Clouds on the Horizon

Corporate donations are unlikely to repeat last year’s gains

Charitable giving among the nation’s biggest companies rose last year, buoyed by an outpouring of

generosity following the September 11 terrorist attacks, according to a Chronicle survey. But without the donations to relief and recovery efforts, corporate contributions would have stayed largely flat, the survey found, and prospects for this year’s giving are no better.

Cash donations at 61 of the companies in the survey grew by a median of 13 percent from 2000 to 2001, meaning half the businesses had a bigger increase and half a smaller increase or a decline. But excluding contributions to September 11–related charities or causes, cash donations by those companies grew by a median of 3.8 percent, compared with last year’s inflation rate of 2.8 percent.

The tightening in corporate giving, which followed five years of double-digit growth in business gifts, is expected to continue. Two-thirds of the companies in the Chronicle survey said they plan to donate about the same amount or less this year than they did in 2001.

Not only are companies coming off a year of unexpected giving related to September 11, but they are also dealing with a rattled stock market and diminishing corporate profits. More than two-thirds of the companies that provided income figures to The Chronicle made less in pretax profits last year than in 2000. The median drop: 43 percent.

And as more companies are rocked by accounting irregularities or other business scandals, prospects for corporate charitable giving this year become increasingly murky.

“Corporate giving is closely tied to how well companies are doing, and we know what that picture looks like,” says Dwight F. Burlingame, associate executive director of Indiana University’s Center on Philanthropy. “With some notable exceptions, it looks like a bad year in terms of corporate charitable giving.”

Businesses in Trouble

Just how bad is difficult to measure, though. Some companies with the shakiest financial prospects did not participate in the Chronicle’s survey. Qwest Communications International, the Denver telecommunications company, and Rite Aid, a drugstore chain in Camp Hill, Pa., for example, face allegations of faulty accounting practices, and each declined to offer information about its charitable gifts.

WorldCom, the long-distance telephone-service provider in Clinton, Miss., did report its giving plans — about $14.6-million this year — but the future of the embattled company is unclear, as it faces a $4-billion accounting scandal and the potential need to file for Chapter 11 bankruptcy protection.

The Chronicle survey is based on data from 99 companies that are among the 150 biggest in the United States based on annual revenue as ranked by Fortune magazine. The Chronicle asked the companies to report the total amount of cash donations they made in each of the last two years and the fair market value of the companies’ donated products during the same period. The companies were also asked to report their giving plans for this year.

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

Pfizer Tops Ranking

In the survey, when gifts of both cash and company products are counted, Pfizer, a New York pharmaceutical company, came out on top in 2001. The company donated $70-million in cash and $377-million worth of drugs, totaling nearly a third more than it gave in 2000. Much of the increase, according to a company spokesman, can be attributed to rising demand for the drugs Pfizer donates as part of a program to help Americans who have no insurance or otherwise are unable to pay for prescriptions. The number of patients participating in the program jumped 40 percent last year to nearly one million.

Pfizer also is increasing its drug donations abroad. Last year the company began distributing in six African nations a drug that treats a deadly AIDS-related illness. Pfizer is expanding the program this year to include Haiti and three more countries in Africa.

Three other drug companies ranked just behind Pfizer on the list of top corporate donors last year: Merck & Company, in Whitehouse Station, N.J. ($341-million); Bristol-Myers Squibb Company, in New York ($335-million); and Johnson & Johnson, in New Brunswick, N.J. ($230-million). In each case, contributions of drugs accounted for most of the donations.

At Bristol-Myers Squibb, 2001 was the first year those contributions were fully counted as part of the company’s charitable giving. In the past, the company gave drugs directly to pharmacies and physicians who made requests in behalf of needy patients, and it did not count the donations as charitable contributions for the purposes of tax deductions. Then, in late 2000, the company set up a new charity, called Bristol-Myers Squibb Patient Assistance Foundation, to handle its domestic drug giveaways. Starting last year, the company began funneling donations through its new foundation, thus counting the contributions as charitable, and taking them as deductions when appropriate.

Bristol-Myers Squibb’s drug-giveaway numbers were also on the rise last year because the company is increasing its philanthropy in Africa to meet its pledge, announced in 1999, to spend $100-million over five years to help women and children infected with HIV. The company pledged to spend $115-million in cash over five years in nine African countries as part of the program Secure the Future.

Cash Gifts

Of all the survey’s respondents, Ford Motor Company, in Dearborn, Mich., reported giving the most in cash last year, $138-million.

Among the company’s grants: $870,000 to three organizations to pay for college scholarships for minorities, and payment on much of a $30-million commitment to cover the cost of a new company-sponsored program called Boost America, which distributes free child-safety car seats to low-income families.

Three other companies contributed more than $100-million in cash in 2001: Philip Morris Companies, in New York ($122-million); Exxon Mobil Corporation, in Irving, Tex. ($120-million); and Wal-Mart Stores, in Bentonville, Ark. ($117-million).

Responding to Terror Attacks

About two-thirds of all the companies that reported figures to The Chronicle increased their cash giving from 2000 to 2001. In many cases, much of the rise is attributable to gifts made to September 11–related charities and causes.

New York Life Insurance, for example, which had expected to nudge up its total cash giving to about $6-million last year, ended up more than doubling its 2000 contributions to $10-million when it took an additional $4-million out of the endowment of its company foundation to give to groups raising money for September 11 causes. The company typically does not dip into the principal of its fund, the New York Life Foundation, instead spending only the interest earned on its assets.

“It was an easy decision,” says the foundation’s president, Peter Bushyeager, of taking the extra money out of the fund. “Look at our name. Look who we are. We wanted to do everything we could, even if it meant fairly extraordinary measures.”

The company supported the relief efforts in others way, too, including producing in its television studio two public-service advertisements encouraging people to give to the American Red Cross. The spots ran on national cable stations during airtime, worth $1.5-million, that New York Life had purchased and then donated to the Red Cross.

The surge in September 11–related gift giving last year was fueled in part by contributions made by employees that were matched by company donations. Some companies ran special matching-gift campaigns, while others expanded existing programs to include and encourage donations to relief and rescue efforts.

Following the attacks, Verizon Communications, in New York, temporarily changed the formula for matching its employee gifts from one-to-one to three-to-one. The company, which had donated $4-million in 2000 to match employee donations, spent $20.5-million on matching gifts last year, half of which went to September 11–related causes.

Among 61 companies that reported making donations related to September 11, a total of $178-million went to relief and rescue efforts, accounting for 8 percent of those companies’ total cash giving in 2001. Companies in the survey also reported donating millions more to September 11 causes in the form of company products, other in-kind gifts, and volunteer time. And some businesses noted that they planned to give additional money to September 11 causes this year, or to pay pledges they made last fall over time.

Going Beyond Money

But measuring corporate support for September 11–related charities and causes doesn’t account for the myriad other ways that businesses responded with their charitable giving in the aftermath of the attacks.

The Hartford Financial Service Group, in Connecticut, gave $460,000 to the September 11th Fund, an organization created by the New York Community Trust and the United Way of New York City. But to help nonprofit groups whose appeals for donations may have been overshadowed by September 11 fund-raising efforts, Hartford also decided to disburse grant payments last fall that were scheduled to be made this year. The company gave a total of $1.5-million to United Ways around the country and to other charities not working on the relief efforts.

Cisco Systems, the San Jose, Calif., computer-networking company, donated nearly $7-million to September 11 causes in this country. But the attacks and their aftermath also prompted the company to support the efforts of nonprofit groups working in Afghanistan. At the end of last year, Cisco gave $300,000 to hunger-relief, health-care, and education programs aimed at helping Afghan women and girls. The company gave $7-million abroad last year, including to programs in India, where Cisco has operations.

Giving Overseas

Cisco, like a growing number of other American companies, has focused more on international giving in recent years, attempting to more closely align its philanthropy with its business operations. Exxon Mobil last year introduced a program to fight malaria in West Africa, where the company has stepped up its oil and gas development. Nationwide Mutual Insurance Company, in Columbus, Ohio, which has expanded its business abroad over the last several years, this year is making its first overseas gifts, including a $33,000 grant to a literacy program in Brazil.

Among the 34 companies in the survey that provided data about their international gifts in 2000 and 2001, the amount of money and products donated to charities abroad grew by a median rate of 17 percent. And last year, 15 of 30 companies that provided figures for both their international giving and their overall giving spent at least one of every 10 of their philanthropy dollars overseas.

Among the survey’s other findings:

• Ninety-seven of the 99 companies that provided separate cash giving figures for 2001 gave a total of $3.1-billion to charity last year. In addition, 31 of the 58 businesses in the survey that donate company goods reported contributing $1.7-billion in products. Taken together, last year’s cash and product gifts reported by survey respondents account for about half of all corporate contributions nationwide, based on estimates in Giving USA, an annual report that measures philanthropy.
• Giving as a percentage of net income — one measure of corporate generosity — may be slipping. Last year, businesses in the survey gave away cash and company products equal to a median of 1 percent of their 2000 pretax profits. Twenty-five companies that reported giving figures for this year, along with last year’s earnings, plan to donate a median of 0.7 percent of their 2001 pretax profits.
• Eighteen of the 40 companies that provided figures for cash giving this year plan to donate more money this year than last. Of the companies that expect to raise cash gifts this year, three corporations in the energy business plan the biggest increases.

The energy company Dynegy, in Houston, expects to more than triple its giving to $5.8-million this year. Despite some financial troubles, which have led to layoffs and a $2-billion restructuring plan, Dynegy is drawing from its new company-run foundation to make grants this year. Among other projects, the foundation expects to spend $500,000 on Dare to Care, a program intended to help nonprofit groups generate revenue through product sales.

Dynegy is producing and distributing to charities a stuffed animal named Bunky Bunny and a line of children’s books and CD’s based on the character. The charities can sell the goods and receive half of the proceeds. The rest of the money will be split among other children’s charities that Dynegy supports. In six weeks starting in May, the Children’s Museum of Houston sold about $2,000 worth of bunnies and related products.

“Every year some company or sector gets beat up and leaves a community high and dry,” says Sara Speer Selber, president of the Dynegy Foundation. “We wanted to provide nonprofit groups with long-term, sustainable funding in good and bad times.”

Valero Energy Corporation, an oil-refining company in San Antonio, expects donations to more than double to $10-million this year because of its merger with Ultramar Diamond Shamrock, an oil company that owns pipelines and gas stations in the United States and Canada. And the San Francisco energy company PG&E Corporation is raising its giving this year by more than 40 percent to $5.5-million, after cutting it in half in 2001 when part of the corporation filed to reorganize under the federal bankruptcy law.

Decline in Giving

Of the 20 companies that reported declining cash-giving budgets this year, the median decrease was nearly 11 percent.

Delta Air Lines, the Atlanta company that has struggled along with the rest of the air-travel industry since the September 11 terrorist attacks, expects a 24-percent drop. At the start of this year, the cash-poor company stopped accepting new grant applications and used $1-million of its foundation’s endowment to meet its commitments for this year.

Delta plans to donate a total of $4.5-million in cash. But it also plans to contribute to charities $6-million worth of airline tickets this year — the same as it did in 2001 — and to encourage employees to volunteer. Delta is stepping up promotion of its “Heart of Delta Awards,” for example, a program that recognizes employees who volunteer at least 100 hours a year.

“If our industry continues on the same track, it will be some time before we get back to the giving levels we saw prior to 2001,” says Michael M. Young, Delta’s vice president for community affairs. “In the meantime, we’ll do what we can with free tickets and other in-kind gifts and to energize our staff to do more volunteering so that we can, as a company, continue to support the community the best we can.”

Marni D. Larose contributed to this article.