Philanthropy is not CSR

Corporate social responsibility has become a popular topic in discussion groups because of increasing awareness that income inequality has become the biggest economic problem today. Capitalism is also increasingly being questioned as a means to addressing this global issue. Pope Francis and President Biden have both said that trickle down has never worked and will never work.

This trickle down is the theory that if the rich get richer, their wealth will trickle down to the masses. This has been used as the primary excuse for saying that maximizing profits will eventually lead to the masses also getting income equality.

One of the questions I used to be asked in those discussions by my students in the DLSU MBA program where I used to teach, is whether company volunteerism or philanthropy is a form of corporate social responsibility. My answer is that corporate philanthropy, while laudable, is not a substitute for a company’s fulfillment of its obligation to society.

Here is an excerpt from an article entitled “The Integrity of a Catholic Management Education” by Naughton and Bausch:

“Volunteerism draws students, in a very real and concrete way, out of their particular interests and can have life changing effects… While volunteer requirements and opportunities should constantly be fostered, the danger is that students learn how to serve society in volunteerism but not how to serve society through their role as managers… Volunteerism may send the message that goodness is performed in the private time of one’s life.”

Most managers believe that they can serve the poor through donations or even volunteer activities on weekends, but they do not use their management knowledge to address unemployment or social injustice which are the roots of inequities in our society.

There are corporate philanthropists who give donations and at the same time use practices like substituting contractuals for regular employees, union busting, refusing to extend health benefits and avoiding environmental protection practices on the excuse that a corporation’s primary goal is to maximize profits.

There are corporations who donate to NGOs to build houses for the poor while many of their employees live in squatter areas or reside in homes without access to decent sewage facilities, potable water and even reliable electricity because their wages are not enough to maintain a life with human dignity for their family.

There are corporations who donate money for books and classrooms while their employees continue to send their children to schools that are overcrowded and with substandard quality of education. There are drug companies that donate money to charities or even donate medicines for the poor, but at the same time they refuse to bring down prices of medicine to levels affordable by the poor.

Early in the morning, when it is still dark, there are already hundreds of thousands of people waiting for transportation to bring them to work. They wait for hours for a ride to go to work; and then wait again for hours to get another ride to go home. But our transport plan is geared to solving the problems of the affluent car riding public.

There are business leaders who use all their influence to resist any increase in the minimum wage with the excuse that we must keep wages at the lowest possible to remain ”competitive.” The idea that every family is entitled to a living wage is farthest from their minds.

These are the businessmen who agree with the economist Milton Friedman, who said that the only obligations of business to society are make a profit and obey the laws.

I used to tell my students that corporations do not make decisions. It is the people who are the decision makers who must accept the responsibilities for each and every action of the corporation. Businessmen should not be judged solely on the impact of their decisions on financial performance of their firm. Business managers must also be judged on the impact of their decisions on their employees, customers, suppliers and especially on the community and society as a whole.

We speak the same way of the responsibilities of parents to their children, doctors to patients, lawyers to clients and citizens to the laws of the land.

In an article by Goodpaster and Matthews, they said: “Corporations are not persons. They are artificial legal construction, machines for mobilizing economic investments toward the efficient production of good and services. We cannot hold a corporation responsible. We can only hold individuals responsible.”

A manager must have the courage to make decisions based on his or her core values. Jim Collins, a management guru, once wrote: “I recommend a test: what values would you continue to hold even if the market, your industry, your customers and the media penalize you for holding them? Only such values are truly core.”

I once came across this short meditation that is a part of a prayer:

If we spend the day on corporate takeovers and plant closings; Without thinking about the people we put out of work; We cannot make up for the harm we do; By giving a woman free legal advice in the evening, when her unemployed husband takes out his frustration by beating her.

Corporate social responsibility (CSR) is the sum total of the obligations of corporations and their decision makers to society. Philanthropy is not a substitute for CSR.

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