Monday, November 07, 2005

Charity and the Corporation

Bill and Melinda Gates

In the last five years, Bill Gates (founder of Microsoft) and his wife Melinda have given approximately $6 billion to charity. The two projects that have commanded the most of his attention are AIDS and Malaria.

The Gates are rare among billionaires. Most people who accumulate this much wealth and power tend to act like the modern equivalent of the medieval Duke or Lord. They seek to build the largest empire they can, attacking rivals and conquering "market share." In this quest, nothing is considered immoral. The only question to consider is whether one can get away with the action and how much it would cost them if they get caught. The law itself, and the instruments for making law, becomes strategic tools to be put to the most profitable use.

Then, when these corporate Barons reach the point where they no longer wish to rule their income or they die, they hand their empire over to an heir. That heir may be a biological descendent, or some younger man (usually a man) who has sufficiently impressed them and been "adopted" (in a sense) as an heir to the throne.

Gates says that his daughters will inherit only a small portion of his vast wealth. He does not want them to inherit too much because, he says, it would harm them to do so. Of course, he is not talking about physical harm. Rather, the view seems to be that easy access to wealth is damaging to one's character. Bill and Melinda Gates seem to think that it is better that their children have good character than lots of money.

The way that Bill Gates speaks about the work that Microsoft does seems to be consistent with this line of thinking. He speaks of his software empowering people, allowing them to do things that they would not have otherwise be able to do. He might say that the money he has received is insignificant when balanced against the power he has given to others.

I can see where the argument is coming from. From the time I started to study ethics, I wanted to spend my time looking seriously at moral issues and publishing the results of that research. Now, at virtually no cost to myself, I can research an issue from the comfort of my own den, write up an essay evaluating that issue, and publishing for others to see. I hope that I can show that I am better than those who try to push an agenda without concern for the quality of their arguments -- the "I do not care if I am right, as long as I am persuasive" crowd.

Of course, Gates, is not the sole person responsible for this. Questions can be asked about whether I would be do more of this or less if Microsoft had been less successful. Yet, there is no questioning the fact that his actions have given the fight against AIDS and Malaria $6 billion more in the last five years than they would have otherwise had. There is no questioning the fact that if others had gotten this money, many (most?) would have used it to grow their kingdoms rather than provided help to others.

Okay, there are some things about the way that Microsoft does business that I do not approve of. I am not here to sing the praises of everything that Bill Gates does. At the same time, there are come things for which he does deserve praise.

Cause-Based Marketing

Many companies try to improve their image through "special offers." They will tell you that, in exchange for purchasing their product, they will make a contribution to charity. This is supposed to make you, the customer, feel good about buying their product. Once you get in the habit of buying their product, and feeling good about it, they hope that you will continue to buy the product, even when they are not supporting a charity.

Yet, when a company does this, there often is not much to feel good about.

Let us imagine a case in which Company A has a product that sells for $5.00. For each item sold, they will contribute a $0.25 to Charity C, which we assume is a worthy and important cause. If you are interested in supporting that cause, is it worthwhile to purchase this product from Company A?

You will need to look carefully to find out. I invite you to consider the possibility that Company A has a competitor, Company B. Unlike Company A, this company does not spend large amounts of money on commercials and other expenses. It simply sells its y product for the lowest price possible. As a result, you can pay $3.00 for what others are paying $5.00 for.

I would like to recommend buying Company B's product and, for each unit that you buy, you send the $2.00 you save to the same charity that Company A is claiming to support. You will spend just as much money. You will have a chance to feel eight times better about yourself. And the charity will have a lot more money to do good deeds with.

Finally, you are the one who gets to write the charitable donation off of your taxes, rather than allowing the corporation to write it off of theirs. Let us assume that, during the course of this promotion, a customer purchases 100 units of product from Company A. Company A makes a $25.00 donation to Charity C. Company A then takes a $25.00 tax deduction from its taxes. If the customer had written a $25.00 check to Charity C directly, he would have collected the tax refund.

The customer, in this case, is arranging for Charity C to benefit from a $25.00, but it is also donating the tax refund it would have gotten from that contribution to Company A.

Of course, if this individual would not have made any type of donation to charity, and thus not gotten any tax deduction, then there is some merit to the corporate program. Twenty-five cents is better than nothing.

Yet, I am writing this section of this post for people who do care, who may be tempted into participating in such a gimmick precisely because they think it does some good. I am writing to say, “You can do better.”

In addition, give some thought to how much this company is spending to advertise its charity. How much does it cost to print all of the promotional materials that go along with their charitable work? How much do they spend buying the advertising that they go through to inform you about their promotion? What would happen if that money went to the charity instead of what comes out of each of your purchases?

When is the last time you took out an advertisement in a paper to announce to the world that you made a charitable contribution? If you ever feel tempted to do so, I would recommend sending the charity the money that would have paid for the advertisement as well.

This is not to say that all cause-based marketing fits this pattern. Where a company invites a customer to contribute a dollar to some cause, adding the money to the bill, would not qualify for this type of criticism.


Why did I write this particular essay? What is its point?

The issue that I have discussed under “Cause-Based Marketing” has bothered me for some time. I have acquaintances who go to a great deal of effort promoting these campaigns because they think that they are benefiting an important cause. I watch them buy – and push others to buy -- $100 worth of product so that they can arrange for the company to make a $10 contribution to “the cause”. They could have done more good by sending the charity itself a check for $20.00, and made it up by buying $20.00 less of that product.

Then, I read the interview on Bill Gates. I listen to these same people complain about purchasing Microsoft products when, in fact, Microsoft has made it possible for medical research programs to get over $1 billion per year – without gimmicks, without high-price advertising, and without customer contribution, simply because the person who founded the company cares about the causes he contributes to.

This represents two different attitudes towards making charitable contributions, and the way that a careful marketing campaign can manipulate public attitudes to favor the one that produces the least benefit.

I thought that the issue needed some perspective.


Anonymous said...

you did not mention that Bill Gates does not contrubute great sums to PACS or polititions therefore they do not like him nor his success. Just an additional comment

Anonymous said...

Though I agree that the big bad corporation can use the excuse of charity to raise a larger profit margin. You have to realize that the biggest profit earners are the charities themselves.

In England the largest money earners are acctualy people like the Red Cross and Christian Aid and not the people who pay into them. Sure the Co. gets a tax write off but the Charity is allowed to with hold active funds for "emergency" reasons (in case people stop giving them money) which they gamble on the stock industry.

These charities tend to raise 4 - 5 million dollars a year in this act alone which never ends up in the hands of the people that need to be helped but the directors that run the charity.

I would like the rules between Co. and Non-Profit to be given a 3rd option where you can have a self circulating charity where company are rewarded for doing the right thing. For example if a company makes parts for a computer and as part of its charity buys computers for schools which increase the sales of the parts they make surely that makes more money to spend on computers for schools? I think this is a better option than the Charity profit margin swindle because if the company grows then it the benefit to the people grow but in order to keep this going you would have to create a 3rd locked in system something in between Non-Profit and a Corporation.