Corporate giving has been on the rise over the past decade, playing a critical part in addressing various global inequities and injustices. But are corporate foundations’ philanthropic actions unwittingly getting some global challenges out of the frying pan into the fire? Profs. Umar Boodoo, Warwick Business School, Irene Henriques, Schulich School of Business, and Bryan W. Husted, EGADE Business School, explore against the backdrop of health grants made by US corporate foundations.
Reviving the Heart of Corporate Philanthropy: Back to “love of humanity” rhythm, by CoBS Editor Olga Panashchenko. Related research: Putting the “Love of Humanity” Back in Corporate Philanthropy: The Case of Health Grants by Corporate Foundations, Muhammad Umar Boodoo · Irene Henriques · Bryan W. Husted, Journal of Business Ethics https://doi.org/10.1007/s10551-021-04807-2.
April 27, 2020. New York City. The City That Never Sleeps lay in a coma, falling apart, after being one of the hardest hit by COVID-19. Two hospitals — one public and the other a wealthy, private hospital — stood weary and worried, struggling to get their deeply distressed ‘hearts’ back to rhythm after countless days of witnessing their crowded corridors, panicky patients, and overwhelmed staff. And death.
Yes, both are similar in troubles, yet so different. While the latter got Warren E. Buffett’s help to fly in coveted N95 masks from China, the former’s strained intensive care units had to make do with plastic tarps and duct tape as flimsy barriers to separate patients. So, there you have it — the world-shaking pandemic laid bare the deep inequalities in the city’s health care system and the embedded disparities appeared to have been exacerbated by corporate philanthropy. And this is just one of the many examples of such unfairness.
Motivation vs reality
In 2017, Americans donated $410 billion to charities of which 9% were health-related. And 21% of these donations were by foundations and corporations. Now, let us ask ourselves an essential question: What is, or rather, should be the primary motivation for charity? It has always been about providing for the poor and disadvantaged, and attacking the root causes of poverty and disadvantage. Which raises another important question: Does corporate philanthropy really go to regions with the greatest health-care needs?
Seeking to address this, Prof. Boodoo and his fellow co-researchers explore corporate philanthropy and its relationship to health inequality in the context of health grants made by US corporate foundations by combining inputs from Robert Wood Johnson Foundation, which collects yearly county-level health data, and Candid, which records corporate giving of US companies through their respective foundations on a yearly basis.
One would expect that a corporate foundation’s philanthropic grant-making for health would be based on the needs of the recipient community. However, there exists significant concern that communities with higher needs, but fewer resources are often handicapped in competitive calls for grant proposals. To get to the root of this concern, it is paramount to first delve into the two key conditions that disadvantage communities with greater needs — homophily and proximity.
Once upon a flock
Homophily captures the idea that people with certain characteristics tend to associate with others with similar attributes. This principle often underlies the inequitable distribution of health outcomes. Unhealthy individuals have fewer contacts with healthy individuals, limiting the former’s access to healthy role models and information about adopting health innovations. As a result, poor health outcomes are reinforced among the unhealthy.
In an organisational setting, homophily translates to people in corporations and corporate foundations being most attracted to potential beneficiary organisations that are cast in the same mould. For example, a study of grant-making by US foundations to Chinese civil society organisations revealed that organisational homophily in decisions by US foundations directed funding toward elite-led bureaucratic organisations controlled by the Chinese government and away from truly grassroots NGOs. Birds of a feather really do flock together.
Regarding grant-making, homophily will play a role insofar as corporate grant makers will be keen on those proposals that best reflect the community norms used by corporate foundations to determine what is an appropriate application. Grant proposals from areas which do not share the same community norms of professionalism, but may suffer from more severe health problems due to the dearth of effective interventions or medical resources, may not be winning competitive grants because they may not have access to professional grant writers and resources needed to prepare proposals that are consistent with the professional norms in major metropolitan areas.
Homophily also determines the flow and diffusion of information. Within homophilous groups, the diffusion of information and opinions is quite rapid, but across groups, diffusion slows down. That means, the costs of information search are reduced by focusing search on similar organisations. In addition, homophily constrains the flow of information and the network of contacts through which this information flows. Reduced costs and constraints lead to a tendency for corporate foundations to allocate greater CSR resources to homophilous beneficiaries. As such, all these factors serve as a stumbling block for potential recipients that are less similar, regardless of their manifest need for funding. And this results in a more inequitable distribution of health grants and, potentially, of health outcomes.
Next, we zoom in on one of the most significant sources of homophily — geographic proximity.
A stone’s throw away
“Proximity bred familiarity, and familiarity bred comfort.” – Nicholas Sparks, American novelist, screenwriter, and philanthropist.
Being proximate encourages chance encounters and opportunities for interaction, which can spark off new relationships and maintain existing ones. In terms of the allocation of philanthropic grants, increased proximity brings down the efforts and costs of information search. This causes corporate foundations to prefer nearby beneficiaries, which often tend to be more homophilous. As such, proximity begets homophily.
Proximity also constrains the set of opportunities for interaction between actors — in this case, between corporate foundations and potential beneficiaries. These constraints shape the flow of information about opinions, norms, and values relevant to the awarding of grants. So, proximity fosters the formation of community cultures surrounding philanthropy.
Additionally, a “home bias” induced by geographic proximity influences many kinds of business activities, including investment and CSR. Investors and corporations prefer to invest in their hometowns. In the case of corporate philanthropy, most philanthropy is directed to headquarter cities, which tend to be large metropolitan areas, and already have greater wealth, resources, and capabilities than non-metropolitan areas. Last but not the least, there tends to be a high affinity between corporations and local NGOs, which are the recipients of corporate generosity. Once again, we see how dissimilar and distant communities are harmed when foundations focus only on their backyards.
Now that we have established how the concepts of homophily and proximity affect health equity, it is time to head back, and unravel the details of the probe carried out by Prof. Boodoo and his colleagues on the data from Candid and Robert Wood Johnson Foundation. And see if the numbers tell a different story.
The stark reality
One would expect corporate philanthropy to provide for the poor and disadvantaged by addressing the root causes of health inequalities, not reinforce them. But the reality is quite different.
Healthcare grants by corporate foundations predominate in areas with lower health-care needs, such that counties which have fewer uninsured citizens and where citizens have greater access to primary-care physicians and mental health providers, are the more likely recipients of health-related corporate grants. The numbers say it all: As the number of health providers goes down by 10 for every 100,000 people, the odds of receiving health grants drops by 12%. And for every 1%-point increase in the rate of uninsured adults, the odds of receiving health grants goes down by 9%.
Even among the “winners”, more health grants are awarded to counties with less severe health needs. Conditional on receiving grants, a decrease of 10 health providers for every 100,000 people is accompanied by a reduction of 2.1% in the value of health grants.
Recipient counties have also been found to be more urban than counties that do not receive such grants. As it is, rural Americans face persistent health disparities compared to people living in urban areas because rural Americans tend to have less access to health-care and experience high rates of disease and death. The researchers’ findings that corporate health-giving targets urban counties suggest that corporate giving will exacerbate such disparities.
In addition, if a county is home to the headquarters of at least one corporation which has a foundation, then its likelihood of receiving grants and the amount it receives are both significantly higher. Evidence indicates that the odds of receiving a health grant goes up by more than 9 times when a county houses the HQ of at least one company which has a grant-making foundation. And counties that have at least one corporate HQ receive on average 47% more in health grants per capita than counties in which there is no corporate HQ.
Make it right
Unwittingly, corporate foundations are complicit in worsening the health resource gap between rural, small, poor counties and more wealthy, large, urban counties. Instead of going to places where the need is greatest, funding appears to go to places where the need is less, but which are closer or more similar to home. Grant recipients located in the same county as a large corporate headquarters would benefit from this location bias. So, what exactly can corporate foundations do to turn things around and achieve the greatest benefit from their donation dollar?
To begin with, firms and their foundations need to change the criteria they employ in awarding funds. For example, an attractive grant application from a nearby location needs to be balanced against an assessment of need. Next, corporate foundations need to overcome what amounts to “similarity bias” due to corporate homophily. Last but not the least, given that health inequalities are unfair, affect everyone, and are avoidable, and that interventions to reduce health inequalities are cost effective, both public and business policy should seek to reduce such inequalities.
To put the “love of humanity” back in corporate philanthropy, corporate foundations should become aware of the implicit bias that might be driving their funding decisions and actively work to reduce inequalities in health grants, contend Profs. Boodoo, Henriques and Husted. Having good health is a basic requirement for a just society. That calls for all corporate foundations to align their giving so that those with greater health needs are able to obtain good health.
- Link up with Professors Boodoo and Henriques on LinkedIn
- Follow on Twitter: @Dr_MuhammadUmar / @henriques_irene / @bryan_husted
- Read a related article: Women’s Philanthropy – the end of an invisible phenomenon?
- Discover Warwick Business School, UK
- Study an MBA or EMBA at Warwick Business School.
Learn more about the Council on Business & Society
- Website: www.council-business-society.org
- Twitter: @The_CoBS
- LinkedIn: the-council-on-business-&-society
The Council on Business & Society (The CoBS), visionary in its conception and purpose, was created in 2011, and is dedicated to promoting responsible leadership and tackling issues at the crossroads of business and society including sustainability, diversity, ethical leadership and the place responsible business has to play in contributing to the common good.
In 2020, member schools now number 7, all “Triple Crown” accredited AACSB, EQUIS and AMBA and leaders in their respective countries.
- ESSEC Business School, France-Singapore-Morocco
- FGV-EAESP, Brazil
- School of Management Fudan University, China
- IE Business School, Spain
- Keio Business School, Japan
- Trinity Business School, Trinity College Dublin, Ireland
- Warwick Business School, United Kingdom.