corporate donation
\nDONATION V2.0.
\nREFRAMING THE COMPANY DONATION BASED ON
\nBEHAVIOURAL ECONOMICS
\nINTRODUCTION
\nTraditionally, the corporate donation has been driven by a combination of altruism and an
\nacknowledgement that the Company should \u201cgive back\u201d. To receive donations, charities
\nneeded to prove that \u201cdoing good\u201d would benefit the Company not only in terms of the
\noutcomes of the donation but that the Company should acknowledge its place in society
\nas a responsible \u201cperson\u201d and to some extent, has complied with these wider societal
\nexpectations and obligations as a result.
\nHowever, there are two hurdles with this approach:
\n(i) trying to quantify the \u201cbenefit\u201d \u2013 as the fundamental driver remains largely altruistic
\nand
\n(ii) the legal structure of the Corporation itself which creates many hurdles and potential
\nconflicts in fulfilling these obligations.
\nThe Company although a distinct legal entity with limited liability is now an entity with the
\nsame rights as an individual. However, given ownership is separated from the entity, the
\nBoard and management only act as agents, the variety of regulatory controls and
\nobligations, competing preferences and interconnectedness of disparate interests, the
\nCompany, if a real individual, would likely be embodied, as a slightly confused \u201cperson\u201d
\nwith a broader family group shouting to it about \u201cwhat\u2019s best\u201d.
\nWe still attribute individual traits to the Company in terms of \u201cbehaviour\u201d and expectations
\ndespite this structure.
\nConversely, the underlying driver of the Company is economic and so not to be \u201cgood \u201cin
\nthe virtuous sense but rather \u201cgood\u201d in a quantitative sense say, versus peers or outright
\nfinancial performance\u2026and more recently with elements of ESG\/CSR added in.
\nIncreasingly however, we are seeing evidence that whilst doing \u201cgood\u201d (virtuous) may not
\nbe the key or sole driver of \u201cgood\u201d (financial) metrics, there is meaningful correlation to
\nshow this is actually the case.
\nWe want to examine this in more detail.
\nThe key to successfully have Companies adopt this premise is to:
\n(i) demonstrate the proposition is correct in a robust and quantified manner
\n(ii) convey it in \u201ccorporate speak\u201d to Boards and senior management removing many of
\nthe usual qualitative elements and rely more on verifiable data
\nOur discussion will revolve around considerations of:
\n(i) the shareholder primacy vs broader stakeholder engagement debate
\n(ii) the reframing of the traditional donation (V1.0) to the \u201cnew\u201d V2.0 Donation which we
\nbelieve can be considered the equivalent of other financial incentives
\n(iii) the subsequent opportunity associated with this reframing to improve financial metrics
\nand deliver meaningful change to the charitable sector by simply diverting existing
\nbudgets and cost allocations.
\nSHAREHOLDERS AND STAKEHOLDERS\u2026SOME PARAMETERS TO SET
\nTHE SCENE
\nThe proposition that demonstrated and tangible CSR and broader stakeholder
\nengagement are integral to a Company\u2019s raison d\u2019\u00eatre is now without doubt\u2026it\u2019s just how
\nthat it is done and to what extent it is implemented.
\nThe four basic summaries below regarding a Company\u2019s \u201cresponsibilities\u201d to various
\ninterests such as shareholders, customers, employees, suppliers and broader
\nstakeholders are necessarily short and over-simplified, definitely non exhaustive and
\nrequire further examination\u2026(just not here)\u2026
\nView 1 \u2013 the win\/win = the Company will do well (in terms of real metrics) when it is
\n\u201cdoing good\u201d.
\nView 2 \u2013 the societal demand response \u2013 growing focus by society of a Company\u2019s
\nactions towards external issues and stakeholders. The expectation of the community for
\nthe Company to actively deal with various distributive, restitution and compensation type
\nfailures that are purely market driven.
\nView 3 \u2013 CSR is an agency problem and can raise governance issues in attempting to
\nbalance or prefer outcomes between shareholders and stakeholders (\u2026or \u201cit ain\u2019t our
\njob\u201d)
\nView 4 \u2013 the Company is not set up to, nor has expertise in, \u201csolving\u201d external demands
\nof society, it merely optimises what it does (making widgets) within the defined
\nboundaries of the rules (legislation)\u2026.similar to 3 but governed by clear guidelines which
\nare simply followed (\u2026or \u201cit ain\u2019t our fault\u201d)
\nI am clearly a supporter of View 1 but thus far, it has been difficult to robustly demonstrate
\nthis to be the case in a consistent and defensible set of measurable metrics and data
\nthat the Company itself can, in an economically, reduced risk fashion test and act
\nupon.
\nSome literature (i) supports View 1 but is has been \u201ctop down\u201d research looking at certain
\nperformance indicators versus direct and pure philanthropic activities of Companies.
\nOther research has looked at cohort analysis (the returns of those Companies with \u201chigh
\nESG\/CSR ratings\u201d are better than vs those with low ratings). The issue here is we have
\nyet to agree on what is an acceptable\/universal adoption of \u201cratings\u201d as many different
\nversions are currently used.
\nOur approach to the experiment and survey was also driven knowing that we needed to
\ntake a Company \u201clens\u201d to the issue as a necessary pre-requisite. Thus, when we seek to
\nreframe the concept to Donation V2.0, its success or otherwise will ultimately be be
\nexamined and judged under this lens. If not, we are left with the traditional approach and
\nthe same outcomes associated with donation V1.0.
\nWhilst this \u201clens\u201d necessarily reduces the analysis to numbers and thus, largely eliminates
\nthe altruistic and philanthropic aspects of a donation\u2026that\u2019s the point\u2026we are trying to
\nre-frame to Donation V2.0 and enter into a discussion using a less traditional basis.
\nWe therefore need to outline our contentions to Companies around areas such as risk,
\nrelative value, return on investment, opportunity costs, IRRs, NPVs, demand curves and
\nprice elasticity. The subsequent propositions are drawn from data and an experimental
\napproach that is robust, used regularly, widely, seen as standard and replicable (Discrete
\nchoice modelling).
\nThe BIG point established from the experiment, and our key starting point, is not so much
\nthe quantum of the change in outputs (deltas) with respect to price, demand and
\nswitching providers but rather that the delta clearly exists.
\nWe understand and acknowledge that the value of the changes to price\/demand\/
\nswitching outputs using Donation V2.0 in our experiment will vary across sectors and
\ngoods\/services \u2013 as it does with the use of other incentives \u2013 but the change in
\nbehaviour\/consumer response will happen.
\nThe way in which each Company utilises this information will be up the to Company itself
\nbut our point is that Donation V2.0 cannot be ignored as a valid input with respect to
\nunderstanding and incentivising consumer behaviours.
\nIt also allows the Company to align or embed purpose with strategy in a tangible
\ndemonstration to all stakeholders.
\nBROADER STAKEHOLDER INTERESTS MUST BE NOTED BUT
\nSHAREHOLDERS STILL \u201cWIN\u201d.
\nBefore going on to examine Donation V2.0, we need to take a quick look at the
\nshareholder vs stakeholder discussion and look at some practical issues around the
\nimplementation of achieving a fair balance between these groups.
\nThe move to Company \u201cstakeholder\u201d acknowledgement has been driven by and grown
\nout of V1.0 ESG\/CSR considerations and expectations into a broader theme which seeks
\nto show that those Companies actively pursuing a robust ESG\/CSR agenda will be
\n\u201cbetter off\u201d in the long run.
\nWhilst I agree with the theme, there are a many issues in terms of balancing or prioritising,
\nin a relative sense, these competing demands or expectations. Importantly unless these
\ncompeting interests vs outputs can be somewhat quantified (relative and outright) the
\nwhole debate becomes a mess and is entirely subjective. By way of example:
\n\u2013 How, and by what criteria, are the needs\/wants of all relevant external stakeholders,
\nassuming they can be identified, (and completely ignoring shareholders) balanced and
\nprioritised amongst each other? (note s.172 CA UK indeed formally identifies the need
\nof Directors to take into account broader stakeholders yet its practical implementation
\nis fraught with difficulty- if not impossible.)
\n\u2013 Did the Company pay \u201ctoo much\u201d in dividend and \u201cnot enough\u201d on ensuring, say, an
\nethical supply chain?
\n\u2013 Did the Firm \u201cwaste\u201d money on subsidising employee health via gym membership to
\nensure better employee engagement and productivity, reducing days off or was that
\nmoney \u201cwell spent\u201d?
\n\u2013 The Chair of a XYZ Widgets tells shareholders at the AGM that, through perfectly
\nlegitimate and acceptable accounting, the Company could have paid tax of between
\n$80 and $100 but chose to pay $100 to do \u201cthe right thing\u201d. The next Agenda item at
\nthe AGM is a vote on the re-election of the Chair which subsequently fails\u2026
\nSo why does it seem shareholders must win?
\nQuite simply, that despite the contention that stakeholders should be taken into account
\nwhen making strategic and economic decisions of the Company, it is shareholder money
\nthat is funding these Company decisions. Thus, the issue is not one of shareholder
\nprimacy but simply, ultimate accountability for use of their (shareholder) money.
\nThere are shareholders who will absolutely agree that stakeholder engagement needs to
\nbe addressed but at what \u201ccost\u201d to them? How does the Board or senior management
\njustify certain types of spending\/investments to shareholders that whilst serving a broader
\nsocietal benefit, are unable to be measured and quantified or have outcomes that cannot
\nshow a degree of correlation (or causation) to the Company\u2019s performance? Without
\nbeing able to measure, limits will be placed on the Company by its shareholders.
\nThe solution lies in demonstrating (quantitatively) that Board and management decisions
\nto pro-actively take into account stakeholders, at the very least, firstly do not destroy or
\nsignificantly diminish shareholder wealth whilst also fulfilling a Company\u2019s broader
\nobligations or, alternatively, it is a \u201cfair price\u201d to pay by the Company and the results of
\nthe spend have a degree of correlation to performance.
\nWHY THE SHAREHOLDERS ARE USUALLY HAPPY SO LONG AS YOU
\nHIT YOUR TOP LINE GROWTH AND DIVIDENDS ARE PAID\u2026or IT\u2019S AS
\nMUCH ABOUT WHAT IS NOT SAID\u2026
\nNow that we\u2019ve established the completely unsurprising connection between Boards,
\nsenior management and the priority their shareholders, let\u2019s take a look at how
\nshareholders may think about things.
\nIf you\u2019ve been to an AGM, you\u2019ll notice a lot of numbers and commentary in the
\npresentation but not notice (by definition) a lot of things that have been left out. Usually,
\nthis is not nefarious or an active omission but because it doesn\u2019t really matter in the
\nscheme of things and given time constraints, is not that important. (go read the Annual
\nReport).
\nSo, when the Chair or CEO\/CFO presents high level financials, you\u2019ll see the revenue line
\nand the revenue change YoY, vs same quarter last year etc\u2026\u2026.what you won\u2019t see is
\nHOW they achieved this in terms of the mix of superior product, superior sales team and
\nthe types of incentives offered for products\/services during the course of the year to
\nachieve sales growth. These incentives exist and are used \u2013 simple.
\nLet\u2019s go back to XYZ Widgets. They have a number of widget lines and also introduced a
\nfew new widget product derivations but in order to ramp up sales for the new lines,
\nneeded to offer discounts or other incentives such as \u201c2 for 1\u201d, upgrades, packages with
\nexisting widgets quite apart from the new widget (purportedly) being a superior product
\n(often the biggest competitor to a new product is inertia). The use of incentives to
\nincrease sales, gain initial or increase current market share \u2013 even at an initial loss or cost,
\nfor a longer term positive outcome (see IRRs and NPVs) \u2013 is an entirely standard strategy
\nand one which is planned and costed in to Company budgets.
\nSo at the end of the financial year, XYZ Widgets improved the top line revenue by 10%
\nwhich was spot on expectations and budgets. Assuming they were decent cost
\nmanagers this allowed them to pay a dividend to shareholders also in line with
\nexpectations\u2026everyone is happy.
\nOne question NOT asked at the AGM was \u201cwhat mix and amount of financial incentives
\ndid you utilise to hit that 10% top line revenue improvement?\u201d\u2026why, because so long as
\nit was legal and moral, it didn\u2019t matter\u2026
\nCURRENT PHILANTHROPIC PITCHES, CONSTRAINTS\u2026AND THE
\nNEED FOR BUCKETS
\nCurrent pitches for Company donations or other financial support rely on a combination
\nof the trend towards broader stakeholder management as well as allowing the Company
\nto signal publicly it\u2019s acknowledgement that society\u2019s expectations have changed and
\nthey are tangibly making an effort to meet these expectations (assuming no level of
\ngreenwashing). There is also an element of simple altruism\u2026.exactly the point.
\nThe usual pitch and successful outcome to receive a donation generally relied on
\nconvincing the Company various advantages accrue, or expectations are met, that are
\nlargely qualitatively based and thus hard to measure apart from some (ex post)
\nquantitative analysis generally based on the recipient\u2019s subsequent use of funds.
\nImportantly, as it stands, donations within a Company\u2019s budget fall into the \u201cdonations
\nbucket\u201d of costs\/expenses. This is usually a relatively small bucket in relative terms
\ncompared to most every other cost or expense line item in a Company\u2019s P&L.
\nWhat we are suggesting is that in order for a Company to support Donation V2.0;
\n(i) we need to reframe the concept of a \u201cdonation\u201d particularly in terms of its \u201coutput\u201d as
\ndirectly related to the Company itself
\n(ii) validly argue Donation V2.0 can therefore be allocated to another, larger category of
\ncosts\/expenses (bucket).
\nThe key issues we are trying to demonstrate are:
\n(i) causality or high degree of correlation between Donation V2.0 incentive and customer
\nresponse
\n(ii) method of measurability and subsequent quantification of (i) and
\n(iii) tangible benefit \u2013 or limited\/no downside to the Company for undertaking use of
\nDonation V2.0 (i.e. point (ii) is a positive number)
\nWhy is this important?
\nIt comes back to using other people\u2019s money on an agency basis to run the Company, the
\nDirectors and senior management liability or justification for their actions\u2026and buckets.
\nShareholders seek a return on investment for the risk of deploying their capital. By
\nspending money on something that is neither causal, measurable or directly \u201cbeneficial\u201d
\nto the Company, shareholders rightly have the ability to at least question that spend,
\nthe amount of that spend and seek to have it constrained (or in the extreme, completely
\ncurtailed).
\nHowever, what if the Company can defend the outlay as one which does not
\ndiminish shareholder wealth and quite possibly enhances it whilst achieving
\npositive outcomes for stakeholders and societal interests?
\nThat\u2019s our bingo moment. (BINGO!)<\/p>\n
—–<\/p>\n
gift from a company
\nV2.0 of DONATION.<\/p>\n
REFRAME THE COMPANY DONATION IN TERMS OF<\/p>\n
ECONOMICS OF BEHAVIOR<\/p>\n
INTRODUCTION<\/p>\n
Traditionally, corporate donations have been motivated by a combination of charity and a desire to help others.<\/p>\n
awareness of the need for the company to “give back” Charities rely on donations to survive.<\/p>\n
needed to show that “doing good” would help the company not only financially but also in terms of reputation.<\/p>\n
However, the Company should acknowledge its standing in society as a result of the donation.<\/p>\n
as a responsible “person” who has adhered with certain societal norms to some extent<\/p>\n
As a result, there are expectations and obligations.<\/p>\n
However, there are two drawbacks to this strategy:<\/p>\n
I attempting to quantify the “benefit” \u2013 as the primary motivator is still mostly altruistic<\/p>\n
and<\/p>\n
(ii) the Corporation’s legal structure, which poses numerous challenges and risks.<\/p>\n
conflicts<\/p>\n","protected":false},"excerpt":{"rendered":"
corporate donation DONATION V2.0. REFRAMING THE COMPANY DONATION BASED ON BEHAVIOURAL ECONOMICS INTRODUCTION Traditionally, the corporate donation has been driven by a combination of altruism\u2026<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9033,7586,1386,7589,9034,9031,7587,7588,7584,7585,9032],"tags":[8809,7838,8811,8808,8813,8807,8806,8814,8810,8812],"class_list":["post-106914","post","type-post","status-publish","format-standard","hentry","category-assignment-help-uae","category-best-dissertation-writing-service-in-australia","category-best-research-paper-writing-services-in-usa","category-capstone-project-writing-service","category-cheap-essay-writing-services-china","category-essay-writing-service-usa","category-legitimate-phd-dissertation-writing-services-usa","category-term-paper-writing-service","category-thesis-writing-service-in-canada","category-uae-best-dissertation-writing-help-service","category-write-my-essay-australia","tag-best-master-thesis-writing-service","tag-best-thesis-writing-services","tag-cheap-thesis-writing-services","tag-master-thesis-help","tag-master-thesis-writing-service","tag-thesis-help-online-free","tag-thesis-writing-help-online","tag-thesis-writing-services-cost","tag-thesis-writing-services-near-me","tag-thesis-writing-services-reviews"],"_links":{"self":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts\/106914","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/comments?post=106914"}],"version-history":[{"count":0,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts\/106914\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/media?parent=106914"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/categories?post=106914"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/tags?post=106914"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}