June 02, 2010
Corporate Philanthropy: Another Version of Other People's Money?
Posted by Christine Hurt
Via my colleague Suja Thomas' Give Blog, I noticed a Bloomberg interview with Peter Brabeck-Letmathe, former CEO (1997-2008) and current Chairman of the Board of Nestle S.A. in which he criticized corporate philanthropy.
“I’m personally very much against corporate philanthropy,” Brabeck said in a television interview in London. “You shouldn’t do good with money which doesn’t belong to you. What you do with your own money, this is absolutely fine.”

Stark sentiments, but logical.  Having corporations make shareholders' charitable donations isn't very efficient, and heterogeneous shareholders might make different donation decisions.  However, aggregated donations can have more impact, and nonprofits depend on large corporate gifts, so if this sentiment were universal, it would definitely change the philanthropic landscape.  Brabeck-Latmathe did agree that investments in communities that increase share value were optimal.

Brabeck-Letmathe has voiced his opinion before.  In 2005, he spoke to corporate leaders at Boston University and said that corporations had no obligation to "give back" to communities or society because they had taken nothing away.  This statement isn't quite as logical.  I would assume that corporations, like other citizens, benefit from the richness of their communities, government services, and the like.  So, Mr. Brabeck-Letmathe had me with the "OPM" argument, but not so much with this "every corporation is an island" argument.

I also noted this other statement (from the 2010 Bloomberg interview):  "Most social problems are extremely complex.  You think at first glance you solve a problem here, but the reality is you’re just creating another one somewhere else.”  Of course, because the company involved here is Nestle, we all remember the Nestle baby formula programs in developing countries, which led to unintended consequences and a boycott.  I remember a friend telling me not to eat that Nestle Crunch bar during lunch in seventh grade because "Nestle kills babies."  That's not a good advertising campaign.

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