The Jewish Ethicist: The Corporation and the Community, Part 3
Ethics of corporate philanthropy.
Q. Should corporations contribute money to charity?
A. We previously discussed the issue of corporate community involvement. We concluded that such involvement is justified because shareholders want it, because it is good for business, and because it is simply irresponsible for firms to ignore their vast impact on communities. This corporate responsibility is no more than an extension of the individual social responsibility of owners. At the same time, we don't want to see the cultivation of "corporate busy-bodies"; the main focus of corporate concern should be on those groups, known in business jargon as "stakeholders," who are most directly impacted by corporate activity.
While corporate philanthropy might sound like an unqualified benefit, it actually raises a number of ethical concerns. Here are two:
- Legitimacy. Management might support their personal favorite charities, at the expense of the financial and ethical interests of the owners. Jewish law forbids a manager to arbitrarily decide on distribution of profits to charity; profits should be distributed to the owners who can then decide for themselves what charities to favor. (1)
- Authenticity. There is nothing wrong with marketing and advertising, but sometimes marketing expenses are camouflaged as charitable contributions. For example, a prominent marathon race has a number of sponsors. One is a private family; this is probably a charitable donation. Another is a maker of running shoes, which probably hopes to influence a natural target audience. While there is nothing objectionable about such sponsorship, it hardly qualifies as community involvement. There is a direct parallel to this in Jewish law. It is permissible and even praiseworthy to give money to the synagogue in return for various honors, such as reading from the Torah. But it is improper to count these contributions as part of our regular charity budget. (2)
So the resolution of the ethical dilemma is to engage in corporate charity, but to limit and focus donations. But we should also examine the source of this dilemma.
The whole ethical dilemma regarding charitable contributions from business profits stems from the definition of the commercial firm as a purely financial enterprise. We have no problem with the fact that non-profits such as schools or hospitals are not totally focused on the bottom line.
Yet ultimately, this dichotomy between profit and non-profit enterprises is somewhat artificial. Human beings are whole people and engage in a variety of activities; organizations should be able to do this too. This is increasingly recognized, and more attention is being paid to commercial firms which explicitly adopt social goals, such as the Scott Bader Commonwealth touted by E.F. Schumacher in his bestseller "Small is Beautiful", or the Basque Mondragon cooperative.
Rav Yisrael Meir HaKohen, in his classic work "Ahavat Chesed" ("Loving kindness") states that the ideal is to combine the goals of livelihood and charity. He writes that if a business is explicitly founded on the basis that a fraction of its profits (he discusses a tithe) are devoted to charity, this is more than merely a "donation" to charity. The business itself is in partnership with God, and the running of the business itself is a special mitzvah! (3)
It is appropriate for commercial companies to give modest amounts to charity in accordance with shareholders' desires, business interests, and above all any opportunities to help the community due to the firm's situation. At the same time, we should be looking beyond this narrow model of business as focused on profits and giving charity "on the side". Ultimately, we should internalize the lesson of the "Ahavat Chesed" and envision more ideal organizations whose entire goal is to be help mankind as active partnership in God's work of creation.
(1) Rema Yoreh Deah 177:22. (2) Taz, Yoreh Deah 249:1. (3) Ahavat Chesed end of chapter 20.
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The Jewish Ethicist presents some general principles of Jewish law. For specific questions and direct application, please consult a qualified Rabbi.
The Jewish Ethicist is a joint project of Aish.com and the Business Ethics Center of Jerusalem. To find out more about business ethics and Jewish values for the workplace, visit the JCT Center for Business Ethics website at www.besr.org.