Stock Ownership and Company Contributions to Charity

Funding for this research was provided by the National Science Foundation (SES 800 8570) and the Program on Nonprofit Organizations, Yale University. We would like to thank Denise Cobb for her assistance in typing the manuscript and an anonymous ASQ reviewer for his or her insightful comments. This paper examines the effect of ownership patterns on corporate contributions to charity and corporate beliefs rationalizing contributions. The study uses data and findings from an earlier study of the Twin Cities corporate grants economy and new data on 69 publicly held firms headquartered in Minneapolis-St. Paul to test hypotheses derived from agency theory about corporate giving. Controlling for pretax income, proximity of the company's executives to the local philanthropic elite, and the rationale used to justify contributions, we found that companies gave less money to charity in 1979-1981 if the CEO or some other individual owned a significant percentage of stock in the company. In contrast, the percentage of stock owned by a single corporate interest or family group had no effect on company contributions. Social proximity of executives to the local philanthropic activists had a positive effect on contributions, except when a family group owned more than 5 percent of the company's stock. We explore the implications of our findings from the perspective of agency theory and business policy.'