January 11, 2010

Goldman Sachs Update - Employee Giving

Happy New Year! Yesterday's New York Times had a bit of an update on the Goldman corporate philanthropy story we've been following here on Reimagining CSR (see past articles here, here and here). WSJ.com has a round-up of related stories here.

According to the paper, "As it prepares to pay out big bonuses to employees, Goldman Sachs is considering expanding a program that would require executives and top managers to give a certain percentage of their earnings to charity." The article goes on to say, "While the details of the latest charity initiative are still under discussion, the firm's executives have been looking at expanding their current charitable requirements for months and trying to understand whether such gestures would damp public anger over pay…"

The most recent article doesn't provide much new information, other than what the paper reported on the same subject this past fall, beyond demonstrating that the concept is apparently still alive. However, it does compare the concept to an employee-giving program at Bear Stearns: "The charity idea would be similar to a decades-long program at the failed investment bank Bear Stearns, which required more than 1,000 of its top workers to give 4 percent of their pay to charity each year and then checked their tax returns to ensure compliance." It then goes on to estimate the impact of such a program, "Assuming a similar percentage and level of participation."

Granted, that's a big assumption - the article doesn't give any definite information about the number of workers or percent of pay that would be involved in a Goldman program - but the Bear Stearns program is still useful as a benchmark. If the company were indeed to implement an employee giving program along the lines of what's being discussed, and if the numbers looked something like Bear Stearns', my question is this - would this program actually have any impact on the overall giving by affected employees? That is, do the company's top earners (elsewhere in the NYTimes article, we learn, "For their work in 2008, 953 Goldman employees were paid more than $1 million each") currently donate less than 4% of their income?

Of course, the answer to this question doesn't necessarily change whether the program would achieve Goldman's aims. Theoretically, if this initiative could indeed influence public perception about the bonuses, it matters less whether employees' donations are increasing and more whether the company has a strong story to tell about how generous its employees are with their large paychecks. In that case, the company could get as much value simply by gathering information about its employees' existing donations and their impact and sharing that information. I'm not sure it's relevant for the company to set a mandatory giving hurdle when the hurdle is relatively easy to reach.

On the other hand, perhaps the Goldman Sachs program, if it indeed becomes reality, will be nothing like the Bear Stearns program. Perhaps it will require that employees (or at least the highest-earning employees) donate a significantly higher figure, a percentage that would seem far above what the average person would expect even from a million-dollar earner - for the sake of argument, let's say something like 25%. Would that change perceptions of the program? Would that make the general public - if that's in fact the stakeholder Goldman would be trying to influence - change its attitudes toward the company, such that this solution (employee giving program) actually impacts the problem (public anger at big bonuses) it seems designed to solve? I'm not sure - but it would definitely break through the clutter of expected actions.

Of course, maybe the lackluster reactions to the idea - as evidenced, for instance, by the comments to the NYTimes story (admittedly not a representative sample, but the comments are really negative) - will convince Goldman Sachs decision-makers that this proposed solution won't, in fact, address the problem in question. Regardless, I look forward to the next installment of this story, which continues to help us think more deeply about causal relationships in the world of corporate philanthropy.

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