Corporate philanthropy: The "top of the pyramid"

Business and Society Review

Volumn 112, Issue 3, 2007, Pages 315-342

  Leisinger, Klaus M ^a,b  

^a Novartis Foundation for Sustainable Development

^b UNIVERSITY OF BASEL   (Switzerland)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 34548380444     PISSN: 00453609     EISSN: 14678594     Source Type: Journal    
DOI: 10.1111/j.1467-8594.2007.00299.x     Document Type: Review

References (96)

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2. All data are from official UN sources collected In the World Bank Publication V. Bhargava, (ed.) Global Issues for Global Citizens. An Introduction to Key Development Challenges [Washington, DC: World Bank, 2006) p. 31ff.
3. For example adequate nutrition to avoid chronic hunger, access to basic health and education services, potable water and adequate sanitation, safe housing and access to public infrastructure. This problem has already been part of the development debate since the 1970s, see e.g., P. Streeten First Things First. Meetings Basic Needs in the Developing Countries (New York: Oxford University Press, 1981).
4. See Datafinder on http://www.prb.org, accessed July 30, 2007.
5. See http://en.wikipedia.org/wiki/ List_of_countries_by_military_expenditures, accessed April 22, 2007.
6. See http://www.unicef.org/media/media_35898.html, accessed August 3, 2007.
7. See J. Sachs The End of Poverty. How We Can Make it happen in Our Lifetime (New York/London: Penguin, 2005).
8. This is also the core idea of the well-known "global ethic" project; see http://www.weltethos.org, accessed July 30, 2007.
9. R. De George, Competing with Integrity in International Business (New York: Oxford University Press, 1993) is the title of a book that still merits professional attention.
10. A quick search on Google (April 12, 2007) produced 83,100,000 hits for "corporate responsibility" and 36,400,000 for "corporate social responsibility." If one looks for "conferences on corporate responsibility," more than 9 million proposals appear.
11. J. M. Clark, "The changing basis of economic responsibility," Journal of Political Economy, 24(1916)3: 209-229,
12. reprinted in M. B. E. Clarkson The Corporation and Its Stakeholders. Classic and Contemporary Readings (Toronto: University of Toronto Press, 1998) p. 28.
13. Similar to the model introduced by Ralf Dahrendorf in 1959 to qualify the significance of social norms, see R. Dahrendorf, Homo Sociologicus (Cologne: Opladen, 1959), p. 24
14. et seq.; for a similar differentiation of corporate responsibility obligations see A. B. Carroll, Business and Society. Ethics and Stakeholder Management 2nd ed. (Cincinnati: South-Western Publishing, 1993) p. 36.
15. A. Smith The Theory of Moral Sentiments (Indianapolis: Liberty Fund, 1984) p. 135; close to this "theoretical" observer's view come surveys or polls such as the Environics/GlobeScan Millennium Poll (Toronto 1999) or expert surveys such as "The GlobeScan Survey of Sustainability Experts" (Toronto 2005). A good way to judge a corporation's nonfinancial performance is to do so in the spirit of the ten principles of the UN Global Compact.
16. See D. Doane, A. Holder, Why Corporate Social Responsibility Is Failing Children, The Corporate Responsibility Coalition/Save the Children, London 2007.
17. J. A. Birchenhall, "Economic development and the escape from high mortality," World Development 35(2007)4: 543-568;
18. for the record: policies to improve income distribution in the context of economic growth will help to "lift more boats." For the introduction of this debate, see H. Chenery, Redistribution with Growth (New York: Oxford University Press/World Bank, 1974).
19. J. Birkinshaw, G. Piramal (eds.), Sumantra Goshal on Management: A Force for Good (Harlow: FT Prentice Hall, 2005) p. 2.
20. See, e.g., D. Dollar, A. Kraay, "Spreading the wealth," Foreign Affairs 81(2002)1: 120-133.
21. See, e.g., M. Wolf, "The morality of the market," Foreign Policy September/October 138 (2003): 47-50.
22. C. K. Prahalad, The Fortune at the Bottom of the Pyramid (Upper Saddle River, NJ: Wharton School Publishing, 2005).
23. See also UNDP Commission on the Private Sector and Development, Unleashing Entrepreneurship. Making Business Work for the Poor (New York: United Nations Development Programme, 2004).
24. C. K. Prahalad, A. Hammond, What Works: Serving the Poor, Profitably. A Private Sector Strategy for Global Digital Opportunity (Washington, DC: Markle Foundation/World Resources Institute, 2002), p. 19.
25. See also C. K. Prahalad, S. L. Hart, "The fortune at the bottom of the pyramid," Strategy + Business 26(2002): 2-14.
26. M. E. Porter, M. R. Kramer, "The competitive advantage of corporate philanthropy," Harvard Business Review Separate Print (product number 242X), December (2002): 56-68.
27. See also www.foundationstrategy.com/services/positioning.asp.
28. Ibid.
29. Port and Kramer further developed and refined their approach, see M. E. Porter, M. R. Kramer, "Strategy and society: the link between competitive advantage and corporate social responsibility," Harvard Business Review December (2006): 78ff.
30. The notion that "charity can be good for business" is shared by a variety of other authors, see e.g., C. Smith, "The new corporate philanthropy," Harvard Business Review May-June (1994): 105-118
31. (reprint 94309), argues that "In newly emerging economies, even small grants can set forth waves of change . . . companies see philanthropy as the best means of building friendships with government leaders, overcoming regulatory hurdles, capturing the imagination of the emerging middle classes and opening dialogue with host communities" (p. 112);
32. see also A. Reder, "The wide world of corporate philanthropy," Business & Society Review 92(1995): 36-42.
33. M. E. Porter, M. R. Kramer, "Strategy and society. The link between competitive advantage and corporate social responsibility," p. 79.
34. M. E. Porter, M. R. Kramer, "The competitive advantage of corporate philanthropy," p. 7 ff.
35. M. E. Porter, M. R. Kramer, "The competitive advantage of corporate philanthropy, Ibid., p. 9.
36. Social investments of this kind - as valuable as they can be - do not necessarily have a clear-cut "business case." The evidence for philanthropy creating positive incentives for customers to buy from this and not an alternative company is at least mixed. Carmen Valor finds in her study that - while a high percentage of people is willing to buy brands supporting good causes - price and quality remain the most important attributes at the time of the actual purchasing decision. Only once these variables are in line with expectations will philanthropic contributions make a difference. See e.g. C. Valor, "Consumer's responses to corporate philanthropy: are they willing to make trade-offs?" International Journal of Business and Society January 2005, available at http://www.allbusiness.com/business_planning/business
37. M. E. Porter, M. R. Kramer, "Strategy and society. The link between competitive advantage and corporate social responsibility," p. 83.
38. M. Friedman, "The social responsibility of business is to increase its profits," available at http://www.colorado.edu/studentgroups/ libertarians/issues/friedman-soc-resp-business.html, accessed April 16, 2007.
39. See L. Lankoski, Differential Impacts of Corporate Responsibility Issues (Paris: INSEAD, 2006).
40. R. C. Solomon, "Corporate roles, personal virtues: an Aristotelean approach to business ethics," Business Ethics Quarterly 2(1992)3: 317-339.
41. See e.g. P. P. McGuiness, "Corporate philanthropy, government and blackmail," Quadrant June 2004, available at www.the-rathouse.com/ quadedit55~ns4.html, accessed July 30, 2007.
42. E.g. C. Smith, "The new corporate philanthropy." pp. 106-116;
43. K. M. File, R. A. Prince "Cause related marketing and corporate philanthropy in the privately held enterprise," Journal of Business Ethics 17(1998): 1529-1539;
44. C. M. Sanchez, "Motives for corporate philanthropy in El Salvador: altruism and political legitimacy," Journal of Business Ethics 37(2000): 363-375.
45. As so often there are no "simple causalities" between business success and any individual action - here corporate philanthropy, see Bruce Seifert, Sara A. Morris and Barbara R Bartkus, "Comparing big givers and small givers: financial correlates of corporate philanthropy," Journal of Business Ethics 45, no. 3 (2003): 195-211.
46. See S. R. Neiheisel, Corporate Strategy and the Politics of Goodwill (New York: Peter Lang, 1994);
47. St. Brammer, A. Millington, "Corporate reputation and philanthropy: an empirical analysis," Journal of Business Ethics 61(2005): 29-44;
48. P. R. Varadarajan, A. Menon, "Cause-related marketing: a coalignment of marketing strategy and corporate philanthropy," Journal of Marketing 52(1988): 58-74;
49. C. M. Sanchez, "Motives for corporate philanthropy in El Salvador: altruism and political legitimacy," pp. 363-375;
50. K. M. File, R. A. Prince, "Cause related marketing and corporate philanthropy in the privately held enterprise," pp. 1529-1539.
51. J. M. Ricks, J. A. Williams, "Strategic corporate philanthropy: addressing frontline talent needs through an educational giving program," Journal of Business Ethics 60(2005) : 147-157.
52. See e.g. S. Brammer, A. Millington, "Corporate reputation and philanthropy: an empirical analysis," pp. 29-44.
53. Brammer and Millington find "on a high level of abstraction . . . evidence that companies which make higher levels of philanthropic expenditure have better reputation," but ". . . this effect is, to some extent, industry specific" (p. 40);
54. D. Campbell, G. Moore, and M. Metzger, "Corporate philanthropy in the UK 1985-2000: some empirical findings," Journal of Business Ethics 39(2002): 29-41.
55. L. Moir, R. J. Taffler, "Does corporate philanthropy exist? Business giving to the arts in the UK," Journal of Business Ethics 54(2004): 149-161. This is not the place to deal in detail with managerial utility as a motive, but if "managerial utility motivations" are triggered by personal social values (and not by superficial opportunism to support the rapidly changing fashion of the month, be it arts yesterday, sports today, and anything else tomorrow) one can deal with it as altruism, as no corporation is an anonymous system but always formed and structured by human beings. Altruistic motivations will be dealt with later in this article.
56. R. J. Williams, J. D. Barett, "Corporate philanthropy, criminal activity, and firm reputation: is there a link?" Journal of Business Ethics 26(2000): 341-350;
57. this was also confirmed by Merck's former chief executive, Raymond Gilmore, in the context of the company's handling of its pain killer Vioxx. R. Gilmore, "Raising money to treat the world's sickest people isn't the problem: spending it is," available at http://knowledge.wharton.upenn.edu/ article.cfm?articleid=1438, accessed April 22, 2007.
58. See www.corporatephilanthropy.org and especially the CECP report "Giving in numbers" 2006 edition, New York 2007.
59. S. R. Neiheisel Corporate Strategy and the Politics of Goodwill: A Political Analysis of Corporate Philanthropy in America (New York: Peter Lang, 1994).
60. See "Voices of the poor," available at www1.worldbank.org/prem/ poverty/voices/index.htm.
61. See also World Bank: World Development Report 2000/2001. Attacking Poverty, op. cit. pp. 15 et seq.
62. See www.earthinstitute.columbia.edu/millenniumvillages/.
63. J. Sachs, The End of Poverty. How We Can Make It Happen in Our Lifetime, pp. 19f.
64. K. M. Leisinger, Health Policy for Least Developed Countries. Social Strategies (Basel: Co-operative Society, 1984).
65. M. Chang, "Address to the WHO Global Partners Meeting on neglected tropical diseases," Geneva April 19, 2007.
66. See World Health Organization: The World Health Report 2003 and 2005, Geneva 2003/2005.
67. World Health Organization: The World Health Report 2005. "Make every mother and child count," Geneva 2005, p. xiv.
68. For details see www.euro.who.int/eprise/main/WHO/Progs/CHH/den/chap2/ 20041123_4.
69. C.-E. A. Winslow, "The cost of sickness and the price of health," Geneva: WHO, 1951, p. 9.
70. K. M. Leisinger, Health Policy for Least Developed Countries, pp. 40ff.
71. P. N. Rosenstein-Rodan, Notes on the Theory of the 'Big Push (Cambridge: Center for International Studies, Massachusetts Institute of Technology, 1957).
72. H. Leibenstein, Economic Backwardness and Economic Growth (New York: Wiley, 1957), pp. 94 ff.
73. G. Myrdal, Asian Drama. An Inquiry into the Poverty of Nations Vol. 3 (Harmondsworth: Penguin, 1968) p. 1868.
74. See e.g. J. Sachs, "The development challenge," Foreign Affairs 84(2005)2: 78-90.
75. See in a development context G. Myrdal, Asian Drama. An Inquiry into the Poverty of Nations, p. 32.
76. A. B. Carroll, Business and Society. Ethics and Stakeholder Management, p. 32.
77. See also A. K. Buchholtz, A. C. Amason, and M. A. Rutherford, "Beyond Resources. The mediating effect of top management discretion and value on corporate philanthropy" Business and Society 38(1999)2: 167-187.
78. Th. Donaldson, Th. W. Dunfee Ties that Bind. A Social Contracts Approach to Business Ethics (Boston: Harvard Business School Press, 1999) pp. 38-41 and 254ff.
79. D. C. Hambrick, P. A. Mason, "Upper echelons: the organization as a reflection of its top managers," Academy of Management Review 9(1984)2: 193-206;
80. also L. D. Lerner, G. E. Fryxell, "CEO stakeholder attitudes and corporate social activity in the Fortune 500," Business & Society 33(1994)1: 58-81;
81. also G. R. Jones, "Personal values and corporate philanthropy - a theoretical model for the role senior executives' personal values play in decisions regarding corporate philanthropy," Flinders University of South Australia School of Commerce Research Paper Series 0023, December 2000;
82. also A. K. Buchholtz et al. "Beyond resources: the mediating effect of top management discretion on values of corporate philanthropy," Business and Society Review 38(1999)2: 168-187;
83. R. Solomon, "Corporate roles, personal values: an Aristotelian approach to business ethics," Business Ethics Quarterly 2(1992): 317-340.
84. This seemingly applies also to disaster relief, see D. Cagir, "Agency costs or advertising? Corporate donations for tsunami relief," Claremont McKenna College, Leadership Review 5(FaIl, 2005): 90-109.
85. L. Campbell, Ch. S. Gulas, and Th. S. Gruca, "Corporate giving behavior and decision-maker social consciousness," Journal of Business Ethics 19(1999)4: 375-383.
86. B. Shaw and F. R. Post, "A moral basis for corporate philanthropy," Journal of Business Ethics 12(1993): 745-751.
87. D. J. Wood, "Corporate social performance revisited," Academy of Management Review 16(1991)4: 698.
88. Th. Donaldson, Th. W. Dunfee, Ties that Bind. A Social Contracts Approach to Business Ethics, p. 241.
89. Novartis has given support to facilitate access to medicines to fight leprosy, tuberculosis, malaria, and leukemia in the order of magnitude of about 1 billion Swiss francs in 2006. Over the 28 years of existence of the Novartis Foundation for Sustainable Development, the company has spent more than 200 million Swiss francs for health, social and agricultural projects (www.novartisfoundation.com). The Novartis Institute for Tropical Diseases in Singapore is engaged in not-for-profit research addressing new ways to fight dengue fever, tuberculosis, and malaria by applying cutting-edge scientific know-how and technologies (www.nitd.novartis.com).
90. At least not in the German-speaking part of Europe, where such endeavors are often denounced as "alibi actions" used by corporations to detract the public from alleged irresponsible business conduct elsewhere. From a U.S. perspective, Michael Porter and Mark Kramer state that ". . . the reputation argument seeks . . . strategic benefit but rarely finds it." See M. E. Porter, M. R. Kramer "Strategy and society. The link between competitive advantage and corporate social responsibility," Harvard Business Review (December 2006): 81.
91. Personal communication on May 3, 2007.
92. This argumentation is not meant to insinuate that people act only morally if there are strong incentives to do so. Our argument is based on Amitai Etzioni's approach that people's behavior is influenced by two factors, first, by what they perceive to be their moral obligation and, second, by what they perceive to be in their interest. Etzioni acknowledges significant differences with regard to the extent to which each of these factors works with different personalities. See A. Etzioni, The Moral Dimension: Towards a New Economics (New York: The Free Press, 1988).
93. A. Kolk, R. Van Tulder, "Poverty alleviation as business strategy? Evaluating commitments of frontrunner multinational corporations," World Development 34(2006)5: 789-801.
94. See http://www.zenithoptimedia.com/gff/pdf/ Adspend%20forecasts%20July%202006.pdf.
95. E.g. a "problem-solving" and "return on investment" mind-set for philanthropic investments, a "results-based payment" approach that provides incentives to achieve concrete outcomes or impacts rather than reporting about activities and inputs; to use modern human resources methods including job descriptions, the setting of targets, performance appraisals and bonus-systems; and so on.
96. J. Sachs, The End of Poverty. How We Can Make It Happen in Our Lifetime, p. 290.