What Role Should Charity Play In Business?

Capitalism, as we've seen throughout history and are routinely reminded of, can be a tremendous force for social good -- creating jobs, lifting people out of poverty, even fueling democracies. On an individual level, businesses routinely give back to their local, national and global communities in a variety of charitable ways. It can be as simple as sponsoring the nearby Little League team or actually building charity into your business model, like TOMS Shoes, which donates a pair of shoes to children in developing nations for every pair the company sells at home.

For some entrepreneurs, charity is as essential to their mission as profits, a responsibility that comes with starting and running a business. Others see their contribution in the form of providing jobs and helping the economy grow -- and choose to give back on their own time. And some, perhaps more cynical, see company-sponsored charity as nothing more than a publicity tactic designed to charm customers. To a certain extent, they're all right.

Our Board of Directors can certainly be considered a group of socially conscious entrepreneurs. Take Rob Dyrdek, who recently opened the doors to his "Fantasy Factory" for a charitable event called SK8 4 Life, which raised more than half a million dollars for underprivileged kids in Los Angeles. Or Sir Richard Branson, whose Virgin Group has an entire foundation -- Virgin Unite -- focused solely on philanthropic causes around the world.

So how focused should entrepreneurs be on charity? And how big a role -- if at all -- should it play in their businesses. We asked the Board of Directors.

Sir Richard Branson

Founder and President, Virgin Group

"Dr. Yes"

"I think every single business should be a force of good -- or there's no point in really going into business. Every move you make in business can be a force for good, whether its creating jobs, and once you've made some money, you can then use your entrepreneurial skills to tackle some of the intractable problems in the world, whether it's youth homelessness in your own hometown, or whether its trying to sort out global warming or conflicts in the world. Anyone who's in a position to make a difference must try to make a difference."

Lexy Funk

Co-Founder And CEO, Brooklyn Industries

"The Contrarian"

"In a highly developed capitalist economy with minimized governmental funding in certain sectors, charitable contributions by business owners or by businesses can fill the gap. But it is all based on wealth. If you haven't built wealth yet as an entrepreneur, the best way to be charitable is to build contributions into product. Many of our T-shirts are collaborations with non-profits where a percent of the proceeds go back to the organization. This way charity is carried through to the consumer and helps drive sales and ownership to the purchaser."

Clint Greenleaf

Founder And CEO, Greenleaf Book Group

"The Cowboy"

"I'm a fan of charity in my business -- we donate to a number of worthy causes. But I'm not going to judge or suggest to anyone that they should do the same. I think charity is a very personal decision and isn't a business issue any more than your political views should be. Sure, some will judge you based on your choices, but that shouldn't be a major motivator for tying charity to your business or not. Focus on giving your clients value and make money with integrity, and the rest takes care of itself."

Warren Brown

Founder, CakeLove and Love Cafe

"Cake Daddy"

"We're all in one big community and it's very easy to lose sight of that given how we're always posited against one another. I think the fundraisers thrown for businesses in need are great and show the real heart of America."

Lawrence Gelburd

Lecturer, The Wharton School

"The Rock 'n' Roll Professor"

"Generally, it is more credible if there is a clear relationship of the company's products and services to the charity's function. Screening the charity for legitimacy is important as well."

Gary Whitehill

Founder, The Relentless Foundation And New York Entrepreneur Week

"The Sheriff"

This is a very important, but rarely discussed, business model that creates true competitive advantage -- a hybrid between both for and non-profit organizations. Most businesses today view their revenue model in a linear fashion instead of from a multi-dimensional context. Integrating both organizational structures into the initial framework of a business allows the model to be leveraged exponentially. Each structure has different pros and cons built into it. But when combined together in the right way, with a clear and concise plan of implementation and execution, a business can achieve far more than as just one structure or the other."

Phil Town

Investor And Author Of Rule #1 And Payback Time


"Charity starts at home. And should stay there. There is nothing so off-putting as businesses doing PR under the guise of charity work. Also, businesses usually have multiple owners. One shareholder's charity might be another shareholder's most hated scam. Don't subject your employees to your vision of the world with company money unless it's all yours anyway. And, by the way, let's repeal the income tax laws and make charitable giving a non-tax event so that rich people's gifts are not subsidized by the poor."

Julie Jumonville

Co-Founder And Chief Innovation Officer, UpSpring Baby

"The Mad Scientist"

"Charity should play a role in any and every business. It can be as simple as giving one extra hour per week to your employees to volunteer at their charity of their choice, or following the TOMS Shoes model of one pair of shoes donated to children in need for every pair purchased. Regardless, if we all put in one hour per week, the world would be in a much better place -- and believe it or not, your employee productivity will improve because of this type of work culture."

Rob Adams

Director, Texas Venture Labs at the University of Texas

"The Validator"

"I feel charity is something that corporations should commit to in the form of a portion of their profits. Businesses are profit-oriented and charities are not, so I feel there needs to be separation between them -- and it is up to the corporation if they want to support a charity."

Jennifer Hill

Startup Advisory And Venture Lawyer, Gunderson Dettmer LLP

"The Advocate"

"Lead by example. Executives have a powerful opportunity to encourage and empower employees to play greater roles in the positive transformation of society. Offer a product or service that answers a pressing need (great reason to launch a company!). Do business with diverse, environmentally friendly and/or socially responsible businesses. Develop employee-matching donations programs. Schedule a team-building outing that supports a community service. Encourage and incentivize your employees to give back to the community on a regular basis. Inspire your team, suppliers, customers and community to do the same. This isn't just a benefit for the charity -- it makes good business sense, motivates employees and demonstrates the company's commitment to the community."

The original version of this article appeared on AOL Small Business on 8/25/10.