Groups That Advise Corporations Are Wary About Taking Their Dollars

When Net Impact, a group of 5,000 former and current M.B.A. students worldwide, plans its annual conference each year,

it solicits money from corporations to run it. Companies such as Starbucks, Ford Motor Company, and Hewlett Packard each gave $10,000 last year to Net Impact, which promotes the creation of ethics classes and seminars in business schools.

The San Francisco–based group also received $10,000 from Citigroup, the New York banking giant that has a long record of committing money to an array of charities and causes.

But Citigroup’s business activities have received increasing criticism among environmentalists, government officials, and others, forcing Net Impact to grapple with vexing questions as it decides what companies to solicit for its 2002 conference — a situation similar to that faced by many groups that seek to improve how business operates.

To avoid awkward situations, some business-responsibility groups have adopted rigorous systems for evaluating whether to accept corporate donations. Some organizations refuse to take corporate donations of any kind to avoid questions about whether their financial supporters are trying to influence what positions they take. Others are asking themselves whether taking money from certain companies could make people cynical about their work, and whether accepting a donation would be perceived as absolving unethical corporations of their business sins.

‘The Smell Test’

For Net Impact officials, the question about accepting Citigroup money centers on whether the organization should be influenced by Congressional investigators, who say that Citigroup gave the Enron Corporation loans that allowed the flailing company to cover up $4-billion in debt, effectively allowing it to disguise its financial trouble. What’s more, some environmental groups have accused Citigroup of bankrolling what they say are ecologically damaging projects around the world. The company has denied all of those charges.

Despite the allegations over some of its business dealings, Citigroup will once again be solicited by Net Impact, whose leader says that Citigroup’s current battles aren’t enough to warrant its exclusion from the organization’s donor list.

“We believe that Citigroup passes the smell test,” says Ben Klasky, Net Impact’s executive director. “Even the best companies out there have issues now and again.”

Net Impact’s policy on accepting donations includes asking its board to review offers that might hurt the organization’s image. In this case, Mr. Klasky says, the board was not notified of Net Impact’s intention to pursue Citigroup for a donation this year. But he says that the organization, prompted by The Chronicle’s query, is reconsidering its policy on what donations it should accept and when the board should be asked for its opinion.

Net Impact’s decision to take Citigroup money prompts criticism from some environmental leaders. Randy Hayes, president of Rainforest Action Network, a San Francisco group that is focusing many of its protests on Citigroup, says he believes Net Impact and other groups that accept donations from corporations accused of misdeeds lose their credibility.

“It’s blood money,” Mr. Hayes says.

Mr. Klasky says he is aware that some businesses that offer cash to groups such as his might be up to no good. But, he says, “most of the companies that give us money walk the ethical walk,” he says. “But we realize that companies might want to make a contribution to spiff up their image.”

Ethics Policies

To avoid getting the kind of criticism Net Impact has received, some leaders of groups that work to improve businesses’ social and environmental performance say they don’t accept corporate donations of any kind. They rely instead on foundation dollars and other income sources, such as contracts with governments and international organizations, such as the United Nations.

Some accept corporate money — but only on a fee-for-service basis. Redefining Progress, in Oakland, Calif., uses its $1.4-million annual budget to measure business’s impact on the environment and suggest operating changes to companies that pollute.

“For a price, we can show a company how its emissions of carbon affect the environment, and how those emissions might expose them to risk in the marketplace in the long term,” says Michel Gelobter, the organization’s executive director. But he says the group also relies on private grant makers, such as the Joyce Foundation, in Chicago, and the Energy Foundation, in San Francisco, because it doesn’t want to accept corporate donations that might be made by a company simply hoping to improve its image or influence the charity’s approach.

Donors Screened

Some business-responsibility groups that accept corporate money have adopted elaborate policies to vet prospective donors.

The World Resources Institute, in Washington, which collaborates with large corporations such as General Motors and BP Oil on environmental research, covers 10 percent of its $19-million annual budget with donations from businesses.

To determine whether the group should accept money from a company that has offered support, the organization sends e-mail messages to its 130 staff members asking them if they are aware of any case in which a company has behaved unethically or irresponsibly, says Paul Faeth, the group’s executive vice president. An internal board committee on social responsibility looks into any questions that are raised, then reports to the organization’s president.

“It’s important to have some checks and balances,” says Mr. Faeth.

In recent years, the World Resources Institute turned down some prospective donors because of their approach to labor or human rights. In one instance, the organization returned a five-figure check from a donor, whom Mr. Faeth declined to name. “They were saying one thing and doing another,” Mr. Faeth says.

Importance of Funds

Still, some business-responsibility groups say accepting corporate money is important, not only to their day-to-day financial survival, but also to demonstrate that their work is important enough for businesses to support it.

When the Aspen Institute’s Initiative for Social Innovation Through Business was offered $1-million over several years by the foundation run by J.P. Morgan Chase & Company, in New York, to organize an ethics contest among university business students, the group accepted, despite J.P Morgan Chase’s links to the Enron scandal. (Kristin Lemkau, a spokeswoman for J.P. Morgan Chase & Company, disputed the assertion of Congressional investigators that the bank helped Enron disguise $4-billion in loans. “The transactions with Enron were legal and were done in accordance with general accounting principles,” says Ms. Lemkau.)

“We’re trying to develop business leaders who can tackle complex ethical issues,” says Judith F. Samuelson, executive director of the Aspen Institute program, who sees the grant as a fee-for-services deal. “The Chase grant allows us to do that by giving us the support to come up with tough case studies that students have to wade through.”

Ms. Samuelson acknowledges that some people may perceive such a grant as an example of a company looking to improve its image through philanthropy. “I won’t say I don’t worry about that perception, but our niche is developing future leaders, and we stay focused on that,” Ms. Samuelson says. She adds that her group, which was started to foster discussions of ethics among executives and in business schools, regularly holds internal talks about how best to accept corporate dollars.

Despite the care the group says it takes in deciding whether to accept corporate largess, Ms. Samuelson says the Aspen Institute program has never considered shunning the nearly $200,000 in donations it receives from the business world to help amass its annual budget of $1.6-million.

“It’s very important for us to get corporate support,” she says. “Corporations have to be part of the solution, especially when private philanthropy doesn’t want to engage corporations directly.”

Besides, Ms. Samuelson adds, it is often impossible to predict where corporate scandals will emerge. Just last year, her organization extensively recruited Enron to support one of its semiannual conferences. In the past, the corporation had helped to finance a survey of business schools and their students performed by the Aspen Institute and the World Resources Institute. Because of Enron’s collapse, which experts say was at least partly due to the company’s shaky business ethics, the money never came through.

Still, Ms. Samuelson doesn’t second-guess her courting of the company.

“A year ago, Enron was still viewed as a market leader and a major philanthropic player,” she says. “We don’t tend to focus on short-term crises. When we talk to companies, we talk about how best to prepare their leaders to confront the complex issues they’ll have to deal with in the business world.”

She says she takes at face value the stated intent of companies that develop relationships with her group. “All we can do is work with companies who are open to change,” she says. “And Enron was open to change.”