November 18, 2009
The Silver Lining to "Supersize Bonuses": Corporate Philanthropy?
Posted by Lisa Fairfax

By now, you have no doubt heard about Goldman Sach's decision to launch its 10,0000 Small Businesses Initiative.  Guided by a team of advisers including the deans of Wharton and the Columbia Business School, and co-chaired by Warren Buffet and Michael Porter of the Harvard Business School, the Initiative will receive $500 million from Goldman to be used to help develop small businesses throughout the U.S.  Of course, the announcement was made in the midst of an apology by Goldman's CEO for the company's "participation in things that were clearly wrong," and on the heels of sharp criticism regarding the company's large bonuses.  As a result, the announcement has been met with a heavy dose of cynicism from those who see it as a public relations ploy.   Indeed, a week ago when Goldman announced plans to increase its charitable giving more generally, a New York Times article called the move "no surprise" in light of "the firm's anticipated profits and supersize bonuses, which have touched off public furor."   To be sure, as the New York Times notes, Goldman has insisted that the Initiative "was not motivated by its current public relations headache."  Indeed, a Goldman press release points out that the Initiative has been in development for nearly a year and is modeled after a similar 2008 initiative  focused on supporting women entrepreneurs and managers.  But even if the cynics are correct (and assuming that one believes that at least some form of corporate philanthropy is a good idea) one wonders if the motives behind engaging in this endeavor really matter for purposes of recognizing the potential benefits that can flow from the Initiative.   A couple of thoughts.

First, to the extent these actions were aimed at quelling public criticism, the criticism and skepticism with which they have been met cast doubt on the success of those actions, particularly since some have pointed out that the money pledged for the Initiative is "dwarfed" by the $16.7 billion earmarked for bonuses this year, while others note that the Initiative is at best a first step in the right direction.  

Second, regardless of the motivation, it is in fact a step in which the company has pledge to provide businesses with greater access to education, networks and financial capital.  Hence, it is a step that has the potential to do good.  And if it is just a first step, then it could be that the Initiative triggers many more steps that do good.

Third, as one commentator has noted, if it is the case that engaging in corporate philanthropy can have a positive impact on a company's public image and its bottom line, then don't we want to encourage companies to do so?  In other words, so long as a company actually engages in corporate philanthropy, is it wrong for them to engage in such philanthropy, at least in part, for public relations purposes? On the one hand, this does not mean that a company's good behavior can erase more problematic actions or that a company should be rewarded for pretending to engage in philanthropy or responsible behavior.  On the other hand, it may mean that we can both recognize the ploy if it is one, while at the same time appreciating and crediting the Initiative and its potential to positively impact small businesses.

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