of reasons why people give this way. One great reason is to avoid the necessity of being asked. If you intend to support an organization such as your alma mater anyway, by making an open-ended pledge and asking to be removed from the solicitation list, you can accomplish your dual goals of supporting a good cause and avoiding calls and letters.
The last giving mode is what many call "Inactive." Inactive giving means that you choose not to give when asked (Step Three) and do not engage in Active giving (Step Four). But Inactive giving does not necessarily mean that you will not be giving at all. Inactive givers allow others to make their donation decisions for them. Those others are (most often) bureaucrats in the federal, state, and local governments.
When you make a voluntary donation, it is tax deductible. You decide where the money will go, and often how it will be used. Inactive givers forfeit that choice. They may be pleased with how some of the tax dollars they pay are distributed: scientific research at universities or the National Institutes of Health, support of the national park system, and so on. But the bitter debates over too many issues, such as defense or the environment, may give others pause about allowing the government to direct their dollars to questionable projects. There's no avoiding taxes, but philanthropy is one way of counterbalancing political decisions that contradict your interests and values.
Steps Five and Six: Indirect Giving
In Step Five, indirect giving, the recipient knows who the giver is, but the giver doesn't know the identity of the recipient. On Step Six, the giver knows who the recipient is, but the recipient doesn't know the identity of the giver.
We're now getting more into how modern charities are organized: namely, through nonprofit organizations that mediate between donors and beneficiaries. These two steps assure that the dignity of the beneficiary is maintained. A recipient of charity should not feel that he or she is less of a human being merely because he or she is receiving aid.
Excerpted from The Good Corporate Citizen by Doris Rubenstein Excerpted by permission.
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Posted July 6, 2004
Posted July 3, 2004
Every executive and business owner should read this book! It's important for today's leaders to recognize the vital role that business plays not only in our community but how it's relationship with community affects the bottom line. This author's words have inspired me to start a giving program for my own business.Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.