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My dad, like most dads, loves to give advice. He will be turning 63 in November and has a lot of experience from which he draws on to give nuggets of wisdom. Whenever I have to make a decision among several choices I usually make a list of pros and cons for each choice and go over it with family and friends. After a couple minutes into my exhaustive list, my dad would say, “you know what Johnny, you got to bottom line it” and then he would ask me a question that is so on point that my response would determine what option is best for me. He has that ability to cut through bulls**t to the heart of it.
When it comes to corporate giving, there are so many arguments to why giving helps society and improves goodwill with the community, but lets bottom line it. Companies have a fiduciary duty to increase shareholder value so, in my best dad voice, “How does corporate giving help a company make money?
Well, in 2009 the answer to this question was provided by three researchers. Brauch Lev and Christine Petrovits at New York University and Suresh Radhakrishnan at the University of Texas did a study that found charitable donations increased the revenue of the companies that gave! The researchers collected a ton of public company charitable contribution data from 1989-2000. For those interested, they applied a Granger causality methodology, which distinguishes causation from association. This revelation was found only in industries highly sensitive to customer perception - read B2C businesses. The researches discovered, that on average, for every $5 a company donated to charity, their revenue increased by $8.
This is huge. Now, whenever anyone from philanthropy is speaking with a corporation about partnership or donations, they ave academic research to support the benefits charitable giving provide to a companies bottom line. Unfortunately, the researches could not detect a relationship between charitable giving and revenue growth in non-consumer businesses.
I envision companies that are consumer oriented (big guys like SC Johnson or small mom and pop stores) will gravitate toward tools that help them donate and broadcast their donation efforts easily. There is opportunities for social entrepreneurs to create tools, both online and offline, that make it easier for companies to execute their philanthropic agenda. Soon, every company will have one.