Philanthropy as Corporate R&D
A Posting by James V. Toscano
In the current issue of McKinsey’s Voices on Society, Doug Conant, former CEO of Campbell Soup Company and current chair of the Committee Encouraging Corporate Philanthropy, writes that corporate philanthropy, in addition to helping individuals, “can help reduce business risk, open up new markets, engage employees, build the brand, reduce costs, advance technology and deliver competitive returns.”
To Conant, philanthropy is a “discovery phase in investment in a social issue….Much like R&D, philanthropy allows companies to make thoughtful investments in sectors where the return profile is typically more speculative.” In his thinking, philanthropy is part of a growth strategy. He then gives examples of philanthropic contributions that demonstrate his thesis.
Calling this approach “the new normal” for corporate philanthropy, he calls on companies to look at the opportunity “to more fully leverage philanthropic initiatives that can pave the way for future market-based innovations.”
A Solid Business Case
Before nonprofit leaders decry this as some attempt to use philanthropy underhandedly to serve business’ selfish interests, think about what Conant is actually doing. He is making a solid business case for philanthropy as a very legitimate and important part of the corporate armamentarium.
Clearly, philanthropy builds healthier communities, more viable communities, more workable communities, more equitable communities and adds to the amenities of living in these communities. That’s certainly good for business, but it is also good for society.
If business can then meet the emergent needs of a more equitable population, then it’s a win-win. What we actually need is a lot more business philanthropy to help significantly reduce the growing inequality in a variety of measures of societal health: income, jobs, education, housing, and, perhaps most important, social mobility.
If at the end of this we have a better business climate, and we should, all to the good.
The Twin Cities Example
Here in Minneapolis-Saint Paul, we have had rather large philanthropic investments in the arts over the last fifty years. Certainly, we have great appreciation of what the arts do for a society. Certainly, we revere and cherish those memorable experiences we have had at the theater, museum, recital, gallery and music hall. And we have a long record in being able to recruit those Harvard MBAs in the middle of the winter at 30 below!!!
The great American patriot, statesman, journalist, businessman Benjamin Franklin, a true poly- math, was also a great philanthropist in the finest sense of the word. Across the river from where later the Campbell Soup Company located, Franklin organized a number of charities and set a rule, which lives up to the present time in the form of the Benjamin Franklin Society, that one should give 5% of one’s annual income to charity.
Membership in the Society is free; there are no dues, newsletters, appeals or other aspects of most membership organizations. One is a member as long as 5% of income is given away each year. When it is not, membership lapses. I have been a full member in good standing since my 22nd birthday, well over 50 years ago.
Two hundred and fifty years later, our own remarkable businessman and philanthropist, Kenneth Dayton, promoted the 5% rule for business, not only for his own Dayton Hudson Corporation but encouraged all other businesses to contribute that percent of pre-tax net profits to charity.
The Franklin/Dayton Rule
The Franklin/Dayton rule, applied to US corporations would go a long way in giving the society the boost it needs to begin the process of better distribution of all of the resources available in a society, a long step to boosting the philanthropic share of GNP from 2% to 4%, maybe the 5% goal. Call it R&D if you wish, build businesses development and growth upon it, but, first, give it to those worthwhile charities that return significant impact for the investment.
Enlisting business and making it clear that philanthropy is, indeed, good for business, are major and continuing success stories in our times. Continuing and enhancing this tradition, significantly upping the investment and the indirect returns of that investment to business are desirable trends.
I salute the efforts of Mr. Conant and his Committee Encouraging Corporate Philanthropy. May you succeed wildly!