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

Chapter 18 - The community and the corporation. The objectives of this chapter are to: 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,...

The Community and

the Corporation

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

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

The Firm and Its Communities

Figure 18.1

What the Community and Business Want from Each Other

Figure 18.2

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

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

 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

Community Relations

 Several specific ways in which businesses and their

community relations departments have addressed

some critical concerns facing communities are:

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

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

tax-exempt 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

Corporate Community Involvement

Aid to Minority, Women, and Disabled

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

 L arge corporations, sometimes in cooperation with

universities, have provided financial and technical advice

and training to such enterprises

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

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

Philanthropy in the United States by Source of

Contributions, 2011

Figure 18.3

Corporate Contributions in the United States, as a Percentage

of Pretax Corporate Profits,

1972 - 2010

Figure 18.4

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

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

Priorities in Corporate Giving

Figure 18.5

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

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

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)

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

Measuring the Return on Social Investment

Figure 18.6

 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

Measuring the Return on Social Investment

Building Collaborative Partnerships

he need for collaborative partnerships is very apparent

when dealing with community problems

ne area in which collaborative partnerships among

business, government, and communities have been

particularly effective is education

artnerships offer an effective model of shared

responsibility in which businesses and the public and