Lecture Business and society: Stakeholders, ethics, public policy (14/e): Chapter 18 - Anne Lawrence, James Weber

Chapter 18
The Community and
the Corporation
McGraw­Hill/Irwin

Copyright © 2014 by The McGraw­Hill Companies, Inc. All rights reserved.


Ch. 18: Key Learning Objectives
 Defining a community, and understanding the
interdependencies between companies and the communities in
which they operate
 Analyzing why it is in the interest of business to respond to
community problems and needs
 Knowing the major responsibilities of community relations
managers
 Examining how different forms of corporate giving contribute to
building strong relationships between businesses and
communities
 Evaluating how companies can direct their giving strategically,
to further their own business objectives
 Analyzing how collaborative partnerships between businesses
and communities can address today’s pressing social problems
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The Business–Community Relationship
 Community refers to a company’s area of local
business influence
 Whether a business is small or large, local or global, its
relationship with the community or communities with which it

interacts is one of mutual interdependence

 There are expectations on both sides – what the
business expects from the community and what the
community expects from the business
 In best situations, community support of business and
business support of community are in balance
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The Firm and Its
Figure 18.1
Communities

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What the Community and
Business
Want
from
Each
Figure 18.2
Other

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The Business Case for Community
Involvement

 Civic engagement – The active involvement of
businesses and individuals in changing and improving
communities
 Reasons for community involvement
 Major way to carry out corporate citizenship mission
 To win local support for business activity, be granted an
informal “license to operate” in the community
 Helps to build “social capital”—the norms and networks that
enable collective action
• High levels of social capital enhance a community’s quality of life

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Community Relations
 The importance of community relations is shown by
the following statistics, drawn from a study conducted
by the Center for Corporate Citizenship:
 86 percent of companies have a specific community
involvement strategy
 80 percent of companies factor community involvement into
their overall strategic plan
 59 percent of companies set their community involvement
strategy centrally and execute locally
 71 percent reported information about their community
involvement activities on their corporate Web site

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Community Relations
 Is the “organized involvement of business with the
community”

 Grown in importance in recent years from “fringe”
function to mainstream/strategic




In support of this commitment, some corporations have
established specialized community relations departments;
others house this function in a department of public affairs
or corporate citizenship
Community relations departments are typically involved with
a range of diverse issues including education, health care,
and environmental issues

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Community Relations
 Several specific ways in which businesses and their
community relations departments have addressed
some critical concerns facing communities are:


Economic development



Housing



Aid to minority, women, and disabled veteran-owned
enterprises



Disaster, terrorism, and war relief

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Corporate Community Involvement –
Economic Development
 Intended to bring new business into the area and
develop workforce skills
 The Great Recession has made it even more
imperative that businesses do so


In 2009, Microsoft Corporation launched a program called
Elevate America to provide job training at a time when many
were looking for work or seeking to improve their skills as the
economy struggled to recover from a severe downturn

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Corporate Community Involvement –
Housing
 Life and health insurance companies have taken the
lead in programs to revitalize neighborhood housing
through organizations such as Neighborhood
Housing Services of America


NHS is a locally controlled, locally funded nonprofit and taxexempt organization that offers housing rehabilitation and
financial services to neighborhood residents

 Similar efforts are being made to house the
homeless
 Corporations also often work with nongovernmental
organizations (NGOs) such as Habitat for Humanity
to build or repair housing
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Corporate Community Involvement
Aid to Minority, Women, and Disabled
Veteran-Owned Enterprises
hese businesses often operate at an economic
disadvantage.
n some cases, they do business in economic
locations where high crime rates, poor transportation,
low-quality public services, and a low-income clientele
combine to produce a high rate of business failure
arge corporations, sometimes in cooperation with

universities, have provided financial and technical advice
and training to such enterprises


They have also financed the building of minority-managed inner-city

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Corporate Community Involvement
– Disaster, Terrorism and War Relief
 International relief efforts are becoming more
important, as communications improve and people
around the world are able to witness the horrors of
natural disasters, terrorism, and war
 Corporate involvement in such efforts is an
extension of the natural tendency of people to help
one another when tragedy strikes

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Corporate Giving
 Important aspect of business-community relationship,
involves corporate giving to non-profit organizations
 Also called corporate philanthropy
 America has historically been a generous society
 In 2011, corporate contributions totaled $14.6 billion, or about
5 percent of all charitable giving
 As U.S. firms have become increasingly globalized their

international charitable contributions have also grown
 The major factors driving international gifts were the size of
the company’s workforce in the receiving region and
perceived humanitarian need

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Philanthropy in the United
Figure 18.3 States by Source of
Contributions, 2011

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Corporate Contributions in the
United States, as a Percentage
Pretax Corporate Profits,
Figure 18.4 of
1972 - 2010

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Corporate Giving
 In the United Sates, tax rules have encouraged
corporate giving for educational, charitable, scientific,
and religious purposes since 1936
 Current rules permit corporations to deduct from their taxable
income all gifts that do not exceed 10 percent of the

company’s before-tax income

 Corporations can give directly or through establishing
corporate foundations
 Eighty-one percent of large U.S.-based corporations have
such foundations; collectively, corporate foundations gave
about $42 billion in 2011
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Forms of Corporate Giving
 Typically, gifts by corporations and their foundations
take one of three forms:


Charitable donations (gifts of money)



In-kind contributions (gifts of products or services)
•
•



Category now exceeds cash contributions
Of U.S. corporate contributions in 2010, 38 percent were in-kind
(noncash)

Volunteer employee service (gifts of time)

•
•

Involves the efforts of people to assist others in the community
through unpaid work
An important trend is what is known as skills-based volunteerism,
in which employee skills are matched to specialized needs

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Figure 18.5 Priorities in Corporate Giving

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Corporate Giving in Strategic Context
 Strategic philanthropy – Corporate giving that is
linked directly or indirectly to business goals and
objectives. In this approach, both the company and
society benefit from the gift. Is made directly from the
company to community organizations, not through a
foundation
 Increasingly popular approach to corporate giving

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Strategic Philanthropy
 Areas in which corporate contributions are most

likely to enhance a company’s competitiveness,
according to Harvard Business Review study:





Factor conditions - supply of trained workers, physical
infrastructure, and natural resources
Demand conditions – affect demand for a product or service
Context for strategy and rivalry - designed to support
policies that create a more productive competitive
environment
Related and supporting industries - strengthen related
sectors of the economy, may also help companies

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Strategies to Optimize Benefit
from Contributions
 Draw on the unique assets and competencies of the
business
 Align priorities with employee interests
 Align priorities with core values of the firm
 Use hard-nosed business methods to assess the
impact of gifts (return on social investment)

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Measuring the Return on Social
Investment
 The benefits that accrue to business and society are
sometimes called return on social investment
 Companies are using standard business tools to
measure the outcomes of their investments in the
community, just as they would any other investment
 Return on social investment is often more difficult to
measure than other kinds of return
 Nevertheless, community relations and corporate giving
professionals have made significant advances in developing
appropriate metrics as shown on the next slide

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Measuring the Return on
Figure 18.6 Social Investment

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Measuring the Return on Social
Investment
 Inputs are the resources companies provide
 They may include cash contributions, employee time, products
and services, or logistics support

 Outputs are measures of the activities that took place

 usually numerical counts of people and communities served

 Impacts represent the difference the program made, that
is, the actual benefits that accrued to the people and
communities served
 It is similar to outputs, except that it tries to capture the actual
results of the gift

 Value creation represents the benefits to the business of
the program
 This is similar to the concept of enlightened self-interest
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