July 16, 1998 | Read Time: 5 minutes
Corporate-giving officers are sharply divided over whether it makes any difference to a business’s bottom line if a company gives to charity.
In a Chronicle survey of the largest U.S. companies — based on revenue rankings by Fortune magazine — corporate officials were asked to rate their philanthropy on a scale of 1 through 10 in terms of its relevance to their business’s “financial success.”
According to the ratings system, 1 meant that philanthropy is “not at all significant,” and 10 meant that it is “extremely significant” to such success.
Among the 72 corporate-giving officials who answered the question, 34 ranked corporate giving somewhere from 6 to 10, while 38 ranked it somewhere from 1 to 5.
The oil producer Atlantic Richfield Company was the only respondent to give philanthropy the highest ranking of 10. Chevron Corporation, Pfizer, and Rockwell International Corporation rated the significance of philanthropy just a notch below, at 9.
At the other end of the scale, four businesses — General Electric Company, J. P. Morgan & Company, McKesson Corporation, and U S West — rated philanthropy a 1, or “not at all significant.”
The survey found little difference in the views of officials at companies that are relatively generous and those at corporations that give sparingly. For example, General Electric, which offered one of the lowest rankings, made $50.2-million in cash gifts last year — twice the amount that Atlantic Richfield made.
Even among companies that work in the same industry — such as automobile manufacturing or telecommunications — views on charitable giving ran the gamut. The drug company Bristol-Myers Squibb ranked philanthropy a 2, while Pfizer, another pharmaceutical company, ranked it a 9.
Christopher Perez, grants coordinator at Pfizer’s foundation, says he chose 9 because corporate giving insures that a company has a healthy society and economy in which to operate — and that affects the bottom line. Pfizer, he says, even included philanthropy in a new set of corporate values it wrote last year: “The ongoing vitality of our host nation and local communities has a direct impact on the longer term health of our business,” reads part of the company’s proclamation.
Pfizer plans to increase cash donations this year by 13 per cent, to $27.3-million, and product donations by 23 per cent, to $100-million worth.
At Atlantic Richfield, Russell Sakaguchi, executive director of the corporate foundation, says philanthropy contributes to the company’s overall business strategy. It plays a role, he says, in the way the company manages its “relationship with employees, suppliers, opinion makers, and community groups.”
In fact, Mr. Sakaguchi says, the company’s charitable giving scored a big coup for the business in May when research paid for in part by the ARCO Foundation was featured on the front page of the Los Angeles Times. The research, on how recent government policy changes have affected Los Angeles welfare recipients, was called “one of the most comprehensive studies to date.”
Such coverage in a major daily newspaper was worth millions of dollars in promotion to the company, Mr. Sakaguchi says. And, it cost the company little: a tax-deductible, $30,000 grant to the Economic Roundtable, a public-policy group.
Altogether, Atlantic Richfield and the ARCO Foundation plan to give away about $25-million this year.
By contrast, officials at some companies doubt that charitable giving can have a direct impact on the bottom line. Marcia Argyris, president of McKesson’s corporate foundation, says she “would be naive” to conclude that corporate donations improve earnings.
McKesson, which distributes bottled water, medicine, and health-care products primarily to hospitals and pharmacies, gave $3-million in cash donations last year — among the smallest quantities reported in the Chronicle survey.
“I’d like to think that customers make decisions because we give to charity,” says Ms. Argyris. “It certainly doesn’t hurt, but the reality is customers are making decisions based on quality and price.”
The reason McKesson gives at all, she says, is its 13,700 employees. “Giving helps build employees’ loyalty and helps make it a great place to work for all of us,” she says.
U S West, a telecommunications company, says philanthropy has little influence on the company’s business — at least for now.
Laurence J. Nash, director of administration for U S West Foundation — which plans to donate $24-million this year — says surveys of customers have never found a tie between the company’s philanthropy and its sales of phone services. But, he adds, that may be because U S West faces little competition from other phone companies for customers.
“If we were in a competitive arena — and we are moving into one — we hope that the community involvement would have an impact,” Mr. Nash says, noting that the federal government has deregulated the telecommunications industry to allow for more competition.
In any case, the influence of philanthropy on profits can be difficult to measure, Mr. Nash and most of the other corporate-giving officials say.
“ ‘Does philanthropy affect financial success?’ is such a hard question to answer,” says David Ford, president of Lucent Technologies Foundation, which began making grants last year for Lucent Technologies, the electronics business that spun off from AT&T Corporation.
Mr. Ford, who ranked philanthropy a 5, spent the past decade as president of the Chase Manhattan Bank Foundation. He says that more and more companies are altering their philanthropy to make it more relevant to business goals. Still, he adds: “Saying that the act of giving money away is of primary importance in terms of making the sale, it’s hard to make that case.”
Lucent will give away $20-million this year — 20 per cent more than last year.
It will give that much, says Mr. Ford, for a less tangible reason than money: Lucent, he says, “wants the reputation of the company to reflect good works.”
