Prof. Lynnette Purda, Associate Dean of Graduate Programs and RBC Fellow of Finance at Smith School of Business, Queen’s University, offers an insight into trends in philanthropy – the motivations and types of giving, the influence of national cultures, and what makes philanthropy impactful. From an interview with Prof. Adrian Zicari, ESSEC Business School.    

Related research: Lynnette Purda, 2023. “International trends in corporate philanthropy and the influence of institutional context,” Chapters, in: Anthony Goerzen (ed.), Research Handbook on International Corporate Social Responsibility, chapter 7, pages 92-107, Edward Elgar Publishing.

Adrian Zicari: You review several motivations for philanthropy, and you link them to different national institutions, that is the broad context of the company, its legal framework, tax code, and political situation, among others. Which institutions would ideally be more conducive to impactful philanthropy? What would be your advice to public policy officers and civil society in that sense? 

Lynnette Purda: A good starting point for considering the institutions that allow for impactful philanthropy is to first consider what we mean by impactful. Here, I would suggest that impactful should be perceived to imply more than simply the volume of giving. There exists a great deal of empirical evidence across many countries that links political institutions to the volume of corporate philanthropy. In these scenarios, donations are frequently used as an alternative mechanism for persuasion, political, and regulatory influence. While this philanthropy may have a significant benefit for the firm, it’s unclear whether it is impactful for society at large.

In contrast to political institutions, there lies multi-country research that shows a more positive relation between strong legal and regulatory institutions and corporate philanthropy. When the legal environment is strong and political corruption low, philanthropy is likely to be more aligned with altruistic motivations than political ones.

In environments with sound legal systems, governance of both corporations and charitable organizations is likely to be stronger, ensuring enhanced monitoring of giving, its motivations, and its resulting impact. Charities Aid Foundation (CAF) advocates explicitly for fair, transparent regulation of civil society organizations who in turn are charged with ensuring good governance and honest reporting of their impact (Charities Aid Foundation, 2019).

Adrian Zicari: You raise an interesting point: the substitutability of corporate versus individual giving. Indeed, this point was at the core of the famous Friedman (1970) argument against corporate social responsibility. To what extent – if any – can companies’ donations be interchangeable with individual giving? Do you see a “crowding out” of corporate versus individual donations – or vice versa? 

Lynnette Purda: While there is surely some overlap in the kinds of institutions that influence both sources of giving – for example taxation policies are likely to impact both corporations and individuals to encourage gifts – I don’t see that one will crowd out the other.

Fundamentally, the motivations behind an individual vs a corporate gift are likely to be different. A key argument for corporate donations and charitable foundations for that matter, is that their scale or expertise may allow for more efficient giving. This is particularly apparent when we see corporations provide donations not just of cash, but “in kind” donations of goods or services that they may be particularly oriented to provide.

Adrian Zicari: You explore the important role of informal institutions – for instance national culture influences – in framing or influencing specific modes or approaches to philanthropy. How would these influences operate in today’s multicultural societies? 

Lynnette Purda: This is a great point. One way is that we do see that individual founders, executives, or board members have a significant influence on a company’s giving decisions. As a result, their individual culture, beliefs, spirituality and so on may be reflected in the company’s choices.

At the same time, we also note that measures of culture at the national level tend to change very, very slowly. While it is clear that some countries are becoming much more diverse, it’s not clear that we have captured that diversity and those changes adequately in some of the standard measures we use to reflect a country’s cultural norms. As a result, we probably have not yet seen a significant influence on giving at the national level based on these metrics.

Adrian Zicari: After having published this work, what would you like to continue exploring about corporate philanthropy? 

Lynnette Purda: In follow up work, I have been looking more explicitly at the use of corporate philanthropy as a means of political persuasion. Again, we do this work in a cross-country setting and find that when corruption levels are higher, so too is corporate philanthropy.

When we dig slightly deeper, we see that the higher level of giving tends to be concentrated in firms that don’t have other means of political persuasion. For example, firms that have a political member on the board or those with minority state ownership, donate significantly less than otherwise similar firms who don’t have these same means of persuasion.

Adrian Zicari: And finally, would you like to give any particular message to our readers? 

Lynnette Purda: Readers are likely familiar with the significant range in motivation that exists for why companies participate in philanthropy. They may be used to being skeptical and have likely heard of giving as a motivation to detract from regulatory scrutiny or to boost reputation in the face of challenges. While it is good to be skeptical at the individual company level, it is also useful to be mindful of whether national institutions systematically influence company motivations as well.

Useful links:

• Link up with Prof. Lynnette Purda and Adrian Zicari on LinkedIn
• Read a related article: Women’s Philanthropy: The end of an invisible phenomenon
• See the book Research Handbook on International Corporate Social Responsibility
• Discover Smith School of Business and apply for one of the Smith MBAs.

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