Philanthropy is a way for companies to build goodwill in the community, showing a willingness by a company to become involved in community life and helping the firm build a reputation for doing good things. When bad things happen - accidents, lawsuits, plant closings - philanthropic firms can draw on that goodwill to mitigate the anger and punishment some critics would heap on the firm. Thus, philanthropy is a type of insurance. . . .I like the point that Paul Godfrey is making. Maybe Corporate tithes bring some of the blessings that tithe payers experience? Different mechanisms are at play, of course (or so I think).
I have done a large study of more than 150 companies and found solid evidence that, when bad things happen, firms active in philanthropy experience less damage to their stock price than firms that don't give.
Thanks to John Tvedtnes for the tip.