South-Western - Management  
Tiny Outfits, Big Hearts
Topic Ethics and Social Responsibility, Entrepreneurship
Key Words Small business, giving, community and civic relations
News Story 

When a tragedy like the recent tsunami strikes, giving becomes an important humane gesture. Big corporations made huge contributions like Pfizer's $10 million, Exxon Mobil's $5 million, and Cisco's $2.5 million. Small businesses, without their own foundations, employee gift-matching plans, and philanthropy departments can't match the sheer size of the donations made by these huge corporations but their contributions can have impact too. For example, Sweet Relief started with one restaurateur in New York who wanted to contribute a percentage of his dessert sales to the tsunami recovery efforts. Alone, he could afford to contribute $20,000. When he encouraged other restaurants to join him, however, together they hope to raise at least $250,000.

According to a 2002 survey, 91% of small businesses with between 4 and 99 employees support charitable organizations on some level, and recognize the importance of supporting their communities. Donor-advised funds (or DAFs) can maximize the impact of giving while minimizing the administrative tasks associated with charity. DAFs generally require an initial donation of $5,000. The assets are pooled and managed by professionals who then distribute the funds to charities of the business's choice.

Small business owners should consult a tax professional or the IRS publication 526 to get the latest information on charitable contributions. Although in some cases there are no tax benefits beyond the standard deductions, many entrepreneurs find that their giving can have positive effects on the bottom line, sometimes in unexpected ways.

Community contributions can benefit in many ways. For example, Landis Communications in San Francisco did the PR for the renovation of the city's Union Square at no cost. From a civic point of view, employees felt good about what the company was doing, and the company received leads from the project, even landing a national account with one of the area's retailers.

Questions
1.

What are some methods small businesses can use to help them to make the most of the donations they offer?

2.

What are some of the unexpected gains or benefits that companies receive when they give back to their communities or to those in need?

Source "Tiny Outfits, Big Hearts," Business Week Online, Feb. 7, 2005, pp.NA.
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