The Corporation and the Community: Part 2 – The limits of corporate philanthropy

When do we cross the line from good corporate citizenship to irresponsible management?

Q. Last week you wrote that corporations should help the community in a limited way and where they have the greatest impact. Where do we draw the line?

A. Let’s begin by reviewing the ethical foundations of corporate philanthropy and its limitations.

It is a fundamental principal in Jewish tradition that charity is not the same as a tax levied to fund some specific need. The donor’s act of giving is at least as important as the benefit received by the recipient. One remarkable example of this principle is that in Jewish law, charity recipients are themselves obligated to give charity. Thus, someone who wants to support a needy individual has to give that person an amount over and above their personal needs in order that the recipient will have something left over to give to others! (1)

We find also that even though all farmers in the Land of Israel have to give tithes to the Levites and the poor, each farmer is allowed to decide which Levite and which poor person to help. (Today these tithes are usually redeemed and any obligation is fulfilled with money.) (2)

Based on this principle, an early Medieval authority, Rav Tuvia, ruled that a business manager or active partner shouldn’t give tithes from the investor’s profits; he is required to distribute the full profits to the investor, who will then give to the charity he sees fit. (3) We must enable the investor to fulfill by himself the commandment of charitable giving.

The same applies to a business manager today. Even if he knows for sure that all shareholders intend to give a certain fraction of their profits to charity, he shouldn’t arrogate to himself the decision of which donations to make. He must distribute the profits to the owners and let each one decide for himself.

Yet we also find that some charitable donations can be made from profits, and indeed are considered a business expense. Rabbi David Oppenheim pointed out in the seventeenth century that community representatives routinely deducted standard donations such as making a donation to a synagogue for being honored with an aliyah (reading from the Torah). (4) We can explain that these donations are expected of any respectable individual, as a gesture of friendship.

A parallel situation exists with respect to a guardian for orphans. Like a business manager (who is also a kind of guardian), he is not allowed to give charity from the funds of the orphans; rather, when the youngsters grow up they will receive the money and will decide how to fulfill their charitable obligation. They are exempt from financing even the most pressing communal needs. The only exception is donations which contribute to their status in the community, thus helping their acceptance and livelihood.

Yet if the orphans have poor relatives who are reduced to begging, we do give charity from their savings. It is a disgrace for a person to see his own relatives reduced to begging and to refrain from helping them.(5)

All charitable giving needs to be personal. That’s why managers should distribute profits to owners, who can individually enjoy the privilege of giving. But there are some kinds of donations which are beyond charity; they are simple expressions of dignity and self-respect. Giving a modest donation to a community which hosts us, or supporting relatives who have reached financial desperation, is not generosity ג€“ it is menschkeit, simply being a human being.

Managers need to identify areas where business contributions to the community are obligatory expressions of menschkeit. The expenses of being a good citizen, making amends for damages, and picking up a fair share of others’ desperate and immediate needs are fair demands for corporations which have the means to bear them.

SOURCES: (1) Shulchan Arukh Yoreh Deah 248:1. (2) Mishnah Demai 6:3 (3) Mordechai commentary on Bava Kamma, siman 192. (4) Chavot Yair 224. (5) Shulchan Arukh Yoreh Deah 248:3