Big Business Doing More for Charity

Corporations plan increases after giving dropped in 2003

In 2003, for the second year in a row, most of the nation’s largest corporations decreased their charitable

giving, according to a Chronicle survey. But despite the decline, many corporations say they expect their giving to increase or remain steady this year as long as the economy holds strong.

Cash donations at 86 corporations dropped by a median of 11 percent in 2003, meaning giving at half the companies decreased by a greater percentage and at half it fell less, held steady, or increased.

Corporations often establish their giving budgets based on the previous year’s earnings, so the decrease reflects 2002’s sluggish economy, says Curt Weeden, president of the Contributions Academy, a company in Mount Pleasant, S.C., that trains corporate grant makers. “While the economy is making a rebound, I’m not sure we’ll see all the effects of it in the contributions arena.”

But the Chronicle survey did find signs that corporate giving may be turning around this year.

Among the 72 companies that provided data about their 2004 giving budget, 56 percent said they would give the same amount as in 2003 and 36 percent said they expected an increase of 3 percent or more.

The survey also found that companies with a long tradition of giving large sums are the ones that are increasing their donations significantly as the economy improves. Giving by the 10 corporations that provided the most in cash, products, and services grew by a median of almost 19 percent in 2003.

This finding suggests that a small number of big companies are a key reason the overall dollar amount given away by business continues to increase. “Giving USA,” an annual report on the state of philanthropy published by the Trust for Philanthropy of the American Association of Fundraising Counsel, in Glenview, Ill., said corporations increased their philanthropy last year to $13.46-billion, an almost 2-percent increase, after adjusting for inflation.

Gains in Profits

Companies planning to give away more this year attribute the increase to a rise in profits thanks to the nation’s improving economy.

“The economic conditions are a little bit better, so facilities might be able to give a little bit more,” says Phyllis Epp, executive director of the International Paper Company Foundation, in Stamford, Conn. “I wouldn’t say it’s a complete turnaround, but we’re seeing movement in the right direction.”

Her foundation has increased its budget from $5-million last year to $6-million and plans to donate the extra $1-million to support a United Nations World Food Program effort to feed 68,500 children in Kenya.

Even companies in economically hard-hit industries, like the air-travel business, expect to donate more this year. The Delta Airlines Foundation, in Atlanta, plans to give $3-million in 2004 compared with $2.3-million last year. But the company said it would not increase the amount it provides to match donations its employees make to charity; Delta last year reduced to 50 cents the amount it provided for every $1 an employee gives to charity. Previously, the airline matched the donations dollar for dollar.

In some cases, giving budgets are increasing this year, but they pale in comparison to 2002’s giving, when many companies were completing donations made in the wake of the September 11, 2001, terrorist attacks. For example, PepsiCo plans to increase its 2003 budget of $35.8-million by at least 3 percent this year, but that figure is only a little more than half the amount it distributed two years ago. Jacqueline R. Millan, director of corporate contributions at the company, in Purchase, N.Y., says giving was inflated in 2002 because PepsiCo paid most of its pledges for September 11 disaster-relief efforts that year. The company’s giving also was higher in 2002 because it fulfilled several large pledges for non-September 11 activities earlier than it had anticipated, she says.

After the Scandals

In addition to the effects of the economy and September 11, corporations are still reeling from the highly publicized scandals at Enron and other companies, says Carol L. Cone, a consultant in Boston who helps businesses design their philanthropy programs. She says the scandals, among other things, have driven corporations to try to gain greater marketing value from their giving.

Philanthropy is “no longer something on the side that’s not a working asset,” she says. As part of this, an increasing number of companies say they are “branding” their giving by connecting it with one charitable cause.

For example, the Bank of America Corporation, in Charlotte, N.C., established its Neighborhood Excellence Initiative this year. The program, which will reach 30 geographic areas in which the bank does business, will provide $15-million over two years to nonprofit groups, individuals, and high-school students who are helping their neighborhoods by building low-cost housing, improving public education, and fighting local crime problems.

Andrew D. Plepler, president of the company’s charitable-investments program, described the new effort as “enlightened self-interest.” He says it will benefit charities and the public, but also indirectly provide marketing value by creating a program customers across the country can associate with the bank. He says the company has not reduced support for other charitable giving to pay for the program.

Giving Trends

Besides the increasing connection between giving and marketing strategies, the Chronicle survey identified other trends influencing corporate-giving programs, including:

• Volunteer programs. More companies are creating programs to encourage their employees to volunteer or are becoming increasingly sophisticated in the use of technology to aid that effort.

• Business mergers. Many companies, especially in the financial-services field, are revamping their giving programs after mergers with other businesses or acquisitions of smaller companies.

• Unrestricted grants. While most businesses continue to earmark their money for specific nonprofit programs, a growing number of companies are providing money for larger grants designated for general operating support.

The Chronicle survey is based on data reported by 93 companies that are among the 150 biggest in the United States, as ranked by Fortune magazine according to annual revenue. Corporations that participated in the survey were asked to report the total amount of cash donations they made this fiscal year and in each of the last two fiscal years, and the fair market value of their donated products during each of those three years.

The survey does not attempt to calculate other ways that companies support charities. For example, companies may offer low-interest loans to nonprofit groups. The marketing or research divisions of companies may also give money to nonprofit organizations through deals intended to help the companies test a new product or gain the endorsement of a charity. Those deals typically are not counted as part of a company’s giving budget.

Topping the list of the country’s largest corporate donors for the second year in a row is Merck & Company, a pharmaceutical corporation in Whitehouse Station, N.J., that gave away a total of $843-million in products and cash in 2003. Brenda D. Colatrella, senior director of Merck’s office of contributions, says the $210-million growth in the company’s giving from 2002 to 2003 was the result of its effort to provide discounted medicine to poor or uninsured people in the United States. Merck also increased its giving abroad, which primarily consists of donations of Mectizan, a drug that treats onchocerciasis, a disease that causes blindness.

The Merck Company Foundation, which accounted for 78 percent of Merck’s $54-million in cash grants last year, hired a new president in October — David Ruth, a former MasterCard International executive — and plans to reassess its giving, says Ms. Colatrella. While Merck’s philanthropic priorities, which include support for science education and access to health care, will not change, the company will examine where it has given historically and whether its grants have achieved the broad goals Merck set for its giving.

“It’s really a matter of asking the question: Is this the best use of available resources within our giving priorities?” Ms. Colatrella says.

Rounding out the list of the top five corporate donors are Pfizer ($686.2-million) and the Bristol-Myers Squibb Company ($615.7-million), both in New York; Johnson & Johnson, in New Bruns-wick, N.J. ($384.5-million), and the Microsoft Corporation, in Redmond, Wash. ($264-million).

Pfizer, like Merck, said its growth in giving is primarily due to increases in donations of drugs and other medical products, but the company also started a program to prevent HIV/AIDS in the southern United States, where the rate of HIV infection has risen in recent years. According to the Southern AIDS Coalition, a group of AIDS charities, 46 percent of the estimated new HIV/AIDS cases since 2001 have been reported in that region. Pfizer will provide $3-million over three years to AIDS-prevention efforts in the South, says Richard E. Luftglass, executive director of U.S. philanthropy at Pfizer.

In total cash donations, Wal-Mart Stores, in Bentonville, Ark., topped the survey with $153.4-million, an increase of $17.4-million. Betsy B. Reithemeyer, director of the Wal-Mart Foundation, which is responsible for most of the corporation’s philanthropy, says the fund plans to increase its giving by about 10 percent this year.

Other changes at Wal-Mart include increasing the amount local store managers, who direct the majority of Wal-Mart’s philanthropy, can provide to nonprofit groups each year. “Currently we limit each organization to $1,000,” Ms. Reithemeyer says, “We’re re-evaluating that to see if we need to give the store manager an ability to give more than that under certain circumstances.” She says the company is considering whether managers could decide to give a single group up to $2,500 in a year.

Besides Wal-Mart, the other companies that gave more than $100-million in 2003 are the Altria Group, in New York ($112.1-million); the Exxon Mobil Corporation, in Irving, Tex. ($103-million); and the Ford Motor Company, in Dearborn, Mich. ($100.9-million).

Volunteer Programs

Microsoft expects to slightly change its cash giving this year as well, says Akhtar Badshah, Microsoft’s senior director of community affairs. The company’s Unlimited Potential program, which donates money to nonprofit groups worldwide to teach poor people computer skills, will offer fewer grants this year, but for larger amounts of money and for multiple years. “We started off by investing our money in a lot of different organizations,” Mr. Badshah says. “Our effort now is to consolidate some of that and scale it up.”

Most of Microsoft’s donations are in the form of software, worth about $224-million last year, but the company also gave away $40-million in cash, split between Unlimited Potential and matching employee donations.

Microsoft also plans to start a companywide employee volunteering program designed to provide incentives for the corporation’s 56,000 workers to donate their time. According to Mr. Badshah, Microsoft employees asked the company headquarters to provide guidance on volunteer opportunities. “The effort is much more bottom up than top down. Employees come to us and say, Where do we go?” he says.

“It’s been easier for our employees to write a check than give their time, and I think we’re really going to start changing our focus on that,” says Cathy MacCaul, a communications manager in Microsoft’s community-affairs office. She adds that it is too early to say what types of incentive the company will offer.

Along with the software giant, several other companies are starting or improving their efforts to prod employees to volunteer.

For example, U.S. Bancorp, in Minneapolis, plans annually to pick one charity and encourage its employees to donate their time to it. Next year Bancorp personnel will be asked to volunteer at the Special Olympics, while in 2006, the designated group will be Habitat for Humanity.

Teresa Bonner, a spokeswoman for Bancorp, says the focus on one charity will increase the involvement of the bank’s personnel and their families in volunteer work and also strengthen employee morale.

“By having a focus, it allows us to promote that activity within the company, to make employees more aware of it,” she says. “It also makes for better employees.”

Money for Operating Costs

In addition to employee-volunteer programs, a handful of companies are offering more unrestricted grants to nonprofit groups.

Altria, a consumer-products company, plans to increase the size of the grants it offers for general operating support from a maximum of $10,000 to $35,000, says Jennifer P. Goodale, Altria’s vice president of contributions.

The UPS Foundation, the grant-making arm of the United Parcel Service, in Atlanta, also plans to provide more operating support, in addition to providing more money overseas as the company grows, says Evern D. Cooper, the fund’s president.

“There is a need for unrestricted grants just to keep the lights on,” she says. Without that money, “it forces nonprofits to engage in mission creep just to get the dollars.”

But most corporations are not increasing their support for unrestricted grants, saying they prefer to provide money for programs they can prove are making a difference.

“We like to see measurable results from our giving,” says Edward F. Ahnert, president of the ExxonMobil Foundation, which does not plan to increase the amount it provides in operating support this year. “We like to have plans in place at the beginning with our partners about what the outcomes or deliverables are going to be.”

But Mr. Plepler of Bank of America say he prefers unrestricted grants in part because his corporation’s giving office does not have enough staff members to continually evaluate grantees and measure results effectively.

“We’re not the Ford Foundation with a couple hundred people watching it,” he says.

The bank’s new neighborhood program will provide $12-million in operating support to nonprofit groups.

Mergers and Acquisitions

In addition to providing more unrestricted grants, the Bank of America Foundation plans to increase its giving to about $110-million from $75.6-million last year.

The increase is due in part to the bank’s acquisition of FleetBoston Financial Corporation, in Boston. Mr. Plepler says Bank of America will continue to honor FleetBoston’s commitments this year, but not all its grantees will continue to receive funds in the future.

“I don’t anticipate a huge shift,” he says. “This is not to say all groups funded by Fleet will be funded.”

Last year, FleetBoston’s foundation gave $19.6-million to, among other things, economic development, literacy efforts, and youth programs.

Mergers and acquisitions are reshaping other financial-services companies’ philanthropy as well.

The Wachovia Corporation, in Charlotte, N.C., is providing $20-million over five years to organizations that help public schools recruit and train teachers.

The new program is a result of Wachovia’s merger with the First Union Corporation in 2001, says Steve Bentley, the company’s director of community affairs. The program increases the Wachovia foundation’s budget by $5-million to $49-million this year.

Aside from the merger, Mr. Bentley says, Wachovia has experienced a rise in the number of nonprofit groups asking for money. He says the economic downturn in North Carolina’s textile industry has forced charities in that state to seek support from other corporate sources.

Ms. Goodale of Altria also says more nonprofit organizations are seeking money from her company, estimating that solicitations rose 30 percent last year. But she attributes the increase to cuts in government funds. And while many corporations are flush with increased profits, Ms. Goodale says, nonprofit organizations cannot expect companies to cover the entire shortfall in government support.

“The economy is down, people say it’s coming back, but federal and state funding is being cut,” she says. “When you look at where these NGO’s [nongovernmental organizations] get their money, there’s far less dollars out there.”

Leah Kerkman, Stanley W. Krauze, Cassie J. Moore, and Elizabeth Schwinn contributed to this article.