With Mark Zuckerberg announcing that he will give 99 per cent of his Facebook shares (currently worth about $45bn) to worthy causes over the course of his lifetime, there is an expectation that other wealthy individuals will follow in his philanthropic footsteps.
There can certainly be benefits for companies that openly back good causes. A recent study by IO Sustainability and Babson College found that corporate social responsibility (CSR) can boost a firm’s revenues by up to 20 per cent and, according to the Stern School of Business, companies in industries which are “highly sensitive to consumer perception” may see sales rise off the back of their benevolence.
But Zuckerberg’s is a personal donation – and a high profile one at that. Aside from the obvious benefits of donating money to charity, are there advantages to being so openly philanthropic? Or should you keep your giving to yourself?
POWER OF THE PERSONALITY
In 1962, Milton Friedman wrote that “if a corporation makes a contribution, it prevents the individual stockholder from himself deciding how he should dispose of his funds.” Nevertheless, companies run sizeable CSR programmes, involving both giving money and their employees’ time.
But would they be more successful if the initiative came from employees – from the chief executive downwards – rather than the CSR department? The 2015 Cone Communications Global CSR Study found that, while consumers still expect corporations to act responsibly, 52 per cent would need to see proof of a company’s CSR initiatives to believe them.
Direct giving from employees may seem more authentic than purely corporate initiatives. But executives, especially very senior ones, are ambassadors for their company. However worthy the cause might be, before making the details of any donation public, it’s important to realise that the reaction may not be entirely positive. Indeed, Zuckerberg’s announcement has met with some cynicism on social media.
So executives should aim to tie their personal philanthropy to their company’s broader philanthropic strategy. Richard Branson has been successful because his personal feats sit well alongside his company’s non-profit ventures, like fundraising platform Virgin Money Giving.
By choosing to publish the size of your donation, you may help your chosen charity to attract further support from others. Indeed, a study by Harvard University’s Katherine Grace Carman revealed that “individual giving behaviour is affected by social influences,” and that such influences “are stronger within salary quartiles”.
But making a sizeable donation publicly may equally invite unwanted speculation about, and envy of, your wealth. “In the US, charitable giving is like having a gym membership,” says Sita Schutt, founding director of Prospero World, a philanthropy advisory service. In Britain, there is a preference for discretion, she explains.
There is also an undoubtedly political dimension to choosing both a cause and a charity. Affiliating yourself with a potentially divisive cause risks inflicting serious reputational damage on you and your business.
Philanthropists are increasingly turning to specialist advisers such as Prospero World and New Philanthropy Capital, set up by two former Goldman Sachs employees. Such organisations can help identify suitable organisations linked to the donor’s causes of interest and keep them apprised of how their money is being spent.
The vehicles you choose are just as important. Zuckerberg has elected to use a Limited Liability Company, which will allow him to put his money where he wants, in private investments which will generate profit for example, and not just donate to charities and charitable trusts. This will also ensure he retains Facebook voting rights.