Corporate Giving Rises Again

But double-digit growth barely keeps pace with pre-tax profits

Corporate contributions jumped by 12 percent last year and are expected to continue growing apace this year, a new Chronicle survey of the nation’s top businesses has found.

Company giving budgets, which began to grow again in the mid-1990’s after nearly a decade of stagnation, have seen double-digit growth in each of the last four years, according to

Chronicle

surveys of many of the largest companies in the United States. And this year, the 47 companies that reported their 2000 giving plans to The Chronicle expect, on average, a 17-percent rise in cash donations. The median increase — meaning half of the companies plan a bigger increase and half anticipate a smaller increase or a drop — is expected to be 7 percent, roughly the same rise as in each of the last two years.

Much of the jump may be attributed to the nation’s robust economy, and, more specifically, to the financial success of the companies in the survey. At the 32 companies that provided income figures, pre-tax profits rose by a median of 16 percent from 1998 to 1999.

Still, while both profits and the total amount of donations are on the rise, companies are not necessarily becoming more generous. Giving as a percentage of net income — one measure of corporate generosity — has remained flat in recent years at about 1 percent. This year, for example, corporations in the Chronicle survey plan to give away cash and company products equal to a median of 0.9 percent of last year’s pre-tax profits.

The survey is based on data reported by 97 companies, which are among the 150 biggest in the United States, based on annual revenue as ranked by Fortune magazine. The companies were asked to report their charity budgets, including both cash donations and the fair-market value of gifts of the company’s brand-name products. The survey does not attempt to calculate the myriad of other ways companies provide support to non-profit groups, such as through employee-volunteer programs.

Together the companies gave $2.5-billion in cash and $1.1-billion in product donations to charity last year. That is nearly one-third of all corporate contributions nationwide, according to estimates in Giving USA, an annual report that measures philanthropy.

In the Chronicle survey, when gifts of both cash and company products are counted, three pharmaceutical companies land at the top of the list of last year’s biggest contributors. Merck & Company ($256-million), Johnson & Johnson ($188-million), and Pfizer ($154-million) all donated significant amounts of medicine last year, which accounted for at least 70 percent of their total giving.

Wal-Mart Stores, the giant retailer, reported giving the most in cash contributions last year — about $112-million. And the company, which encourages its employees to organize fund-raising events and then matches the amount raised, reported the biggest cash giving budget for this year, too — $175-million.

Philip Morris Companies was second on the list of top cash donors last year, contributing $98-million. The cigarette and food manufacturer captured the No. 2 spot after it changed its accounting system last year to keep better track of donations made throughout the company, in the United States and abroad. In 1998, the company reported making $60-million in cash donations, but that figure did not include much of the giving from its subsidiaries, including Kraft, and from its divisions worldwide. Last year, for the first time, Philip Morris consolidated its reporting for all philanthropic spending.

The contributions of the three other top cash donors in 1999 — Bank of America ($96-million), ExxonMobil Corporation ($93-million), and SBC Communications ($87-million) — all reflect a recent merger or acquisition that helped increase giving at the newly created company. In fact, in each case, last year’s donations and this year’s giving budgets are equal to, or greater than, the total of what the companies involved in the mergers had given when they were separate entities.

In 1998, for example, the telecommunications company SBC donated $53-million to charity, while its counterpart in the industry, Ameritech, contributed nearly $28-million. Total giving of the two companies, which merged in October, was $87-million in 1999, and the combined company, which took the SBC name, plans to donate about $100-million this year.

Other companies in the Chronicle survey — Bell Atlantic and GTE Corporations, the telecommunications companies that last month completed a merger, and Pfizer, which just combined with Warner-Lambert — also plan to continue donating at least as much as the combined total of both companies’ giving before the consolidations.

For Pfizer that means contributing at least $50-million in cash and $220-million worth of company products in 2000. Verizon Communications, the company that has emerged from the combination of Bell Atlantic and GTE, plans to make $70-million in cash donations this year from its newly created Verizon Foundation, and will contribute additional money directly from the corporation.

But even as companies pledge not to cut charity budgets over all, officials of non-profit groups still worry about the impact of mergers and acquisitions at the local level. Among their biggest fears is that when businesses consolidate, offices, plants, and employees may move out of their area — and with them the company’s philanthropy.

That isn’t likely to happen in Alaska, though, where Oklahoma-based Phillips Petroleum recently acquired the Alaska oil operations of Atlantic Richfield Company, which is now owned by BP Amoco. Before the deal was approved, the state asked Phillips to sign an agreement promising a certain level of charitable giving in Alaska and committing itself to fulfill certain other demands.

Under the agreement, which the company pledges to abide by even though it is not legally bound to do so, Phillips each year will make donations to non-profit groups in Alaska. The amount of money will be determined by a formula based on the previous year’s oil production in the region and the price of oil.

Phillips, which donated $6.5-million last year, plans to contribute $11.5-million in 2000, including $3.7-million earmarked for Alaskan charities.

The significant jump in Phillips’ giving budget — 77 percent — places the company among the corporations in the Chronicle survey that project the biggest increases in cash giving this year.

The Goldman Sachs Group, an investment company, leads the way with plans to nearly triple its donations to $40-million in 2000. Much of the rise is due to the creation of the Goldman Sachs Foundation, which plans to donate $20-million this year. The fund was created last year with $200-million worth of stock after the company went public.

One of the largest gifts from the foundation so far this year is a $3-million grant to the Institute of International Education, in New York, to establish the Goldman Sachs Global Leaders Program. The institute will select 100 college students from around the world to participate in the program, which is intended to teach young people about leadership and the technology-driven economy.

WorldCom, the telecommunications company, reported the second biggest increase in cash giving this year — nearly doubling its budget to $7.3-million. It has taken an unusual approach to corporate philanthropy. Instead of supporting a variety of organizations and causes, the company’s foundation gives almost all of its money to a single program that the foundation itself manages. The three-year-old program, called Marco Polo, helps to create educational resources and to post them on the Internet; it also trains teachers to use material found on the Internet in their lessons.

Interest in Marco Polo has caught on so quickly, foundation officials say, that the fund, which had planned to pay for 2,000 teachers to be trained this year, expanded its budget to cover the cost of training 10,000 teachers.

Along with Phillips, Goldman Sachs, and WorldCom, seven other companies in the survey reported plans to increase their cash giving for 2000 by at least 25 percent. Among them is the Prudential Insurance Company of America, which set up a special $20-million fund this year as part of the company’s celebration of its 125th anniversary. Money from the fund will go to help non-profit groups in Newark, N.J., where Prudential has its headquarters.

Among the survey’s other findings:

• Eleven of the 47 companies that reported cash budgets for 2000 plan to contribute less than last year. AutoNation, which sells cars, expects the biggest drop — by more than 40 percent to $2-million. The company’s executives say that the dip is part of $100-million in cuts the company made this year to trim overhead expenses as it rapidly expands its presence on the Internet and the number of dealerships it owns. They expect giving to rebound in 2001, and to continue to grow as the three-year-old company matures.
• Fifteen corporations expect to donate cash and products this year worth at least 1 percent of 1999’s pre-tax profits. J.C. Penney Company expects to contribute the biggest share of last year’s earnings — 4.3 per cent. The giant retailer’s figure was so high in part because earnings in 1999 were so low, having dropped by 44 per cent from 1998. The company aims to spend 2 percent of the average of its profits over a three-year period.
• Last year, 22 companies spent at least $1 out of every $10 of their philanthropy dollars overseas. One of the companies, Merck, spent nearly $9 abroad out of every $10 in donations. More than half of the $224-million worth of cash and products Merck gave away internationally was in the form of one drug, Mectizan, which treats an eye disease known as river blindness. The pharmaceutical company has distributed the drug mainly in Africa.
• Among the 29 companies that provided data about their international gifts in 1998 and 1999, the amount of money and products donated to charities abroad grew by a median rate of 13 per cent.

  Aetna, an insurance and financial-services company, reported a nearly six-fold increase in overseas giving from 1998 to 1999. The company and its international affiliates made significant new grants last year, including $1.5-million to help victims of an earthquake in Taiwan, and $2.5-million to a Chinese university for construction of a new management school named for the company.

Other companies in the Chronicle survey not only are increasing their overseas philanthropy but are also doing more to account for the company’s international charity. In many cases, a company’s affiliates and offices in other countries have been left on their own to determine a giving budget and choose the organizations they support. Often, the contributions they do make are not reported to the company’s headquarters here.

To keep better track of its worldwide giving, Texaco last year created the Texaco Global Fund. Although the oil company’s overseas subsidiaries will continue to support their own local giving programs, Texaco also will make corporate gifts through its new foundation, which will focus its contributions in three areas: education, cultural heritage, and general operating support for non-governmental organizations.

But even with more oversight and attention, making donations abroad can sometimes be tricky. Pfizer, which has been stepping up its international gifts in recent years, is working out the terms of its latest offer to donate to poor South Africans a drug that treats a deadly disorder, cryptococcal meningitis, that can strike people infected with the virus that causes AIDS. Health officials in South Africa reportedly had balked at some of the conditions Pfizer has placed on the drug-giveaway plan, including limiting use of the medicine to patients with meningitis, and not offering it to people with other, more common infections.

Pfizer officials say that the conditions are designed to ensure that the drug is used properly. They also say that they are confident they will work out an agreement with the South African government and begin distributing the drug this fall. The company would not estimate the expected value of the donated medicine, which it expects to supply to approximately 100,000 people.

Last year, officials in South Africa held similar talks with Bristol-Myers Squibb Company, which had announced its plans for a new program — called Secure the Future — that would pay for research, medical training, and other efforts to help women and children infected with the AIDS virus in Southern Africa.

Among other things, African officials denounced the Bristol-Myers plan to train African medical practitioners in the United States instead of in their native countries. To respond to such complaints, Bristol-Myers, which has promised to spend $100-million on the program over five years, turned to Compaq Computer Corporation, in Houston. The computer company now plans to donate equipment that will allow physicians at Baylor College of Medicine, also in Houston, to provide training via computer to health workers in Africa.

Bristol-Myers officials said they welcomed Compaq’s involvement not only because it helped to satisfy the African officials but also because it provided an important opportunity to get even more support for the program.

“We’re looking for other participants,” says John Damonti, president of the company’s foundation. “The problem is in trying to get companies to participate and to take the piece they want and to get the credit they want.”

Mr. Damonti and other observers of corporate philanthropy say that as more companies try to tie their giving to the company’s business goals and to boost their company’s image and profile by tying their name and products to non-profit work, corporations may be less willing to sign on to another company’s charity project.

“No matter how much we make room for other people to get involved, I think this is still going to be seen as Bristol-Myers Squibb’s Secure the Future,” Mr. Damonti says.

But Wendy Hawkins, head of a new teacher-training program sponsored by the computer-chip manufacturer Intel Corporation, says that cooperative efforts are worth pursuing.

Earlier this year Intel introduced a program, called Teach to the Future, which aims to train 400,000 teachers in 20 countries over the next three years in how to use technology in their classrooms. Intel, which pledged at least $100-million in cash, equipment, and other support to the effort, also brought together Microsoft Corporation, Hewlett-Packard Company, and other companies in the computer industry, both large and small, to contribute cash, equipment, and technical expertise estimated to be worth an additional $400-million.

“We couldn’t do it alone at the level we wanted,” Ms. Hawkins says. “But we also really wanted to take a leadership role, rally our industry, and provide the opportunity for other companies that might not be able to step up by themselves to be part of something that will really make a difference.”

To get other companies involved, Ms. Hawkins says, Intel had to convince them that it would “share the limelight” when it came to publicity about the program. But, all in all, she says, she was pleased that there wasn’t more wrangling about how the participating companies would get credit for their involvement.

“While I can’t say there weren’t discussions about what size the print of my name would be versus the size of the print of yours,” Ms. Hawkins says, “it was gratifying to see that we could step back, stop the arm wrestling, and simply remind each other about the real reason we all wanted to do this — to make a difference in education.”

Officials at other companies in the Chronicle survey say that they, too, are reworking their philanthropy because their company would like to have an effect on a specific issue. Dell Computer Corporation this year said it would no longer support the broad range of causes it had previously financed, but would instead give only to organizations in central Texas and Tennessee — where the company has facilities — that focus on children’s health, education, or access to technology. Those grants, made through the company’s foundation, will total $1.5-million. In another change, the foundation will award larger grants to each group it supports: The average amount will be about $25,000, compared with $9,000 or so in recent years.

“We’ve had wonderful opportunities and supported wonderful non-profits, but there’s not one thing that you can look at in the past five years and say, We have moved the needle, made an impact,” says Michele Glaze, manager of the Dell Foundation.

Conoco, an oil company that last year spun off from E.I. du Pont de Nemours and Company, is using its new independence as an opportunity to review its philanthropy. Sue Collier, who was named to the company’s new position of director of strategic philanthropy, says that Conoco had been giving about $8-million each year to a diverse range of charities, with about one-quarter of the money going to charities in the Houston area, where the company has its headquarters.

Now, Ms. Collier says, the company, which has business operations abroad, will probably increase its international gifts. It will also consider guidelines that may provide more focus to its grant making; decide whether or not to create a foundation; choose the best method to determine how much to give each year; and think about the company’s approach to such charitable issues as disaster relief.

As companies like Conoco evaluate their giving and set their charity budgets, a new non-profit group called the Committee to Encourage Corporate Philanthropy wants to get their attention. The group, formed in November by some of the nation’s most prominent business leaders along with the actor and businessman Paul Newman, intends to spread the word about the importance of corporate giving.

The committee plans to advise companies, help set up corporate foundations, and conduct research into and demonstrate how companies may benefit from charitable activity. But the group’s leaders say that the committee’s best chance to spur corporate giving may be to get its members — 35 chief executives of top companies so far — to increase their own companies’ giving and to apply peer pressure to persuade their counterparts at other companies to do the same.

“There’s safety in numbers in the way that companies think about sizing their corporate giving,” says Paul M. Ostergard, president of the new committee and former head of the Citigroup Foundation. “If we can take the whole group of leading companies and move up their giving by larger leaps, we feel it will pull everyone else along.”

Adds Mr. Ostergard: “The capacity of corporate America to give is greater than what we are seeing.”