Thursday, December 30, 2004

Here's $100,000 - don't spend it all in one place

Babble on.

The death toll from the earthquake-tsunami disaster has risen to over 100,000 souls, and continues to climb. Many, many more lives are in peril from hunger and disease. The scale of this tragedy is difficult to grasp, but it is clear that for a cataclysm of unprecedented size, unprecedented measures are required.

That's why it's so disappointing to me to see a company like Royal Bank of Canada pledge only $100,000 to relief efforts. Don't get me wrong: companies have no obligation to donate a cent, but most shareholders, employees, and customers expect a corporation to act as a responsible citizen. $100K from my little company would be huge. But RBC declared net income in fiscal 2004 of over $2.8 billion - that's profit, not revenue. So $100K from them comes across as somewhat cheap.

Especially so, considering pharmaceutical giant Pfizer has dipped into their bottom line to the tune of over $35 million - U.S. dollars:

Pfizer will donate $10 million to local and international relief organizations operating in the region.
Pfizer will contribute approximately $25 million worth of the company’s healthcare products which includes the anti-infective products Zithromax, Zyvox and Diflucan. Pfizer organizations in Asia have already begun donating Pfizer medicines and discussing logistical support issues with local health and relief officials.
"In addition to our financial contribution and product donations, we are ensuring that Pfizer colleagues with the needed medical and technical skills are available to assist with the relief effort throughout the affected areas."

The Pfizer Foundation Matching Gifts Program will match US employee contributions to non-profit organizations assisting in the relief effort. (Babbler's bold)

Pfizer is bigger than RBC, to be sure - not even twice as big, though. And the provision of medicines is one area where a drug company's special expertise is more appropriate than anything a bank could contribute. Still, doesn't the comparison make you cringe just a little?

Kudos to Pfizer for their generosity. It clearly illustrates the difference between a token gesture and a significant contribution.

Babble off.


At 1:51 p.m., Blogger Mike said...

What you don't seem to understand about corporations is that they exist solely for the purpose of enriching their shareholders. It's unethical for executives to be giving away money except to the extent that they get a PR benefit. That's the calculus of corporate giving.

You should also realize that it costs Pfizer practically nothing to give away drugs that it's already developed. It's like software; the real costs are in the development and the incremental cost of producing a copy is almost zero. Of course, the press release will always quote the market price as the value of the donation.

At 6:35 p.m., Blogger Matt said...

Thanks for the advanced economics lessons, Mike. I thought Babbler was fairly clear that he wasn't railing against corporate whores, but whatever.

That said, I dislike your thesis, Damian. I agree that there is a good case to be made for solid corporate citizenship and charitability. I believe that corporations that don't engage with their communities and charitable organizations are worse off for it, by any standard you would care to measure it with (including $$).

But how can you look at a single act of charity and make a judgement? If you're wondering about RBC, you have to start with examining their charitable giving as a whole. At that point, you can either (A) tell them it's not enough and they should be doing more, or (B) tell them it IS enough, but they should be redirecting some of their existing giving to tsunami relief. (Or (C), decide everything is just fine.)

I can't disagree that $100k doesn't seem like much of a donation from the biggest bank in Canada. But if I saw you toss 50 cents into a Sally Ann bucket, would it be fair for me to assume you are a cheap bugger? You might have put a $20 in the one at the other end of the mall. You might have donated $500 to your local food bank.

And moreover, if I gave you a hard time about it, how would you change your behaviour next time? I would suggest that if you weren't prepared to toss several dollars into the bucket, you'd just walk on by. I would also suggest that this is not a positive thing.

Just my couple of cents, so to speak.

I also want to follow Mike's Pfizer logic a little further. DVDs are incredibly cheap to produce (incrementally). Shouldn't they be free with a self-addressed stamped envelope? I suppose, but if they were, then theater tickets would be more expensive, and fewer movies would be made, because there's less opportunity for them to make money.

Can anyone explain to me why it's unfair to compare this to drug production? Preferably, while avoiding arguments that boil down to "the laws of economics magically do not apply to health care and pharmaceuticals".

At 9:07 a.m., Blogger Prolix said...

Mike's comments on Pfizer's actual cost is true if the opportunity cost was zero (i.e. there is more supply than demand and they are not lowering their price).

At 9:08 a.m., Blogger Prolix said...

Mike's comments on Pfizer's actual cost is true if the opportunity cost was zero (i.e. there is more supply than demand and they are not lowering their price).

At 11:13 a.m., Blogger Matt said...

Again, I understand the economics - my question is, to Mike's point, what exactly does Pfizer have to do to get some love? Drug companies are lobbied to give away their product to the 3rd World on the grounds that it's humane and, on a manufacturing basis, affordable. Then when they do something like Pfizer's doing now? "You should also realize that it costs Pfizer practically nothing..."

And my question to both Damian's and Mike's point is, do we really want to foster an environment where corporate giving is a no-win situation (at least in terms of the optics)? I prefer the approach of the Sally Ann bell ringers: no matter what the donation, it's "Thank you", and "Merry Christmas".


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