University of Vaasa - Vaasan yliopisto

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Corporate philanthropy may be viewed as socially responsible giving by corporations
(Sasse & Trahan 2007 and may include cash gifts, product donations, and employee
volunteerism. Generally, it refers to the giving by a commercial organization
directly to charitable organizations or to individuals in need with the intention of
improving the overall quality of life.
Various literatures have listed traditional philanthropy as the original form of CSR or
as CSR at its most basic level (Bronn & Vrioni 2001; Seitanidi & Ryan 2007). In
fact, there exists a continuum in terms of the degree of involvement in CSR, where
corporate philanthropy is at one end of the spectrum and corporate community
involvement and partnerships are listed at the opposite end. In what is being referred
to as a new paradigm in CSR (Seitanidi & Ryan, 2007), there appears to be a
movement away from an indirect from of corporate involvement such as corporate
philanthropy, to a more direct form of involvement or interaction such as cause
related marketing. Seitanidi & Ryan (2007) noted that the trend has been for
organizations to be more receptive to the idea of corporate community involvement
or community relations. In fact, this trend was first mooted sometime ago by
Varadarajan & Menon (1988), where they had noted that corporate involvement in
social well-being began as a voluntary response to social issues and problems, but
then evolved into a phase in which social responsibility was viewed as an investment
by corporations.
Overview of Motives for Corporate Phylanthropy
Several motives for corporate philanthropy can be identified. From the literature, it
can also be seen that there are various studies that agree and disagree with each of
these motives. In this section, the salient motives are briefly discussed.
The economic motive of corporate philanthropy is that it maximizes shareholder
wealth through increasing profits for the organization. The underlying principle here
is that through giving, the organization benefits from being socially responsible and
in the long term, that can help build sales, energize the workforce and develop trust
in the organization as a whole. In addition, the role of government in encouraging
philanthropy through attractive incentives such as tax deductible donations further
supports this view. Conversely, the other view is that there is a negative relationship.
In Wang et al. (2008) study, the authors provided examples for those who agree that
financial performance and corporate philanthropy are positively associated, and also
examples to show that corporate philanthropy diverts valuable corporate resources
and inhibits corporate financial performance. A study was carried out by Godfrey
(2005) cited in Sasse & Trahan (2007), that summarized the research findings of
various scholars on the link between financial performance and corporate
philanthropy. The conclusion was a “decidedly mixed picture”.
Another motive argues that corporate philanthropy influences stakeholders’ (as
defined earlier) perception of the organization (Brammer & Millington 2005).
Through corporate giving, organizations enhance their reputations. These positive
images in turn induce stakeholder support and enable the organization to secure