September 28, 2010 | Read Time: 5 minutes
Washington
Like many corporations, Citigroup has refocused its philanthropy on areas that align with what it does as a business. Three years ago, the New York financial-services company streamlined its giving to focus on programs that help poor and middle-income people gain economic independence.
That has meant fewer grants but longer-term ones, often with a focus on measuring results and expanding the programs if they are successful. For example, the company’s foundation, which gave $94.7-million in 2009 (down about 32 percent from 2008), this year announced a five-year effort to help the Corporation for Enterprise Development, KIPP Foundation, and the United Negro College Fund develop a program that will help low-income students save for college while they receive academic support.
This has taken place against a backdrop of economic tumult. Citigroup lost more than $27-billion in the global financial crisis of 2008, requiring a bailout from the U.S. government to stay afloat.
In an interview with The Chronicle, Citigroup’s chief executive, Vikram S. Pandit, spoke about what the company seeks in nonprofit projects, whether corporate giving is good for business, and the impact of the financial crisis on his company’s giving.
“Corporate citizenship” is a vague term. What does it mean at Citigroup?
As a bank, we have a responsibility to do everything we can to make the communities we’re in prosper. One of the responsibilities that goes with that is financial inclusion. Financial inclusion is about making services and making our capabilities available to people who aren’t part of the financial system yet. We try to bring people into the system, to help them save, help them learn how to build assets, help them have a checking account. All those things go with our responsibility of being a bank.
How does your philanthropy fit into that?
There are philanthropic aspects to some of what one can do. But this is really about sustainability. How do you develop sustainable models of financial inclusion? That is a fundamentally different approach. If we bring everything we know about finance and our systems and our smart people together, we can figure out how to create a business model around financial inclusion that can even create a little bit of a profit. There has to be some aspect of philanthropy, which is seed money or start-ups or experimentation. But to make them sustainable, they need to be grounded in basic business theory, business models. Microfinance is a perfect example of that. It’s something that does great for people who are not part of the lending system, but also it can be profitable.
So you’re looking to support projects that would eventually become sustainable and profitable?
What [our corporate foundation does] is focus on financial inclusion and sustainability as being the goal. Why? Because that’s what we’re good at. You can’t really have success without financial inclusion. Yes, we try very hard to see if we can seed and fund those things that can have a life and are sustainable. It’s not exclusively that, but it’s a big part of our thinking.
Do you make these investments because they are the right thing to do or because they are good for business?
Do I believe that it’s ultimately good business? Of course. Anything that makes your communities prosper has to be good business. But do I attach those definitions to what I want to see every quarter, every year, every 10 years? Not necessarily. Certain of these projects could turn out to be short-term successes, but a number of them are about laying the groundwork for what banks are supposed to do, which is making sure communities prosper.
Aren’t what’s most profitable and what’s best for society often at odds?
There could be some people who believe they’re at odds. But this is so squarely in the pathway of our purpose, our mission, that it’s not incongruent with what is right for our shareholders. The primary goals of our foundation and our community efforts is to drive financial inclusion. How can that be bad for shareholders on any long-term basis? I don’t see that.
You had to cut your giving by a third last year. What’s the future?
We had to do a lot of things in this environment. You can rest assured that the [foundation’s] budget is going to be higher for sure. Toward the end of the year, when we go through the budgeting cycle, we will figure that out.
How do you measure the success of your giving?
Scalability is an interesting measurement. Secondly, the human stories are the success stories to me. Just talk to some of the people and see exactly what these programs did for them, how they changed how they approached life and how they changed their behavior. Ultimately, it’s those stories that really tell you how successful you are.
Some companies try to give about 1 percent of their profits. Citigroup has obviously been giving even though it hasn’t been profitable in the past two years. How much should companies be giving as a percentage of profits?
I shy away from having targets. I really think it’s about finding opportunities. If they are good opportunities, we should do them.
As you become more strategic in your philanthropy, is it tough to say no to other great causes?
There is always a human part of anybody that wants to do more rather than less and can get moved by causes that are out there. We do some of that. But then you have to ask yourself, where can you actually make a difference? We have that responsibility to put our efforts, all our products, all our resources, all our people, toward those efforts where we can actually make a difference. I’m hoping that in those areas where we may be philanthropic but may not be doing everything we are doing in financial inclusion, that there are other organizations for whom that’s their sweet spot.
