Charities, Hints of an Embryonic Backlash

Transcription

1 Corporate Giving: Widespread Agreement about Facts, Not about Obligation; Charities Admired, but Hints of Embryonic SOX-Type Backlash BDO Dunwoody CEO/Business Leader Poll by COMPAS in the Financial Post COMPAS Inc. Public Opinion and Customer Research May 12, 2006

2 1.0 Introduction The CEO panel was asked a broad range of questions on charities, the tax treatment of donations, the comparative social service roles of charities and government, and corporate obligation. Panelists tend to perceive the landscape consensually but differ about their obligations to give. On the facts, the CEOs and business leaders on the panel tend to agree that the Harper government s elimination of capital gains tax on donations was excellent, charities should play an important role in providing social services because of their greater capacity for innovation, and efficiency and because donors scrutinize the work of charities more carefully than do taxpayers scrutinize the work of government, corporate support for charities increases employee morale, and charities pressure on companies for financial support is on the upswing. Panelists do not agree about the magnitude of the business sector s obligations. For example, only a minority agree that profitable organizations should be obliged to share their wealth with the less fortunate. Charities benefit from a kind of halo effect in the eyes of the majority of panelists today. Yet, there emerge hints of an embryonic backlash. Some minority opinions were volunteered that, if held more widely, would not augur well for the charitable sector. In our Sarbanes-Oxley era, a few business leaders volunteered concern about a lack of financial accountability for charities. Comments about charities operating in the third world seemed to elicit the most concern, which ranged from criticism about misuse of funds to fanaticism. 2

3 These are the key findings from the current web-survey of the panel of CEOs and business leaders undertaken for the Financial Post under sponsorship of BDO Dunwoody LLP. 2.0 More Honeymoon for Harper; Charitable Solicitation on the Upswing Following a pattern evident in past polls, the Harper government earns very high scores for its varied initiatives, in this instance for the abolition of capital gains taxes on charitable donations of equities, as shown in table 2A. The federal government s decision could not come at a better time, given respondents perceptions that charitable solicitation is on the upswing, as shown in table 2B. Table 2A: [Q1] In last month s budget, the Harper government eliminated capital gains taxes on charitable donations of publicly-traded securities. What score would you give this on a 100 point school report card-type scale? % DNK 74 1 Table 2B:[Q7] Are charities [ROTATE POLLS] (%) Increasing their efforts to get support from companies 63 Maintaining the level of past efforts 22 Decreasing their efforts 1 Don t know or no opinion 14 3

4 3.0 Charities Good for Society, Social Services, and Employee Morale Panelists perceive charities as essential for social services. They believe that charities should provide about a third of social services (table 3A), and that charities are more innovative, efficient, and scrutinized than government (table 3B). They also believe that charitable involvement is good for employee morale (table 3C). Table 3A: [Q2] Out of 100%, what proportion of social services should be provided by [ROTATE] % DNK Governments 66 1 Charities supported by individuals and companies 34 1 Table 3B: [Q3] On a 5 point agreement scale where 5 means agree strongly and 1, disagree strongly, how would you score the following reasons for charities to play a bigger role than they now do? [RANDOMIZE] Charities can be more innovative and respond more quickly to new challenges Charities are more efficient and cost-effective than government Charities are more subject to donor scrutiny than are governments subject to taxpayer scrutiny MEAN DNK

5 Table 3C: [Q6] In practice, do you find that companies involvement with charities [ROTATE POLLS] % Greatly increases employee morale 16 Increases employee morale 61 Doesn t affect morale 20 Reduces employee morale 2 Greatly reduces employee morale 0 Don t know or no opinion Some Reservations about Charities, Hints of an Embryonic Backlash Charities do not presently face a credibility gap. But quantitative and qualitative (volunteered verbatims) suggest that the charitable sector may encounter some challenges in the future. One indicator of a potential challenge for the charitable sector is that panelists are divided in their opinions about various reasons why companies should be giving. Few panelists agree strongly that companies should give to charity as a way of paying back society (17%), companies should give because government is stretched thin (16%), and that profitable organizations should be obliged to share their wealth (11%), as shown in table 4A.. The best news for charities is that most panelists do not agree with various rationales for which companies should not give (table 4B). Yet, a noticeable minority do agree with these positions. Thus, sizeable minorities agree in various measures that companies are too taxed to given, the management of public companies should not be entitled to given away shareholder money (a position articulated by Terrence Corcoran in the pages of FP), and companies should focus on making a profit and paying taxes. 5

6 The best news for charities is that only a minority feel that charities receive too little accounting scrutiny to justify donations to them. But this good news is tempered by some very critical verbatims, some which touch on accountability: One valid concern with charities picking up a greater role in social services is that they carry their own preconceptions with them, e.g. you need to accept their faith/political agenda (Hamas), etc. in order to get help. Private companies struggle for cash flow and bad debt elimination daily. There are so many charities who believe that constant solicitation will result in corporations giving money just to get rid of them that they are creating a backlash and turning off the source of the funds they need. Even though the terrible Canadian capital cost allowance rules leave us uncompetitive, we are under ever increasing financial pressure to buy equipment. This leaves very little room available for discretionary spending. While we still try to give to charities, we see the Canadian government taking our taxes to pay for programs that perennially keep people from working. They collect the taxes, support programs and leave us with nothing to spend on nonessentials. Solicitation overload. Too many charities looking for support so it is increasingly more important to prioritize and frankly ignore most requests as they simply take too much time to consider. We are trying to follow the US model but Canadians overall are taxed more than US so more difficult for individuals to contribute to same levels as US. I have seen some things in Africa that disgusted and angered me very deeply. As one doctor said in east Africa when I visited, If we get 5 to 10% of the money sent by any country to these NGOs we are very happy and grateful. Imagine if we got 50% of the money, famine and disease would be under control within 10 years, no doubt. There should be very strict norms applied to NGOs and reporting should be made public. NGOs and other charitable 6

7 organizations would never want to do that they would be exposed for what they really are. Our companies contribute only to charities we have fully researched. The reality is that most charitable organizations spend most of the money they received unwisely and very little of it actually gets to the people. As a result we only give to very few organizations. While I can support certain charities, I do reconsider doing so when they become more aggressive in their requests. Lately they are becoming very aggressive bordering on demanding. Table 4A: [Q4] How would you score the following reasons favouring companies giving more to charities. On a 5 point agreement scale, where 5 means agree strongly and 1, disagree strongly. [RANDOMIZE] Companies should give to charity as a way of paying back society Governments are stretched too thin to handle all of society s obligations, and corporations should help In the modern era, profitable organizations should be obliged to share their wealth with the less fortunate MEAN DNK

8 Table 4B: [Q5] How would you score the following reasons opposing companies giving more to charities. On a 5 point agreement scale, where 5 means agree strongly and 1, disagree strongly. [RANDOMIZE] Canadian companies are heavily taxed and have little ability left to give to charity It is improper for public companies to give away money that belongs to shareholders and not management When companies give to charity, it is a bit like eating the goose that makes the golden eggs. Companies should do what they know best how to do make a profit and pay taxes Charities do not receive enough financial and accounting scrutiny to justify giving them more money MEAN DNK Methodology The COMPAS web-survey of CEOs and leaders of small, medium, and large corporations was conducted May Respondents constitute an essentially hand-picked panel with a higher numerical representation of small and medium-sized firms. Because of the small population of CEOs and business leaders from which the sample was drawn, the study can be considered more accurate than 8

9 comparably sized general public studies. In studies of the general public, surveys of 124 are deemed accurate to within approximately 8.8 percentage points 19 times out of 20. The principal and co-investigator on this study are Conrad Winn, Ph.D and Tamara Gottlieb. 9