After the financial crisis in 2008, unemployment doubled from 2007 to 2009 in the US. The Dow Jones Industrial Average fell from 14,000 to 7,000 just 16 months later after the economic crash. Around 8 million people lost their jobs, savings, businesses, and their homes. Major financial institutions such as Merrill Lynch, Lehman Brothers, AIG, Washington Mutual, either failed, were acquired or were bailed out because they were considered too big and too important to fail, just like General Motors and Chrysler was bailed out by the US government.
In March 2011, only 44% of Americans were confident in the banking industry, compared to back in 2008, when 68% expressed confidence in the industry. In a 2009 Gallup poll, only 19% of Americans showed confidence in the integrity of bankers, while in 2005, 41% expressed confidence in bankers.
An Edelman survey found that financial services was the least-trusted sector globally. According to CEO, Richard Edelman, a company must deliver a collaborative approach that benefits not only the shareholders, but society. A company should be transparent about how it makes money and provide clear communication through all forms of media.
Building trust is a responsibility for public relations. An initiative such as a philanthropic act is not considered to be marketing or a sponsored activity, but it builds a sharp public image for a company.
For example, HSBC is using philanthropy to build trust by working closely with clients and assisting them in philanthropy plans and charitable structure management. By being a part of client philanthropic acts, HSBC puts itself at the core of the action, making it a leading party of the cause. Similarly, J.P. Morgan provides grantmaking and administrative services for charitable trusts and foundations for which J.P. Morgan serves as a trustee or agent.
Philanthropy is considered as a charitable action which serves the company’s face well in public. Philanthropic strategy can help banks to build back their positive identity with each of their stakeholders, including employees, consumers, stockholders and government.
For banks, strategic philanthropy can create a favorable reputation associated with the right cause through supportive actions. For example, by supporting communities, banks can attract and retain employees, establish relationships with new customers, and engage positively with political leaders.