Corporate Donations Cool Off

Economic slowdown blamed for lack of increases in gifts

After five years of double-digit growth, corporate charitable contributions are expected to remain largely flat this year, according to a Chronicle survey of the nation’s largest companies. Companies cite the nation’s sluggish economy.

Fifty-five out of 91 corporations in the survey expect to donate about the same amount or less this year than they did in 2000.

Among the 44 companies that provided figures for their 2001 giving budgets, cash contributions are expected to drop by an average of 2 percent. The median change — meaning half of the companies plan a bigger increase and half anticipate a smaller increase or drop — is expected to be an increase of 4.1 percent this year, less than three-fifths the rate of last year’s median change.

“We see companies pulling back their cash giving programs as the quarterly financial reports come out,” says Curt Weeden, director of the Contributions Academy, a training organization for corporate-giving officials in Mount Pleasant, S.C.

In other ways, too, the weakened economy is taking its toll on giving. Some companies, for example, are refraining from making multiple-year grants. Others say they are delaying spending decisions until later in the year when they might have a better picture of their companies’ financial health.

More than one-third of the companies that provided income figures to The Chronicle made less in pretax profits last year than in 1999. And as company earnings decline, giving as a percent of net income — one measure of corporate generosity — appears to be slipping. Two dozen companies that gave figures for 2000 and 2001 report that they will give a median of 0.9 percent of last year’s pretax profits in cash and products this year, compared with 1.1 percent in 2000.

How the Survey Was Conducted

The Chronicle survey is based on data reported by 96 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 this year and in each of the last two years, and the fair market value of the companies’ donated products during each of those three years.

The survey does not attempt to calculate 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 deals typically are not counted as part of a company’s giving budget.

In the Chronicle survey, when gifts of both cash and company products are counted, Pfizer, a pharmaceutical company, was last year’s biggest contributor. The company last year acquired another drug giant, Warner-Lambert Company, and the combined business donated more than $283-million worth of company products and $57.2-million in cash. In total, Pfizer more than doubled its 1999 gifts.

Three other drug companies were among the other top donors last year. Merck & Company gave $249-million in products and cash, Johnson & Johnson donated $217.6-million, and Bristol-Myers Squibb Company gave $172.2-million.

The Microsoft Corporation, which donated $197.5-million worth of its computer-software products and $34.3-million in cash, also ranked among the biggest donors. Microsoft’s product donations leapt 150 percent from 1999. Last year’s gifts included $50-million worth of software that was donated to historically black colleges and universities through a program run by the United Negro College Fund.

Wal-Mart Stores, the retail giant, reported giving the most cash in 2000 — $150.4-million. Three other companies donated at least $100-million in cash last year — Ford Motor Company, Philip Morris Companies, and SBC Communications, a telecommunications company in San Antonio.

Doubling Donations

In all, nearly three-quarters of the companies that reported figures to The Chronicle increased their cash giving from 1999 to 2000, including four corporations that more than doubled their gifts.

At one of those companies, WorldCom, a telecommunications company in Clinton, Miss., donations jumped from $3.8-million to $9.1-million. Nearly all of 2000’s contributions went to cover the costs of MarcoPolo, an online teacher-training program established by the MCI WorldCom Foundation in 1997.

Three other companies more than doubled contributions last year: Dynegy, an energy company in Houston; the International Paper Company, in Purchase, N.Y.; and Washington Mutual, a financial-services company in Seattle. In each case, the company made at least one major acquisition last year, and picked up the corporate-giving tab of the businesses it acquired.

Dynegy last year bought Illinova Corporation, a power company in Illinois, and nearly tripled its giving to $2.8-million.

The giving budget for Washington Mutual, which has been on a bank-buying spree in recent years, rose to nearly $22-million last year, from less than $11-million in 1999. The company expects its giving to grow to $30-million this year.

At least $2.3-million of this year’s contributions will support charities in Texas, where Washington Mutual now owns more than 300 bank branches since its merger with Bank United in Houston in February. Last year, when Washington Mutual had only 45 branches in Texas, it made gifts totaling $350,000 in the state.

“We’re conscious that when we go into a new area, the company wants to get involved in the community,” says Cheryl Di Re, Washington Mutual’s senior vice president of community relations and marketing. How much the company contributes in each city or town, she says, depends in part on the size of the local unit’s business and the number of employees that work there.

International Paper last summer acquired another paper company, Champion International, picking up the company’s full philanthropy budget in the process. International Paper’s cash giving rose from $7.6-million in 1999 to $19.8-million last year. But the company expects giving to drop to about $16-million this year as it integrates Champion’s charity program into its own by, among other things, eliminating duplicate grant making.

Company officials declined to give details, but said that International Paper and Champion each contributed to some of the same organizations, including a few environmental groups.

In addition to International Paper, one third of the 44 companies that provided The Chronicle with cash-giving figures for 2000 and 2001 said they expected contributions to decline.

Qwest Communications International, a company in Denver that provides telephone and Internet services in the United States and abroad, is slashing cash donations by more than half, to $8-million, this year.

The company, which last year acquired US West, is spending billions of dollars to upgrade its communications network and improve customer service. Because of the expenditures, a company spokesman said in an e-mail message, “the company is in a negative cash-flow position and we would have to borrow money in order to give it away.”

Delaying Grant Programs

While companies like Qwest are dealing with business challenges by cutting their charitable contributions, others are taking different approaches.

BellSouth Corporation, which this year plans to donate about $29-million, as it did in 2000, is delaying the start of a few new grants programs while it continues to watch earnings. The Atlanta communications company had expected, for example, to put out a request for grant proposals at the beginning of this year under a new program to encourage minorities to attend college. It has shelved that request at least until the end of the year.

The value of BellSouth’s foundation endowment has fluctuated along with the stock market. The fund’s assets are worth about $64-million, down from a 12-month high of $70-million.

“As we see the impact of the market, we’ll have to try to look ahead five years and make sure we still have an appropriate expenditure plan,” explains Pat L. Willis, president of the BellSouth Foundation.

At least one company in the Chronicle’s survey has suspended giving altogether until the company regains financial stability.

The Rite Aid Corporation, a company in Camp Hill, Pa., that owns more than 3,600 drugstores around the country, hasn’t given any money to charity in more than a year.

The company, which is in debt and has been reorganizing since new management took over at the end of 1999, will decide on a philanthropy budget within six months, a spokeswoman says. She declined to speculate on how much the company may contribute, or to say how much the company has given to charities in the past.

Optimism About the Future

Despite the difficult economic climate facing many corporations, business leaders remain optimistic about corporate philanthropy over the long term.

Charles H. Moore, a former business executive who heads the Committee to Encourage Corporate Philanthropy, in New York, expects companies to continue to see merit in their philanthropy.

“Corporations are building a sense of how they want to be corporate citizens,” says Mr. Moore, whose group is composed of 65 corporate leaders working to spur giving among big businesses. “That sense will hold steady even as earnings may be fluctuating.”