National retail chains frequently use charitable giving as a tool for overcoming local opposition to their expansion plans. Facing strong resistance in Western Branch, Virginia, Wal-Mart ran ads in the local paper touting the $200,000 it had given to local causes. In Auburn, California, Home Depot made charitable contributions a focal point of its campaign to overcome the community’s long-standing opposition to big box stores. In Arlington, Texas, just weeks before elected officials were scheduled to decide the fate of a controversial proposal to build a Wal-Mart supercenter, the company donated a much publicized $20,000 to local charities.
Strategic donations can be very effective in convincing reluctant residents and city officials that a new chain store will benefit the community. As the industry publication Chain Store Age noted, “Cause programs can help operators in their real estate negotiations and dealings with local zoning boards.” Giving to local causes can help put a local face on a distant global corporation.
But Al Norman of Sprawl-Busters cautions that communities need to keep corporate retailers’ donations in perspective. “Wal-Mart donated $163 million in 1999,” he notes. “That’s a lot of money, but it represents less than one-tenth of one percent of Wal-Mart’s total revenue. It’s the equivalent of someone who makes $40,000 a year giving $40 to charity, and then making a lot of noise about it.”
Moreover, the arrival of a large retail chain almost invariably means dozens of local businesses will be forced to either scale back their operations or close altogether. In the process, communities lose an important source of support for local causes, one that may be far more significant than any support provided by the newly arrived chain.
Empirical research comparing small and large business giving is hard to come by. But existing evidence suggests that, contrary to common perception, small businesses give more time and money to charitable causes than do big businesses.
In 1991, Dr. Patricia Frishkoff, Director of the Family Business Program at Oregon State University, completed a study of charitable giving by 182 businesses in four communities. She combined cash donations with the value of in-kind contributions and found that the small businesses were more generous.
Companies with fewer than 100 employees gave an average of $789 per employee, compared to $334 per employee at firms with more than 500 employees. The 128 small businesses studied donated a combined total of $2.5 million to charitable causes.
“I have significant concerns about the loss of community dollars when local businesses close,” Frishkoff says.