Is philanthropy being used by corporate wrongdoers to buy good will?
While an increasing number of philosophers and community activists argue in favor of corporate philanthropy, the practice is not without its critics. A number of firms that have restated suspect earnings also appear on lists of top corporate givers or are ranked among most ethical firms, prompting the suspicion that companies are using philanthropy as a kind of moral window-dressing. This paper explores whether restating firms are (1) using philanthropy to divert public attention away from suspect financial results; or (2) making donations to buy good will or a better reputation after they have been required to restate suspect earnings. Our results paint a mixed picture of the morality of corporate philanthropy. Firms forced to restate suspect earnings do seem to be using philanthropy either to divert attention away from their lackluster earnings or to elicit good will from the large community after such restatements. However, the reverse is not true. Just because a firm is a top giver, it does not follow that it is more likely to be a restater of earnings. Nor did we find evidence that firms ranked as very ethical are more likely to be restaters than non-restaters. Firms engage in philanthropy for a variety of reasons. We should not uncritically praise them for their giving, but neither should we regard with a cynical eye all corporate reputations for goodness or all corporation donations.
KeywordsCorporate Fraud Governance philanthropy Social responsibility
- Bartkus, B. R., Morris, S. A., & Siefert, B. (2002). Governance and corporate philanthropy: Restraining Robin Hood? Business & Society, 41(3), 319–344.Google Scholar
- Beck, R. (2005, July 5). Jury still out on ‘I didn’t know’ defense. Seattle Times. Available at seattletimes.nwsource.com/html/businesstechnology/2002357488_exectrials05.htm.
- Belsie, L. (2005, September 14). Corporate philanthropy as ethical indicator. Christian Science Monitor.Google Scholar
- Berkowitz, B. (2005, October 12). Philanthropy the Wal-Mart way. Media Transparency. Available at www.mediatransparency.org/story.php?storyID=88.
- Black, W. K. (2001). Why do the non-heathens rage? Journal of Criminal Justice and Popular Culture, 8(3), 225–276.Google Scholar
- BusinessWeek Online. (2003, December 1). The corporate donors. Special Report.Google Scholar
- Business Ethics. (2004). 100 best corporate citizens for 2004 (Vol. 18, No. 1).Google Scholar
- CSRWire.com. (2005, October 28). Corporate philanthropy adds to shareholder wealth.Google Scholar
- Epstein, K. (2005). Philanthropy, Inc. Stanford Social Innovation Review, Summer, pp. 1–30.Google Scholar
- Friedman, M. (1962). Capitalism and freedom. Chicago: University of Chicago Press.Google Scholar
- Harned, P. J. (2005). A word from the president: Corporate social responsibility and organizational ethics. Ethics Today Online, 3(9), 1–2.Google Scholar
- Harrow, J., Palmer, P., & Bogdanova, M. (2006). Business giving, the tsunami and corporates as rock stars: Some implications for arts funding? Cultural Trends, 15(4), 299–323.Google Scholar
- Iannou, L. (2003, May 26). Corporate America’s social conscience. Fortune, special report. Available at http://www.fortune.com/fortune/services/sections/fortune/corp/2003_05csr.html.
- Margolis, J. D., & Walsh, J. P. (2003). Misery loves companies: Rethinking social initiatives by business. Administrative Science Quarterly, 48, 268–305.Google Scholar
- Morris, K. (1999). The reincarnation of Mike Milken. Business Week, 10, 94–95.Google Scholar
- National Committee for Responsive Philanthropy (NCRP). (2005, September). The Waltons and Wal-Mart: Self-interested philanthropy. Washington: NCRPGoogle Scholar
- Paiste, D. (2005, September 26). Schools: Tyco gifts untainted despite Kozlowski’s conviction. New Hampshire Union Leader.Google Scholar
- Porter, M. E. (2002). Tomorrow’s markets: Global trends and their implications for business. World Bank (p. 4).Google Scholar
- Porter, M. E., & Kramer, M. R. (2002, December). The competitive advantage of corporate philanthropy. Harvard Business Review (pp. 56–68).Google Scholar
- Reeves, J. (2005, June 28). Jury Acquits former HealthSouth CEO scrushy. Associated Press. Avaliable at www.ecommercetimes.com/story/4425.html.
- Voronin, Y. A. (1998). Organized crime: Its influence on international security and urban community life in the industrial cities of the rurals. Comparative Urban Studies Project Occasional Paper, No. 17, published by Woodrow Wilson International Center for Scholars.Google Scholar
- Washington Post. (2002, September 15). Charities struggle with scandal-tainted donations.Google Scholar