The holidays are approaching. Many of your clients will be thinking about end-of-year gifts to various charitable, educational, and artistic institutions. Perhaps high on the list will be those groups that have been active in relieving the suffering of those directly affected by the events of September 11. If you’re looking for a way to make those gifts go further, or if you are a trustee for an institution seeking contributions and you need a way to attract those gifts, here are some books that should be helpful.
Making It Count
Corporate Social Investing: The Breakthrough Strategy for Giving and Getting Corporate Contributions, by Curt Weeden (Berrett-Koehler Publishers, Inc., 1998), looks at the benefits of contributions by corporations to various 501(c)3 entities. Aimed at corporations and charitable entities, with an eye toward explaining how contributions of money, time, and goods or services can be maximized for all concerned, this book features forewords by Paul Newman (whose own charitable venture, Newman’s Own, has contributed over $100 million to charity since its inception in 1982) and Peter Lynch, who has taken his financial knowhow and applied it to the boards of several nonprofits.
Weeden begins by pointing out the two conflicting viewpoints of corporate philanthropy today. The first is that businesses are cheap; the second is that businesses are socially responsible.
With regard to the first viewpoint, contributions as a percentage of profits have fallen steadily over the last couple of decades, as executives have looked more and more at the bottom line and thought more of profits than of benefits to the community and even to the business itself. Contributions now amount to little more than 1% of a corporation’s profits; in the mid-1980s, it was nearly double that: 2.6%
Not only that, but just try getting volunteers from a seriously downsized corporation. Employees in many companies are so squeezed trying to do their jobs and those of former co-workers that even the most strident calls from management for participation in some charitable program may fall on deaf ears. These are no small difficulties for the nonprofit world to face, since corporate gifts and volunteers are of growing importance to their bottom lines as more and more government programs cease.
Corporations have pulled in their purse strings, and the effects are being felt by nonprofits of all descriptions.
Viewpoint number two, that corporations are socially responsible, also has some basis in truth. Some corporations have figured out ways to tie merchandising campaigns to charitable causes and increase business while donating a portion of the proceeds to the cause they’ve joined with. Think about co-branded credit cards that give a portion of sales to the co-branded charity with each purchase, or marketing campaigns that sell certain types of merchandise with a portion of the sale price going to the linked cause. This often has been good not only for the nonprofit involved, but for the corporations doing the selling.
But the latter type of activity is not philanthropic, is it? It’s a marketing campaign tied to a cause–hardly one hundred percent altruistic. Yet that seems to be where some of the greatest promise lies, says the author, in seeking “social investing”–Weeden suggests that we lose the word “philanthropy” as a throwback to times gone by. Corporate social investing, on the other hand, makes use of philanthropic principles, tax laws, public perception, and savvy marketing (on the parts of both the corporation and the nonprofit) to reach maximum benefit for all concerned.
One thing Weeden points out is that while a “profit sharing” venture results in charitable contributions, corporations may be reluctant to consider it because it does not get credited as a charitable contribution. But the costs of such a venture, he points out, can generally be classified as some other allowable business deduction. And since corporations are allowed to deduct up to 10% of pretax profits as charitable contributions in any given year, says Weeden, that opens up a very wide area for helping nonprofits achieve their aims while aiding the community and the corporation (both bottom line and public image) at the same time.
There is the possibility of missteps, of course. Weeden mentions the unfortunate teaming of the AMA and Sunbeam. In 1997, Sunbeam won the right, through monies to be paid through sales, to put the prestigious AMA logo on such “health care products as heating pads, bathroom scales, and so on,” the author recalls. Within a couple of weeks of the announcement there was such an uproar among influential members of the association over the AMA “selling” its name that the alliance was ended abruptly. AMA officials conceded that it had been “an error.”
There was also the questionable ethics of the Smithsonian Institution accepting a $100,000 donation from the Alyeska Pipeline Services Corporation for the installation of an exhibit depicting the trans-Alaska pipeline. Conservationists were concerned that the Smithsonian had sold out by allowing an exhibition that downplayed the environmental issues associated with the pipeline. The lesson: If the organization or the corporation stands to lose more in public relations than it can possibly gain in financial terms, the idea of an alliance definitely ought to be revisited–and perhaps scrapped.
Weeden lays out a logical 10-step program of corporate social investing that covers everything from what sort of benefits will accrue to the business doing the investing to how much of the company’s profits should be committed to causes each year. He offers guidance to corporate executives who seek a way to make companies more responsive to public needs, but who are unsure how to proceed. He also provides tips to members of nonprofit organizations seeking creative new ways to obtain funding from businesses and corporations who in the past gave, but only in small and ineffective ways.
The Trustee’s Dilemma