Corporate Giving’s Growth Slows

Rise in 1999 donations can’t match double-digit increases of recent years

Charitable giving by many of the nation’s largest companies will grow at a much slower rate this year than in the recent past.

Among 62 companies that reported their 1999 giving budgets to The Chronicle, total cash contributions were expected to increase by 6.1 per cent over last year.

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Charitable Giving at 91 Major Corporations: View list, additional charts, and related articles

Giving at those same companies grew by 14.2 per cent from 1997 to 1998, and the charitable donations of a similar group of large companies went up at about the same rate from 1996 to 1997.

The drop in the philanthropic growth rate may be linked to a decline in the growth of corporate earnings. Companies in last year’s Chronicle survey had seen pre-tax profits rise by 11 per cent from 1996 to 1997. This year, the 62 companies reported a 9.2-per-cent increase in profits, on average, from 1997 to 1998.

At the same time, giving as a percentage of pre-tax profits — one measure of corporate generosity — has remained flat. Counting both cash and in-kind gifts, corporations in the Chronicle survey plan to give away in 1999 a median of 0.9 per cent of last year’s pre-tax profits — meaning half will give more and half will give less. Companies donated that same percentage of their previous year’s earnings in both 1997 and 1998.

Some companies did see big revenue increases last year, paving the way for big increases in giving this year.

Ford Motor Company and Lucent Technologies were among the 14 companies in the survey that saw profits rise by at least 50 per cent in 1998. Cash giving is expected to go up this year by 42 per cent (to $81.5-million) at Ford and 71 per cent (to $37.3-million) at Lucent.

The Chronicle survey is based on data reported by 91 companies that 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 for this year and each of the last two years, and to answer questions about their giving habits.

The 91 companies gave a total of about $2.1-billion in cash and $983-million in gifts of company products to charity last year — about $1 out of every $3 in cash and in-kind gifts made by companies nationwide, according to estimates in Giving USA, an annual report that measures American philanthropy.

Gifts from big and small companies nationwide account for about 5 per cent of all the donations that American charities receive each year, Giving USA estimates.

Education-related charities were the biggest beneficiaries of grants from the country’s largest corporations. Among the companies in the Chronicle survey, more than half reported that the biggest share of their gifts in 1998 went to support education.

And as companies continue to sharpen the focus of their philanthropy to dovetail with their overall business plans, youth-related causes appear to be the biggest winners.

At least 10 corporations in the Chronicle survey are working on or have recently completed formal reviews of their giving programs. Among them are three companies — Lucent Technologies, Texaco, and TRW — that have decided to put a greater emphasis on either youth development or early-childhood education.

Many companies that are evaluating their giving are also deciding to devote a growing portion of their philanthropy to overseas causes. A 1996 Conference Board study found — and more-recent anecdotal evidence suggests — that gifts to charities abroad account for a relatively small but fast-growing segment of corporate philanthropy.

Some of the movement of charitable dollars abroad may be attributed to the continuing flood of mergers and acquisitions among America’s top companies. As corporations acquire international companies — or are acquired by them, as was the case in the German company Daimler-Benz’s merger with Detroit’s Chrysler Corporation — some charity dollars are likely to move abroad.

Even when mergers and acquisitions are limited to the United States, the dynamics of companies’ philanthropy can be expected to change. In many cases, charity officials worry about losing corporate patrons, as company headquarters consolidate or move. Those officials also fear that companies that are involved in restructuring may be too busy to worry about philanthropy, and that the giving budgets of newly formed companies may be less than the total amount that the smaller companies had been giving before the deal was completed.

The new Bank of America, which was created last year by the merger of NationsBank Corporation, in Charlotte, N.C., and San Francisco’s BankAmerica Corporation, set out to allay such concerns from the start. At the announcement of its merger last year, the company also announced a series of new charitable grants and organized a company-wide employee-volunteer day.

This year, Bank of America plans to donate more money than any other company in the Chronicle survey — $100-million. That’s $30-million more than the total donated by both NationsBank and BankAmerica Corporation in 1997, when they were separate companies.

The new bank’s budget includes $10-million for the United Way’s child-development program, called Success by 6. The company has pledged a total of $50-million to the program over five years.

Among the other top cash givers in the Chronicle survey are seven companies that plan to give away at least $50-million in cash this year. They are Dayton Hudson Corporation, Ford Motor Company, General Electric Company, Johnson & Johnson, Philip Morris Companies, SBC Communications, and Wal-Mart Stores.

Of the companies in the Chronicle survey, the retailer Wal-Mart, with more than 2,900 stores around the country, distributed the most money to charities last year — about $79-million.

When gifts of company products are included, the pharmaceutical maker Merck & Company catapults to the top of this year’s list of donors. Merck plans to donate drugs valued at $200-million, along with $40-million in cash.

Two other pharmaceutical companies, Johnson & Johnson and Bristol-Myers Squibb Company, move to the No. 2 and No. 3 spots, respectively, when product donations are counted. Along with cash donations, Johnson & Johnson plans to give away $125-million in drugs this year, while Bristol-Myers plans to donate drugs valued at $80-million.

Still another drug company, Pfizer — which made a $300-million donation last year — would have topped 1998’s giving list, but that cash contribution was made to the company’s own foundation and will be counted only as the money is given out in grants over the coming years. This year, the foundation plans to give away $16.5-million, up from $3.1-million in 1998. The company also plans to make additional cash and product donations, but officials declined to estimate the total value.

Among the survey’s other findings:

* Seventeen companies that reported cash budgets for 1999 expect their giving to decrease this year. Among them were several oil companies, which suffered revenue losses last year because of drastic declines in oil prices. The largest expected drops are at Chevron (17.2 per cent), Citigroup (29.2 per cent) Coca-Cola Company (37.8 per cent), and Phillips Petroleum (41.3 per cent).

* Ten companies expect their 1999 giving to be more than 2.5 per cent of 1998 pre-tax profits. The leaders are Bankers Trust Corporation, at 8.6 per cent of pre-tax profits; Dayton-Hudson Corporation, at 4.7 per cent; Johnson & Johnson, at 4.2 per cent; and Texaco, at 4.0 per cent. The Bankers Trust figure was so high because profits plummeted last year from $1.2-billion to $163-million while its giving remained the same. In 1997 and 1998, the commercial-banking company gave away little more than 1 per cent of the previous year’s earnings.

* Six companies saw decreases in cash giving of more than 10 per cent from 1997 to 1998, with TRW — which manufactures parts for the automotive, space, defense, and Telecommunications industries — and Georgia-Pacific Corporation — the forest- and paper-products company — falling the most: by 29.7 per cent and 24.9 per cent, respectively.

* Seventeen companies saw increases in cash giving of 25 per cent or more from 1997 to 1998, and six had increases of 50 per cent or more. Two companies — Dell Computer Corporation and First Union Corporation — more than doubled their giving, while Washington Mutual, a financial institution that recently acquired three other banks, saw the biggest increase in cash giving last year — nearly tripling its philanthropic budget, to $10.4-million.

Washington Mutual is among the companies expecting the biggest increases in cash giving this year, too. It plans to give $15-million, or 44 per cent more than it did last year.

Also among the companies planning big jumps this year is Reliant Energy, which expects to increase its cash giving by 48 per cent, to $10.7-million. That growth comes as the utility company is expanding rapidly — having grown recently from 1.4 million to 4 million domestic customers — and as it re-evaluates its philanthropy.

Officials at Reliant Energy — which recently changed its name from Houston Industries — expect to learn this month the results of a consultant’s study of the company’s grant making — and that of its newly created foundation.

Among the companies that have already completed evaluations of their philanthropy and created a tighter focus for their giving:

Lucent Technologies. At the start of this year, the electronics company’s foundation released a strategic plan, titled “Learning to Reach for a Brighter Future,” that called for all of the foundation’s program areas to be related to youth development. “Preparing young people to meet the challenges of our complex, changing society has become a worldwide priority,” the plan notes. Under the plan, the foundation is discontinuing grants made outside that area, including the general support of four public-policy think tanks and an annual gift to the National Science Foundation to support faculty fellowships in industrial ecology.

Texaco. Last year, the Texaco Foundation, which makes grants for the oil company, handed over to the company’s corporate-giving program all grant making not related to early-childhood education. Company officials say they wanted the foundation to focus on an area where it could make a measurable difference, such as through its support of music programs that help young children learn science and math. Texaco has an interest in such education, company officials say, because it may help create a work force of engineers and other skilled employees.

TRW. The company unveiled its new philanthropic focus last year: early-childhood education. The company also shifted all its grant making to fit under four other themes identified in the review as priority areas: access to learning, community leadership, global markets, and employee involvement.

Laura L. Johnson, manager of contributions for TRW’s foundation, said those areas were chosen because they closely matched issues that the company was interested in, such as increasing the pool of skilled workers in this country and abroad.

“It may be enough at times to give just to be a good neighbor,” Ms. Johnson says. “But we needed to see what we are doing over all, to make sure we were supporting things that made sense to the community and to us as a company.”

Home Depot, which sells building supplies nationwide, is another company that ties its philanthropy to its business interests. It aims much of its charity at efforts that promote low-cost housing, and, for the first time, the company has set aside money in its charity budget for disaster-relief efforts. So far, Home Depot has spent $110,000 to help neighborhoods in Tennessee, Arkansas, and other states that were struck by tornadoes and floods. Local stores have also pitched in in those areas, donating cleaning supplies and other items.

Prudential Insurance Company of America, too, has introduced a new program this year that tries to focus its charitable giving more sharply and direct it to company concerns. Under its Prudential Neighborhood Partnership program, the company’s foundation will spend about $1.5-million a year to support non-profit groups in five neighborhoods, one each in Jacksonville, Fla.; Los Angeles; Minneapolis; Newark, N.J.; and Philadelphia.

“The concept is to focus funding to achieve better results,” says Gabriella E. Morris, president of the Prudential Foundation and the company’s vice-president for community resources. “We don’t want to fix everything, but we want to work with communities to address their high-priority issues of concern.”

Along with awarding grants, Prudential will support the five neighborhoods through its employee-volunteer programs and by making below-market-rate loans to area organizations, Ms. Morris says. Such a loan might come in handy, she says, if, for example, a child-care facility in one of the neighborhoods needed money to expand.

The loans that Prudential makes in the neighborhoods would not come from the company’s charity budget, illustrating a long-held truth about corporate philanthropy: Companies help non-profit groups in many ways that are not strictly considered charity. Support may come in a host of other forms, such as sponsorships, money to underwrite special events, free consulting from company officials, and programs that lend employees as volunteers.

Amy Longsworth is the vice-president for corporate programs at the Nature Conservancy, in Arlington, Va., which receives up to 15 per cent of its annual revenue from corporations. She says that every year, more and more companies are interested in doing more for charities than just donating cash and products. And, she says, when arrangements extend beyond contributions, relationships between charities and companies are created that often benefit both parties.

This year, one of the conservancy’s regular corporate contributors, Procter & Gamble Corporation, also lent the organization the services of one of its senior-level executives. The official helped the charity study and promote its name, logo, and identity — a process known as branding.

“It’s invaluable to have one of the premier companies in the field of branding bring that market discipline to us through one of its top executives,” Ms. Longsworth says. “You can’t add up the worth of that gift.”

Kristen R. Batch contributed to this article.