Corporate Philanthropy and the Business Benefit: The Need for Clarity

It is supposed that corporations give to charitable causes out of self-interest - indeed, it is argued that this is all that the law permits - as a measured business response to political pressures and public hostility.s But can corporations give out of altruism - simply on the basis that giving is the social responsibility of all citizens, including corporate citizens? Case law and some commentary appear to answer no. Nevertheless, the actual giving practices of corporations seem, difficult to explain otherwise. Recently, the American Law Institute ( ALI ), as part of its Corporate Governance Project, proposed a rule to define the limits of a business corporation\u27s power to make charitable contributions - Proposed Section 2.01, The Objective and Conduct of the Business Corporation. This need for clarity or harmony is the subject of this essay. Part II summarizes a philosophical debate between two scholars on the mission of the corporation. Part III briefly traces the historical development of the relevant principles and Part IV examines the actual philanthropic practices of several large publicly held corporations. Finally, Part V considers the continuing significance of the common law rule in light of these practices and urges support for the ALI proposal