Charitable
Contributions by Corporations
— Outline
A. P. Smith Mfg. Co.
v. Barlow
- 1. Identify PROBLEM:
- A. Who decides?
- B. Whose money
is it?
- Shareholders?
- Who are the
shareholders?
- (1/2 pensions,
1/4 ultra rich)
- Other corporate
participants?
- In a market,
why would
shareholders
get the marginal
increase in
corporate
returns? More
likely to
go to a participant
in a less
competitive
market with
more bargaining
power: consumers,
suppliers,
wage earners
or entrepreneur.
- C. Corporate
Purpose?
- 2. Corporate benefit:
- A. Corporate self-interest
narrowly understood:
FREE RIDING.
- B. Corporation
as social citizen:
without Princeton,
will it have engineers?
- C. Corporation
as tax haven: tax
evasion by contributing
at the corporate
level.
- D. Charity as “good
business”: Public
Relations
- Should that
mean a ban on
anonymous giving?
- 3. Social Implications:
- A. Decline of the
Aristocracy: who will
be the non-governmental
funders?
- B. Free Riding generalized:
If no one contributes,
what then?
- Public vs. Private
funding: who decides
which public goods
will be funded, Congress/Legislatures
or corporate managers?.
- C. The minimum becomes
the maximum: following
the no-true-charity
rule, is a firm permitted
to pay above market
wages? To be cleaner
than the EPA requires?
Safer than OSHA? Insurance
not mandated by the
Taxi and Limousine
Commission? Have executive
bathrooms if you can’t
prove they lead to
better executives?
- D. Is EXCESSIVE charity
a problem that we
must worry about?
- — Armand Hammer,
building a personal
monument with corporate
money.
- — Statute of
Liberty: $5 of publicity
for every nickel of
charity.
- Can the shareholders
protect themselves
without court intervention?
- Can other corporate participants protect themselves without court intervention?
- Who pays for corporate charitable contributions?
- Non-shareholder roles have no judiciable cause of action
- Are there incentives
for managers to give
away corporate money?
- Will managers pay
the price? (I.e.,
if they can give away
corporate money to
the arts, can’t
they just take it
for themselves?)
- 4. Rules:
- Reasonable (relative
to...)
- No pet projects (how
extreme?)
- Corporate benefit
(before or after free
riding?)
- Anonymous gifts? (If
the reason for allowing
charity is that it
is advertising/PR,
then anonymous gifts
shouldn’t be
allowed. What if the
charity is viewed
as being the indirect
gift of shareholders
or other corporate
participants? ).
