August 17, 2006 | Read Time: 18 minutes
Disaster relief and big profits account for 10% rise
Historic disasters and a growing economy prompted the nation’s largest corporations to increase their
giving in 2005, according to a Chronicle survey.
This year, many big companies expect their charitable efforts to increase even further, though some companies’ giving budgets are not keeping pace with their surging profits.
Cash giving by 82 of the country’s biggest companies increased by a median of 10.1 percent, meaning that half of those organizations increased their giving by a higher percentage and half by less. The total dollar amount of cash donations rose from $3.2-billion in 2004 to $3.7-billion last year.
In some cases, efforts to aid victims of Hurricane Katrina and international disasters raised giving at corporations. Forty-six of the companies that responded to the survey reported donations to Gulf Coast relief and recovery efforts, giving a total of $172.8-million in cash. For the tsunamis in South Asia, 38 respondents reported giving $80.3-million in cash. Katrina in particular has had a significant impact on corporate donors, with many making plans for unprecedented multiple-year commitments to help the Gulf Coast recover, and laying the groundwork to better assist victims of future catastrophes.
Despite the worldwide emergencies last year, most companies attributed their growth in giving to the expanding economy and increased earnings.
For example, the Dow Chemical Company, in Midland, Mich., increased its cash giving by about $6.2-million from 2004 to 2005, thanks to better earnings. Last year, the company’s pretax profits rose by $2.6-billion.
“We had our best year in 2005,” said R.N. (Bo) Miller, executive director of Dow’s foundation, which supports science and math education and environmental groups.
Philanthropy Forecast
Of the 72 companies that estimated how much they would donate to charitable causes during their current fiscal year, 27 said their philanthropy would grow by more than 3 percent. Thirty-four said their giving would remain steady, and 11 said it would decline.
While some giving budgets may be rising, the increases pale in comparison with some corporations’ massive earnings, said Curt Weeden, chief executive of the Association of Corporate Contribution Professionals, in Mt. Pleasant, S.C. The association is a membership organization of 117 of the largest corporate philanthropies.
Since companies often set their giving budgets based on their previous year’s earnings, said Mr. Weeden, “we should be looking at a very substantial increase in 2006 reflecting 2005’s huge increase in profits, right? Wrong.”
According to the Chronicle survey, at least a dozen companies increased their giving last year but donated a smaller percentage of their pretax profit than in previous years.
For example, rapidly rising oil and natural gas prices helped the Exxon Mobil Corporation, in Irving, Tex., earn record profits in the last two years.
Its cash giving rose more than $20-million in 2005 to support antipoverty projects in Africa, educational programs in the United States, and other causes. (Last month it announced it would give $10-million to public schools in and around New Orleans to help math and science teachers.)
But its total giving last year — $132.7-million — equals 0.3 percent of its 2004 pretax profits. In 2003, Exxon Mobil gave away 0.6 percent of its pretax profits.
The company’s record earnings do not affect its philanthropy in part because of the oil industry’s ups and downs, said Bill C. Carpenter, program officer at the ExxonMobil Foundation.
Such an approach allows the company to continue giving at a relatively steady amount during flush and lean times, he added. “Our philanthropic programs are not tied to our profits,” he said.
Biggest Givers
The Chronicle surveyed the 150 biggest companies in the United States, as ranked by Fortune magazine according to annual revenue, and received data from 82 of them.
Businesses that participated in the survey were asked to report the total amount of cash donations they made this fiscal year and in each of the last two fiscal years, and the fair market value of their donated products during each of those three years.
Topping the list of the largest corporate donors in the United States is the pharmaceutical company Pfizer, in New York, which last year contributed more than $1.6-billion in cash and products.
Pfizer this year has started an effort to help poor Hispanics along the U.S.-Mexico border.
The project will give $2.5-million to community health centers and other groups to provide care to the population, which has one of the highest rates of cardiovascular disease and diabetes, said Robert L. Mallett, the drug company’s senior vice president in charge of corporate philanthropy.
Following Pfizer in the top five largest corporate donors of cash and products combined are Merck & Company, in Whitehouse Station, N.J. ($1-billion); the Bristol-Myers Squibb Company, in New York ($758.9-million); Johnson & Johnson, in New Brunswick, N.J. ($591.9-million); and the Microsoft Corporation, in Redmond, Wash. ($334-million).
In total cash donations, Wal-Mart Stores, in Bentonville, Ark., continues to be the largest donor. In 2005 it provided $236.1-million, the first company to report giving away more than $200-million in cash in one year since The Chronicle started its corporate philanthropy survey in 1993.
Katrina’s Impact
Wal-Mart was one of the 46 companies in The Chronicle’s survey that reported giving cash (and products, which alone have totaled $87-million to date for these companies) for Hurricane Katrina relief and recovery efforts.
These companies’ efforts represent a substantial portion of the corporate world’s giving to hurricane relief. In a new report, the Foundation Center, in New York, said that 286 U.S. companies had donated $358.1-million in cash for Katrina relief as of June 1. Noncash giving by 81 companies the center tracked equaled $227.4-million.
Given the size of the disaster, several companies have pledged major gifts to recovery projects, usually tapping into their specific business acumen to help.
For instance, Cisco Systems, in San Jose, Calif., said it would provide $20-million in cash over three years to provide technological upgrades, including high-speed Internet access, to 30 public schools in Louisiana and Mississippi. Ten Cisco employees have taken a paid leave from the company to run the 21st Century Schools project, to which Cisco’s chairman, John P. Morgridge, donated $10-million of his own money.
“In spite of all the terrible things that happened as a result of Katrina, there’s an opportunity for us to help rebuild and create an environment that is much better for those that are there,” said Tae Yoo, Cisco’s vice president of corporate affairs.
Aiding the Gulf Coast
Ms. Yoo said the money Cisco has dedicated to Hurricane Katrina will not decrease its philanthropy to the causes it traditionally supports, a promise that other companies helping the Gulf Coast have made.
“It isn’t a matter of robbing one community to pay another,” said Andrea L. Taylor, director of U.S. community affairs at Microsoft.
Ms. Taylor visited New Orleans and other areas last week to meet with government officials and nonprofit leaders to determine how the company will support job training in the field of information technology for local residents.
One company’s philanthropy, the Allstate Foundation, in Northbrook, Ill., plans to help the devastated region’s charities directly.
Allstate gave $250,000 to the Louisiana Association of Nonprofit Organizations, in Baton Rouge, and the Urban Institute, a think tank in Washington, to pay for a November meeting that will help nonprofit groups apply information gleaned from some 800 studies that have been produced about Gulf Coast charities, said Jan Epstein, the fund’s executive director.
“All too often, good research doesn’t get turned into action,” she said. “Our goal would really be to help re-engineer the nonprofit sector down there.”
So far, 300 nonprofit leaders have signed up for the one-day event, which will be held in New Orleans.
Aside from assisting with Katrina’s aftermath, companies are preparing for future emergencies.
Such efforts include setting aside money as part of their annual budgeting so they will have relief funds available before a disaster strikes and clarifying guidelines on how employees may help out, such as taking time off to volunteer without risking their jobs.
In a few instances, companies have hired new employees to oversee their charitable response to natural disasters and other catastrophes.
For example, DHL Express, the worldwide delivery and shipping company in Plantation, Fla., in May appointed Daniel A. Ludwig to run the new Humanitarian Affairs and Emergency Management Office. (DHL is not included in The Chronicle’s survey because it is not wealthy enough to be in the Fortune 150.) One of Mr. Ludwig’s goals is to help the United Nations and other aid groups remove the bottlenecks that often arise when medicines, clothes, and other supplies come pouring into a country during a crisis.
“Often times you’re dealing with small airports that don’t have the capacity, and in some cases the awareness, of the magnitude of relief aid that is going to be coming their way,” he said. “So when it does hit, they are often overwhelmed.”
In the two weeks immediately following Hurricane Katrina, DHL helped distribute more than 2,300 tons of emergency aid that arrived on charter flights from 18 nations.
Rethinking the Red Cross
Katrina also has caused corporations to question whether the American Red Cross, which was criticized for inadequately responding to the hurricane, is the best organization to support during disasters.
“The Red Cross was a substantial success in 9/11, in Katrina, and other hurricanes, but it was also considered a substantial failure as well,” said Kevin D. Martinez, director of community affairs at Home Depot, in Atlanta.
In particular, he said, he would like the Red Cross to better explain when it believes that its responsibilities for relieving a community’s immediate needs end.
Despite the concerns, most businesses plan to continue to support the charity. Indeed, Mr. Martinez is working with other companies to help the organization collaborate better with the corporate world.
These efforts include cataloging supplies that businesses can offer in a crisis and helping the Red Cross develop the logistical expertise to ensure that aid gets to the areas where it is most needed.
“What we’re trying to do right now is mitigate the issue of what was failure,” Mr. Martinez said. “It is incumbent that our dollars are well spent. Those are our stockholder dollars, our consumer dollars. Those are dollars that need to be accountable.”
Kara Bunte, a spokeswoman for the Red Cross, said the organization has improved its relations with companies since Katrina. “We have taken steps with them to have an ongoing dialogue,” she said. “We want the best partnerships.”
Support for Science
A renewed attention to disaster philanthropy is not the only trend in corporate giving this year.
Among other key findings of the Chronicle survey:
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More companies are tying their grant making to efforts to get their employees to volunteer, including contributing money to charities where workers donate their time.
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Companies continue to grapple with how best to measure their philanthropic efforts, with some changing their focus to be better able to show results.
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Some businesses, such as Dow Chemical and Exxon Mobil, are increasing their contributions to bolster elementary and secondary education in math and science, as American students continue to perform poorly in those subjects.
The National Academy of Sciences last year published a report that warned of the United States losing its competitive edge in the world economy because of a lack of workers who are skilled in science and math.
“Every level of the corporation is reading that our kids are falling behind on the world stage,” said Truman T. Bell, who oversees Exxon Mobil’s education giving. “We’re doing more now because of the problem in the U.S.”
Some companies also are changing their giving to be better able to measure its benefit to society.
The CVS Corporation, for instance, reduced its giving to an array of health and education causes to focus on supporting children with disabilities.
The drugstore chain, in Woonsocket, R.I., is giving money to Easter Seals and other charities to provide disabled children with medical treatment, build playgrounds that are accessible to children with disabilities, and offer other services. The corporation will spend $25-million over five years on the effort.
By narrowing its philanthropic focus, the company will be able to measure what it accomplishes and have a greater impact, said Jennifer Veilleux, CVS’s director of community relations.
With its previous giving, “we were very scattered and fragmented in addressing many different issues. As we started to measure the effectiveness of what we were doing, it was really hard to say we made a huge impact in, say, breast cancer,” she said. “We were all over the map.”
In addition, helping children is expected to have a business benefit by appealing to women, who make up 80 percent of CVS’s customers, she said.
‘Can’t Be a Quick Fix’
CVS in many ways is a bellwether of the corporate world, where a growing number of companies are trying to find better ways to measure their giving and align it with their business goals.
But after Hurricane Katrina, some corporate grant makers are questioning this trend, saying it prevents businesses from playing a meaningful role in fighting some social ills.
“Some of the issues that some people are looking for companies to resolve are real long-term issues that can’t be a quick fix,” said Jennifer P. Goodale, vice president of contributions at the Altria Group, in New York, which owns Kraft Foods and Philip Morris USA.
Indeed, after the hurricane, a larger percentage of Americans said they want companies to help impoverished people. According to a survey by Cone, a Boston company that helps businesses with their giving, 75 percent of 1,044 respondents said companies should do more to alleviate poverty, a 10-percent increase from a survey taken before the storm.
For corporations to help tackle such an endemic problem, they need to look beyond their bottom lines, Ms. Goodale said: “We have to step back a bit and find this balance between are we in it for the right reason, or are we doing it just because we want it to look good for our shareholders or look good for the stock analysts?”
Noelle Barton, Candie Jones, Caroline Preston, and Elizabeth Schwinn contributed to this article.
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