In a Salt Lake Tribune interview with Paul Godfrey of the BYU Marriott School of Management, Paul stated that companies that actively donate to charitable causes tend to reap benefits in their stock price. Here’s an excerpt:
Philanthropy is a way for companies to build goodwill in the community, showing a willingness by a company to become involved in community life and helping the firm build a reputation for doing good things. When bad things happen – accidents, lawsuits, plant closings – philanthropic firms can draw on that goodwill to mitigate the anger and punishment some critics would heap on the firm. Thus, philanthropy is a type of insurance. . . .
I have done a large study of more than 150 companies and found solid evidence that, when bad things happen, firms active in philanthropy experience less damage to their stock price than firms that don’t give.
I like the point that Paul Godfrey is making. Maybe Corporate tithes bring some of the blessings that tithe payers experience? Different mechanisms are at play, of course (or so I think).
Thanks to John Tvedtnes for the tip.
If corporations paid out that money as dividends instead of charitable contributions, that also would serve to increase the stock price.
The bottom line is that customers pay for that philanthropy through higher prices, or stock-holders pay for it through lowered dividends.
Another way of looking at it is that corporations pay for nothing, their customers do.
In the medical field, such as drug makers, where the prices for their products are paid in the most part by insurance companies or by the government (medicare/medicaid), then EVERYONE pays for that philanthropy through higher insurance premiums and higher taxes.
I wholeheartedly believe in charity. I also believe it should be left up to the individual, and not forced on us by hiding it in the price of the products we buy, or withheld from stockholders by reducing their dividend.
I especially don’t like it when corporations whose products I use end up donating to causes that I don’t support, especially political causes that I strongly disagree with.
It sounds to me like someone is trying to justify their own social engineering attempts at the expense of people who have little say in it.
In my view, that report is pure Bovine Scatology.
Philanthropy is a way for companies to build goodwill in the community, showing a willingness by a company to become involved in community life and helping the firm build a reputation for doing good things. When bad things happen – accidents, lawsuits, plant closings – philanthropic firms can draw on that goodwill to mitigate the anger and punishment some critics would heap on the firm. Thus, philanthropy is a type of insurance. . . .
“I have done a large study of more than 150 companies and found solid evidence that, when bad things happen, firms active in philanthropy experience less damage to their stock price than firms that don’t give.”
And how exactly is this report bull crap? What evidence do you have to the contrary?
I like the point that Paul Godfrey is making. Maybe Corporate tithes bring some of the blessings that tithe payers experience? Different mechanisms are at play, of course (or so I think).
Yes, it would seem a very strong case could be made that companies are receiving some of the blessings as tithe payers.
By the way, you do have a say in what companies do. Don’t buy their product if they are contributing to causes you don’t agree with.
How is the report BS?
Here’s why:
Two things have to happen for a stock price to go down. One, a potential buyer has to make an offer on a stock that is less than the last trade, and Two, a current stock holder has to be willing to sell some of his shares at that lower price.
For the stock price to go down, both of those parties have to be somehow influenced to transact at a reduced price.
People or organizations on the receiving end of that company’s philanthropy are probably not going to be the stock sellers and buyers on any particular day or week.
I don’t see a connection or mechanism of influence between the recipients of philanthropy who are not stock buyers/sellers, and the people who are the stock buyers/sellers.
It sounds to me like the wrong people are being bribed.
“when bad things happen, firms active in philanthropy experience less damage to their stock price than firms that don’t give.”
When bad things happen, maybe the company deserves for the stock price to go down.
The Godrey’s conclusions also sounds very subjective. What are “bad things” and what is “active in philanthropy” and how does he quantify them in order to make a comparison ?
Excusing higher prices because the corporation does philanthropy on the side does not seem to be a “good thing” to me. “It’s okay that we charge you an arm-and-a-leg for your medicine Mrs. McGillicutty because we donate a lot of money to the local Public Broadcasting channel, and the local arts organizations.”
As to not buying products from companies that support causes I don’t like, that’s a great idea, and I’ve done that. I’d love to do more of it. But it’s also much work to try to keep track of it all.
I do not dispute the data that the report shows, but here is a question to consider. If Enron, WorldCom, Exxon or other organisation that have had a major ‘accident’ would have done more of social work, would we be able to ‘forgive’ them? Consider the Exxon-Valdez case. The destruction was dire. Would a vast amount of philantrophy been able to ‘cushion’ the blow? Philantropy is not a major concern for me when deciding to buy or not a product.
By the way, anon @7:08, tithe is what you have to give and usually it is done with no hoopla around. When a corporation gives charity, seldomly do they do it quietly. They run campaign ads, so everyone notices that they are doing it, hence increasing their ‘community insurance.’ Also, most of the so called ‘blessings’ are more photo ops, than a real concern for people.