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November 30, 2011 / Rebekah Seder

Philanthropy Factoid Wednesday – The origins of corporate philanthropy


Today’s corporate philanthropy has its roots in the great Depression. The Revenue Act of 1935 allowed corporate charitable contributions of up to five percent of net income to be tax exempt. Subsequently most states gradually changed their corporate charters to allow these kinds of contributions. However, as Olivier Zunz describes in Philanthropy in America: A History, this often created tension between management and stockholders, as the latter generally did not believe that management had the right to distribute profits.

When the A.P. Smith Manufacturing Company attempted to donate $1,500 to Princeton University in 1951 and were blocked by stockholders, the case ended up before the New Jersey Supreme Court. The court favored management, noting that “the appellants, as individual stockholders whose private interests rest entirely upon the well-being of the plaintiff corporation, ought not be permitted to close their eyes to present-day realities and thwart the long-visioned corporate action in recognizing and voluntarily discharging its high obligations as a constituent of our modern social structure.”

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