Board of directors and industry determinants of corporate philanthropy

Abstract

Purpose – The purpose of this paper is to extend the current research on corporate philanthropy and organizational outcomes by empirically exploring two specific types of antecedents: board of director composition and industry membership. Design/methodology/approach – A theoretical framework was developed based on the resource dependence and stakeholder theories which suggest that the extent that firms build relationship with certain stakeholders is closely tied to the personal and social background of board members, in turn influencing the allocation of resources to corporate philanthropy. Hierarchical multiple regression analysis as well as analysis of variance with post hoc comparisons was conducted using multi-year data philanthropic data from 104 US corporations. Findings – The results provided empirical support for a positive relationship between the number of female board directors and the level of corporate philanthropy. In addition, the results showed significant inter-industry variations in the level of corporate philanthropy. This indicated that the rather aggressive role of philanthropy in mitigating reputational challenges associated with product-market dysfunctions. Contrary to the theoretical predictions, the results did not support a positive relationship between the proportion of outside directors and level of philanthropy. Research limitations/implications – The authors believe the empirical finding on the relationship between industry membership and corporate philanthropy is a significant contribution to the philanthropy literature. Accordingly, by empirically showing the disproportionately higher level of philanthropy by some prominent industries (such as gas and oil, financial services and chemical) than their counterparts, the authors contribute to the understanding of sector-level determinants of corporate philanthropy. Practical implications – Since board of directors have a direct involvement in reviewing and approving major corporate initiatives, the choice of these directors is more likely to influence the amount of resources committed to philanthropic causes. Consistent with other studies in the larger corporate social responsibility research, the authors found that more women directors on the board are associated with greater philanthropic spending. Hence, a major implication of the study is that shareholders and the general corporate community need to pay close attention into who is elected to serve as director of business organizations as these directors’ background and experience could shape major social responsibility initiatives such as corporate philanthropy. Originality/value – By empirically investigating the relationship between board composition and philanthropy, this study extends the scholarly discussion to focus on the role of the board in shaping the level of firm commitment in overall CSR. In addition, this study provides empirical evidence on the role of industry context in the level of commitment in corporate philanthropic activities.