Abstract
Nonprofit organizations play a crucial role in society. Unfortunately, many such organizations are chronically underfunded and struggle to meet their objectives. These facts have significant implications for corporate philanthropy and Kant’s notion of imperfect duties. Under the concept of imperfect duties, businesses would have wide discretion regarding which charities receive donations, how much money to give, and when such donations take place. A perceived problem with imperfect duties is that they can lead to moral laxity; that is, a failure on the part of businesses to fulfill their financial obligations to nonprofit organizations. This article argues the problem of moral laxity rests on a misinterpretation of Kantian ethics and, therefore, is really not a problem at all. As such, we argue corporate philanthropy while an imperfect duty should be interpreted more akin to perfect duties and, as a consequence, moral laxity does not arise for those corporations committed to acting on the basis of the moral law. More specifically, firms have duty-based obligations on the basis of benevolence, and as good corporate citizens, to help fund non-profit organizations.
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Notes
Nonprofits contribute substantially to our economies. In the United States, nonprofit organizations generate over $1 trillion in revenues, which accounts for 5.2% of gross domestic product (GDP) and 8.3% of total wages earned (Blackwood et al. 2008). In Canada, the nonprofit sector, including hospitals, colleges, and universities, added $87 billion to the economy in 2005, which makes up 6.8% of GDP. Nonprofit contributions to GDP were more than the agricultural, retail, food services, and motor vehicle manufacturing industries, and only slightly less than the mining and oil and gas industry (Statistics Canada 2008). Internationally, if the nonprofit sector were a separate economy, it would rank the seventh largest in the world, ahead of Italy, Brazil, Russia, Spain, and Canada (Salamon et al. 2004).
For our purposes throughout this paper we will use the term “nonprofit organization(s)”, unless otherwise noted, to mean those non-profit organizations whose purpose and activities provide support and aid to those experiencing need and vulnerability in society.
For Cummiskey, Kantian ethics is really consequentialism in disguise, since in acting beneficently we are to promote the ends of others and this generates a utilitarian-like normative theory.
Baron argues that Kant leaves no room for supererogatory acts. However, for Baron, although imperfect duties are unspecific, they should not be considered undemanding. There is no reason to think Kant’s imperfect duties are supererogatory or cause moral laxity.
See Statman (1996) for a detailed discussion of how one might fulfill one’s moral obligations. Interestingly, for Statman, he argues that the distinction between perfect and imperfect duties is not as clear-cut as Kant suggests. Moral obligations create reasons for action that may be stronger than, say, self-interested reasons tied to subjective preferences. Coming across a person in need and acting benevolently on the basis of duty, for example, constitutes a moral reason for action in the same way a duty to keep promises constitutes a moral reason for action. Duties of beneficence and promise keeping might be equally strong (or possibly weaker or stronger) depending upon the reasons given. In this sense, we ought not to think that perfect duties, by nature, are more morally binding than imperfect duties.
In Singer’s (2009) recent book, he argues individuals could increase personal charitable donations as a way of ameliorating need. After all, if everyone recognizes a moral duty of benevolence, an onus of responsibility for helping nonprofits financially falls on individual citizens. Singer, for example, argues for a progressive contribution scale ranging from 5% for people with a gross income of $105,000 annually to 33% for people with a gross income of $10.7 million annually. Collectively, says Singer, this would provide $471 billion extra for the world’s poorest from only the top 10% of income earners in the United States. Of course, increasing personal contributions need not solely be the responsibility of top earners as those with incomes below $105,000 could likely contribute modest amounts without significant hardship.
In terms of NGOs as stakeholders in the community, it should be noted that a Kantian duty of benevolence is not the only moral reason why there may be a need for businesses to transfer resources to this sector. It would seem to us that Kant’s view that humans have a moral duty to develop their talents would suggest that those organizations that created the conditions for developing people’s talents (organizations that are frequently NGO’s) would have a moral reason to be supported by the community, including businesses. Hence, while one would rule out a business contribution to a sports team in a wealthy neighbourhood as being a contribution that fulfilled a duty of benevolence, such a contribution could be fulfilling a moral duty to develop the talents of individuals (in this case those talents associated with competitive sport) within a community. Hence, one has, in our view, a general basis for business contributions that build human capacities within the community, assuming, of course, that Kant is right in our having a duty to develop one’s talents—something that is open to debate.
The vast majority of nonprofit organizational revenue does not come from donations or gifts but from earned income and government funding. Private giving (foundation grants, individual donations, and corporate contributions) only makes up a small percentage of the revenue nonprofits need to operate. In the United States, fees-for-service account for 57% of revenue, while government accounts for 30%. Private charitable donations only account for 13% of total nonprofit revenue (Sokolowski and Salamon 1999). Of the $307 billion private charitable donations in 2008, 75% came from individuals (including bequeathed donations), while corporate donations accounted for only 5% (AAFRC 2009). In Canada, the majority of nonprofit revenue comes from government (49%), earned income (35%), and private giving (13%). Of the revenues derived from private giving, the bulk of this funding comes from individual donations (at 8%) while corporate contributions make up only 3% (Hall et al. 2005). Internationally, the numbers are similar: of 35 countries surveyed, 53% of revenue came from earned income, 35% from government sources, and 12% from private giving (individuals, foundations, and corporations; Salamon et al. 2004). Although no specific percentage of corporate donations is identified, the trend suggests it would be low relative to individual contributions.
Transfer pricing occurs when related companies, such as a parent and a subsidiary, invoice on intercompany transactions as a way of shifting income from the U.S. to low-tax jurisdictions.
Kantian analysis suggests motivations are either self-focused for profit or focused on the social good. Behaviour research complexifies this, however, by showing the multifaceted nature of motivations and the possibility of multiple motivations being possible at a single time (i.e., both egoistic and altruistic). Such a critique of Kantian ethics would need to be addressed but will not be discussed in this paper. We do discuss issues regarding organizational decision-making and motive later that may have some bearing on this debate.
One significant problem with the Campbell et al. (1999) and Cowton (1987) studies is that the information could have been tainted by social desirability bias. This bias is based on the notion that executives and managers are merely saying they are altruistic because this is what shareholders and/or the public wants to hear. In the Dutch study (Meijer et al. 2006) cited above, the social desirability bias was controlled by asking companies if they made public the cause or organization to which they donated and how much they donated. Of the respondents surveyed, 86% said they did not disclose to whom or how much was given. However, it is unclear whether social desirability bias was controlled for in the Australian or Canadian studies cited above; therefore, these may be unreliable.
Over the past three decades, more than one hundred papers have been published studying the link between corporate social responsibility, which often includes financial donations to nonprofits, and financial performance. At best the link is equivocal. Some research shows a negative relationship between being a good corporate citizen and profitability (Bromiley and Marcus 1989); others reported a positive relationship (Bowman 1978; Ingram 1978; Spencer and Taylor 1987), including two meta-analysis studies (Griffin and Mahon 1997; Orlitzky et al. 2003); and still other studies have found a positive correlation between being social responsible toward employees and financial performance only (Bergman et al. 1999).
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Ohreen, D.E., Petry, R.A. Imperfect Duties and Corporate Philanthropy: A Kantian Approach. J Bus Ethics 106, 367–381 (2012). https://doi.org/10.1007/s10551-011-1002-y
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DOI: https://doi.org/10.1007/s10551-011-1002-y