Chapter 18: The Community and the Corporation

Chapter 18 The Community and the CorporationCopyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCh. 18: Key Learning ObjectivesDefining a community, and understanding the interdependencies between companies and the communities in which they operateAnalyzing why it is in the interest of business to respond to community problems and needsKnowing the major responsibilities of community relations managersExamining how different forms of corporate giving contribute to building strong relationships between businesses and communitiesEvaluating how companies can direct their giving strategically, to further their own business objectivesAnalyzing how collaborative partnerships between businesses and communities can address today’s pressing social problems18-*The Business–Community RelationshipCommunity refers to a company’s area of local business influenceWhether a business is small or large, local or global, its relationship with the community or communities with which it interacts is one of mutual interdependenceThere are expectations on both sides – what the business expects from the community and what the community expects from the businessIn best situations, community support of business and business support of community are in balance18-*The Firm and Its CommunitiesFigure 18.118-*What the Community and Business Want from Each OtherFigure 18.218-*The Business Case for Community InvolvementCivic engagement – The active involvement of businesses and individuals in changing and improving communitiesReasons for community involvementMajor way to carry out corporate citizenship missionTo win local support for business activity, be granted an informal “license to operate” in the communityHelps to build “social capital”—the norms and networks that enable collective actionHigh levels of social capital enhance a community’s quality of life18-*Community RelationsThe importance of community relations is shown by the following statistics, drawn from a study conducted by the Center for Corporate Citizenship:86 percent of companies have a specific community involvement strategy80 percent of companies factor community involvement into their overall strategic plan 59 percent of companies set their community involvement strategy centrally and execute locally71 percent reported information about their community involvement activities on their corporate Web site18-*Community RelationsIs the “organized involvement of business with the community”Grown in importance in recent years from “fringe” function to mainstream/strategic In support of this commitment, some corporations have established specialized community relations departments; others house this function in a department of public affairs or corporate citizenshipCommunity relations departments are typically involved with a range of diverse issues including education, health care, and environmental issues18-*Community RelationsSeveral specific ways in which businesses and their community relations departments have addressed some critical concerns facing communities are:Economic developmentHousingAid to minority, women, and disabled veteran-owned enterprises Disaster, terrorism, and war relief18-*Corporate Community Involvement – Economic DevelopmentIntended to bring new business into the area and develop workforce skillsThe Great Recession has made it even more imperative that businesses do so In 2009, Microsoft Corporation launched a program called Elevate America to provide job training at a time when many were looking for work or seeking to improve their skills as the economy struggled to recover from a severe downturn18-*Corporate Community Involvement – HousingLife and health insurance companies have taken the lead in programs to revitalize neighborhood housing through organizations such as Neighborhood Housing Services of AmericaNHS is a locally controlled, locally funded nonprofit and tax-exempt organization that offers housing rehabilitation and financial services to neighborhood residents Similar efforts are being made to house the homelessCorporations also often work with nongovernmental organizations (NGOs) such as Habitat for Humanity to build or repair housing 18-*Corporate Community Involvement Aid to Minority, Women, and Disabled Veteran-Owned EnterprisesThese businesses often operate at an economic disadvantage. In some cases, they do business in economic locations where high crime rates, poor transportation, low-quality public services, and a low-income clientele combine to produce a high rate of business failure Large corporations, sometimes in cooperation with universities, have provided financial and technical advice and training to such enterprisesThey have also financed the building of minority-managed inner-city plants and sponsored special programs to purchase services and supplies from minority firms18-*Corporate Community Involvement – Disaster, Terrorism and War ReliefInternational relief efforts are becoming more important, as communications improve and people around the world are able to witness the horrors of natural disasters, terrorism, and warCorporate involvement in such efforts is an extension of the natural tendency of people to help one another when tragedy strikes18-*Corporate GivingImportant aspect of business-community relationship, involves corporate giving to non-profit organizationsAlso called corporate philanthropyAmerica has historically been a generous societyIn 2011, corporate contributions totaled $14.6 billion, or about 5 percent of all charitable giving As U.S. firms have become increasingly globalized their international charitable contributions have also grown The major factors driving international gifts were the size of the company’s workforce in the receiving region and perceived humanitarian need 18-*Philanthropy in the United States by Source of Contributions, 2011Figure 18.318-*Corporate Contributions in the United States, as a Percentage of Pretax Corporate Profits,1972 - 2010Figure 18.418-*Corporate GivingIn the United Sates, tax rules have encouraged corporate giving for educational, charitable, scientific, and religious purposes since 1936Current rules permit corporations to deduct from their taxable income all gifts that do not exceed 10 percent of the company’s before-tax incomeCorporations can give directly or through establishing corporate foundationsEighty-one percent of large U.S.-based corporations have such foundations; collectively, corporate foundations gave about $42 billion in 2011 18-*Forms of Corporate GivingTypically, gifts by corporations and their foundations take one of three forms:Charitable donations (gifts of money)In-kind contributions (gifts of products or services)Category now exceeds cash contributionsOf U.S. corporate contributions in 2010, 38 percent were in-kind (noncash) Volunteer employee service (gifts of time)Involves the efforts of people to assist others in the community through unpaid workAn important trend is what is known as skills-based volunteerism, in which employee skills are matched to specialized needs18-*Priorities in Corporate Giving Figure 18.518-*Corporate Giving in Strategic ContextStrategic philanthropy – Corporate giving that is linked directly or indirectly to business goals and objectives. In this approach, both the company and society benefit from the gift. Is made directly from the company to community organizations, not through a foundationIncreasingly popular approach to corporate giving18-*Strategic PhilanthropyAreas in which corporate contributions are most likely to enhance a company’s competitiveness, according to Harvard Business Review study:Factor conditions - supply of trained workers, physical infrastructure, and natural resourcesDemand conditions – affect demand for a product or serviceContext for strategy and rivalry - designed to support policies that create a more productive competitive environmentRelated and supporting industries - strengthen related sectors of the economy, may also help companies18-*Strategies to Optimize Benefit from ContributionsDraw on the unique assets and competencies of the businessAlign priorities with employee interestsAlign priorities with core values of the firmUse hard-nosed business methods to assess the impact of gifts (return on social investment)18-*Measuring the Return on Social InvestmentThe benefits that accrue to business and society are sometimes called return on social investment Companies are using standard business tools to measure the outcomes of their investments in the community, just as they would any other investmentReturn on social investment is often more difficult to measure than other kinds of return Nevertheless, community relations and corporate giving professionals have made significant advances in developing appropriate metrics as shown on the next slide18-*Measuring the Return on Social Investment Figure 18.618-*Inputs are the resources companies provideThey may include cash contributions, employee time, products and services, or logistics support Outputs are measures of the activities that took placeusually numerical counts of people and communities served Impacts represent the difference the program made, that is, the actual benefits that accrued to the people and communities servedIt is similar to outputs, except that it tries to capture the actual results of the giftValue creation represents the benefits to the business of the programThis is similar to the concept of enlightened self-interestMeasuring the Return on Social Investment18-*Building Collaborative PartnershipsThe need for collaborative partnerships is very apparent when dealing with community problemsOne area in which collaborative partnerships among business, government, and communities have been particularly effective is educationPartnerships offer an effective model of shared responsibility in which businesses and the public and nonprofit sector can draw on their unique skills to address complex social issues18-*