Skip to main content
SpringerLink
Log in

The Impact of Operational Diversity on Corporate Philanthropy: An Empirical Study of U.S. Companies

  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

Abstract

This paper investigates the impact of diversity on corporate philanthropy. Compared to previous studies that have considered the influence of board diversity and CEO gender on corporate philanthropy, this study introduces the concept of operational diversity, which is the implementation of diversity programs at management, employee, and supply chain levels, and further, it explains why operational diversity influences corporate philanthropy, by using the premises of resource dependence theory. Second, this study also investigates the influence of board diversity on corporate philanthropy. Third, this study uses a large sample of U.S. firms over the period of 1991–2009 and tries to mitigate possible omitted variables and endogeneity problems that are often overlooked in previous research. We demonstrate that firms with operational diversity programs are likely more dependent on a broad variety of resources and give more to community as a strategic maneuver; hence, operational diversity is a better indicator for predicting future corporate giving than board diversity alone. However, having a woman or a member of a minority as a company’s chief executive officer is not sufficient to impact its charitable giving. A battery of robustness tests support our conclusion and confirm that our results are not driven by a firm’s general corporate social responsibility (CSR) score, gender or independence of board members, or firm ownership. This paper will assist researchers, practitioners, and other stakeholders in deepening their understanding of the predictors of corporate giving.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. Given the different levels of giving by industries and time, we include industry and year fixed effects in all of our regression analyses.

  2. According to KLD Stats (www.kld.com), the coverage universe of KLD has expanded over time. Between 1991 and 2000, KLD covers only S&P 500 Index firms. Domini 400 Social Index firms, 1,000 Large U.S. Companies, and Large Cap Social Index firms were added in 2001 and 2002. From 2003 on, KLD covers all the above, with the addition of 2,000 Small Cap U.S. Companies and Broad Market Social Index firms.

References

  • Ackerman, R. W. (1973). How companies respond to social demands. Harvard Business Review, 51(4), 88–98.

    Google Scholar 

  • Albinger, H., & Freeman, S. (2000). Corporate social performance and attractiveness as an employer to different job seeking populations. Journal of Business Ethics, 28(3), 243–253.

    Article  Google Scholar 

  • Amason, A. C. (1996). Distinguishing the effect of functional and dysfunctional conflict on strategic decision making: Resolving a paradox for top management teams. Academy of Management Journal, 39(1), 123–148.

    Article  Google Scholar 

  • Amato, L., & Amato, C. (2007). The effects of firm size and industry on corporate giving. Journal of Business Ethics, 72(3), 229–241.

    Article  Google Scholar 

  • Anderoni, J., & Vesterlund, L. (2001). Which is the fair sex? Gender differences in altruism. The Quarterly Journal of Economics, 116(1), 293–312.

    Article  Google Scholar 

  • Barnett, M. L., & Salomon, R. M. (2006). Beyond dichotomy: The curvilinear relationship between social responsibility and financial performance. Strategic Management Journal, 27, 1101–1122.

    Article  Google Scholar 

  • Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120.

    Article  Google Scholar 

  • Barney, J., & Arikan, A. M. (2001). The resource-based view: Origins and implications. Blackwell Handbook of Strategic Management. Oxford: Blackwell Publishing.

  • Barney, J., & Wright, P. M. (1998). On becoming a strategic partner: The role of human resources in gaining competitive advantage. Human Resource Management, 37, 31–46.

    Article  Google Scholar 

  • Bartkus, B. R., Morris, S. A., & Seifert, B. (2002). Governance and corporate philanthropy: Restraining Robin Hood? Business and Society, 41(3), 319–344.

    Google Scholar 

  • Bear, S., Rahman, N., & Post, C. (2010). The impact of board diversity and gender composition on corporate social responsibility and firm reputation. Journal of Business Ethics, 97(2), 207–221.

    Article  Google Scholar 

  • Becker, G. (1964). Human capital. Chicago: University of Chicago Press.

    Google Scholar 

  • Berman, S. L., Phillips, R. A., & Wicks, A. C. (2005). Resource dependence, managerial discretion and stakeholder performance (pp. B1–B6). Honolulu: Academy of Management Best Paper Proceedings.

    Google Scholar 

  • Boatsman, J., & Gupta, S. (1996). Taxes and corporate charity: Empirical evidence from micro-level panel data. National Tax Journal, 49(20), 193–213.

    Google Scholar 

  • Boyd, B. (1990). Corporate linkages and organizational environment: A test of the resource dependence model. Strategic Management Journal, 11(6), 419–430.

    Article  Google Scholar 

  • Brammer, S., & Millington, A. (2004). The development of corporate charitable contributions in the UK: A stakeholder analysis. Journal of Management Studies, 41(8), 1411–1434.

    Article  Google Scholar 

  • Brammer, S., & Millington, A. (2006). Firm size, organizational visibility and corporate philanthropy: An empirical analysis. Business Ethics: A European Review, 15(1), 6–18.

    Article  Google Scholar 

  • Burlingame, D. (2001). Corporate giving. International Journal of Non-Profit & Voluntary Sector Marketing, 6(1), 4–5.

    Article  Google Scholar 

  • Carrell, M. R., & Mann, E. E. (1995). Defining workforce diversity in public sector organizations. Public Personnel Management, 24(1), 99–113.

    Google Scholar 

  • Carroll, A. (1979). A three-dimensional conceptual model of corporate social performance. Academy of Management Review, 4(4), 497–505.

    Google Scholar 

  • Chen, J., Patten, D., & Roberts, R. (2008). Corporate charitable contributions: A corporate social performance or legitimacy strategy? Journal of Business Ethics, 82(1), 131–144.

    Article  Google Scholar 

  • Coffey, B., & Wang, J. (1998). Board diversity and managerial control as predictors of corporate social performance. Journal of Business Ethics, 17(14), 1595–1603.

    Article  Google Scholar 

  • Cox, T. (1993). Cultural diversity in organizations: Theory, research, and practice. San Francisco, CA: Berrett Koehler.

    Google Scholar 

  • Cox, T., & Blake, S. (1991). Managing cultural diversity: Implications for organizational competitiveness. Academy of Management Executive, 5(3), 45–56.

    Google Scholar 

  • Cox, J. C., & Deck, C. A. (2006). When are women more generous than men? Economic Inquiry, 44(4), 587–598.

    Article  Google Scholar 

  • Daft, R. (1983). Organization theory and design. New York: West.

    Google Scholar 

  • Daily, C., & Dalton, D. (2003). Are director equity policies exclusionary? Business Ethics Quarterly, 13(4), 415–432.

    Article  Google Scholar 

  • DiTomaso, N., & Post, C. (2007). Diversity. In S. R. Clegg & J. Bailey (Eds.), International encyclopedia of organization studies (pp. 397–401). Thousand Oaks: Sage.

    Google Scholar 

  • Dufwenberg, M., & Muren, A. (2006). Generosity, anonymity, gender. Journal of Economic Behavior & Organization, 61, 42–49.

    Article  Google Scholar 

  • Dwyer, S., Richard, O., & Chadwick, K. (2003). Gender diversity in management and firm performance: The influence of growth orientation and organizational culture. Journal of Business Research, 56(12), 1009–1019.

    Article  Google Scholar 

  • Eckel, C., & Grossman, P. J. (1998). Are women less selfish than men? Evidence from dictator experiments. Economic Journal, 108(448), 726–735.

    Article  Google Scholar 

  • Fisman, R., Heal, G., & Nair, V. (2006). A model of corporate social responsibility. Research Paper, Wharton School, University of Pennsylvania.

  • Fry, L. W., Keim, G. D., & Meiners, R. E. (1982). Corporate contributions: Altruistic or for-profit? The Academy of Management Journal, 25(1), 94–106.

    Article  Google Scholar 

  • Garcia-Castro, R., Ariño, M., & Canela, M. (2010). Does social performance really lead to financial performance? Journal of Business Ethics, 92(1), 107–126.

    Article  Google Scholar 

  • Godfrey, P. (2005). The relationship between corporate philanthropy and shareholder wealth: A risk management perspective. Academy of Management Review, 30(4), 777–798.

    Article  Google Scholar 

  • Haley, U. (1991). Corporate contributions as managerial masques: Reframing corporate contributions as strategies to influence society. Journal of Management Studies, 28(5), 485–509.

    Article  Google Scholar 

  • Harrison, D. A., & Klein, K. J. (2007). What’s the difference? Diversity constructs as variety, or disparity in organizations. Academy of Management Review, 32(4), 1199–1228.

    Article  Google Scholar 

  • Hill, C., & Jones, G. (2010). Strategic management: An integrated approach (9th ed.). Boston: Houghton Mifflin Company.

    Google Scholar 

  • Hillman, A. J., Cannella, A. A., & Paetzold, R. (2000). The resource dependence role of corporate directors: Adaptation of board composition in response to environmental change. Journal of Management Studies, 37(2), 235–255.

    Article  Google Scholar 

  • Hillman, A. J., & Dalziel, T. (2003). Boards of directors and firm performance: Integrating agency and resource dependence perspectives. Academy of Management Review, 28(3), 383–396.

    Google Scholar 

  • Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360.

    Article  Google Scholar 

  • Kamas, L., Preston, A., & Baum, S. (2008). Altruism in individual and joint-giving decisions: What’s gender got to do with it? Feminist Economics, 14(3), 23–50.

    Article  Google Scholar 

  • Kesner, I. (1988). Directors’ characteristics and committee membership: An investigation of type, occupation, tenure, and gender. Academy of Management Journal, 31(1), 66–84.

    Article  Google Scholar 

  • Lev, B., Petrovits, C., & Radhakrishnan, S. (2010). Is doing good good for you? How corporate charitable contributions enhance revenue growth. Strategic Management Journal, 31(2), 182–200.

    Google Scholar 

  • Marquis, C., & Lee, M. (2011). Who is governing whom? Senior managers, governance, and the structure of generosity in large US firms. Working Paper No. 11-121, Harvard Business School: Cambridge, MA.

  • McGrath, J. E., Berdahl, J. L., & Arrow, H. (1995). Traits, expectations, culture and clout: The dynamics of diversity in workgroups. In S. E. Jackson & M. N. Ruderman (Eds.), Diversity in work teams (pp. 17–45). Washington, DC: American Psychological Association.

    Google Scholar 

  • Navarro, P. (1988). Why do corporations give to charity? The Journal of Business, 61(1), 65–93.

    Article  Google Scholar 

  • Osterman, P. (1995). Work/family programs and the employment relationship. Administrative Science Quarterly, 40, 683–698.

    Article  Google Scholar 

  • Pearce, J., & Zahra, S. (1992). Board composition from a strategic contingency perspective. Journal of Management Studies, 29(4), 411–438.

    Article  Google Scholar 

  • Pfeffer, J., & Salancik, G. (1978). The external control of organizations: A resource dependence perspective. New York: Harper & Row.

    Google Scholar 

  • Pfeffer, J., & Salancik, G. R. (2003). The external control of organizations: A resource dependence perspective. Stanford, CA: Stanford Business Press.

    Google Scholar 

  • Porter, M., & Kramer, M. (2002). The competitive advantage of corporate philanthropy. Harvard Business Review, 80(12), 57–68.

    Google Scholar 

  • Post, C., Rahman, N., & Rubow, E. (2011). Green governance: Boards of directors’ composition and environmental corporate social responsibility. Business & Society, 50(1), 189–223.

    Article  Google Scholar 

  • Richard, O. C. (2000). Racial diversity, business strategy, and firm performance: A resource-based view. Academy of Management Journal, 43(2), 164–177.

    Article  Google Scholar 

  • Richard, O. C., Murthi, B. P., & Ismail, K. (2007). The impact of racial diversity on intermediate and long-term performance: The moderating role of environmental context. Strategic Management Journal, 28(12), 1213–1233.

    Article  Google Scholar 

  • Roberson, Q., & Park, H. (2007). Examining the link between diversity and firm performance: The effect of diversity reputation and leader racial diversity. Group & Organization Management, 32(5), 548–568.

    Article  Google Scholar 

  • Robinson, G., & Dechant, K. (1997). Building a business case for diversity. Academy of Management Executive, 11(3), 21–31.

    Google Scholar 

  • Ross, S. A. (1973). The economic theory of agency: The principal’s problem. American Economic Review, 63(2), 134–139.

    Google Scholar 

  • Seifert, B., Morris, S., & Bartkus, B. (2003). Comparing big givers and small givers: Financial correlates of corporate philanthropy. Journal of Business Ethics, 45(3), 195–211.

    Article  Google Scholar 

  • Seifert, B., Morris, S., & Bartkus, B. (2004). Having, giving, and getting: Slack resources, corporate philanthropy, and firm financial performance. Business and Society, 43(2), 135–161.

    Article  Google Scholar 

  • Simmons, W. O., & Emanuele, R. (2007). Male-female giving differentials: Are women more altruistic? Journal of Economic Studies, 34(6), 534–550.

    Article  Google Scholar 

  • Smith, C. (1994). The new corporate philanthropy’. Harvard Business Review, 72(3), 105–116.

    Google Scholar 

  • Stultz, J. E. (1979). Madam director. Directors and Boards, 3(4), 6–19.

    Google Scholar 

  • Terjesen, S., Sealy, R., & Singh, V. (2009). Women directors on corporate boards: A review and research agenda. Corporate Governance: An International Review, 17(3), 320–337.

    Article  Google Scholar 

  • Thomas, D. A. (1993). The dynamics of managing racial diversity in developmental relationships. Administrative Science Quarterly, 38, 169–194.

    Article  Google Scholar 

  • Urriolagoitia, L., & Vernis, A. (2010). Is there crisis in corporate philanthropy? Exploring the contribution trends in Spanish and US companies. Social Innovation Documents, ESADE, Spain.

  • Vaidyanathan, B. (2008), Corporate giving: A literature review, Center for the Study of Religion and Society, Working paper, University of Notre Dame.

  • Van Fleet, J. (2010). Corporate giving to education during economic downturns: Global trends and the difficulty to prediction. International Journal of Educational Advancement, 9, 234–256.

    Article  Google Scholar 

  • Waddock, S., & Boyle, M.-E. (1995). The dynamic change of corporate community relations. California Management Review, 37(4), 125–140.

    Article  Google Scholar 

  • Waddock, S., & Graves, S. (1997). The corporate social performance financial performance link. Strategic Management Journal, 18(4), 303–319.

    Article  Google Scholar 

  • Wang, J., & Coffey, B. (1992). Board composition and corporate philanthropy. Journal of Business Ethics, 11(10), 771–778.

    Article  Google Scholar 

  • Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5(2), 171–180.

    Article  Google Scholar 

  • Williams, R. (2003). Women on board of directors and their influence on corporate philanthropy. Journal of Business Ethics, 69(3), 217–236.

    Google Scholar 

  • Zhang, R., Zhu, J., Yue, H., & Zhu, C. (2010). Corporate philanthropic giving, advertising intensity, and industry competition level. Journal of Business Ethics, 94(1), 39–52.

    Article  Google Scholar 

Download references

Acknowledgments

The authors would like to thank Dr. Thomas Clarke, Section Editor and two anonymous referees of the Journal of Business Ethics for comments and suggestions that greatly improved the paper’s quality. All remaining errors are our own.

Author information

Authors and Affiliations

  1. College of Business, University of South Florida Sarasota-Manatee, 8350 N. Tamiami Trail, SMC-C263, Sarasota, FL, 34243-2025, USA

    Jean D. Kabongo

  2. College of Business, University of South Florida Sarasota-Manatee, 8350 N. Tamiami Trail, SMC C229, Sarasota, FL, 34243, USA

    Kiyoung Chang

  3. University of Washington Bothell, 18115 Campus Way NE, Office UW2-322, Bothell, WA, 98011-8246, USA

    Ying Li

Authors
  1. Jean D. Kabongo
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Kiyoung Chang
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Ying Li
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Jean D. Kabongo.

Appendix

Appendix

Description of main variables

Variable

Description

GIVING (Com_Str_a)

GIVING equals 1 for a company that has consistently given more than 1.5 % of trailing 3-year net earnings before taxes (NEBT) to charity over the period 1991–2009, or has been notably generous in its giving, and 0 otherwise

TOTAL GIVING (Com_Str_num)

Total counts of community giving strength

CEO (Div_Str_a)

CEO equals 1 for a company’s chief executive officer being a woman or a member of a minority group, and 0 otherwise

PROMOTION (Div_Str_b)

PROMOTION equals 1 for a company that has made progress in the promotion of women and minorities, particularly to line positions with profit-and-loss responsibilities in the corporation, and 0 otherwise

BOARD (Div_Str_c)

BOARD equals 1 for a company where women, minorities and/or disabled hold four seats or more (with no double counting) on the board of directors, or one-third or more of the board seats if the board number is less than 12

WORK/LIFE (Div_Str_d)

WORK/LIFE equals 1 for a company that has outstanding employee benefits or other programs addressing work/life concerns, e.g., childcare, elder care, or flextime, and 0 otherwise

CONTRACTING (Div_Str_e)

CONTRACTING equals 1 for a company that does at least 5 % of its subcontracting, or has a demonstrably strong record on purchasing, with women—and/or minority—owned businesses, and 0 otherwise

DISABLED (Div_Str_f)

DISABLED equals 1 for a company that has implemented innovative hiring programs for disabled, or has a superior reputation as an employer of disabled

GAY (Div_Str_g)

GAY equals 1 for a company that has implemented progressive policies toward its gay and lesbian employees

OTHER (Div_Str_x)

OTHER equals 1 for a company that has made a notable commitment to diversity that is not covered by other KLD ratings

DIV_OPER (Div_Str_extra)

DIV_OPER equals the count of all strengths the company has received in the category of diversity minus BOARD and CEO. (DIV_OPER = DIV_COUNT – BOARD − CEO). It measures operational diversity level of the company

DIV_OPER_N (Div_Str_Robust)

DIV_OPER_N is a narrower definition for DIV_OPER. DIV_OPER_N = DIV_OPER – WORK/LIFE – GAY

DIV_COUNT (Div_Str_num)

DIV_COUNT equals the count of all strengths the company has received in the category of diversity

LOGTA

LOGTA is the logarithm of a company’s total assets in million US dollars

TOBIN’S Q

Tobin’s Q is defined as the ratio of a company’s market value to its book value

ROA

ROA equals a company’s return on assets

XAD_TA

XAD_TA equals a company’s advertising expenses over total assets

CASH_TA

CASH_TA equals a company’s cash, marketable securities over total assets

PPE_TA

PPE_TA equals a company’s property, plant, and equipment over total assets

BOARDSIZE

BOARDSIZE is the number of board members

 %FEMALE

%FEMALE is the percentage of female directors on the board

%INDEPDIR

 %INDEPDIR is the percentage of independent directors on the board

 %INSTITUTION

%INSTITUTION is the percentage of institutional shareholders

Rights and permissions

Reprints and permissions

About this article

Cite this article

Kabongo, J.D., Chang, K. & Li, Y. The Impact of Operational Diversity on Corporate Philanthropy: An Empirical Study of U.S. Companies. J Bus Ethics 116, 49–65 (2013). https://doi.org/10.1007/s10551-012-1445-9

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-012-1445-9

Keywords

Search

Navigation