1
The end of corporate philanthropy
Hein van Marrum S1908537
0629467295
heinvanmarrum@gmail.com
3 Abstract
4 Table of content 1. Introduction. 7. 2. Literature review. 11. 2.1. SME’s. 11. 2.1.1. The CEO. 12. 2.1.2. CEO-gender. 12. 2.2. Corporate Philanthropy. 13.
2.2.1. Strategic corporate philanthropy. 16. 2.2.2. Altruistic corporate philanthropy. 17.
5
5.3 Proposition 3. 29.
6. Conclusion. 31.
7. Limitations and further research. 32.
8. Epilogue: The social role of a company. 35.
9. References. 38.
10. Appendices. 47.
10.1. Carroll’s framework (1970). 47.
10.2. Interview questions Dutch. 48.
10.3. Interview questions English. 49.
10.4. First contact email Dutch. 50.
10.5. First contact email English. 51.
10.6. Example interview (Respondent A). 52.
7 1. Introduction
Through time, many scholars have argued the social role of a company. On the one hand we have the scholars in favor of the social obligation of a company to look after society. On the other hand we have the scholars that argue that companies are there for the shareholders, and obliged to maximize shareholder value at all time between the boundaries of the law. From the beginning of the previous century, there was a general line of thought that CSR-policies and codes of conduct would regulate themselves and that there was no need whatsoever to enforce something like that through (soft) law. Norms and personal values where ought to be the perfect drivers of appropriate behavior in organizations and automatically the organization itself. However, in the years that followed, firms were getting more and more complex and personal norms and values weren’t longer sufficient enough to deal with ethical dilemmas, causing the growth of the creation of codes of conduct (Baumhart, 1961).
In later years, pressure from society called for companies to take care of some of the societal needs, causing a rise in discussion about whether or not firms should be obliged to care for society. Nowadays, the general thought is that companies are in some way obliged to behave in a morally responsible way regarding specific ethical issues (Crane & Matten, 2004Thesis). With the extended media coverage that is possible today, companies could actually benefit a lot from having in a morally responsible way, using it as some sort of strategic philanthropy (Crane & Matten, 2004).
8 The impact of SME’s on society can be seen in the fact that they provide work places in the local market and all other economic activities that could benefit society. However, there is also a different role that is played by companies: their social role. In the last few decades, companies are more and more expected to answer to all sorts of moral, ecological and social responsibilities (Leisinger, 2007), and their competitive position can be influenced by the way in which they bring these responsibilities in practice (Porter & Kramer, 2002).
Companies are engaging in a lot of social activities. One could think of examples like the sponsoring of a cultural event or a football club, or the donation of money to a charity. Nowadays, these activities are called Corporate Social Responsibility (CSR) and companies face a lot of issues regarding this. Parts of the CSR activities of a company are the philanthropic activities of a company, and these activities are by many scholars seen as a category of CSR (Carrol, 1979; Choi & Wang, 2007). Corporate philanthropic actions are the actions that are engaged by a company where it donates part of its resources to a third party to contribute to a social cause (Ricks & Williams, 2005).
Better understanding of these activities would be helpful for companies in order to improve their competitive position (by optimizing their philanthropic actions) and make a commitment to bettering society (Porter & Kramer, 2002). Of course, the argument could be made that philanthropic actions merely rest on personal gains (Velasquez, 2012). This principle of utilitarism, introduced by Emanuel Kant, argues that everyone only acts in such a way that is best for him (Rachels, 2006) and this principle can also be applied in business (Velasquez, 2012). The hard part of this principle is that it can’t be proven whether a person or a company acts from self-interest or not. However, in the theoretical part of this research we will discuss definitions that take care of the researchability of philanthropy and distinguishes it from other, more self-interested actions. This will be a distinction between a more self-centered (or company centered) approach and a more altruistic approach that is researched by investigating the return on the donation.
9 Despite the importance of the subject, philanthropy is a relatively scarce topic in research literature. The research in general about philanthropy is focused merely on the larger companies, while they can’t be automatically generalized for SME’s (Carter & Jones, 2012). An argument here is that SME’s are only a prerogative of larger firms and are therefore not worth researching (Perrini, Russo & Tencati, 2007). A lot of recent researchers are advocating for a new, different research approach on CSR in small firms that integrates the psychological processes and motives (Spence & Rutherfoord, 2003; Jenkins, 2004; Vyakaman, Bailey, Myers & Barnett, 1997; Thompson & Smith, 1991; Tilley, 2000; Grayson, 2005). Especially ethical questions like philanthropy should be examined along CEO’s who are also the owners since it is no offer when it doesn’t hurt the executive (Shaw & Post, 1993). That is one of the reasons why SME’s are chosen in this research, since the executives of SME’s are most of the time also the owners (Carter & Jones, 2012). Also no distinction whatsoever was made between altruistic and strategic philanthropy.
Next to that, the concept of corporate philanthropy has been studied primarily in Anglo-Saxon countries, where firms are obliged by law to give disclosure about their philanthropic behavior (Adams & Hardwick, 1998; Campbell, Moore & Metzer 2002; Campbell & Slack, 2006; Brammer & Millington, 2005; Brammer & Millington, 2006). The research in these Anglo Saxon countries had its focus on larger companies, where ownership and control were often separated from each other. The type of ownership (separated from management or not) influences the strategic choices that are made by management (Hoskisson, Eden, Lau & Wright). This brings us to the thought that small and medium sized enterprises might differ in their philanthropic activities when compared to large enterprises, since there is less chance that ownership and management is separated in small and medium sized enterprises, in contrast
10 (Rachels, 2009; Velasquez, 2012; Alesina & Giuliano, 2011; Funk & Gathmann, 2009). The presumption of a relationship between the gender of the CEO of an SME and the allocation of resources to corporate philanthropy is logic, but never proven. The ambivalent previous research on this topic was focused on larger enterprises, where the influence of the CEO is often moderated by company cultures and formats in contrast to SME’s where the influence of the CEO is more direct (Carter & Jones, 2012). Better understanding of these topics will result in better understanding of corporate activities and companies will benefit from that. In research, there is significant consensus about the fact that size itself might be only an indicator of more complex factors that affect corporate philanthropy. However, little research models these underlying mtoives (Udayasankar, 2008).
The goal of this research is to examine the preferences of different gender CEO’s of SME’s on philanthropic activities (both altruistic and strategic) of the SME. The developments in corporate philanthropy as described earlier, give rise to the question whether corporate philanthropy has evolved to some sort of marketing tool to serve the company. The developments in the position of women in the business world could, in contrast, mean that companies will get a more caring attitude towards society. The research question therefore is:
Do small and medium sized enterprises engage in corporate philanthropy and what role plays the gender of the CEO in this allocation decision?
11 2. Literature Review.
In the following part, different parts of the research topic will be further examined. This part begins with a further description of SME’s and how they are seen in this research. Thereafter, the role of the CEO is examined, including the differences between male and female CEO’s regarding the topic of philanthropy. In the next part of this chapter, this concept of philanthropy is explained, together with the differences between strategic philanthropy and altruistic philanthropy as well as the researchability of both topics.
2.1. SME’s.
12 2.1.1. The CEO.
The chief executive officer (CEO) is the person that is at the end responsible for designing the organizational strategy (Jones, 2010). According to Hambrick (1988), a CEO can influence the operating of an organization in five principal ways:
The CEO is responsible for setting the organization’s goals and designing its
structure.
The CEO selects key executives to occupy the topmost levels of managerial hierarchy. The CEO determines top management’s rewards and incentives.
The CEO controls the allocation of scarce resources such as money and
decision-making power among the organization’s functional areas or business divisions.
The CEO’s actions and reputation have a major impact on inside and outside stakeholders’ views of the organization and affect the organization’s ability to attract resources from its environment.
In smaller organizations, the CEO is often also the (co-)founder of the company (Carter & Jones, 2012). In this research, we look for CEO’s who also own a majority of the company since on the topic of altruistic philanthropy, the one who donates should be the one who gets hurt financially (Galaskiewicz, 1997). The CEO of a company can thus be recognized by the importance of the decisions that he makes. For this research, it is important to look at the allocating task of the CEO, where choices have to be made whether to spend money in a certain way. Decisions that are taken by CEO’s are influenced by a lot of factors; social pressure (Buelens et al. 2006), personal beliefs (Velasquez, 2012), but also educational background and culture (Scholtens & Dam, 2007; Buelens et al. 2006). Regarding corporate philanthropy, the drivers of corporate philanthropy are the people who are running the SME, the owners who are most of the time CEO (Perrini et al. 2007). Also, ethical codes in SME’s are more based on personal opinions than in larger firms.
2.1.2. CEO-Gender.
13 outside stakeholders (environment, society) than man (Faccio et al, 2014; Rachels, 2009). According to Rachels (2009), women tend to act in a role that is shaped by evolution and purposed to look out for each other.
Men however, have a much more aggressive attitude towards others, since they were the ones that had to defend their property. Recent research about this specific topic is ambivalent in its results. Das (2005) argues that there are no significant differences in ethical orientation in terms of gender of CEO’s. Other research suggests that a higher rate of women in the board leads to more focus on the social role of a company (Bear, Rahman & Post, 2010). The theory of Rachels (2009) is aimed at women in general, but for women in top management positions, the specific combination of skills and personal characteristics needed to reach that position, other assumptions might be more accurate (Faccio et al, 2014) and therefore a difference between males and females among top executives might not be necessary present (Adams and Ragunathan, 2013; Adams and Funk, 2012).
In this research, an argument is made for researching smaller companies because the results found in larger companies can’t be generalized for smaller companies. When it comes to the ethical behavior of a company, SME’s differ highly compared to large enterprises (Withers & Ebrahimpour, 2013). Differences can be found from ethical codes written by the company to complete departments concerned with the corporate social responsibility. Next to that, larger companies have most of the time more resources available to allocate to philanthropic actions than do smaller companies (Withers & Ebrahimpour, 2013). The role of the type of gender of the CEO plays an important role in the choice whether or not to allocate resources to philanthropic activities. The course of the company is influenced by personal intentions and motives, which differ among men and women (Cliff, 1998). These differences are especially about growth, but other topics like CSR, employee policies and the dealing with competitors and external pressures are significant as well. In small business, the effect of different gender is more visual in differences in the organizational behavior since lines are shorter and the personal opinions of the owner aren’t that much mediated by bureaucratic processes or other person’s opinions (Cliff, 1998; Rekker, Benson & Faff, 2014).
2.2. Corporate philanthropy.
14 (Ferrell, Fraedrich & Ferrell, 2005). In this paragraph, a part of ethics, corporate philanthropy, is explained further. Corporate philanthropy is defined as the philanthropic activities of a company (Carrol, 1995) and divided in two parts: strategic corporate philanthropy and altruistic corporate philanthropy. The following part will elaborate on these topics and define them in such a way that they are researchable.
Philanthropic activities are more and more becoming a marketing tool in recent years (Brønn and Vrioni, 2001). CSR and environmental concerns are increasingly influencing the decision making process of consumers, which causes companies to engage in CSR related activities for economic purposes (Mohr & Webb, 2005). A report on corporate philanthropy in the Netherlands that was made in 2007 on a sample of 1000 companies, showed that about 78% of the companies in the Netherlands were engaging in philanthropic activities whilst only 27% of them had a specific CSR related policy (Schuyt, Gouwenberg, Bekkers, Meijer & Wiepking, 2007). Recognizing whether the intent behind the philanthropic action is from an economic or caring orientation is hard to do. Companies were making a clear distinction between their marketing activities and their philanthropic activities, but then again the true intent is not measurable and always sensitive to biases. Nevertheless, most authors who are writing about corporate philanthropy do take this for granted and don’t ask the question whether philanthropic actions have a marketing based goal.
16 values of society. If society doesn’t ask you to donate to charity but you still do, it can be seen as a form of true corporate philanthropy. This definition of true corporate philanthropy doesn’t solve the issue about the researchability of the intent of philanthropic activities. There is for example a difference in using your resources beyond the ethical responsibilities with the goal of benefiting others or benefiting your company. However, this does provide a framework that can be used to determine the influencing factors of corporate philanthropy and judge whether an action is true philanthropy by checking whether these actions are economically, legally or by society obliged.
There are, according to Jenkins (2006) several factors that influence the outcomes of corporate philanthropy in SME’s. Next to the perceived external pressure, it is known that different industries mean a different focus of philanthropic resources. The personal motivations of the CEO have been discussed earlier and also the ethical standards that are already present in the company are important influencing factors (Jenkins, 2006). However, Jenkins (2006) argues that the internal drive of the CEO is the main motivator for philanthropic actions in SME’s where the perceived external pressure and visibility is often much lower than in large firms.
Literature also speaks of a distinction between two forms of corporate philanthropy, namely strategic corporate philanthropy and altruistic corporate philanthropy (Brammer & Millington, 2006; Gan 2006, Siegfried, McElroy & Bientit-Fawkes, 1983). The following two sub-paragraphs will explain those concepts further.
2.2.1. Strategic Corporate Philanthropy.
17 recruitment and lobbying costs (Varadarajan & Menon, 1988; Smith, 1994; Ricks & Williams, 2005; Godfrey, 2005; Jenson, 2002; Jenson & Murphy, 1990; Frank, 1996; Fobrun, Gardberg & Barnett 2000; Zucker, 1986). Though different authors have different ideas about whether or not strategic corporate philanthropy is benefiting the organization in a financial way, all authors recognize a growing use by companies of the mechanism to preserve the strategic position of the company (Siegfried et al., 1983; Seifert, Morris & Bartkus, 2003; Galaskiewicz, 1997, Griffin & Mahon, 1997; Gan, 2006, Brammer & Millington, 2006). The amount of money spend on strategic philanthropic actions do have a positive relation with the amount of media coverage that is being offered in return (Saiia et al., 2003). A conclusion might be here that when no media coverage is present, a very low amount of philanthropic resources are allocated to that project, since media coverage is the door between the investment and the results that were mentioned earlier. In short, strategic philanthropy can be recognized by the donation of resources to society with the aim of increasing shareholder value (Galaskiewicz, 1997; Leisinger, 2007).
2.2.2. Altruistic Philanthropy.
18 say that personal motives play a role in choosing the characteristics of altruistic philanthropy, but personal gaining can never be the motivator of altruistic actions.
When we combine our theoretical findings in a conceptual model we get the following:
Since there is no conceptual model like this available in literature (Hah & Freeman, 2014) about corporate philanthropy in SME’s, I’ve gathered all recent, available research where certain influencing factors are named. Literature doesn’t speak of whether these factors make a difference in the choice between strategic and altruistic philanthropy. The majority of literature speaks of the personal motives of the CEO as the most important factor (Hah & Freeman, 2014; Muller, Pfarrer & Little, 2014; Rekker et al. 2014; Jenkins, 2006).
2.4. Propositions.
19 In the first part we discussed the differences between male and female CEO’s, where women were found to be both more risk averse and caring (Faccio et al., 2014; Rachels, 2006). Also, the influence of CEO-gender characteristics on different organizational activities was found to be proven (Carter & Jones, 2012), next to the fact that gender does determine the attitude towards certain ethical questions like philanthropy (Velasquez, 2012; Bear et al., 2010). Next to that, we can conclude that, speaking from a shareholders point of view, allocating resources to altruistic philanthropy instead of strategic philanthropy might result in lower shareholder value and higher risk (Anheier, 2009; Shaw & Post, 1993). Since altruistic philanthropy is a riskier activity than strategic philanthropy and female CEO’s are more risk aversive than male CEO’s, the following proposition is drawn:
Proposition 1: Female CEO’s in SME’s engage less in altruistic philanthropy than do male CEO’s in SME’s.
On the other side, women were found to be more caring, resulting in the assumption that female CEO’s might actually engage more in corporate philanthropy (Alesina & Giuliano, 2011; Funk & Gathmann, 2009). Since there is an option to choose when deciding to go with philanthropic activities (strategic or altruistic), but the results for society might be the same, female CEO’s might choose for the least risky option (Anheier, 2009). The need of female CEO’s to care for society is answered by choosing for philanthropy while the need of female CEO’s to make the less riskier choice would be answered by the alternative of strategic philanthropy. The following proposition is drawn considering these facts:
Proposition 2: Female CEO’s in SME’s engage more in philanthropic activities than male CEO’s in SME’s.
So in general, these two propositions can be summarized by the following assumption which will be the leading subject of this research:
20 3. Methodology.
The method that is used to come to an answer on the research question has to be chosen very carefully, both looking at the advantages and disadvantages of the method in combination with the characteristics of the phenomenon that has to be researched (Yin, 2003). The purpose of this chapter is to describe and argue why this method is chosen. Also it will explain the selection process of the respondents.
3.1 Method.
This research is exploratory, since there has been no research whatsoever on this specific topic before. However, there is enough theory about the actors in this relationship to derive propositions that can give structure to the research process. According to Marshall & Rossman (1995), in that case, the formation of propositions from existing literature that will serve as guidance in the exploratory research process is a logical and responsible research method. In fact, they argue that exploratory research should have the goal to derive hypothesis from empirical data for future research. Fassin (2008), argues that explorative research should focus on qualitative research methods that study people who are directly involved with the object of research. Since no research whatsoever has been done on regarding this topic, just forming hypotheses about the subject is short sighted. All different kinds of factors could be influencing this relationship. Through this qualitative, explorative method, it is better possible to develop strong hypotheses that take those factors into account. Therefore, the research method that is chosen is semi-structured interviews (Cooper & Schindler, 2006). The interviews will be held with male and female CEO’s of SME’s.
21 The difference between altruistic philanthropy and strategic philanthropy will be made by testing whether the return from the philanthropic donation was to any kind at the same level as the donation itself.
For this specific research, interviews will be chosen as the leading tool of data gathering. Real altruistic philanthropy can be researched by interviews, since the essence of altruistic philanthropy lies in the fact that there is no external information about these activities.
By this qualitative way of research, a rich amount of primary data can be gathered, which is necessary to come to the core of the subject (Cooper & Schindler, 2006). CEO’s of SMEs will be asked about the choices they make when it comes to the philanthropic activities, as well as their motivations for those choices.
The data will be gathered through semi-structured interviews and by analyzing several documents like websites and financial statements. In the appendix, a questionnaire can be found that was used during the interviews. The semi structured character of the interview has the advantage of the possibility to ask further on certain subjects, attitudes or motives (Cooper & Schindler). A consequence is here that this form of research is both time consuming and intensive, next to the fact that interpretation biases from both interviewer and interviewee are a serious concern (Cooper & Schindler, 2006).
The interviews will be recorded, so the interviewer isn’t busy writing during the interview sessions. However, notes are taken during the sessions to add to the recorded data since facial expressions and other emotions might not be recorded while they can be very important (Cooper & Schindler, 2006). The interviews will be written out and ordered per question according to the guidelines of Ryan and Bernard (2000), where answers will be coded before connections and similarities are sought.
When in the end a significant part of the answers leads to the confirmation of a certain proposition, actual hypotheses can be formed as a base for further research (Ryan & Bernard, 2000).
3.2. Participant selection.
22 view, the researcher lives and studies in the Netherlands and doesn’t have the budget to do an international study to take care of cultural differences. The availability of data in the near environment of the researcher is abundant and therefore the participants are all CEO’s of companies from the Netherlands.
Firms were selected on the base of the personal connections of the researcher. Respondents were selected when they possessed the characteristics that were necessary, namely the CEO and the owner of an SME. The firm should be independent and not owned by a parent company that can both supply resources and take the profits as well as their ability to determine at some point the strategic choices of the daughter company.
3.3. Data collection.
In order to reach the respondents, an email was send to them. This email can be found in Appendix C. From this email contact an appointment was made for an interview and the interviews were held. The interviews were recorded, as said earlier. For privacy consideration the companies and firms will be made anonymous. When interested in the digital recordings, please send an email to the researcher.
3.4. Participants.
Respondent A: Female, owner and CEO of an SME with ten employees together with husband. The SME is active in several forms of entertainment among which paintball and outdoor activities are the main source of income.
Respondent B: Male, owner and CEO of an SME with 14 employees. Active in food trading.
Respondent C: Female, owner and CEO of an SME with about 150 employees. Active in career advising and employment.
Respondent D: Male, owner and CEO of an SME that is placed in the Philippines but managed from the Netherlands. Active in the international trading of meat.
24 4. Results.
In this chapter, the results of the semi-structured interviews will be discussed. The complete interviews were written out and made anonymous and can be found in appendix 8.4. First, some general notions about the interviews and the respondents will be given. The following parts will then contain the findings in general and specific about the propositions that were formed.
4.1.The interviews.
Finding the respondents was easier said than done. Most small enterprises from the personal connections of the researcher didn’t have the right amount of employees, since a lot of entrepreneurs are active on their own and do not have any employees. Next to that, the timeframe of this research played an important role, since most respondents were asked to arrange a meeting in about two to three weeks. This resulted in some negative replies where the respondents didn’t have spare time for the interview. The interviews were about 30-45 minutes long, dependent on the answers that were given and the additional explanation that was sometimes necessary to make. When a respondent didn’t engage in any philanthropic activities for a simple and short reason, the interview was obviously shorter than when a respondent had to explain the various reasons that were leading him to the choices he or she made. The respondents were all middle aged (between 30 and 55) and interviewed in Dutch. The translation of the interview questions can be found in Appendix 8.2. It turned out to be necessary to highlight the difference between altruistic and strategic corporate philanthropy more explicitly since the meaning of the concepts wasn’t clear to all respondents.
4.2. General findings.
In general, the findings were as expected when it came to the financial resources of the SME. Most SME’s argued that they didn’t have the financial room to engage in strategic philanthropy, let alone altruistic philanthropy. For example, respondent E argued that:
25 The respondents were all chosen regardless of the age of the company. Most companies were about 2 – 5 years old, with an exception for firm B which was 136 years old. However, for this company, the economic crisis also played a role and made it harder to allocate resources for good cause. The economic welfare of the company was a main driver of the decision to allocate resources to corporate philanthropic activities.
These corporate philanthropic activities were in general seen as just philanthropy. Or as respondent A argued:
“I don’t believe in marketing through philanthropic actions, I don’t think the sponsoring of a soccer-team won’t give you the same or more in return. When I would do such a thing I would do it to support a local team or organization that needs the money, not from any marketing point of view. For that we use other tools.”
A last general finding was that all owners argued that altruistic philanthropy is something that they do in private. The reaction of respondent C was in this case the same reaction of all other owners:
“It might be hard to donate from a company that is continually striving to grow, always in short of resources, but a part of the income I get from my company I donate to charity, keeping my business and personal life divided from each other.”
4.2.1. Proposition 1.
Proposition 1: Female CEO’s in SME’s engage less in altruistic corporate philanthropy than do male CEO’s in SME’s.
26
“I went to the Philippines and I saw the miserable situation of the children on the streets there. It grabbed me and I decided to donate money on a regular basis in the name of my company. There is no return for me, only the satisfying feeling that some children will have a roof above their heads when they sleep. We also don’t communicate this through any form of marketing, it is just about the children.”
The women that were interviewed showed indeed a high rate of risk-aversion. They saw the bankruptcy of their company as a sword of Damokles hanging above their head. No risk should be taken to take care of some good cause when the company wasn’t able to survive. Actually, when it came to the social role, respondent A argued that the only goal of the company was to survive:
Question 11: Do you think companies have a social role?
“ No, the role of a company like ours is to survive. We have jobs to maintain and children to feed, I think certainly small companies shouldn’t be focusing on their social role since they are on thin ice and anything could happen. We don’t have the big reserves to survive every negative event.”
4.2.2. Proposition 2.
Proposition 2: Female CEO’s in SME’s engage more in philanthropic activities than male CEO’s in SME’s.
27 Respondent F:
“Yes, we do engage in corporate strategic philanthropy. I am selling sportswear and obviously, sponsoring a local soccer team is a good form of marketing. I have close bonds with the local sport teams, since they are my prime customer. I also use other forms of marketing, but this works pretty well for me.”
Respondent B:
“We don’t. There is no result in it I think. Our clients are other businesses, we don’t need more exposure among people, only between businesses and there are other ways to let that happen. If we support a local football team it would only be out of sympathy and I guess I don’t have the sympathy for anything like that. Next to that, our current results aren’t that bright and positive, so then you will set priorities and our priorities don’t lie in bettering society. The marketing form of philanthropy doesn’t work for us.”
In contrast, from the female respondents, two of the three were thinking that strategic philanthropy was actually a useful tool to get higher returns for your company. Only Respondent A didn’t believe in it. Respondent E was the most assertive in this process:
“We don’t exist that long yet, but we currently help our employees by buying them their own tools to make cloths. Also we strive to import the fabrics that were made under good circumstances. Moreover, we just want to do much more in it, for example sponsoring the factories in India from where we import our fabrics to help women there to get a decent job. We also communicate this, this responsible way of doing business is our identity.”
All female owners had a company that was doing business in the consumer market, so business to consumer.
28 5. Discussion.
In this chapter, all important results from the previous chapter will be discussed further. The propositions that were drawn earlier, are in this chapter confirmed or rejected. In the end, on the base of the answers on the previous propositions, the research question that was formulated in the introduction chapter will be answered.
5.1. Proposition 1.
Proposition 1: Female CEO’s in SME’s engage less in altruistic corporate philanthropy than do male CEO’s in SME’s.
Although we won’t try to reach any significance and generalizablity in this research, we won’t hesitate to determine the significance of some propositions in order to serve as a base to build future hypotheses on for further research.
When looking to the results, we see that the female CEO’s of SME’s in this research indeed tended to be risk-aversive and see that as a reason to not engage in altruistic corporate philanthropy. However, the male CEO’s also didn’t engage that much in altruistic philanthropy. Here only respondent D was engaging in altruistic philanthropy. However, the other two respondents were giving financial based reasons for their choice, but did not put a high value to that reason. They merely didn’t see that as their responsibility, whereas the female respondents all showed some striving towards the helping of others. In short they did want to do it but just were to afraid of the financial risks whereas the male respondents just didn’t think that they should do so. The proposition can be seen as right, since this research showed that women are more reluctant to use altruistic philanthropy. The reason underlying these propositions was also the reason that was given by the respondents, namely the high risk that was inherent to engaging in altruistic corporate philanthropy.
5.2. Proposition 2.
29 Two out of the three male respondents were not fond of using corporate philanthropy. The female respondents were more eager to use it, however due to financial restraints they weren’t able to do so. In this case, another important finding should be noted. From all respondents, the two male respondents that weren’t using corporate philanthropy as a benefiting tool were doing so because they didn’t feel like their business needed this form of marketing. They were business to business companies and therefore arguably less vulnerable for the norms of society. The other owners were active in business to consumer markets and could be much more vulnerable to societal norms. Only respondent A was a business to consumer company who was reluctant to corporate strategic philanthropy. However, later she claimed that, when the estimated return was sufficient, she would also engage in such activities. This respondent was more or less calculating the risks and when the return on an investment in philanthropic activities could not be guaranteed, she wouldn’t do it.
5.3. Proposition 3.
Proposition 3: Female CEO’s do engage more in philanthropic activities than male CEO’s and when they do, they choose the strategic philanthropy.
This proposition is a summary of the two propositions made earlier. We can say that in this research, the female CEO’s of SME’s were much more seeing philanthropy as a competent tool than did male CEO’s of SME’s. That also comes forward in their opinion regarding the social role of a company, where two of the three were claiming that their company and companies in general should strive towards a role that is both economic and societal
responsible. However, the generic attitude of the respondents was that in case of the altruistic philanthropy, it was much more a personal job than it was something that should be done in the name of the company.
31 6. Conclusion
In this chapter, a short conclusion will be drawn upon the results that were discussed earlier. Thereafter, the limitations of this conclusion will be discussed as well as the goals for further research.
When coming back to the research question, we proposed in the introduction, we can say a few things. The research question was:
Do small and medium sized enterprises engage in corporate philanthropy and what role plays the gender of the CEO in this allocation decision?
To answer this question, we developed a few propositions on the fundaments of the available knowledge in recent literature. The propositions were merely based on gender differences. In the results there were clearly some answers that were given by almost everyone and on that base, further research can build to develop hypotheses on this topic.
The following conclusions can be drawn from this research. Small and medium sized
enterprises do engage in corporate philanthropic activities. However, they are most of the time and more than larger companies, restricted by the economic welfare of the company to be able to allocate resources to philanthropic activities. Also, it depends whether the company is a business to business company or a business to consumer company, since the latter is much more vulnerable for societal pressure than the former.
32 When coming back to the drawn up model. Our respondents were seeing financial resources and the economic situation of the company as an important reason for the course they were following. In this research, the personal motives, the industry, visibility, available resources and return were the main influencing factors on the decision whether or not to participate in corporate philanthropy at all.
The main theme of this research was of course how gender differences were translated into personal motives and to what extent it would influence the choice for a certain form of corporate philanthropy.
7. Limitations and further research
The limitations of this research are obviously abundant. Since this research has an explorative character, the goal is not to provide any significant results but to serve as a base for further research. However, the conclusions that were made according to this research do have limitations in it, which will also be something to focus on when further research on this topic will be done.
33 the interview and the research. Also the personal connection between the respondent and the interviewer could play a role in the answers and the interpretation of those answers. Further research should develop a research method that is less vulnerable for those biases.
A second limitation is the industry specific limitation. This research doesn’t cover for industry differences, while this research alone showed that there is also a difference in the position in the value chain that a company is in. Further research should test hypotheses on companies that are in both the same position in the value chain and the same industry. Focusing on the same industry sector is already proposed for further research by Yelkikakan and Köse (2012), who argue that differences are always present because some industries face other economic times than others, certainly small companies (Li, Segarra Roca & Papaoikonomou, 2011). Uhlaner, Berent-Braun, Jeurissen & de Wit (2012) also argue for industry focus since in some industries, management trends and newly introduced best practices are sooner adopted than in other. This could be the same for management practices regarding the allocation of resources to philanthropic activities.
A third limitation is that this research was held in the Netherlands, for budget reasons, while cultural differences could play a very dominant role (Velasquez, 2012). These results can’t be generalized among other countries and cultures, since societal norms and values as well as country specific moral and codes determine to some extent to behavior of individuals
(Rachels, 2006). When future research covers these problems, some practical implications and advice can be given.
35 8. Epilogue: The social role of a company.
Through time, many scholars have argued the social role of a company. On the one hand we have the scholars in favor of the social obligation of a company to look after society. On the other hand we have the scholars that argue that companies are there for the shareholders, and obliged to maximize shareholder value at all time between the boundaries of the law. From the beginning of the previous century, there was a general line of thought that CSR-policies and codes of conduct would regulate themselves and that there was no need whatsoever to enforce something like that through (soft) law. Norms and personal values where ought to be the perfect drivers of appropriate behavior in organizations and automatically the organization itself. However, in the years that followed, firms were getting more and more complex and personal norms and values weren’t longer sufficient enough to deal with ethical dilemmas, causing the growth of the creation of codes of conduct (Baumhart, 1961).
In later years, pressure from society called for companies to take care of some of the societal needs, causing a rise in discussion about whether or not firms should be obliged to care for society. Nowadays, the general thought is that companies are in some way obliged to behave in a morally responsible way regarding specific ethical issues (Crane & Matten, 2004). With the extended media coverage that is possible today, companies could actually benefit a lot from having in a morally responsible way, using it as some sort of strategic philanthropy (Crane & Matten, 2004).
36 validity as long as it is used for maximizing the shareholder wealth. In other words, strategic philanthropy is allowed, altruistic philanthropy not.
Next to that, some scholars argue whether we can call strategic philanthropy actual philanthropy? Isn’t it just using the term philanthropy for profit maximization (Crane & Matten, 2004; Clement-Jones, 2005; Murray, 2005; Leisinger, 2007). According to Murray (2005) and Clement-Jones (2005), there isn’t even a conflict between opponents and advocates of CSR, only a disagreement about using the term philanthropy for something can nowadays be seen as something that is done out of pure self-interest.
To conclude, since strategic philanthropy had actually proved to be able to serve as an instrument to enhance shareholder value, it can be considered to be just another tool in the toolbox of CEO’s. However, altruistic philanthropy can be seen as using shareholders money to solve the problems of society (Friedman, 1970), instead of maximizing shareholder value. Therefore, altruistic corporate philanthropy could be seen as a riskier activity than strategic corporate philanthropy, since it weakens the position of the company without giving something in return (Anheier, 2009).
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47 10. Appendices.
48 10.2. Interview questions Dutch.
Vraag 1: Kun je wat over jezelf en over je bedrijf vertellen?
Vraag 2: Wat is jouw rol in het bedrijf, wat zijn je verantwoordelijkheden? Vraag 3: Betrek je andere mensen in je beslissingprocessen? Hoe?
Interviewer legt het begrip corporate strategic philanthropy uit.
Vraag 4: Maakt uw bedrijf gebruik van corporate strategic philanthropy? Hoe? Vraag 5: Wat is je motivatie hiervoor?
Vraag 6: Wat krijgt het bedrijf hiervoor terug?
Vraag 7: Zijn die returns de primaire motieven voor het gebruik maken van corporate strategic philanthropy?
Interviewer legt het begrip altruistic philanthropy uit.
Vraag 8: Doet uw bedrijf aan altruistic philanthropy? Vraag 9: Wat krijgt het bedrijf daar voor terug?
Vraag 10: Wat zijn de motieven achter deze beslissing?
49 10.3. Interview questions English.
Question 1: Please introduce yourself and the company.
Question 2: What is your role in the company? What are your responsibilities?
Question 3: Do you involve other people in the decision making processes of your company? How?
Interviewer explains the concept of corporate philanthropy
Question 4: Does your company engage in corporate philanthropic activities? How? Question 5: What are your motivations behind it?
Question 6: Regarding to your philanthropic activities, what is the return for your company? Question 7: Are those returns the prime motivators of allocating resources to that activity?
Interviewer explains the concept of altruistic philanthropy
Question 8: Does your company allocate resources to altruistic philanthropic activities? Question 9: If yes, what was the return for the company on those activities?
50 10.4. First contact email Dutch.
Hallo,
Voor mijn afstudeeronderzoek doe ik onderzoek naar de verschillen tussen mannelijke en vrouwelijke eigenaren van het midden en klein bedrijf. Hiervoor hou ik interviews met deze eigenaren.
Graag zou ik u willen vragen om mee te werken aan mijn onderzoek. Het interview zal ongeveer 30 minuten in beslag nemen en zal volledig anoniem worden verwerkt. Wanneer u wilt meewerken, maak ik graag een afspraak voor een interview. Ik ben flexibel qua tijd en locatie.
51 10.5. First contact email English.
Hello,
For my thesis, I am doing research to the differences between male and female CEO’s of small and medium sized businesses. The research method is interviews and I am currently looking for CEO’s who are willing to be interviewed by me.
I would like to ask you to participate in my research. The interview will take about 30 minutes and will be made completely anonymous. When you want to participate, I would like to make an appointment for an interview. I am very flexible when it comes to time or place.
I would very much like to hear from you. Kind regards,
52 10.6. Example interview (Respondent A).
Question 1: Please introduce yourself and the company.
My name is ……….., owner and director of ……….., a paintball and event centre. Our company provides room for parties, buffets, paintball, indoor beach volleyball and all sorts of other activities for groups. I am running this business together with my husband and we currently have 8 people working for us, doing jobs like serving and cleaning and helping in every possible job that needs help.
Question 2: What is your role in the company? What are your responsibilities?
Where my husband is responsible for the financials, I am the operational manager, responsible for the day to day planning and strategy. The strategic decision making process is done by me and my husband together.
Question 3: Do you involve other people in the decision making processes of your company? How?
No, we take the strategic decisions, other “ on the job” decisions can be made by my employees on their own, they have a high autonomy.
Interviewer explains the concept of corporate philanthropy
Question 4: Does your company engage in corporate philanthropic activities? How?
No.
Question 5: What are your motivations behind it?
53
Question 6: Regarding to your philanthropic activities, what is the return for your company?
In fact it is just selling our room with some discount, because we earn money on serving the beverages on those meetings.
Question 7: Are those returns the prime motivators of allocating resources to that activity?
Yes, otherwise we wouldn’t do it. We give some discount because we care about them, but if we have to make loss on it we wouldn’t do it.
Interviewer explains the concept of altruistic philanthropy
Question 8: Does your company allocate resources to altruistic philanthropic activities?
No, we can’t afford such a thing right now, economic times are harsh at the moment.
Question 9: If yes, what was the return for the company on those activities?
-
Question 10: What were the motivations behind it?
Economic times, but something like donating we like to keep for our private lives. In private, I donate to charity, but when it comes to my business I just want to have my income secured.
Question 11: Do you think companies have a social role?
54 10.7. Example interview (Respondent B).
Question 1: Please introduce yourself and the company.
My name is ……….., I am an entrepreneur and owner and CEO of ……….. We are a food trader, mainly in Dutch and European products to our clients in Asia. We have 10 employees.
Question 2: What is your role in the company? What are your responsibilities?
I am taking all the decisions regarding strategy. I give directions to my employees and when big deals are made, I am usually the one who organizes the meeting with our partners.
Question 3: Do you involve other people in the decision making processes of your company? How?
We have a very flat structured company, where lines are very short. Normally we communicate the whole day on certain issues. When I make a decision I want to gather as much relevant data as possible on the topic and in that case I ask my employees to give that data to me. Decisions I make fully on my own.
Interviewer explains the concept of corporate strategic philanthropy
Question 4: Does your company engage in corporate strategic philanthropic activities? How?
We don’t. There is no result in it I think. Our clients are other businesses, we don’t need more exposure among people, only between businesses and there are other ways to let that happen. If we support a local football team it would only be out of sympathy and I guess I don’t have the sympathy for anything like that. Next to that, our current results aren’t that bright and positive, so then you will set priorities and our priorities don’t lie in bettering society. The marketing form of philanthropy doesn’t work for us.
Interviewer explains the concept of altruistic philanthropy
Question 8: Does your company allocates resources to altruistic philanthropic activities?
55
Question 9: If yes, what was the return for the company on those activities?
The intern did do some work for us, so there was a return here. However if not, then it was still ok.
Question 10: What were the motivations behind it?
I just thought it was good for the intern. Real altruistic philanthropy is something I keep for my private life. I have a business to run.
Question 11: Do you think companies have a social role?
