ALIGNING CHARITABLE AND BUSINESS INTERESTS

For decades, many wealthy taxpayers have donated money to charities as a positive way to offset taxes. It is a viable tax-cutting strategy. But for some, the tax strategy takes a backseat to the primary of goal of doing something good. Both individual and corporate donors want the money they contribute to be used efficiently and effectively to support a cause — not squandered needlessly on overhead expenses. As such, we now see companies incorporating their philanthropic initiatives as part of their core business.

Overview

According to “Giving USA 2016: The Annual Report on Philanthropy for the Year 2015,” individuals, estates, foundations and corporations in the U.S. made record-breaking charitable donations in 2015 — totaling approximately $373.25 billion. Between 2010 and 2015, the rate of charitable giving grew faster than the country’s economic growth rate.(1)

With the new president promising both income and corporate tax deductions, there may be increased attention given to tax breaks that could be eliminated. For charitable donations, the question becomes inevitable: If donations are no longer tax deductible, will people and corporations continue to give at their current levels?

2015 Charity Recipients(2)

(in billions USD)

 

Choosing a Cause

When breaking down charitable donations by source, individuals give more than corporations.(3) Perhaps it’s because people tend to have more pet causes — those deeply aligned with their personal experiences and/or beliefs. After all, it’s difficult for a corporation to align the beliefs of hundreds or thousands of employees with like causes. However, corporations can foster a culture of volunteerism by aligning their charitable efforts with smaller, local charities with which employees can become directly involved. Higher levels of participation may lead to stronger engagement, personal fulfillment and, very likely, more money donated via employees and their fundraising efforts.(4)

Resource Management

Companies committed to philanthropic efforts can do more than offer money and volunteers; they can offer expertise. Corporations that spend millions of dollars developing IT, marketing and human resource departments are equipped with knowledge that could help charitable partners further their work. Not only does such a partnership provide charitable organizations with resources beyond their means, but it enables greater savings so that a larger percentage of donations can be devoted to the mission instead of overhead expenses.

Good Works, Good Value…

“Corporate Social Responsibility (CSR) is changing the corporate culture to embrace doing the right thing by encouraging businesses to take a broader view on value created. Additionally, CSR is helping improve corporate accountability through more sophisticated measurement systems of positive and negative impact.”(5)

Vetting and Oversight

This business approach to philanthropy promotes the concept that giving is no longer about causes … it’s about results. When people are passionate about a cause, they want to know their contributions are put to good use. There are websites that can help individual and corporate donors perform due diligence for a wide variety of charitable organizations by assessing their transparency, accountability and financial responsibility. The following are a few of these resources:

  • GuideStar.org
  • GiveWell.org
  • CharityNavigator.org
  • CharityWatch.org

Final Thoughts

In recent years, the face of philanthropy has gotten younger. Almost 85 percent of millennials gave charitably in 2014 and 70 percent volunteered. Seventy-seven percent reported they’re more likely to volunteer when they can use their specific skills to benefit a charity or cause.(6)

It’s worth considering where millennials concentrate their focus. For example, they want to work for socially conscious companies that leave less of a footprint on the environment and a greater one on mankind. This compassionate philosophy extends to the way companies treat their employees, their customers and their shareholders.(7)

Many young adults demand employers demonstrate business ethics, integrity and transparency, choosing to work only for those with values aligned with their own.(8 ) They also put their money where their mindset is: 75 percent of millennials say they have contributed to nonprofit organizations over the past few years.(9)

Investors of all ages may be attracted to companies that make charitable contributions because, in addition to the potential for positive financial returns, they can experience the positive feelings that come from doing good in the world.

1 Giving USA. June 13, 2016. “Giving USA: 2015 Was America’s Most-Generous Year Ever.” https://givingusa.org/giving-usa-2016/. Accessed Dec. 28, 2016.
2 Charity Navigator. 2016. “Giving Statistics.” http://www.charitynavigator.org/index.cfm/bay/content.view/cpid/42. Accessed Dec. 28, 2016.
3 Giving USA. June 13, 2016. “Giving USA: 2015 Was America’s Most-Generous Year Ever.” https://givingusa.org/giving-usa-2016/. Accessed Dec. 28, 2016.
4 Aberdeen Asset Management. Aug. 31, 2015. “How ‘giving’ has become a core business.” http://thinkingaloud.aberdeen-asset.us/en/thinkingaloudus/culture-and-inspiration/how-giving-has-become-a-core-business. Accessed Dec. 28, 2016.
5 Ibid.
6 Eileen Heisman. National Philanthropic Trust. June 8, 2016. “Millennials and their Influence on Philanthropy.” https://www.nptrust.org/philanthropist/entries/news_for_donors/millennials-and-their-influence-on-philanthropy. Accessed Jan. 9, 2017.
7 Deloitte. 2016. “The 2016 Deloitte Millennial Survey.” https://www2.deloitte.com/content/dam/Deloitte/global/Documents/About-Deloitte/gx-millenial-survey-2016-exec-summary.pdf. Accessed Dec. 28, 2016.
8 Ibid.
9 Adam Weinger. NonProfitHub.org. 2016. “Corporate Philanthropy Trends Affecting Nonprofits in 2016.” http://nonprofithub.org/fundraising/corporate-philanthropy-trends-affecting-nonprofits-in-2016/. Accessed Dec. 28, 2016.

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