Atlas: The corporate philanthropy dilemma: how companies must proceed through social needs? by Ricardo Cesar Martins

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ISTR Sixth International Conference
Toronto, Canada / July 11-14, 2004
Contesting Citizenship and Civil Society in a Divided World

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The corporate philanthropy dilemma: how companies must proceed through social needs?
by
Ricardo Cesar Martins
Brazil

The social interventions promoted by private companies became in the last decades a topic for discussion in the academic circle and in the public opinion. Companies have a historic conception of being motivated just for a single goal: profit. It is common to identify that in some cases, these organizations act in a predatory way to achieve this goal, even degenerating environment and human standards of life.

Since the birth of the Industrial Revolution, this behavior could be noted. Even the employees were not safe from corporate greed. High journeys and low wages were the main reasons for the poor life conditions shared by all proletariat.

In fact, it is not necessary to observe history to find out cases about corporate social irresponsibility through civil society. In recent years, “respected” North American powerhouses were involved in scandals and allegations of corruption, mistreating stakeholders and community, as a way to maximize profits.

So, it is seems extremely relevant to determine if corporate philanthropy is an effective way of social promotion or a simple symbolisms to compensate a predatory and irresponsible intervention.

Companies have no obligation to solve the problems around the world, but they should never create them. This logic is a way to identify two lines of social spending: those that are focused in establishing a sustainable economic action and those that are created to solve problems not linked with its economic activity.

Communities have no legitimacy to demand that Exxon, North-American Oil Company, solve the malaria disease in the Third World. However, it is legit to vindicate that this company respect the environment in its oil extraction, avoiding pollution of the seas, for instance. Any kind of social spending directed to adapt the economic activity of the company sustainable is correct. This is the concept of Corporate Social Responsibility.

The polemic exists in another situation, in which companies perform a social activity, spending in areas not linked with its business. This is the concept of Corporate Social Philanthropy. This kind of actuation may be irrational and impertinent, since this action promotes costs, compromising the profitability of the economic agent, without any benefit for the company economic performance.

A first explanation for the existence of this phenomenon is the ideological values, since a lot of presidents and directors may be trying to buy a place in the heaven, trying to be a good citizen at least once in a lifetime. The other explanation is that companies believe that developing or sponsoring social projects may be a possibility to benefit its business in a way that would be impossible in other conditions. This benefit is a consequence of a behavior change of the organizations stakeholders: employees, present consumers, potential consumers, suppliers, community and government.

The question is that there is a huge problem since social intervention is not motivated by its results, but by an economic benefit due to stakeholders behavior change. The social programs are not motivated to be efficient and efficacious, since it’s not necessary to work. The only important issue is to be seen as a good corporation by the stakeholders.

The social activity promoted by private companies is not stimulated to succeed and organizations must develop tools to ensure that the final result will be reached in an effective way. For this reason, companies must consider not only the benefits obtained with this action, but also its competences to develop this intervention.

One of the issues proved in this paper is that social interventions promoted by private companies need to be linked with its economic business. It is a pre-condition for any oh these projects. The competence developed by the company in its economic activity should not be ignored because it is a powerful resource to stimulate effective results of social projects, avoiding only a symbolic performance.

The present paper proposes a model to evaluate social programs developed by private companies denominated “Competences and Benefits Intervention Model”. The essence of this model is to observe two variables to understand and evaluate a social intervention. The issues observed are the competencies of a company to perform with efficiency and also the company benefits obtained with this action. It is possible to classify all social projects in four different situations.

The four scenarios are: 1) FAILURE: situation in which the company does not know how to perform the social actuation with efficiency and there is no economic benefit with this action for the organization. It is necessary to redesign the social activity; 2) PARTNERSHIP: situation in which the company has competence to perform well, but there is no benefit. The recommendation is to seek partners, other organizations that will also be beneficiary of this activity, as a way to obtain gains with this project; 3) FINANCING: situation in which the company will be beneficiary of a social project that has no competence to perform. The recommendation is to finance other organizations that are able to do it well; 4) REFERENCE: situation that the company is able to do it well and it will be beneficiary with this activity. This is a reference of a successful social intervention.

This paper is an exploratory research that begins with a historic evaluation of economic and social interventions promoted by private organizations, leading to the “Competences and Benefits Intervention Model”. The four different scenarios in this model are empirical illustrated with different kinds of companies in Brazil: cosmetic industry (AVON), telecommunications (SBT), financial institutions (BRADESCO FOUNDATION), media (EDITORA ABRIL), food retail (MC DONALDS), and media vehicles (ELETROMIDIA).

This paper was developed to be an important contribution for private companies all around the world to rethink their strategic planning of social intervention. The “Competences and Benefits Intervention Model” intends to be an important evaluation tool, inspiring managers and directors to adjust any kind of social project to the particularities of the company in question, approaching the social intervention towards the company’s business and core competences.

Date received: September 29, 2003