Strategic Philanthropy

Beginnings of Corporate Philanthropy

The concept of philanthropy evolved through business history even before the broader corporate social responsibility movement had taken shape. The concept of business responsibility that prevailed in the United States during most of its history was fashioned after the traditional, or classical, economic model of the firm. Dominant in the late 1800s and early 1900s, the economic model of the firm thought of the marketplace as the primary determinant of what business firms did in their communities and in society. The pattern of corporate philanthropy in Europe and other parts of the Western world paralleled its development in the United States. Unfortunately, though the marketplace did a reasonably good job in deciding what goods and services should be produced, it did not fare as well in ensuring that business always acted generously, fairly, and ethically. In addition, business created many social problems and the view was developing that business had some responsibility for these social problems that extended beyond just producing goods and services.

Years later, when laws began to be passed constraining business practices, it might be said that a legal model emerged. Society's expectations of business changed from being strictly economic in nature to encompassing issues that previously had been at business's discretion. Over time, a social model of the firm emerged. What this social model did, in effect, is embrace both the economic and legal emphases and add yet another layer of expectations by society that business would assume some role in addressing social problems and issues that had arisen.

In the late 1800s and early 1900s, initial indications of business's willingness to contribute to the community were localized efforts toward meeting community needs through philanthropy, or business giving, and paternalistic practices. It is evident that businesspeople did engage in philanthropy—contributions to charity and other worthy causes—even during the periods that were dominated by the traditional economic view. Voluntary activities to improve, beautify, and uplift the community were evident. One very early example of this was the cooperative efforts between the railroads and the Young Men's Christian Association immediately after the Civil War to provide community services in areas affected by the railroads. These initiatives, in hindsight, can now be seen as early examples of strategic philanthropy, because they benefited both the communities and the railroads.

The emergence of large corporations during the late 1800s played a major role in hastening the movement away from the strict classical economic model of the firm in society. As the economy transitioned away from one dominated by small, powerless companies to large corporations with more concentrated power, questions of business responsibility began to be raised. By the 1920s, community service had become much more important for business. The most visible example of this was the Community Chest movement, which received its impetus from business.

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