Corporate giving to 501(c)(3) nonprofits (“charities”) is a more curious, varied and interesting phenomenon than commentators have recognized. Such “gifts” can be grouped generally into four categories. First, Giving to executives’ preferred charities represents an alternative form of compensation. Second, corporate philanthropy is often tied to the company’s commercial advertising, as a method of promoting consumer goodwill and sales. Thirdly, some corporate gifts may be motivated by their leaders’ desire to “give back” to the community, as an expression of corporate social responsibility. Finally, corporations may use contributions to politically enabled nonprofits, including think tanks and market-oriented/ “public interest” litigation boutiques, to influence regulation, and the political environment generally, in their favor. The paper’s seminal insight is that neither in corporate law nor elsewhere is there a regulatory regime that meaningfully constrains corporate executives’ discretion in employing corporate funds to these ends; nor is there even a meaningful disclosure requirement which would allow for public discussion and critique. Public corporations can give away many millions of dollars -- even to politically, ideologically, religiously “enabled” charities -- without leaving even a public record of so doing. From the perspective of corporate law, the darkness surrounding corporate giving is further problematic because it promotes the formation of nearly invisible networks of background social/professional ties (interlocking for-profit/nonprofit directorates) among corporate elites – affiliations which may compromise the executives’ good faith, independence in corporate decision making.
44 UCLA L. Rev. 579 (1996-1997)