IMPACT

Charitable Giving Could Harm A Company's Image, Study Says

Jan 28, 2014 | Updated Jan 28, 2014

Giving to charity may actually hurt a company’s reputation, a new study from the Yale School of Management has suggested.

Interested in how people view donors who make a profit while doing good, Yale professors George Newman and Daylian Cain presented a number of charitable scenarios to their research participants. Their findings, which have been published in Psychological Science, suggest that people are quick to dismiss those who benefit in any way while engaging in philanthropy.

"This work suggests that people may react very negatively to charitable initiatives that are perceived to be in some way 'inauthentic,'" Newman explained in a press release.

One of the scenarios that Newman and Cain considered was the Gap (RED) campaign. As part of that initiative, the company donates 50 percent of its profits from designated clothing items to fight the spread of HIV/AIDS and malaria.

Participants who were reminded that Gap profits from this venture, were quick to rate the company poorly. They were also less likely to support that charity as a result. However, respondents who were reminded that Gap isn’t obliged to give away any money at all, reconsidered their positions and rated the company more highly.

The researchers dubbed the phenomenon, the "tainted-altruism effect" -- a situation where people are put off when donors benefit from the charity.

"We found evidence that 'tainted' charity is seen as worse than doing no good at all," Newman said in the release.

The pair was first inspired to research the phenomenon after learning of the downfall of Daniel Pallotta, once a wildly successful fundraiser, according to Time magazine.

While serving as the head of a company, Pallotta raised $305 million over the course of nine years for AIDS research and other causes. He also earned a salary of nearly $400,000 a year, a fact that wasn’t widely known.

Once the public caught wind of how much Pallotta was making, he was virulently criticized and his company went out of business.

Clayton Critcher, a professor of marketing at UC Berkeley’s Haas School of Business, told the Yale Daily News that the findings could potentially persuade companies to give less money to charity.

"What this suggests is that at least when it’s pointed out that companies aren’t giving all of their profits away to charity, they might take a penalty for the good works they do," Critcher told the paper.

But Newman and Cain weren’t completely disheartened by their findings. They said that companies need to find a different way to frame their charitable efforts in order to reduce the bias.

"[This] effect can be framed away and appears to be pretty malleable," Newman said in the release. "In some cases, public assessments of charitable actions as genuine may trump any actual benefits realized from those efforts."

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