Corporate giving: Not what it used to be

From the Philadelphia Business Journal

2011 Giving Guide

By Peter Key | 11-18-11

Corporate philanthropy has rebounded to pre-recession levels, but the rebound has not been even and the approach businesses are taking to philanthropy has changed.

A June Giving USA report stated that last year U.S. businesses contributed $15.29 billion to charities. That's the second highest amount since 1954, the first year in which data was tracked, topped only by $16.59 billion in 2005 at the height of the real-estate bubble.

The October "Giving in Numbers” report put out by the Committee Encouraging Corporate Philanthropy (a New York organization founded in 1999 by the late actor Paul Newman and some corporate CEOs), said that although the aggregate amount was impressive, it masked some real problems. Since 2007, one quarter of the companies surveyed for the report have increased giving by more than 25 percent, while 21 percent of them have reduced giving by more than 25 percent, when their giving totals are adjusted for inflation.

The report also found that the form of corporate philanthropy has changed, with companies making larger, more targeted grants and, in response to the recession and weak recovery, doing more giving to address basic needs.

Those trends are evident locally, according to Debra Kahn, the executive director of Delaware Valley Grantmakers.

The organization recently held a conference called "Holding Together in High-Wire Times.” The theme, Kahn said, reflects the fact that although giving has stabilized, it's subject to swings based on everything from the debt situation in Europe to mergers and acquisitions involving local companies.

Partially because of that type of uncertainty, she said, corporations are much more results-oriented in their giving.

"Everybody's interested in the value that they get for their donation and whether or not they're having an impact and that's true for the biggest donors in our region and it's true for the smallest donors,” she said.

Corporate philanthropy is the smallest of the four types of giving in the United States defined in Giving USA, which is put out by the Chicago-based Giving USA Foundation and the Indianapolis-based Center on Philanthropy at Indiana University. The most recent Giving USA report estimated that corporate giving was only 5 percent of the $290.9 billion donated to U.S. charities last year. Individuals are the biggest donors, with $211.8 billion, or 73 percent of the total, followed by foundations with $41 billion, or 14 percent, and bequests with $22.8 billion, or 8 percent.

The totals in the most recent Giving USA report are estimates. Giving USA Foundation and the Center on Philanthropy revise them and totals from past reports as more information becomes available.

According to the most recent Giving USA data, corporate giving began declining before the recession, falling 10.2 percent from its 2005 peak of $16.59 billion to $14.89 billion in 2006, declining an additional 4.4 percent to $14.24 billion in 2007, and then falling 12.9 percent to $12.41 billion in 2008. It began rebounding in 2009, when it grew 11.4 percent to $13.83 billion and grew 10.6 percent last year.

The totals in Giving USA data include the cash value of in-kind gifts. An increase in them, especially by pharmaceutical companies, is responsible for a big chunk of the recent increase in corporate giving, according to Robert Evans, the managing director of Willow Grove-based EHL Consulting Group Inc. EHL, which advises nonprofits, is a member of the Giving Institute, the group for nonprofit consultants whose foundation publishes Giving USA.

The spike in in-kind giving makes the recent increases in corporate giving "a little bit misleading,” Evans said. "It's showing a bigger increase than what some nonprofits have seen with regards to actual cash gifts.”

Pharmaceutical companies aren't the only ones doing in-kind giving. Media companies, including Philadelphia-based Comcast Corp. , contribute air time; software companies, including Redmond, Wash.-based Microsoft Corp. , donate software; and other types of companies give products and services related to what they do.

Nonprofits are happy to get such gifts, or course, but they can only use them in a limited number of ways, as opposed to money, which, if it comes in the form of an unrestricted grant, they can use however they like.

"Is that what the nonprofit sector really needs from corporations?” asked Geoffrey Brown, the executive director of Giving Institute and Giving USA Foundation. "Is it products and services, or is it really the true cash outlay?”

Cash giving by corporations is making a comeback, according to Giving In Numbers.

The report is based on a survey of 184 companies, including 63 of the largest companies in the Fortune 100. Sixty-one percent of those companies increased their cash giving last year, although 53 percent still gave less cash in 2010 than they did in 2007.

The most striking finding of the report was the disparity in giving among respondents to the survey on which it is based. In addition to the numbers cited earlier, the report said 45 percent of respondents gave less, adjusted for inflation, in 2010 than they did in 2007, while 5 percent gave the same amount and 50 percent gave more.

That shows up locally, too.

Teddy Thomas, the executive director of the Camden-based Ronald McDonald House of Southern New Jersey said about half of its corporate donors have reduced their contributions, with a lot of the cutback coming from large corporations that have operations in South Jersey but are based elsewhere. Those companies, she thinks, are pulling back on donations in areas away from their headquarters so they can maintain their charitable giving near where they're based.

Thomas has responded by going after smaller, privately held companies, and she said many have been happy to help.

"Entrepreneurs who are still successful in this environment often want to be very charitable,” she said. "They appreciate their own success and they're willing to help charities.”

Another trend among corporations is to target an area in which they want to make an impact and direct more of their money to that.

Giving in Numbers said that within a matched set of companies, the percentage of companies saying at least half their total giving went to one program area rose to 33 percent last year from 24 percent in 2009.

That increase in focused giving is going on locally, too, said Jill Michal, president and CEO of the United Way of Southeastern Pennsylvania.

"Everybody is in the situation where they have a limited amount of dollars and they see a significant need to make change in their community and at the intersection of that is a focused investment strategy that demands results,” she said.

Corporations also have responded to problems caused by the downturn in their communities by increasing their giving to programs that address basic needs, according to Giving in Numbers.

San Francisco-based Wells Fargo & Co. gives in the area through a regional foundation set up by a predecessor bank that focuses on community revitalization and through its national foundation, whose focuses include community development, affordable housing, work-force development and access to food and human services.

"Over the past several years, while funding priorities have stayed the same, there has been more awareness and focus on programs that meet basic human needs,” said Barbara Nate, a corporate communications manager with Wells Fargo.

Corporations also are listening more to employees when it comes to giving, particularly through employee volunteer programs. Eighty-nine percent of the companies cited in Giving in Numbers had formal domestic employee volunteer programs last year.

Aldustus Jordan, a Wells Fargo vice president and the bank's community affairs manager for the Philadelphia area, said volunteer programs help keep Wells Fargo's employees engaged with the company.

"Our employees consistently say they want to do something, even if it's something small, to benefit the communities around them,” he said.