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Donating to Nonprofit Causes Increases Media Coverage and a Company’s Market Value. No Matter the Size of the Company.
November 21, 2017
Powerful new research from Stanford and Brigham Young Universities, commissioned, by the Satell Institute, shows that companies of all sizes can attract more favorable media coverage by strategic giving during disasters.
Corporations throughout the country quickly responded to aid parts of Texas, Florida and Puerto Rico devastated by recent major hurricanes. They are aware the money they have donated for relief efforts will help repair the economy of communities hit, and rebuild the economic lives of those affected. What many will find out is that their CSR contribution attracts the attention of the media.
Research, commissioned by The Satell Institute Think Tank for Corporate Social Responsibility, examined data collected on corporate responses to four of the largest natural disasters (in terms of corporate disaster response) of the past two decades — the 2004 Indian Ocean Tsunami, Hurricane Katrina in 2005, the 2010 earthquake in Haiti, and the 2011 earthquake and Tohoku tsunami in Japan.
The two-part study, conducted by Zachariah J. Rodgers of Stanford University and Peter M. Madsen of Brigham Young University, revealed that media outlets are more likely to publish stories when a smaller company gives a big donation to a cause as many viewers find it unexpected.
Major financial firms like Goldman Sachs, Morgan Stanley and Prudential received press coverage for writing $1 million checks for philanthropic relief in the disasters studied.
Yet, smaller companies like Teletech Holdings, Publix grocery, Crocs and Health Net each received free, positive publicity in the media for their $100,000 contributions to the disasters tracked. On average, these smaller companies received 20-28% more press coverage for each asset-scaled dollar donated to disaster relief. In the competition for media attention, there’s good reasons for smaller companies to be philanthropic. Their smaller size can be an advantage.
Large companies gain increased market value
Large companies receiving media coverage got a financial boost according to the study.
Rodgers and Madsen measured abnormal stock price returns. They did this separately for companies whose disaster relief work had received media coverage and for companies whose disaster relief philanthropy wasn’t covered by the media.
For the group that got media coverage, abnormal stock price returns increased by 0.55% – 0.65%. With average market capitalization of the companies studied at $25 billion, this represents a market value increase of roughly $150 million per company.
On the other hand, companies that donated to aid disaster victims, but whose donations received no media attention had abnormal stock price returns of essentially zero, indicating that they received no financial benefit from their disaster relief philanthropy.
Corporate relief publicized by nonprofit partners receive an average of 2 to 3 times more media coverage
Given the importance of media attention to financial gains from CSR, the study examined the factors that led to media coverage of a company’s disaster relief philanthropy.
The analysis concluded that companies receive as much as three times more media coverage when announced by a nonprofit partner.