Corporate Giving Rebounds

Increased earnings cited as major reason for growth

After two years of steady declines due to a stagnant economy and volatile stock market, the nation’s largest

companies increased their charitable contributions last year, according to a Chronicle survey. Most companies in the survey expect their giving either to grow or hold steady this year — as long as economic gains continue.

Cash donations by 84 corporations increased by a median of 5.5 percent, meaning that giving by half of the respondents grew by a larger percentage and it increased by a smaller percentage, held steady, or decreased for the remaining companies. Cash giving by those corporations in the survey grew from $2.8-billion in 2003 to $3.1-billion last year.

Most corporations attributed their growth in giving to increases in the previous year’s earnings.

“We’ve had some nice growth years for the company so that means more opportunities for giving as well,” says Paula Prahl, vice president of public affairs at Best Buy, in Richfield, Minn. The electronics retail company primarily supports charities that provide educational computer games and other technology to schoolchildren.

The company’s cash contributions reached more than $18.8-million during the 2004 fiscal year — a $5.5-million increase. Best Buy’s philanthropy will probably grow to $23-million in its 2005 fiscal year, says Ms. Prahl.

For a few companies, financial difficulties continued to hamper their giving last year. At the Goldman Sachs Foundation — the charitable arm of the New York investment firm — giving fell by roughly one-third because its endowment did not achieve any investment growth. However, the fund expects to give more this year, thanks to a $33-million infusion from its parent company.

Of the 65 companies that predicted how much they would give by year’s end, 23 said they would increase their giving over 2004 and 36 expected to give the same amount as last year or increase giving to keep pace with inflation. Six companies said they plan to decrease the amount they donate.

In some cases, the economy is not the major factor behind a company’s increase in giving. For example, the Walt Disney Company, in Burbank, Calif., plans to increase slightly its cash giving this year to celebrate the 50th anniversary of the opening of Disneyland. The entertainment company plans to donate $5,000 to 50 charities in Orange County, Calif., where the theme park is located.

Shifting Priorities

The Chronicle’s findings support other data that show all businesses — not just the nation’s largest — are increasing their philanthropy as the economy improves. According to “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., corporate philanthropy increased last year by 4.5 percent, after adjusting for inflation.

However, while the economy is growing, some companies are changing their philanthropic goals, which may leave the charities they support with less funds.

For example, the Altria Group, in New York, is giving its subsidiary companies — Kraft Foods, Philip Morris USA, and Philip Morris International — a larger percentage of the philanthropy budget to control, says Jennifer P. Goodale, Altria’s vice president of contributions. In 2004, the company gave away $113.4-million — 52 percent of which is directed by its corporate headquarters and Altria subsidiaries; the remainder is controlled by local managers of Altria facilities worldwide.

The new structure will change the company’s charitable priorities. Altria’s grants to arts groups and domestic-violence prevention will decline as Philip Morris USA, for instance, increases its contributions to youth groups, colleges and universities, and charities located near its cigarette-manufacturing plants in Richmond, Va., and Charlotte, N.C.

“There will be gaps where Altria’s funding once was,” Ms. Goodale says. The company has sent letters to its beneficiaries explaining the changes. “The reaction to those letters has been part frustration, part great sadness, and part, ‘Wow, we really appreciate you telling us now,’” she says.

Aside from changes in their philanthropy, corporations are watching Capitol Hill as it considers legislation to curb nonprofit abuses — and adjusting to changes lawmakers passed last year, when President Bush signed into law a bill that tightens rules governing how much companies and other donors may claim when they donate intellectual property, such as patents, to charities. The legislation also requires companies to provide an appraisal for any charitable gifts, such as art or other collectibles, worth more than $5,000.

Curt Weeden, president of the Association of Corporate Contributions Professionals, in Mount Pleasant, N.C., says companies want to make sure the Senate Finance Committee — which is currently drafting new charity legislation — does not change rules governing a vital part of corporate giving: contributions of products.

“Our concern is it would be a huge mistake if the committee urged the IRS to change the rules of product giving,” he says. “We need to clearly tell them who this would be hurting.”

Mr. Weeden’s organization, which was established this year and represents 65 companies, is working with the U.S. Chamber of Commerce to make sure corporate philanthropy has a voice in the debate over new nonprofit regulations.

Among other key findings of the Chronicle survey:

• Sixty-four companies have so far donated a total of $256.4-million in cash and products to help the victims of last year’s tsunamis in South Asia. (That sum does not include how much companies may have spent to match tsunami contributions from employees or customers.) Since the disaster occurred late last year, in December, most companies say tsunami giving would be reflected in their budgets for the current year.
• Even before the tsunamis struck, more companies were increasing their international philanthropy. For 42 companies that reported their overseas contributions in both the 2003 and 2004 fiscal years, such giving grew from $918.5-million to $1.5-billion.
• Companies want to do more to help charities improve their management and operations by convening conferences, building closer relationships between their executives and grantees, and offering employee expertise to aid charitable efforts.

Biggest Donors

The Chronicle survey is based on data reported by 94 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. 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 are not typically counted as part of a company’s giving budget.

Topping the list of the largest corporate donors in the United States is the pharmaceutical company Pfizer, in New York, which donated more than $1.2-billion in cash and products in 2004 — an increase of more than 83 percent from the previous year. Pfizer is the first company to report giving away more than $1-billion worth of cash and products in one year since The Chronicle started its corporate-giving survey in 1993.

Pfizer’s giving increased primarily due to its efforts to provide discounted medicine to poor or uninsured people in the United States, says Richard E. Luftglass, the corporation’s executive director of U.S. philanthropy. The low-cost medicines serve about 2 million people, he says, and that number will continue to grow this year.

Rounding out the top five largest corporate donors of cash and products combined are Merck & Company, in Whitehouse Station, N.J. ($979-million); the Bristol-Myers Squibb Company, in New York ($666.3-million); Johnson & Johnson, in New Brunswick, N.J. ($529.3-million); and the Microsoft Corporation, in Redmond, Wash. ($410.7-million).

In total cash donations, General Motors Corporation, in Detroit, led the survey with $207.6-million. The company and its foundation support a host of charitable efforts, such as disease research, as well as efforts to protect the environment and promote health and safety.

While the corporation’s stock has declined precipitously this year and the company plans to lay off 25,000 employees during the next three years, its foundation is expected to maintain its giving at about the same level in 2005, said Hilary Spittle, a spokeswoman for General Motors. “One of the reasons the GM Foundation was established was to enable GM to continue its philanthropic initiatives in good times and in more challenging times,” she says.

But while the auto manufacturer donates significant sums to charity, one of its goals for 2005 is to donate more motor vehicles, says Lorna G. Utley, the president of the General Motors Foundation. “We will continue to try and focus on product,” she says.

Indeed, in an unusual move, the foundation is buying vehicles from the company at fair market value and giving them to disaster-relief charities. Last year, for instance, after several hurricanes hit Florida, the foundation gave three Hummer H2 sport-utility vehicles to the American Red Cross to help the disaster-aid group drive on roads strewn with debris. The foundation plans to provide an additional 69 Hummers to the Red Cross over the next six years.

Besides General Motors, other companies that provided large amounts of cash donations in 2004 are Wal-Mart Stores, in Bentonville, Ark. ($197.7-million); the Bank of America Corporation, in Charlotte, N.C. ($129.4-million); and Johnson & Johnson, in New Brunswick, N.J. ($122.4-million).

Tsunami Giving

This year many companies increased their cash giving in response to the tsunamis that devastated 12 countries in South Asia and Africa. Gap, in San Francisco, for example, provided $1-million in cash — the single largest amount it donated to one overseas cause — and also doubled the $425,000 raised by its employees for the emergency. Although Gap usually only supports domestic causes, the clothing retailer decided to make an exception in the case of the tsunamis.

“This really hit people in a different way,” says Gail Gershon, director of the Gap Foundation. “People felt really strongly about wanting to do something about it.”

The disaster affected the Chevron Corporation on a “personal level,” says Stephen D. Burns, a spokesman for the company. Chevron has 5,000 employees in Indonesia — one of the countries hardest hit by the deadly waves — and many of those workers lost family and friends. In response, the oil corporation gave almost $3-million for relief efforts and pledged an additional $10-million over three years to help rebuild devastated communities. Half of that pledge is supporting a program operated by Chevron and the U.S. Agency for International Development to provide three months of vocational training to 300 young Indonesians in road construction, electrical installation, and other jobs that will help with the nation’s recovery.

Despite the substantial commitment, the company says its tsunami giving will not take money away from its other charitable efforts. “This is new money,” says Mr. Burns. “Nothing else will get cut.”

Other companies who gave to the disaster also pledged that the tsunami money would not decrease their other philanthropic giving.

The tsunamis have spurred a number of companies to improve their ability to respond to a crisis and strengthen their ties with emergency aid groups. For example, the Business Roundtable, a Washington association of 160 corporate chief executives, is cataloging the equipment, supplies, services, and personnel its members can provide in a disaster to more effectively aid charities (The Chronicle, May 26).

Indeed, procedures established after the tsunamis have helped some companies quickly respond to the recent suicide bombings in London. For example, Gap gave $86,600 to the British Red Cross London Bombings Relief Charitable Fund shortly after the July 7 attacks and pledged to double the amount its employees donate to the cause.

One reason that corporate donations surged for tsunami relief, say observers, is that more companies are interested in supporting international causes as their businesses become more global.

For instance, the Goldman Sachs Foundation in July opened a new office in London with one staff member who will help expand its giving in Europe and Asia, says Christopher J. Williams, a spokesman for the fund.

Nontraditional Aid

While the Chronicle survey measures only cash and product donations, many companies say they want to do more to help the operations of nonprofit groups through other means.

In addition to financial contributions, the Wachovia Corporation, in Charlotte, N.C., for instance, provides management help to Teach for America — a charity in New York that recruits recent college graduates to teach in poor urban and rural schools. The banking corporation’s chief executive sits on the nonprofit group’s national board of directors, and managers of local branches advise Teach for America on its regional efforts.

Kevin Huffman, Teach for America’s director of development, says that in the past three years, the support from Wachovia has benefited the charity in ways it had not originally intended, such as helping to improve its marketing strategy and government relations. “We’ve built this relationship where anytime we have challenges or issues, we can call Wachovia,” he says.

In other examples of nontraditional support, Chevron in September plans to bring 30 nonprofit executives to its corporate headquarters in San Ramon, Calif., for a four-day leadership-development seminar, and Pfizer held a two-day meeting this year in Atlanta that taught AIDS organizations working in the South how to improve their grant applications, management skills, and efforts to evaluate their programs.

But some nonprofit officials say that charities should be wary of such aid from corporations. When companies provide “capacity building” assistance to nonprofit groups they must remember that charities are not managed exactly like corporations, says Judy Pollock, executive director of the Texas Neurofibromatosis Foundation, in Irving, Tex.

Ms. Pollack, who once led a business herself, says company managers “often do not understand the culture and the style of nonprofit management.”

Corporate giving officers acknowledge that providing management-training services or similar assistance is only applicable in a limited number of situations.

“At the end of the day, we clearly understand that a financial contribution is important to the health of nonprofit organizations,” says Laysha Ward, vice president of community relations for Target, in Minneapolis. “But we believe that technical expertise is as critical for some of our partners.”

For example, employees from Target’s marketing department and other divisions helped the King Center, in Atlanta, remodel its bookstore and gift shop in 2002. “Giving what we do every day, it was just a natural,” says Ms. Ward.

With the prospect that earnings will continue to grow this year at many businesses, some giving officers hope that the corporate world will change its view of philanthropy. In recent years, charitable donations have been increasingly considered simply as a strategy to increase profits through marketing efforts or other means, say observers.

“My hope is that the pendulum will swing back from what I think is a little overcommercialization of charitable giving at the corporate level,” says Ms. Prahl of Best Buy.

As a result, she predicts Best Buy and other companies will improve how they measure their philanthropy’s effect — both on the bottom line and on society.

“We’re going to get better at answering why a certain kind of investment is good for the company,” says Ms. Prahl, “as well as for the betterment of mankind.”

Leah Kerkman and Cassie J. Moore contributed to this article.