INTOUCH: FIRMS ENHANCE REPUTATIONS WITH CHARITY

British multinationals operating in countries that lack basic human rights give around 70 percent more money to charity than firms that do not have presence in such politically controversial nations, new study has revealed.
The findings support the growing body of research suggesting that corporate charitable giving plays an important strategic role for many businesses.
In study looking at the charitable donations of 305 UK companies (comprising around half of FTSE All-Share Index companies), analysts found that corporate presence in one or more countries in which political rights and civil liberties are curtailed pushed up the average level of donations from £1.148 million to £1.977 million.
Writing in the UK’s Journal of Management Studies, the researchers suggest that this increased philanthropy could be seen as an attempt to “offset” negative connotations related to the companies’ operations in controversial countries such as China, Burma, Sudan and the Democratic Republic of Congo.
“The positive impact on charitable giving is restricted to presence in only those countries that are most lacking in political rights and civil liberties,” said Stephen Pavelin, of Henley Business School, UK, part of the team which conducted the research. “Our findings suggest that companies are seeking to offset negative impressions in the eyes of the public that arise from doing business in such countries by making greater gifts to charity.”
Unable to separate out corporate giving by country, the team could not determine whether the higher levels of charitable donations were directed towards projects in the UK or in the host countries themselves. “This finding is perhaps indicative of relatively token responses to corporate exposure to political and civil rights issues, rather than significant attempts to address or atone for these issues through giving aimed at impacted communities,” said Pavelin.
While political and civil rights issues were shown to stimulate charitable donations, level of corruption did not have similar effect. “It appears that the salient feature of country in this connection is lack of political rights and/or civil liberties, rather than presence of high levels of corruption,” said Pavelin.
No evidence was found of link between money donated to charity and the fact that firms operated in number of different countries. Multinationals make similar contributions to their ‘uni-national’ counterparts, the study found.