Uzma

Determinants of Corporate Philanthropy

Introduction:

Corporate Philanthropy is "Private Sector Involvement in Voluntary Promotion of Human Welfare". Corporate Philanthropy came under the Discussion of Corporate Social Responsibility (CSR). Lord Holme and Richard Watts define CSR as “It is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large". Milton Friedman (1970) argued that “There is one and only one social responsibility of business- is just to Maximize their Profits for Its Shareholders". Similarly Elaine Sternberg argued that “Using business resources for non-business purposes is theft- an unjustified appropriation of the owners' property”.The same view was of Martin Wolf, he wrote in the Financial Times: “The role of well run companies is to make profits not save the planet. Let them not make the error of confusing the two". So, this clearly shows the arguments of those economist or businesses who are against the CSR and for them only responsibility of Corporate is to maximize their profits.

With the passage of time the concept of CSR got lot of importance and the opinion of Businesses and Economist have changed a lot. Like Peter Drucker (1984) emphasis on social responsibility to maintain an equilibrium in society. He said that "a Healthy business, a healthy university, a healthy hospital cannot exist in a sick society". So it means if Corporations want to have a healthy business then they should have to contribute in the development of the Society. Similarly Lord Browne Madingley, (Group Chief Executive of BP, 2001) argued that “We are part of society and have a responsibility to the world in which we operate. This is not a matter of charity but of investment, because our continued success depends on, among other things, the progress of the communities in which we work”.

Objectives of the Study:

The objectives of my study are;

    1. What are the determinants of corporate philanthropy in Pakistan?

    2. Do people here do it only for image, or do they have genuine social concerns?

    3. What is the impact of any disaster on firm’s philanthropic contributions?

    4. How much corporate philanthropy practiced in Pakistan is compatible to Shariah?

Research Question:

Research Questions which this study try to answer are;

    1. Does earning before tax affects the firm's Contribution level?

    2. Does increase in tax prices affects the firm's Contribution level?

    3. Does leverage affects the firm's Contribution level?

    4. Does number of employees have any affect on firm's Contribution level?

    5. Does advertisement intensity have any affects on firm's Contribution level?

    6. Does dividends of previous year affects firm's Contribution level?

    7. Does Large firms Contribute more towards Philanthropy?

    8. Does any Macroeconomic Shock affects Firms Contribution level?

Significance of the Study:

As the Government alone can’t do any thing which significantly effects the development process of the society, especially in this era, when there is emphasis on the lesser role of Government. So Corporate sector should have to come forward and contribute for the development of the society along with the Government and Non Government Organizations. Its Corporate Responsibility to Give It Back to the Society, from where they Earn. This study will In-Sha-Allah motivate the Corporate Sector to Contribute in the development of the society.

Secondly, As American Corporate Philanthropy is based on Profit Maximization (Self Interest) Motive, While Japanese Corporate Philanthropy is Based on Ethical Values, This study Will IN-SHA-Allah highlight the actual Motives Behind the Pakistani Corporate Philanthropy.

And the Most important, this study will explain whether the Philanthropic contributions done by the Corporate Sector are according to Shariah or not, and if they are not compatible to Shariah then what should be done to make it according to Shariah.

Up till now there has been no significant work been done on this field in Pakistan. So my study will be a Contribution for the promotion of Corporate Philanthropy in Pakistan, and this Philanthropy will not be, what is practiced in West, as just for show off and image creation and for profit maximization. It will be based on Real essence of the Islamic society, and we all should have to contribute for the application of the Islam. This is the only way of success, not only in this world but hereafter.

References:

    1. Bin Okmyung and Bob Edwards (2009), “Social Capital and Business Giving to Charity Following a Natural Disaster: An Empirical Assessment”, Journal of Socio-Economics, 4(38) : 601-607.

      1. K. Sadique, Foqia and Uzma Nomani(2002). “Corporate Social Responsibility and Natural Disaster Reduction in Pakistan”, Sustainable Development Policy Institute.

    2. McWilliams, Abagail and Donald S. Siegel(2005) “Corporate Social Responsibility: Strategic Implications”.Journal of Management Studies, 1(43):1-18.

    3. Muller, Allan and Gail Whiteman(2008), “Exploring the Geography of Corporate Philanthropic Disaster Response: A Study of Fortune Global 500 Firms” forthcoming Journel of Business Ethics.

    4. Makki ,Muhammad Abdul Majid and Suleman Aziz Lodhi “Determinants of Corporate Philanthropy in Pakistan”, Pakistan Journal of Commerce and Social Sciences, vol 1.

    5. Oosterhof. Liesbeth , Ard Heuvelman and Oscar Peters (2009)."Donation to disaster relief campaigns: Underlying social cognitive factors exposed". Evaluation and Program Planning 32:148-157.

    6. Brammer. Stephen and Andrew Millington(2008),"Does it Pay to Be Different? An Analysis of The Relationship Between Corporate Social And Financial Performance", Strategic Management Journal 29:1325-1343.

    7. Navarro, Peter (1988)."Why Do Corporations Give to Charity". The Journal of Business,1(61):65-93.

    8. Muller, Alan and Roman Kraussl(2010)."Doing Good Deeds in Times of Need: A Strategic Perspective on Corporate Disaster Donations". Forthcoming in Strategic Management Journal.

    9. Brammer, Stephen and AndrewMillington(2006)."Firm Size, Organizational Visibility And Corporate Philanthropy: An Empirical Analysis. Business Ethics: A Europeon Review 1(15).

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