Why do large companies have charity arms?


For example, Ronald Mcdonald House Charities (Mcdonalds). According to Wikipedia, Mcdonalds donated $168b in 2021 to the RMHC. Why do companies have charities when they can just save the billions of dollars?

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A somewhat cynical answer is that it’s marketing. People like charity. If you do charity, it reflects well on your brand. You could be doing it to look good to your customers or to look good to lawmakers and regulators, or both. “See, we’re not evil – we gave lots of money to donkey sanctuaries last year!” It could even be used as leverage. “Gee, these new corporate taxes you’re proposing sure are a doozy. I guess we could pay them but unfortunately it means we’ll have to shut down our donkey sanctuaries in your state.”

Charitable spending is also a tax deductible, which effectively means it is cheaper than other forms of spending (but it still is spending – don’t make the common mistake of thinking a tax write-off somehow nets people money). So if you can spin it cleverly, you might be able to run what is effectively a marketing campaign all under the banner of charitable spending, and thus get more marketing bang for the same buck.

A more optimistic answer is that people at these companies genuinely care about these charitable causes.

The most accurate answer is probably somewhere in between, and it will be different for different companies. Some will be more on one end of the scale and others on the other end.

Do you have those “round your payment to the nearest $/€ for charity?” Guess what happens to the money you donate in that case? It’s claimed as a corporate donation, with tax deduction. Not bad when it costs them next to nothing.