Corporate Charitable Giving

Abstract

Of the multitude of questions that beset analysis of the functions of, and justifications for, philanthropy, one subset is generated by the phenomenon of charitable giving by business corporations. Do (or should) such corporations have the power to make philanthropic gifts? If so, what are the functions of such giving and what, if any, should be its limits? In light of the functions and limits on such giving, who in the structure of the corporation (management? stockholders collectively? stockholders individually? others?) should make the decisions as to the amounts to be given and as to the identity of the donees? There has been episodic discussion over whether corporations do, or should, have the power, by management decision or majority (or even unanimous) shareholder vote, to make philanthropic gifts.' If a business expenditure is one from which the corporation cannot possibly derive any benefit of any kind, common law doctrine suggests that the enterprise lacks the power to do so, at least as against dissenting stockholders' claims if not also third persons' claims.The theory appears to be (regardless of whether it is cast in terms of ultra vires) that the legal function of the corporation and its management is to preserve and enhance the value of the assets for its stockholders. This can only be done legitimately if some net benefit to the corporation and its stockholders follows, or is reasonably expected to follow, from its use or expenditure of such assets. Legislation, by expressly empowering corporations to make charitable gifts,2 has undercut the doctrinal obstacle to the power to make such gifts.

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