The Importance of Giving Back
William is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
One hears all of this talk about social responsibility. Who does it benefit? Should companies give back to the community in which they operate? The answer to the first question is everyone. The answer to the second question is that they should give to the community because giving to the community pays intangible dividends to the company doing the giving.
Education
When a company gives to education the rewards can come in the form of a better educated future workforce and consumer base. The earnings of the better educated portion of the population are increased thus increasing their spending power. One donation I found particularly interesting is the gift by Berkshire Hathaway’s (NYSE: BRK-B) Warren Buffett to 15 elementary school children that were finalists in a business contest. This instills in them that capitalist ideals are rewarded for doing things right. There is also a possibility that one of these students could go on to replace him or work for his company, so it is in his best interest to support education so future employees can add value to his company. The Wal-Mart Foundation has programs for its associates such as programs for first-generation college students and the Lifelong Learning program that provides tuition and credit assistance for its associates.
Natural Disasters
Companies understand that customers have long memories when it comes to how they respond during natural disasters. On June 29, 2012, West Virginia, along with several other states from the Midwest to the Mid-Atlantic, was hit by a storm called a “derecho.” Storm and outage details from Appalachian Power reported more than four million outages across 10 states as a result of the storm. According to Wal-Mart (NYSE: WMT) Media Relations Senior Manager Dianna Gee * Wal-Mart was not immune from the outage with 156 of its own stores and clubs losing power across five states. Based on the conversation, the company was really responsive to community needs. She said that nine truckloads of water and two truckloads of food were donated in West Virginia. More than $100,000 in food and water was donated in five states that were affected by the storm. Wal-Mart worked with local agencies such as the Red Cross to see how they could “best impact areas of need.” For example, in New Martinsville, West Virginia they provided over 4,000 bags of ice and gave three air conditioner units to a nursing home.
In addition to donations, Gee also discussed Wal-Mart’s Emergency Replenishment Team which is tasked with staying in touch with community needs and stocking items like ready to eat packaged foods during power outages then transitioning back to more fresh and perishable products as power is restored. According to Gee the focus is on three things: 1. taking care of their associates, 2. getting stores up and running to help establish a sense of normalcy, and 3) supporting the community that supports them on a daily basis. Customers have long memories of large corporate behavior. When the residents of West Virginia see the actions of Wal-Mart they will remember it when they decide to go and spend money. A company wants to be seen as friendly toward the community. In fact Wal-Mart was the largest donor in 2010 giving a little over $319 million.
Don’t be perceived as the Enemy
A company does not want to be perceived by the public as the enemy especially if it is in an environmentally sensitive business such as chemicals. For instance, Dow Chemical (NYSE: DOW) tries to invest in environmentally friendly initiatives in the areas in which they operate. Specifically, in the State of Michigan they support groups like the “The Conservation Fund” and “Lions Club.” In 2010 Dow gave $34 million dollars. A company that is perceived to be the enemy can invite scrutiny from protest groups and government regulators even if they haven’t done anything wrong. Also when something does go wrong like an accident, people are more forgiving when they see the company trying to behave properly under normal circumstances.
Final Word
Giving back benefits the company and the community. When I was child I would have been positively influenced towards capitalism had I been given shares of Berkshire Hathaway as an award. It would have reinforced my understanding of the long-term values of holding stocks and making good decisions. Giving back promotes a better, stronger society in the form of a higher earning, a better educated workforce and consumer base, and a positive long-term brand image. Investing in socially responsible companies is a valid component in evaluating stocks.
Bibliography
The 10 Most Charitable Companies in America @Yahoo Finance
Appalachian Power Outage Details Websites
Buffett gives 1.9B to Gates, other Charities from the Associated Press via Yahoo! Finance
Dow in Michigan-Corporate Donations @www.dow.com
*July 9, 2012 Phone Conversation with Dianna Gee Senior Manager Wal-Mart Media Relations
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