The Business Approach to Philanthropy

I had lunch Thursday at the Silicon Forum, a regular event put on by my pal Auren Hoffman. The topic was "The Business Approach to Philanthropy." Auren interviewed Sheryl Sandberg of Google for 15 minutes, and then about 12 tables of 12 invited guests each discussed the issue among themselves.

I think philanthropy is very important. In my philanthropy posts I’ve advocated for businesses — this includes start-ups — to take integrated philanthropy seriously. By "integrated," I mean weaving volunteerism and donations into the fabric of a corporate culture. Many companies adopt a 1% principle: 1% of profits, equity, and employee time to the company charity. I have also acknowledged the opposing view which says the best way for corporations to maximize social benefit is to maximize return for shareholders. Besides, shouldn’t shareholders decide how to give their money away? This is a fair argument but I still disagree: I think there’s a real self-interest ROI on integrated philanthropy. 1% of profits can easily be made up with higher employee morale (you feel part of something bigger), a positive corporate culture, and then of course all the PR benefits that accrue.

That’s the view I took into the lunch.

Sheryl — who was one of the impressive people, in business or otherwise, I’ve ever seen — said a bunch of interesting things.

  • The vast majority of Americans’ donations go to religious organizations.
  • Higher education — which serves mostly the elite — is in second.
  • Vast majority of our money goes to "visible victims." The tsunami was terrible disaster, but that many people die each week of hunger. Yet, after tsunami, 56% of Americans donated to that cause and donations to the ongoing UN Food program decreased.
  • People want to lever — it’s much easier to get donations for opening a new school versus on-going support for a school.
  • Her big question: how do we get money to the poor, those most in need?

On the drive home I came up with my own list of questions:

  • How do we negotiate in our own minds the need to help the neediest, versus a visible victim in our community? For example, giving money to a cultural institution — like the opera — probably helps those least in need. For me, giving my time and money to organizations like BizWorld (or even Ms. Foundation) means time and money is not going to hunger in Africa. Is this simply a reality of human nature? We want to be charitable, but we also want to be able to touch and feel the fruits of our labor?
  • Why do organizations like Habitat for Humanity exist? The best way to leverage my time and energy is not to give me a hammer and have me start building houses. A carpenter should do that. Then why do educated, well-to-do men and women with no carpentry skills pick up hammers and start building houses? It makes them feel good.
  • Should start-ups be expected to be active philanthropically from their inception? Is this a burden the shareholders and investors should not be expected to bear?
  • There seem to be three kinds of donors — individuals, businesses, governments. Early in our country’s history most charity existed in the private sector. Now, I’m sure government aid trumps all. Given government’s propensity to fuck things up, I’m not supportive of tripling the US AID budget in Africa.

7 Responses to The Business Approach to Philanthropy

  1. Aggie says:

    Ben, as someone who is poor (poverty induced by mental illness, which I’m currently treating mainly by exercising and blogging about it), I see *nothing* wrong with Habitat for Humanity. It solves a concrete problem in a concrete way. Not everyone who volunteers for Habitat wields a hammer. My mother, who can use a hammer effectively, didn’t tell them when she volunteered for Habitat. Instead, she did paperwork.

    I see nothing wrong with what the Gates’ are doing to combat disease in Africa.

    The people I admire the most in terms of philanthropy are people like Paul Farmer’s Partners in Health or the ALS Development Therapy Foundation or any group which combines fundraising with action in the field.

    Smaller groups often make better use of funds. Look at the waste which has been exposed in the Red Cross lately (there have been criticisms of them for decades). Small is beautiful, to quote a famous book title of the sixties.

    As an agoraphobic, I try to be involved with Amnesty International, because I can write letters that might help. For environmental groups, I like Nature Conservancy, not that I belong any more–too poor. When I have funds, I contribute to the American Friends Service Committee, not the Red Cross.

    Even we sick, impoverished mentally ill weirdos can make a difference, although it won’t be with money. Although I am poor, I also do not need money. I need some one-on-one help (not that I’m asking).

  2. Chris Yeh says:

    The question is, what assumptions are you making about how we should judge philanthropy?

    The point about Habitat for Humanity indicates a utilitarian assumption that we should seek to do the greatest good for the greatest number.

    On the other hand, positive psychology states that helping others can help us be happier people. Look no further than Aggie’s comments above for a touching example.

    If the way to judge philanthropy is based on the benefits to the giver, you are apt to reach very different conclusions than if you believe that you should judge based on benefits to the recipient.

  3. Ben Casnocha says:

    If it’s judged based on benefits to giver, is it still philanthropy?

  4. Chris says:

    Not arguing that this is the only way to judge, just that you have to
    understand the assumptions you make. But I submit that whatever approach
    gets people to give the most is the best. I compare it to the mom who nags
    her kids versus the one who uses persuasion. Just looking only at benefits
    to the recipient may not be the optimal approach–even in terms of the
    benefits to the recipient.

  5. Justyna says:

    I like this topic because I’ve done a lot of stewing on this subject recently. As much as I try, I just can’t seem to shake the feeling that ‘a business approach to philanthropy’ is an oxymoron.

    The need of a business often revolves around managing the bottom line by curtailing overhead (either paying employees less, squeezing vendors for greater discounts which eventually drives vendors to pay their employees less, or striving to gain efficiencies in another manner). For that same business to turn around and to start advertising that they are giving a percentage of their profit to some annonymous needy people is just kind of wierd. Donating an employee’s time is equally curious since often what results is that during that 1 week when the employee performs the philanthropic activity they may have to work overtime (unpaid if they are exempt) to finish the work that has piled up during their absence.

    I’m sure that there are many out there who view a company more favorably for their philanthropic campaigns, I guess I’m not one of them unless the company has a track record of stellar treatment and compensation of it’s labor force.

  6. Mike Bateman says:

    Start-ups absolutely should not be active philanthropically. All of their energy and resources should be devoted to the success of the enterprise – which means more jobs. Fewer jobs mean more poverty and less for philanthropy.
    You’re right about your comments on the government. For one, the Internet brings great hope that, by creating jobs in all geographies, the standard of living throughout the world can be raised. Unfortunately, until the world figures out how to rid most of the 3rd World countries of their despotic leaders, those jobs won’t materialize.

  7. Ben Casnocha says:

    One can make a business case for start-ups being active philanthropically: when employees feel part of something bigger, when the workplace culture is more alive and caring, when the press recognizes charity work and improves the company image, all of this can help the business be more profitable.

    There are many 3rd world leaders who are corrupt. But not all.

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