Corporate philanthropy comes of age

Corporate philanthropy comes of age

Donn J. Tilson and Donald Vance Corporate Philanthropy Comes of Age Many corporations are taking an increasingly harder look at their charitable con...

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Donn J. Tilson and Donald


Corporate Philanthropy Comes of Age Many corporations are taking an increasingly harder look at their charitable contributions programs. Closer scrutiny is required because of cutbacks in government funding and boards of directors zdzo demand a more market-driven, bottom-Une approach to philanthropy. Increasingly, tlre expertise of public relations practitioners is being called upon to successfully execute programs of social responsibility. Why? Because they have a good working knowledge of tire community and tlre various publics who keep an eye on their organization. Tlre authors of this article describe innovations in corporate giving that are closely tied to tire public relations function, demonstrating new applications for the knowledge held by practitioners. Donn Tilson is an assistant manager for corporate and external affairs with Southern Bell. His division administers the company's contributions, matching gifts and sponsored membership programs for Florida. Donald Vance is associate professor of Communication and Business Management at tlre University of Miami, Fla.


haritable contributions have been called the oldest form of corporate social behavior. They are a time-honored, and in many corporate circles, a well-respected tradition of returning or investing a share of a company's profits into the community. According to Lloyd Dennis, while a large and growing number of Fortune 500 companies accept the notion that business should be socially responsible, and that it is just as important to upgrade the quality of life in a community as it is to maximize profits, nevertheless, many corporations are taking an increasingly harder and more professional look at their contributions as requests increase because of cutbacks in government funding and as boards of directors demand a more market-driven, bottom-line approach to philanthropy. 1 Doing good is being measured by many businesses in terms of how much it contributes to a company's competitive edge. Some companies, like American Express, have even gone one step further, making contributions a marketing tool by tying giving to sales promotions. Increasingly, public relations practitioners and marketers are


Corporate PhUanthropy taking an active role in corporate contributions, designing publicity campaigns and promotions around programs of charitable giving. The Public Management Institute reports that corporate contributions are the fastest-growing source of private contributions. Business increased its giving in 1983 to $3.1 billion, 5.1 percent over 1982. 2 This represented just over five percent of all charitable donations. 3 Still, only 25 percent of the nearly 2.1 million companies in the United States make a contribution, and only six percent give more than $500 a year. 4 Most company contributions are directed to traditional areas of support--education, the arts, the United Way. s Companies vary, however, in the emphasis of their corporate charity. The Bell system, for example, ahvays has placed primary importance on health and welfare. In 1983, AT&T reported that such nonprofit organizations received nearly 50 percent of all Bell contributions. Education placed second (23 percent) and the arts, third (12.5 percent). Southern Bell, which serves Florida, Georgia, North Carolina and South Carolina, reflected this emphasis on community welfare in 1983 and continued to do so in 1984. 6 In 1985, however, Southern Bell in Florida is increasing its percentage support of education and of the arts. It is a departure from tradition which underscores a shift in the company's contributions philosophy. Many corporate executives have realized that philanthropy should be an integral part of a well-managed company rather than an ad hoc activity reacting to passing fads. Exxon chairman C. C. Garvin, Jr., argues that a professionally run contributions program requires a set of goals and objectives which is reviewed regularly, a set of guidelines for determining how much m o n e y will be allocated to it, criteria for making and evaluating grants, and either an in-house staff or access to competent consultants7 Obviously, a competent staff is an essential part of a contributions program and can play an important role in counseling top management on contributions decisions and ensuring that the program maintains high professional standards of performance. According to Dennis, social responsibility and contributions programs usually are administered by a company's public affairs, public relations, corporate communications, community or urban affairs department, s For example, the Community Relations Department of Pillsbury administers its contributions program, as does Southern Bell's Corporate and External Affairs Office. Some companies even have set up their own professional contributions offices. Many public relations executives, as vice presidents, are in charge of these programs. Public relations practitioners, then, are playing an increasingly important part in the entire contributions process, from reviewing requests to preparing budgets and advising top management on charitable giving strategy. Whereas once a CEO would make a commitment to a charity over dinner and the corporate giving officer would write a check for the CEO, now CEOs are listening more to their contributions managers before making those decisions. These managers, who have come up through the ranks from the outside, have a good working knowl-


Public Relations Rel~ew edge of the community and are more highly regarded than most of their predecessors? There also is a growing involvement of boards of directors in philanthropic decision-making. According to Dennis, board-level committees dealing with social or public policy in major companies have increased from less than 10 percent to nearly 50 percent in the past three years and even more ~o in the top 300 companies and service industries. About 30 percent of the bortune 500 companies have such committees, and in major financial institutions, 50 percent have board-level public-policy types of committees as Compared with only one percent in 1975. I° Some companies, like Northwestern National Bank of Minnesota, have involved their employees in social policy and contributions decision-making. A Task Force of 16 Northwestern employees selected by a committee of their peers studies social policy issues at the request of the company's Management Policy Committee and presents a report with recommendations relevant to corporate goals. The company's division heads then formulate action plans based on the Task Force's recommendations which, in past years, have included starting a community development corporation, redeveloping inner-city neighborhoods and giving branch managers control over contributions, n Like Northwestern, more companies are giving their local managers control over contributions or at least letting them disburse local donations, according to the Public Management Institute. z2Southern Bell line managers In the company's Corporate and External Affairs and Residence Departments recommend local contributions budget items and present these donations to the recipient organizations in the community. Such decentralization of the contributions function brings issues of social responsibility directly to line and middle management, especially managers responsible for operating divisions in a company. This addresses what Prakash Sethi has identified as an age-old problem in many companies: Since line executives cannot relate their responsibilities to corporate social involvement, they consider public relations and contributions only as a head-office concern and consequently, do not help the corporation deliver on its social contract. 13 While historically, a corporation's home-office city would receive generous charitable support and local office towns only minimal funds, that imbalance is changing as local managers move up the corporate ladder. Many executives still maintain close contact with their home-town communities and influence corporate giving as contributions officers or as counsel to their CEO. ~4 Most corporations that make contributions have very specific geographic restrictions and focused areas of interest, with limits on amounts to be donated and the time of ~,ear they will consider contributions requests. According to the Public Management Institute, corporations generally prefer to support organizations and projects that are business-related, provide benefits to employees or plant communities or offer research of expertise 28

Corporate Philanthropy helpful to the specific needs of the business, is At Grumman, the Employee Contributions Council evaluates each request according to guidelines established by the Council. Grumman specifically precludes requests from religious, fraternal and political organizations; restricts contributions to collegelevel institutions; gives greater consideration to appeals from organizations in communities where company plants are located; prefers giving to a local branch (Red Cross, Boy Scouts) over the national organization; requires recipient organizations to reapply for a contribution each year; occasionally considers multi-year contributions for capital funds; and encourages requests from employees for their organizations. 16 In deciding how much money to allocate for contributions, most companies designate a specific percentage of pre-tax U.S. income, sometimes averaged over a period of several prior years. 17The Economic Recovery Tax Act of 1981 allows a corporation to fully deduct up to 10 percent of its taxable ~'ncome for contributions. In the IRS code, contributions are distinguished by gifts to public charities, private nonoperating organizations and private operating and private foundations. TM Most corporations generally contribute one and a half percent or less of their pre-tax profits. The largest givers in terms of total dollars--Exxon, IBM, Mobil--usually average less than two percent of pre-tax earnings. ~9 In a survey of 788 companies by The Conference Board, 1981 contributions budgets averaged .81 percent of U.S. income. About 10 percent of the companies were at the two percent level and 14 percent were at two percent or higher. Most companies at that level were locally based small-to-mediumsized firms. Large corporations are more reluctant to set contributions goals based upon income, and such a ratio is just one element they consider when budgeting their funds. 2°

Ultimately, the decision on the size of the budget involves the corporation's board of directors and top management, who base the giving on overall strategy after setting their contributions goals. A recent study indicated that 85 percent of the CEOs of major corporations are responsible for deciding who gets how much. 21 To provide for balanced giving in good and poor earnings years, some corporations have set up charitable foundations which are corporately funded independent entities. 22 Approximately half of the companies in The Conference Board survey have a foundation. In 1981, foundation donations accounted for 42 percent of all giving among the companies surveyed. 23 Southeast Banking Corporation recently established a foundation for its Florida contributions and allocates one to one and a half percent of its pretax profits to the foundation. The Miami News reports that contributions are restricted to Florida, and most funds are targeted to Dade County, where the company is based. 2. Companies that have institutionalized their contributions programs-often out of necessity in order to handle a tremendous volume of requests-have set up elaborate review and record-keeping procedures. Pillsbury 29

Public Relations Review requires each organization applying for a contribution to submit, in duplicate, a detailed description of the project for consideration, an organizational history, audit reports, a copy of the IRS documents approving taxexempt status and other information. The company's Contributions Manager (in the Community Relations Department) reviews the applications and forwards them to the Contributions Committee, which meets quarterly. Final approval reverses the application flow. 25 Like most public utilities under the ever-watchful eye of Public Service Commissions, Florida Power and Light administers its contributions through a maze of paperwork and management levels. There is a pre-evaluation questionnaire for use in initially reviewing a request, written company practices on review criteria, instructions for charging donations to the proper account codes and check request forms. First-time requests require full accompanying documentation for processing through the various approval levels. 26 According to "Corporate Commitment to Volunteerism,'" a study by Mutual Benefit Life, companies often see philanthropy only in terms of cash contributions. Considerably less attention is given to non-financial forms of volunteerism, such as in-kind services or loaned executives. 27 Donating equipment, land or buildings is recognized by the IRS as tax deductible, and provisions in the Economic Recovery Tax Act actually encourage donations of scientific equipment to universities. Some examples of noncash contributions include donations by Pillsbury of food to the jobless through food pantries, a gift by J.C. Penney of its old store in Seattle (now the city's art museum) ~s and discounts on telephone service for charitable organizations and the clergy in such states as Georgia and New Jersey. 29 Loaned employee volunteers can be a valuable resource to non-profit organizations. They can complement a corporation's contributions program or provide an important substitute if a company cannot help an organization financially.3° Thousands of employees at Honeywell teach English to refugees, conduct computer classes in prisons, work in neighborhood day care centers on company-paid time. Honeywell also recruits retired executives and employees as volunteers. 31 The U.S. Conference of Mayors has endorsed such volunteerism, encouraging business to share its pool of employee expertise in law, finance, management and engineering with local committees. 32A good example of such collaboration is IBM and Citibank's 1984 loan of financial and data systems specialists to Catholic Relief Services to help the nonprofit organization improve its administrative and fund-raising operations. 33In other companies, public relations practitioners are assisting nonprofits in analyzing their solicitation efforts, planning the campaign and providing publicity support. ~ As corporations focus their efforts, become more selective in their giving, reevaluate and consolidate programs and shift money to charities offering 30

Corporate Philanthropy greater paybacks, some experts believe that the days of the philanthropic corporate sponsor are gone and that companies now expect a return on their bottom line for a contribution. The phenomen~il growth of special event sponsorship in recent years may be an indication of hardball giving. Brian Mihalik explains that sponsorship of sports events, concerts and festivals offers cost-effective, tax-deductible promotions that generate sales, good will and help to reinforce or create an image. Many companies which sponsor events now have full-time special events or sports promotion staff managers, in either public relations or marketing, directing these programs. Staffers review project proposals and provide publicity support, but usually give outside professional promoters the job of producing the event. Company employees often provide the necessary volunteer labor for such programs. Staff managers who have other assignments often set up management teams with representatives from the organization that will benefit from the event. 35 Southern Bell and other Bell companies are leading the way in such programs with the participation of corporate community relations teams, representing a departmental cross-section of employee volunteers usually headed by a public relations manager. The teams assist local nonprofits in fundraising, provide valuable feedback to the company on community needs, and complement corporate and contributions objectives and programs, especially when the contributions officer is a public relations executive with direct reporting lines to the team chairmen. ~ A successful strategy that combines philanthropy with sales is "causerelated marketing." American Express pioneered this approach to contributions, starting in 1981. Its objective is to increase the use of the American Express card by tying sales into charitable causes. For example, American Express donated two cents to the San Francisco Art Festival every time customers used their card. The company exceeded its marketing goals, and the Festival received a $100,000 contribution. 37In a similar promotion campaign for the Statue of Liberty, American Express saw a sharp rise in its sales and card membership and eventually donated $1.3 million to the Statue Foundation as a one percent share of sales2 s Other companies, like Chesebrough-Pond's, couple charity tie-ins with coupon distributions, donating money to such organizations as CARE based on the number of coupons redeemed during a special promotion period. Again, while the real objective is to increase product sales, nonprofits nevertheless receive the contributions they need to stay afloat. 39 Such promotions put a company's contributions program out in the open, and this is to the corporation's advantage. Companies often are very secretive about their giving, which, in the long run, undermines the effectiveness of their programs and denies business the public credit it deserves. To rally public support for their contributions, corporations need to open their books and educate the community and their employees about charitable giving. 4°


Public Relations


Pillsbury publishes a "'Corporate Social Responsibility and Charitable Contributions Program Report," complete with corporate dollar amounts, and distributes this to employees, stockholders and other companies. LeviStrauss details its contributions activities in its prospectus. 4~ One of the most curious and promising areas of contributions activity has been the growth of business-government and business-nonprofit partnerships. Brad Rodney points out that in a joint marketing and public relations program, Verbatim Corp., a computer software manufacturer, and the American Camping Association produced a guide to summer camps offering computer instruction. Verbatim underwrote all production and promotion costs, and American Camping distributed the guides with publicity about their sponsor's help. 42 The White House has set up an agency, the Office on Private Sector Initiatives, to promote such partnerships. Under PSI's National Partnerships in Education Program, corporations have adopted 30,000 schools, providing tutors, equipment donations, scholarships and career training programs. PSI also has committees encouraging partnerships in employment, family and community resources and marketing and communication where corporate and agency public relations executives jointly prepare publicity materials for nonprofits and help publicize private sector initiatives. 43 By supporting programs of social responsibility, business not only invests in the community but in its o w n survival. As Alexander Trowbridge, president of the National Association of Manufacturers, has said, "The American public will seek an improvement in the quality of life, and if it doesn't see business as a contributor to that effort, then our political strength will ebb and the pendulum can swing back to the onerous levels of past adversary relationships. ''4~ That is the challenge, then, which confronts American business. With the guidance of public relations practitioners, companies can successfully execute programs of social responsibility, including corporate contributions, and in so doing, fulfill business' obligation to the community. References 1LloydDennis, "The Promises, PromisesEra is Turning," PublicRelations Quarterly 26(Winter 1981-82), P. 13. 2"Charitable Americans Gave More Last Year," The Pahn Beach Post, May 27, 1984, p. 16E. ~"The Changing Face of Philanthropy," Public Relations Journal 40 (October 1984), p. 22. 4Dennis, "The Promises, Promises Era is Turning," p. 14. s'Corporate Philanthropy, Circa 1983," Management Review 72 (September 1983), p. 54. 6Summary of Contributions. (New York, N.Y.: AT&T, 1983), pp. 3-4. 7C.C. Garvin, Jr., "Exxon Chairman Urges More Formal Corporate Giving Programs," Management Review 71 (April 1982), p. 34. 8Dennis, op. cit., p. 14. 9"The Changing Face of Philanthropy," Public Relations Journal, p. 24. 1°Dennis, op. cit., p. 14. 32

Corporate Philanthropy "Douglas Wallace and Janet Dudrow, "How Information Flows Upstream," Public Relations Journal 40 (February 1984), p. 28. 12Corporate 500: The Directory of Corporate Philanthropy, p. 7. ~3Prakash S. Sethi, "'Moving Social Responsibility Down a Peg," Public Relations Journal 38 (August 1982), p. 25. 14"The Changing Face of Philanthropy," Public Relations Journal, p. 24. 13Corporate 500: The Directory of Corporate Philanthropy, p. 7. ~6"Employee Representatives Determine Company's Contributions to Charity," Management Review, p. 34. 17Garvin, op. cit., p. 35. ~SKenMilani and James L. Wittenbach, "A Charitable Contributions Deduction Flow Chart for Corporations: An Update," Taxes 61 (May 1983), p. 321. ~9"The New Need for Charity: Can Corporations Cover It?," The Miami News, p. 8. ~Kathryn Troy, Annual Survey of Corporate Contributions, (New York, N.Y.: The Conference Board, 1983), p. 6. ~l"The Changing Face of Philanthropy," Public Relations Journal, p. 23. =Dennis, op. cit., p. 19. a3Troy, op. cit., p. 6. 24"The New Need for Charity: Can Corporations Cover It?," The Miami News, p. 8. ZSCorporate Social Responsibility Report and Charitable Contributions Program: Fiscal 1983 (Minneapolis, Minn.: The Pillsbury Co., 1984), p. 20. 2~Donations and Fund Raising Events. (Miami, Fla.: Florida Power and Light, 1983), p. 1. w'Corporate Philanthropy, Circa 1983," Management Review, p. 54. :a"The Big-Time Givers: Who They Are, What They Gave," U.S. News and World Report (March 28, 1983), p. 59. ~Summary of Contributions, p. 7. 3°"The Changing Face of Philanthropy," Public Relations Journal, p. 24. 3~"Corporate Philanthropy: What to Expect," Dun's Business Month 120 0uly 1982), p. 55. 32W.E. Duke, "Social Action in the Local Arena," Public Relations Journal 38 (September 1982), p. 16. ~"Two Corporate Executives on Loan to CRS," Spectrum 4 (Spring 1984), p. 5. U"The Changing Face of Philanthropy," Public Relations Journal, p. 26. 35Brian J. Mihalik, "Sponsored Recreation," Public Relations Journal 40 (June 1984), p. 22. ~Sandra Bearden, "Social Responsibility and the Corporation: Paying Our Dues," South Central Review 20 (May 1981), p. 2. 37Carole Rifkind, "Pride in Place," Public Relations Journal 39 (November 1983), p. 22. ~Nancy Josephson, "American Express Raises Corporate Giving to a Marketing Art," Advertising Age 55 (January 23, 1984), p. 10M. 39"Verdict is not in yet on Charity Tie-Ins as a Promotional Tool," Marketing News 18 (March 30, 1984), p. 9. ~°Dennis, op. cir., p. 15. ~l"The New Need for Charity: Can Corporations Cover It?," The Miami News, p. 8. 4:Brad Rodney, "A New Spirit of Partnership," Public Relations Journal 40 (May 1984), p. 21. 43Elizabeth B. Murfee, "Private Sector Involvement," Public Relations Journal (May 1984), p. 17. 4~"The Changing Face of Philanthropy," Public Relations Journal, p. 26.