Tracking Big-Business Donations

Corporate giving is on the rise but percentage of profits donated is headed in the opposite direction

Soaring profits at many of the nation’s biggest companies caused them to increase charitable donations by an average of 31 per cent last year, according to a new survey by the Conference Board.

However, the average proportion of profits that the companies have given to charity has gradually declined in this decade, remaining below 1 per cent for the past three years.

The Conference Board, a New York research group financed by businesses, gathered data from 289 large U.S. manufacturing and service corporations for its report, “Corporate Contributions in 1996.” The companies each earned on average about $1-billion in pre-tax income. More than 60 per cent were Fortune 1000 companies.

The 31-per-cent average was based on data provided by 196 businesses that gave a total of $1.8-billion. That represents more than $1 of every $4 corporations gave last year, according to Giving USA, an annual report on philanthropy published by the American Association of Fund-Raising Counsel.

Some 148 companies provided estimates of how much they would give by the end of 1997, and they predicted a rise of 10 per cent. In addition, 73 businesses provided their anticipated giving budgets for 1998, and they said donations would rise by an average of 7 per cent.

While charities will be heartened by the growth in dollars doled out by companies, some will be dismayed to see that many businesses are not putting a bigger share of their profits into philanthropy.

When the companies’ contributions are measured as a proportion of their pre-tax income, their support of charity last year was equivalent to 0.7 per cent of pre-tax income — the same as it has been since 1994. And it is a drop from the giving reported by the companies in the early 1990s, when they gave between 1 and 1.3 per cent of their pre-tax income to charity.

The 0.7 per cent is also below the national average for companies large and small, according to Giving USA. Last year, U.S. companies gave 1.3 per cent of pre-tax income to charity.

Audris Tillman, the author of the Conference Board’s report, says that giving may not be as small a percentage of corporate income as those figures suggest.

Ms. Tillman, a research analyst at the Conference Board, said, “There are a number of ways that companies undertake these efforts that are not coming strictly from their philanthropic budgets. They may be coming from marketing dollars, in the form of sponsorships, or in stepped-up volunteerism and getting employees more involved. There’s no way to really account for that in this survey.”

Another potential problem with the survey is that companies that are the most generous are more likely to report their figures than those that are not. Since companies, unless they have a corporate foundation, are not required to report their giving figures to the public, it is often hard for the Conference Board and other organizations to get a solid picture of the state of corporate philanthropy.

As has been the case throughout this decade, education was the top cause among companies. Schools, universities, and other educational organizations received 33 per cent of total contributions. That was more than last year, when they received 30 per cent.

Colleges and universities received the biggest share of education dollars, as they have in the past, enjoying 12 per cent of overall donations. However, their share has eroded this decade. In 1990, they received 20 per cent of total donations.

Health and human-services groups followed as the second most popular cause, receiving 26 per cent of total giving — the same share they received last year.

Civic and community-affairs groups were next with slightly more than 10 per cent, while arts and cultural organizations brought in just under 10 per cent.

International groups received 5 per cent of donations. That is an increase over last year, when they received 3 per cent.

Among the industries covered by the survey, pharmaceutical companies gave the most. On average, drug companies donated $35-million to charity last year. Computer companies followed, giving $28.2-million on average. Telecommunications companies were third, donating $19.7-million.

Retail and wholesale-trade companies gave the least overall of any industry, donating $7.9-million on average.

Both drug companies and computer businesses made a large portion of their gifts in products or services rather than cash. Computer companies made 41 per cent of their donations in products — the most for any industry. Pharmaceutical companies followed, with 33 per cent in product donations.

The computer industry in Silicon Valley gives even more of its contributions in the form of product donations than the average computer company does.

A separate survey of 57 of the largest companies in the California region known for its high-technology industry found that on average, the businesses gave 48 per cent of their charitable contributions in the form of products or services.

Some give even more than that. Hewlett-Packard Company in Palo Alto, Cal., for example, gave almost 80 per cent of its $71-million in donations last year in the form of products and services.

The Silicon Valley survey was conducted by researchers at Stanford University’s Graduate School of Business. They found that the 57 companies were slightly more philanthropic than their Conference Board counterparts, giving on average 0.9 per cent of their pre-tax income to charity. However, they too fall below the national average for corporate giving of 1.3 per cent.

For corporate giving in general, not just in Silicon Valley, at least one corporate grant maker thinks big companies should dig deeper and increase the amount of pre-tax income going to charity today.

Curtis Weeden, vice-president for corporate contributions at Johnson & Johnson in New Brunswick, N.J., says he thinks companies have shrunk their philanthropic budgets because they think of corporate giving as expenditures rather than as investments.

“We really need to get away from this notion that corporations are set up to generate wealth and philanthropy is set up to dispense it,” he says. “Rather, we should see philanthropy as an investment.”

Big companies that are publicly held need to do a better job of measuring how their gifts help the bottom line, says Mr. Weeden, so they can see whether there is value in increasing donations.

Mr. Weeden has been working on ways for his company and others to create measurements to show the difference corporate gifts make.

“When properly managed,” says Mr. Weeden, “corporate giving can be an asset to the company at least as close as it can to society.”

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To order a copy of “Corporate Contributions in 1996,” contact the Conference Board, 845 Third Avenue, New York 10022-6601; (212) 759-0900; e-mail orders@confer ence-board.org.

The cost for a preliminary report, available now, is $10 for members and $40 for non-members. Copies of the full report, available next month, will cost more, but no price is available yet.

To order a copy of “Corporate Community Involvement in Silicon Valley 1994-1997,” contact Community Foundation Silicon Valley, 111 W. St. John Street, Suite 230, San Jose, Cal. 95113; (408) 278-0270; e-mail inquiries @commfdn.org. Copies are free. The report is also available on a World-Wide Web site about the report: http://www.ccsurvey.com/survey/comsur.