Is philanthropy being used by corporate wrongdoers to buy good will?

  • Daryl KoehnEmail author
  • Joe Ueng


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.


Corporate Fraud Governance philanthropy Social responsibility 


  1. Bartkus, B. R., Morris, S. A., & Siefert, B. (2002). Governance and corporate philanthropy: Restraining Robin Hood? Business & Society, 41(3), 319–344.Google Scholar
  2. Beck, R. (2005, July 5). Jury still out on ‘I didn’t know’ defense. Seattle Times. Available at
  3. Belsie, L. (2005, September 14). Corporate philanthropy as ethical indicator. Christian Science Monitor.Google Scholar
  4. Berkowitz, B. (2005, October 12). Philanthropy the Wal-Mart way. Media Transparency. Available at
  5. Black, W. K. (2001). Why do the non-heathens rage? Journal of Criminal Justice and Popular Culture, 8(3), 225–276.Google Scholar
  6. Brown, T. J., & Dacin, P. A. (1997). The company and the product: Corporate associations and consumer product responses. Journal of Marketing, 61(1), 68–84.CrossRefGoogle Scholar
  7. BusinessWeek Online. (2003, December 1). The corporate donors. Special Report.Google Scholar
  8. Business Ethics. (2004). 100 best corporate citizens for 2004 (Vol. 18, No. 1).Google Scholar
  9. (2005, October 28). Corporate philanthropy adds to shareholder wealth.Google Scholar
  10. Epstein, K. (2005). Philanthropy, Inc. Stanford Social Innovation Review, Summer, pp. 1–30.Google Scholar
  11. Fombrun, C., & Shanley, M. (1990). What’s in a name? Reputation building and corporate strategy. Academy of Management Journal, 33, 233–258.CrossRefGoogle Scholar
  12. Friedman, M. (1962). Capitalism and freedom. Chicago: University of Chicago Press.Google Scholar
  13. Harned, P. J. (2005). A word from the president: Corporate social responsibility and organizational ethics. Ethics Today Online, 3(9), 1–2.Google Scholar
  14. 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
  15. Hart, S. L., Gautam, A., & Arbor, A. (1996). Does it pay to be green? An empirical examination of the relationship between emission reduction and firm performance. Business Strategy and the Environment, 5, 30–37.CrossRefGoogle Scholar
  16. Iannou, L. (2003, May 26). Corporate America’s social conscience. Fortune, special report. Available at
  17. Margolis, J. D., & Walsh, J. P. (2003). Misery loves companies: Rethinking social initiatives by business. Administrative Science Quarterly, 48, 268–305.Google Scholar
  18. Moore, G., & Robson, A. (2002). The UK supermarket industry: An analysis of corporate social and financial performance. Business Ethics: A European Review, 11(1), 5–39.CrossRefGoogle Scholar
  19. Morris, K. (1999). The reincarnation of Mike Milken. Business Week, 10, 94–95.Google Scholar
  20. National Committee for Responsive Philanthropy (NCRP). (2005, September). The Waltons and Wal-Mart: Self-interested philanthropy. Washington: NCRPGoogle Scholar
  21. Orlitzky, M. (2001). Does firm size confound the relationship between corporate social performance and firm financial performance? Journal of Business Ethics, 33, 167–180.CrossRefGoogle Scholar
  22. Orlitzky, M., & Benjamin, J. D. (2001). Corporate social performance and firm risk: A meta-analytic review. Business & Society, 40(4), 369–396.CrossRefGoogle Scholar
  23. Paiste, D. (2005, September 26). Schools: Tyco gifts untainted despite Kozlowski’s conviction. New Hampshire Union Leader.Google Scholar
  24. Pava, M. L., & Krausz, J. (1996). The association between corporate social-responsibility and financial performance: The paradox of social cost. Journal of Business Ethics, 15, 321–357.CrossRefGoogle Scholar
  25. Porter, M. E. (2002). Tomorrow’s markets: Global trends and their implications for business. World Bank (p. 4).Google Scholar
  26. Porter, M. E., & Kramer, M. R. (2002, December). The competitive advantage of corporate philanthropy. Harvard Business Review (pp. 56–68).Google Scholar
  27. Reeves, J. (2005, June 28). Jury Acquits former HealthSouth CEO scrushy. Associated Press. Avaliable at
  28. Ruf, B. M., Muralidhar, K., Brown, R. M., Janney, J. J., & Paul, K. (2001). An empirical investigation of the relationship between change in corporate social performance and financial performance: A stakeholder theory perspective. Journal of Business Ethics, 32, 143–156.CrossRefGoogle Scholar
  29. Saiia, D. H., Carroll, A. B., & Buchholtz, A. K. (2003). Philanthropy as strategy: When corporate charity “begins at home. Business and Society, 42(2), 169–201.CrossRefGoogle Scholar
  30. Seifert, B., Morris, S. A., & Bartkus, B. R. (2004). Having, giving, and getting: Slack resources, corporate philanthropy, and firm financial performance. Business and Society, 43(2), 135–161.CrossRefGoogle Scholar
  31. Sen, S., & Bhattacharya, C. B. (2001). Does doing good always lead to doing better? Consumer reactions to corporate social responsibility. Journal of Marketing Research, 38(2), 225–243.CrossRefGoogle Scholar
  32. Simpson, G. W., & Kohers, T. (2002). The link between corporate social and financial performance: Evidence from the banking industry. Journal of Business Ethics, 35, 97–109.CrossRefGoogle Scholar
  33. 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
  34. Washington Post. (2002, September 15). Charities struggle with scandal-tainted donations.Google Scholar
  35. Williams, R. J., & Barrett, J. D. (2000). Corporate philanthropy, criminal activity, and firm reputation: Is there a link? Journal of Business Ethics, 26(4), 341–350.CrossRefGoogle Scholar
  36. Zahra, S. A., & Covin, J. G. (1990). Contextual influence on the corporate entrepreneurship-performance relationship: A longitudinal analysis. Journal of Business Venturing, 10, 43–55.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC. 2009

Authors and Affiliations

  1. 1.Center for Business EthicsUniversity of St. ThomasHoustonUSA
  2. 2.Department of Economics, Finance and Decision Information SciencesUniversity of St. ThomasHoustonUSA

Personalised recommendations