LFMI’s research on corporate giving

The Lithuanian Free Market Institute, the Open Society Fund and the U.S.-Baltic Foundation carried out the first project on philanthropy in Lithuania. The project, entitled “Promoting Philanthropy in Lithuania”, was co-ordinated by LFMI’s Vice-President Ugnius Trumpa and LFMI’s Development Officer Aušrinė Lisauskienė.

As part of the project, LFMI conducted a survey among business leaders to elicit their attitudes towards charity and support. The purposes of the survey were to evaluate corporate giving practices in Lithuania as well as to ascertain prevailing motivations for giving and factors determining enterpreneurs’ involvement or non-involvement in giving. The research findings are expected to help perceive the thinking of the business community and investigate the influence of local and new wave western traditions on giving behaviour. The survey was headed by Kęstutis Masiulis, PhD. The key objective of the project “Promoting Philanthropy in Lithuania” was to increase the understanding of voluntary giving among business people and the general public as well as to create an environment conducive to giving practices, thereby promoting civil society and the development of the non-profit sector in Lithuania.

Findings of the Survey “Philanthropy in the Eyes of Business Leaders”

· The survey has demonstrated that giving traditions are only beginning to take shape in Lithuania. The prospects for corporate giving are fairly good, for public attitudes towards it are not hostile.

· Although the business community thinks that giving is the subject of much controversy, half of those polled have positive attitudes towards it. Only one-tenth of those polled appeared to be either indifferent or antagonistic to giving practices.

· Corporate giving is for the most part affected by emotional, solidarity and economic benefit considerations. It is notable that rather than objecting to giving, its opponents indicated economic motivations.

· In identifying projects for which to provide financial aid, business leaders take into account the value, quality and readiness of a given project, the leaders’ qualifications and other qualitative characteristics.

· Orphans and care homes top-ranked among the areas that are most likely to receive donations from entrepreneurs. Culture, health care, children events and environment protection were also indicated as spheres likely to get financial assistance from the business community. Entrepreneurs reported that they would be most reluctant to contribute to religious and national communities as well as academic projects not related to their business activities.

· The respondents indicated legislative flaws, taxation and the complexity of documenting and accounting donations as the biggest barriers to corporate giving. These obstacles discredit not only givers but also recipients, laying the grounds for “shadow” giving which accounts, according to leading business people, for one-third of all donations.

· Goods and services are the most popular forms of contributions, with pecuniary donations ranking second.

· Giving behaviour is not planned in any way. Decisions are usually made on an ad hoc basis. Charity and support are mostly extended directly and personally, without much publicity and in small amounts.

General information on the survey

The survey “Philanthropy in the Eyes of Business Leaders” was carried out by the LFMI’s sociological research group in September through November 1996. The survey was conducted by means of questionnaire (about 200 entrepreneurs were questioned, of these 98 respondents completed the questionnaire in writing and 15 gave random interviews). The survey covered the largest administrative centres in Lithuania.

Background information

On launching the survey there was no written material on the Lithuanian business community’s attitudes towards corporate giving, nor had any research been conducted to ascertain them. The general picture of the country’s business layers was equally unclear, making it hard to identify “business leaders”. The environment for giving was hypothetically felt to be immature, bearing in mind a lack of indigenous traditions and ill-informed society.

The respondents were selected according to the following criteria: a) the size of a company; b) the performance of a company and the pace of its development; and c) a company’s giving traditions. The survey targeted the people in the selected companies directly involved in decision-making. These were for the most part heads of the companies, executive or deputy directors and other board members.

The spectrum of motivations for giving

Emotional motivations. Emotional decision-making prevailed as an essential peculiarity of emotional motivations. Most of the respondents reported that they donate so as to release their negative emotions or experience positive ones (for instance, by contributing to a noble cause). Attempts to get away from negative feelings are prompted by moral imperatives, a moral component of emotional motivations. A search for positive emotions is stimulated by cultural considerations. Both moral and cultural components of emotional motivations are closely related. Naturally givers expect some kind of response from the recipients, such as gratitude, attention or publicity, therefore this motivation partly matches the economic benefit motivation.

Economic motivations. Economic benefit considerations are a distinctive feature of economic motivations. Entrepreneurs influenced by economic considerations extend support in those cases when there is at least a sign of some kind of benefit (usually a chance to publicise or shape a positive image of their firms). Behaviour of this nature is therefore not philanthropic in the strict sense.

Solidarity (socialisation) motivations. Moral and emotional empathy-a quality that makes people help orphans, the disabled or the poor-is not a sufficient stimulus to providing financial assistance to broader social activities such as science, studies, research or publishing. The existence of apparent motivations for assisting in such projects would evidence the maturity of dispositions to giving. Even with prevailing emotional motivations, the reinforced social component would modify emotional motivations.

Assessment of giving practices

Lithuania has no indigenous giving traditions. A mere seven percent of the respondents voiced the opposite opinion. Half of those polled agreed that such traditions are only beginning to take shape; and one-third of the respondents maintained that they had not surfaced yet. The statement that giving traditions will eventually take shape in Lithuania is treated with deep scepticism by only four percent of business leaders, with the majority being more optimistic.

The climate for corporate giving is, according to the survey findings, neither too unfriendly nor too conducive. Half of those polled reported that favourable attitudes towards giving are prevailing, while the other half was of the opinion that negative, very negative or indifferent attitudes are more common than positive ones. That as many as a quarter of business leaders would not feel confident about asking to donate for any cause is a reflection of attitudes towards giving too.

The business community is on average more sceptical about public attitudes towards giving than about its own disposition. 38 percent of the respondents reported that they are sympathetic to charity and support, and 49 percent have a favourable rather than unfavourable opinion (we shall further refer to them as proponents), and merely 10.2 percent admitted that they are indifferent to giving (these respondents shall be further called opponents).

For apparent psychological reasons the opponents tend to make their judgments objective by trying to single out “dark” tones of general attitudes towards giving and to emphasise economic interests. Asked about the prevailing attitudes towards corporate giving, three-fifth of those antipathetic to it indicated negative trends, one out of six pointed out indifferent and rather unfavourable opinions, and one out of six reported favourable and rather favourable dispositions. That well-off respondents reported a frequent occurrence of positive attitudes towards giving may be attributable to similar subjective psychological considerations too.

Corporate giving in Lithuania takes different forms. On average one out of ten respondents donate personally or mostly personally. Twice as active in contributing only personally or mostly personally are people of 45 to 55 years of age. Three out ten respondents give both personally and on behalf of their firms; of these 60 percent of 25 to 35 years of age. Half of those questioned provide financial assistance mostly or only on behalf of their companies. Of these, 60 percent aged 25 to 35, 55 percent aged 36 to 45, and 41 percent aged 46 to 55. This brings us to a conclusion that older respondents are more likely to donate to charitable causes and contribute personally than younger ones. The average amount of private giving that goes unreported is 31.4 percent. Younger representatives of the business community gave preference to moral and economic benefit motivations, whereas older ones indicated the solidarity (socialisation) motive.

The respondents were asked to specify motivations for corporate giving. The results have demonstrated that corporate involvement in giving practices is mostly influenced by the following factors:

1. The emotional sympathy of the heads of companies for the aims of the recipient (28.5 percent) and a wish to help (38.8 percent). Two-thirds of those polled indicated at least one of these reasons.

2. Economic benefit considerations, consisting of fostering a company’s image (55.1 percent) and seeking other benefits (39.8 percent). At least one of these two motives was indicated by fourth-fifth of the respondents.

3. The solidarity (socialisation) motivation (40.8 percent reported solidarity with the aims of the recipient, and 10.1 percent indicated a wish to help in bringing about positive results of an activity). At least one of these motives was reported by half of the respondents.

It is notable that personal connections with people asking for support determine a positive response in 24.5 percent of cases. Inability to decline a solicitation preconditions giving in 13.3 percent of cases. Giving practices of other companies stimulate hardly any contributions. These factors may be regarded as types of emotional motivations.

The survey also aimed at defining what motivates heads of companies to provide support for various projects. Hypothetically decisions like this are supposed to be inspired mostly by reasoning, that is, a qualitative assessment of a given project. This hypothesis has been confirmed by the survey results. Two-thirds of those polled reported that quality considerations have a major influence on decision-making. The value of a project, which may be interpreted in qualitative terms too, would in this case be a primary consideration (40.8 percent). The quality of a project, qualificational characteristics of its executives as well as working traditions would be of subordinate concern. Solidarity with the values and aims of a project has a direct relationship to giving for a total of 43.8 percent of the respondents. A chance to monitor or control the course and results of a project is consequential for a mere 8.1 percent of business leaders. Equally immaterial for most of the respondents were subjective factors, such as personal connections, recommendations and giving practices of other companies. Economic benefits were obviously important to one-third of business leaders.

Areas that are likely and unlikely to attract donations

The circumstances discussed above have a direct impact on entrepreneurs’ opinions about the areas that need supporting and those not worth it.

Orphans and care homes top-ranked among the areas that are most likely to receive financial assistance (69 percent of the respondents would support them in the first place, and 28.7 percent would contribute to them sometimes).

The areas that are somewhat likely to attract donations include:

· culture (31.4 and 54.3 percent respectively);
· the sick and health care (28.9 and 61.4 percent);
· children and children’s events (28 and 65.9 percent);
· academic projects related to a company’s activity (26.7 and 49.3 percent);
· impoverished people (20 and 62.5 percent);
· environment protection (18.1 and 50 percent);
· elderly people (17.3 and 66.7 percent); and
· education (16.9 and 59.7 percent).

The business community would be most reluctant or unlikely to give to:

· religious communities (61.8 percent of those polled would never support them);
· national communities and national cultural wants (60.0 percent);
· publishing (52.1 percent);
· conferences and seminars (50 percent);
· academic projects unrelated to activities of a firm.
· A significant part of the respondents reported that they would not contribute to mass celebrations and events (39.7 percent would never sponsor them), sports (35.2 percent), studies, qualificational training, travel (35 percent) and environment protection (31.9 percent).

Barriers to corporate giving

Asked about formal barriers to giving, one-third of those polled replied very concisely – “laws”. While elaborating on it, they mentioned the complexity of documenting and accounting charity and support. Convoluted bureaucracy imposes a burden not only on givers but also recipients. The latter find it hard to prove their right to receive donations. The respondents singled out other regulatory and accounting flaws too.

Difficulties in documenting charity and support force contributors to let part of donations go unreported. The scope of “shadow” giving is on average assessed at about 31.4 percent.

Roughly one out of ten respondents reported that there are no formal obstacles to giving; that it is only a question of money. They stressed therefore economic barriers restraining the opportunities to successfully run a business, make profits and thus be able to support others.

Only a negligible part of those polled specified constraints of a moral nature (dishonesty of the recipients, plundering, etc.), undermining confidence in recipients, as well as a lack of information in the area.

As many as two-thirds of entrepreneurs think that companies would donate more if taxation were reduced. A constructive effect of tax cuts on giving practices was recognised mostly by people in influential positions, middle-aged and young people, as well as well-off respondents.

Scarce knowledge of the laws governing charity and forms of giving is another barrier to corporate giving. 41.2 percent of the respondents admitted that they have insufficient knowledge; 25.8 percent reported that their knowledge is only partly sufficient; 20.6 percent said that they know very little; and 12.4 percent admitted that they have insufficient knowledge of the legal foundations for giving. The upper echelons of entrepreneurs reported that they know less about relevant laws than their less influential colleagues.

Guidelines for boosting corporate giving

We can contemplate the above-discussed issues from a different perspective, that is, by looking at what would facilitate or encourage involvement in giving.

As mentioned earlier in the article, the largest barriers to corporate giving comprise a heavy tax burden and various constraints for givers to benefit from tax relief. These aspects were indicated by a better half of the respondents. Interestingly, increased profitability of a company ranks third among the factors stimulating giving behaviour. Its relevance was indicated by a mere 38.8 percent. Giving practices are least likely to be influenced by positive shifts in public opinion about giving (5.1 percent), simplification of the procedures for giving (10.2 percent) and bolstered activities of foundations (13.2 percent).

The first two factors were among the most important influences for those antipathic to giving. As many as 97.6 percent of them think that reduced taxation would facilitate giving practices, while 58.3 percent amplified the availability of additional tax deductions. Hence, the apathy is largely attributable to the cumbersome tax burden and insufficient tax deductions for contributors. A company’s profitability is an essential factor for only a quarter of the opponents.

Heads of the companies actively involved in giving (that is, allocating for charitable causes more than 50,000 litas per year) place almost an equal importance on all of the first three factors, that is, tax cuts (56.6 percent), tax deductions (53.3 percent) and a company’s performance ( 43.8 percent). This group of respondents stressed the need for simplified giving procedures too (21.8 percent).

Giving behaviour can be reflected on in terms of the age of donors. Tax deductions were the most important influence for older entrepreneurs, whereas their younger colleagues put an emphasis on reduced taxation (65.9 percent). Tax cuts were of primary consideration for top-ranking respondents, while less influential entrepreneurs did not differentiate the relevance of these three factors.

The respondents proposed means to encourage corporate giving. The answers were divided into four groups: a) improvement of the regulatory basis for business activity and accounting of giving; b) improved access to information; c) revision of the legal system; and d) education of recipients.

Proposals pertaining to the revision of business legislation were statistically the most numerous. One out of four respondents suggested that companies actively engaged in giving practices be encouraged by increased availability of tax deductions. Others were in favour of curtailing bureaucracy and simplifying accounting, with the rest placing importance on the possibilities for givers to publicise themselves or benefit in other ways.

These suggestions do not differ very much from the abstract proposal to revise the legal system. Among the most interesting statements was the recommendation for expanding the circle of recipients. This idea was voiced in response to other questions and during interviews too. The most active entrepreneurs-donors reported a kind of discrimination with regard to receivers, therefore it is worth defining the reasons for such discrimination.

The respondents put forward a proposal to improve access to information on philanthropic programmes, for it was said to be very scarce. They also reported that mass media fail to highlight foreign experience and traditions in the area.

Types of Contribution. Planning giving behaviour

Goods and services are the most popular form of giving. A total of 62.7 percent of respondents practice it rather frequently. 50.9 percent of those polled reported that they prefer pecuniary donations, while 38.3 percent of business leaders said that they grant discounts. Giving via foundations is practiced by a mere 10.4 percent of those polled.

As many as 80 percent of wealthy business people and 77.8 percent of respondents in top-ranking positions extend support in the form of goods and services. 62.5 percent of respondents in fairly influential positions as well as two-thirds of middle-aged and elderly business people grant pecuniary contributions.

Giving often occurs on an ad hoc basis. 45.3 percent of the respondents reported that they plan neither the areas nor the size of donations. It is especially characteristic of people in top positions, of whom 52.4 percent fail to plan their giving activities. An average of 23.3 percent of those polled do plan the size and areas of contribution. Twice as many business people planning their giving behaviour are among those who donate more than 50 thousand litas to charitable causes a year. Few respondents (6.3 percent) reported that they plan only the size of donations. Most of the questioned business leaders have their favourite areas, but only few of them (18.9 percent) refer to these priorities as to “planning”.

42.8 percent of the respondents never or hardly ever control how their money has been used. A mere 19.4 percent of those polled reported that they take the effort to check it, with only 25.5 percent doing it always or frequently. Surprisingly, those who donate large amounts neglect to see to how their donations have been utilised.

The respondents showed reluctance in commenting on the amount of donations as well as in-kind contributions extended in 1995. Two-fifth of those polled failed to answer the first part of the question, and half of the respondents neglected to elaborate on non-pecuniary donations. The survey showed that the numbers of those contributing small, average and large amounts do not vary much. 17.3 percent of the respondents donated up to 10 thousand of litas a year; 25.5 percent up to 50 thousand litas; and 17.4 percent more than 50 thousand litas. The smallest cumulative annual donation was 1,000 litas, while the largest reported contribution totalled close to 3 million litas.

Small contributions (of up to 5 thousand litas) are the most popular. Roughly 40 percent of the respondents reported this amount (almost half of the respondents preferred not to answer this question). In 1995, 38.6 percent of the respondents provided financial support in the amount of 5 to 20 thousand litas, and 27.4 percent – in the amount of 20 to 100 thousand litas. Donations by 7.1 percent of those polled exceeded 100 thousand litas.

Kęstutis Masiulis, PhD, Senior Fellow at the Institute of Philosophy and Sociology, lecturer at the Institute of International Relationships and Political Studies of Vilnius University. Since 1993 Mr. Masiulis has been the head of sociological research at LFMI and carried out five surveys of Lithuanian opinion leaders.