Giving Compass' Take:
- Les Lenkowsky explains how corporate giving can put nonprofits in bad positions and may hurt, rather than help.
- How can funders, especially corporate funders, work to protect and support organizations without inconveniencing them?
- Learn about rejecting tainted money.
What is Giving Compass?
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Corporate giving in 2018 – both cash and in-kind — accounted for 5.4 percent of donations to charity, or about $20 billion, Giving USA 2019 estimates. In addition, companies provide at least as much annually through a variety of sponsorship programs with nonprofits, such as underwriting sporting events, conferences, and dinners, or paying to use an organization’s name or logo on sweatshirts and other apparel. The difference between the two types of support is that businesses are not supposed to receive a direct benefit from their philanthropic gifts, but they can from their sponsorships.
In the real world, however, the line between the two has always been fuzzy and is becoming fuzzier. The motives for corporate giving are rarely completely altruistic, nor in the view of observers such as, most famously, the Nobel Prize-winning economist, Milton Friedman, should they be. Companies are ultimately accountable to their investors or “stakeholders” and as a result, their managers and directors have long believed that their philanthropy should properly contribute to business objectives, albeit in indirect ways, such as by improving employee morale or corporate reputations. However, in recent years, Michael Porter and other influential business strategists have argued for a more direct approach that would make “corporate social responsibility” a part of business planning, since, as they see it, it can have an impact on a company’s bottom-line.
At the same time, charities face risks if the billions of dollars they get each year from corporations confer too much benefit to the donors. Two decades ago, responding to complaints that business underwriting of collegiate football bowl games helped the companies more than the nonprofit organizations running the games, the Internal Revenue Service issued guidelines aimed at limiting what companies could receive (such as tickets or product tie-ins) in return for their support. Exceeding those limits could cause a nonprofit to be taxed on the income it receives, because the IRS would consider it a marketing payment, “unrelated” to the organization’s tax-exempt purposes. With the line between corporate giving and sponsorships becoming blurrier, charities now need to be especially watchful.
Read the full article about corporate giving by Les Lenkowsky at The Lilly Family School of Philanthropy.