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Transcript of 1. Community and Corporation - Current Issues
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THE COMMUNITY AND THECORPORATION
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2008 The McGraw-Hill Companies, Inc. All rights reserved. 17 - 2
Key Learning Objectives
Defining a community, and understanding the interdependencies between
companies and the communities in which they operate
Analyzing why is it in the interest of business to respond to community
problems and needs
Knowing the major responsibilities of community relations managers
Examining how different forms of corporate giving contribute to building
strong relationships between businesses and communities
Evaluating how companies can direct their giving strategically, to further their
own business objectives
Analyzing how can collaborative partnerships between businesses and
communities can address todays pressing social problems
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The Firm and its Communities
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BusinessCommunity Relationship
Relationship is one of mutual interdependence
There are expectations on both sideswhat the business expects from
the community and what the community expects from the business
List of common expectations shown on next slide
In best situations, community support of business and business support
of community are in balance
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What the Community and Business
Want from Each Other
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The Business Case for Community
Involvement
Civic engagement
The active involvement of businesses and individuals in
changing and improving communities
Reasons for community involvement
Major way to carry out corporate citizenship mission
To win local support for business activity, be granted an
informal license to operate in the community
Helps to build social capitalthe norms and networks thatenable collective action
High levels of social capital enhance a communitys quality
of life
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Community Relations
Is the organized involvement of business with the community
Grown in importance in recent years from fringe function tomainstream/strategic
Corporations have established a specialized community relations
department, either stand-alone or as part of public affairs department
Boston College Center for Corporate Citizenship study:
81% of companies now include a statement in their annual reporton their commitment to community relations
74% of companies have a written policy or mission statement fortheir community relations program
68% of companies factor community involvement into their overallstrategic plan
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Corporate Involvement in the Community
Top concerns identified in 2005 survey of communityinvolvement managers:
Education
10th year in a row was identified as top issue
Health care
Economic development
Higher education
Housing
Others including literacy, environmental issues, crime, job
training, and transportation
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Corporate Involvement in the Community
Social issues areas where a number of corporations arenow focusing their efforts:1. Economic development
2. Crime abatement
3. Housing
4. Welfare-to-work job training5. Aid to minority enterprises
6. Disaster, terrorism, and war relief
Following set of slides gives examples of these types ofinitiatives
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Micro-Credit: A New Model of
Economic Development Grameen Bank (meaning village bank), based in Bangladesh, is an internationally
recognized innovator in the field of economic development.
In 1974, Muhammad Yunus, an economics professor at Chattagong University,took his students on a field trip to a poor rural village.
There, they interviewed a woman who supported herself by crafting bamboostools.
The woman had to borrow money for raw materials at the outrageous interest rateof 10 percent a week, leaving a profit of only one penny per stool.
The professor, shocked by what he saw, began lending his own money tovillagers.
Finding that small loans helped many people pull themselves out of poverty,Yunus founded Grameen in 1983 to provide micro-creditto individualentrepreneurs who would not normally qualify for loans.
Today, Grameen has nearly two thousand branches and serves six millionborrowers. These millions of small people with their millions of small pursuitscan add up to create the biggest development wonder, Yunus has said.
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Corporate Community Involvement
Crime Abatement
Example of Minnesota HEALS
In the mid-1990s, the crime rate in the metropolitan area of St.
Paul-Minneapolis, Minnesota, had become so bad that out-of-
town newspapers called the city Murderopolis .
Collaborative alliance formed by 60 companies, includingHoneywell, General Mills, 3M, and Allina Health Systems, local
and state law enforcement agencies, and civic groups to address
public safety issues in the community.
Among the initiatives were development of an integratedinformation system for law enforcement agencies, better housing,
job training, and after school programs .
Crime rates dropped sharply, and the overall climate for business
in the city improved
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Corporate Community Involvement
Housing
Life and health insurance companies have taken lead torevitalize housing through nonprofit organizations like the
Neighborhood Housing Services of America (NHS).
New York Citys coalition for the homeless includescorporate, nonprofit and community members.
Many corporations work with NGOs, like Habitat for
Humanity
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Corporate Community Involvement
Welfare to Work
Example of work of Bank of America (BofA) BofA has partnered with Women in Community Service (WICS),
a nonprofit organization that provides job and life skills training to
women who are on public assistance, in prison, or are homeless or
living in public housing
Bank has contributed staff, products and services, internship
opportunities, and money to WICS, and has hired thousands of
new employees out of welfare-to-work programs
BofA has experienced many benefits: an improved reputation, tax
credits, and recruitment of motivated workers
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Corporate Community Involvement
Aid to Minority Enterprises Example of work of Microsoft:
Microsoft spends $10 billion annually on procuring supplies and
services, 5 percent of this is directed to minority-owned businesses
According to Microsofts Director of Supplier Diversity
The general rule here, is, if all other things are equal, pick the
minority company
Microsoft works closely with its minority suppliers to refine their
business processes to make them more competitive
An example is Group O Direct, an Illinois-based firm thatprovides fulfillment services for customer promotions
Group O Direct, a Mexican-American owned firm, now has
several other high-profile clients, including SBC Communications,
and annual revenues of more than $50 million
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Corporate Community Involvement
Disaster, Terrorism and War Relief
Example of corporate giving for Tsunami relief inDecember 2004:
Their donations, estimated to be around $2 billion, collectively
exceeded those of most governments
Many companies drew on their own expertise to lend a hand:
United Parcel Service mobilized its planes to airlift disaster relief
supplies to the region free of charge
Pfizer donated millions of dollars worth of medicines
GE sent power generators and mobile water treatment plants
British Airways, Intel, and Cisco collaborated to set up a high-speed
wireless Internet network in Banda Aceh, Indonesia, to enable
communications in and to one of the hardest-hit areas
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Corporate Philanthropy Programs
Important aspect of business-community relationship,involves corporate giving to non-profit organizations
Business is only one part of U.S. societys generous giving
patterns As shown on next slide, in 2005 $260 billion was given to
religious, charitable and other non-profit organizations
Business was small, but important, percentage of overall giving
(5%), remainder through individuals and private foundations
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Philanthropy in the U.S. by
Source of Gift, 2005Figure17.3
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Corporate Philanthropy Programs
Corporations can give directly or through establishingcorporate foundations
U.S. tax rules since 1936 have allowed 10% of companys
before-tax income to go to educational, charitable,scientific and religious purposes
Average yearly corporate giving is between 1 and 2% of pre-tax
income
In selected companies and communities, firms give as much as 5%
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Corporate contributions in the United States, as a
percentage of pretax net income
Figure 17.4
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Forms of Corporate Giving
1. Charitable donations (cash)
2. In-kind contributions
Donating products or services
Category now exceeds cash contributions
3. Volunteerism
Donations of employee time doing community work
Many companies sponsor and encourage volunteer activities
A small number of firms offer paid time off for volunteer
community service
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Corporate Giving in Strategic Context
Strategic philanthropy
Corporate giving that is linked directly or indirectly to
business goals and objectives. In this approach, both the
company and society benefit from the gift. Is made directly
from the company to community organizations, not
through a foundation.
Increasingly popular approach to corporate giving
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Strategic Philanthropy
Areas in which corporate contributions are most likelyto enhance a companys competitiveness, according to
Harvard Business Review study: Factor conditions - supply of trained workers, physical
infrastructure, and natural resources
Demand conditionsaffect demand for a product or service
Context for strategy and rivalry - designed to support policiesthat create a more productive competitive environment
Related and supporting industries - strengthen related sectorsof the economy, may also help companies
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Strategies to Optimize Benefit from
Contributions
Draw on the unique assets and competencies of thebusiness
Align priorities with employee interests
Align priorities with core values of the firm
Use hard-nosed business methods to assess the impact of
gifts
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Collaborative Partnerships
Introduced in Ch. 7 - voluntary collaboration between
business, government, and civil society
Education partnerships have been very effective, have
followed 4 waves:
1. Direct involvement (e.g. Adopt-a-School)
2. Application of management/business principles to school
administration
3. Public policy initiatives in education
4. Collaboration for systemic reform
Partnership model could be equally useful for other
community issues