There’s No Such Thing as Corporate Philanthropy!

Corporate Philanthropy does not, or at least should not exist.

While corporations may give to charitable causes, it is not or should not be out of an altruistic sense of corporate social responsibility. Instead, done properly, corporate giving is simply a marketing or research-and-development investment. Let me explain.

Several years ago, I moderated a panel of corporate giving officers for the Association of Fundraising Professionals Greater Philadelphia Chapter. One of the panelists was from a bank, at the time one of the nation’s largest credit card issuers. She told the group that there is no such thing as corporate philanthropy. I saw the mouths of about 100 people drop open. They were either surprised by this news or were shocked that a corporate giving officer would actually admit this. The giving officer from the bank went on to explain that corporations exist for only one reason: to enhance shareholder value. The bank contributed money only where a positive return on investment could somehow be expected.

Many people expect for-profit businesses to act with “Corporate Social Responsibility.” CSR is a term that came into use in the late 1960s. While there are many definitions for CSR, Wikipedia defines it as “a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms.” Today, many nonprofit professionals seem to think that one component of CSR should be corporate philanthropy; they think that corporations should “give back.” News media have even recently done reports on the role of corporate philanthropy.

However, that’s not why corporations exist. Again, they exist to make money for their shareholders, not to perform selfless acts of charity. As for “giving back,” corporations do this every time they pay taxes, provide jobs, pay employees well enough so they can also pay taxes and donate money. As for corporate giving, it needs to accomplish something not just for the charity, but also the corporation.

Marc Gunther, a senior writer for Fortune Magazine, wrote in 2008, “I’m not a big fan of corporate philanthropy. Too often, it’s a feel-good exercise, generating little value for a company’s shareholders. At its worst, it allows CEOs to use other people’s money to glorify themselves.”

On the other hand, corporate giving can benefit the charitable sector while also building shareholder value. Gunther went on to describe giving by General Electric, as an example: “Where’s the payoff for shareholders [from contributions to healthcare in Africa]? ‘We’re building reputational value and trust in places in the world where we aren’t known,’ [Robert] Corcoran[, President and Chairman of the GE Foundation] says. The company is also driving sales. While GE was launching a healthcare project in Rwanda, Paul Kagame, the nation’s president, asked to meet with Corcoran because the country wants to exploit methane gas under Lake Kivu, on the border with the Congo. Corcoran arranged for Kagame to meet John Rice, a GE vice chairman in charge of infrastructure, and the company is now on the verge of selling its equipment to Rwanda.”

In my own career, I’ve had experience with the idea of corporate giving as investment. A large university was implementing a coordinated direct-mail/phone fundraising campaign. However, they lacked sufficient budget resources to contact all of the alumni. So, they contacted a national video rental company headquartered in the same region. The university had no direct connection to anyone in senior management, but they were able to get access to the CEO. He promised the university a sizable challenge grant that allowed it to move forward with the campaign. The development staff was very happy.

That happiness was short lived, however. Within days, an angry marketing director contacted the university. He explained that the CEO had seized part of his budget to provide the grant. Unfortunately for the marketing director, who had fewer dollars with which to work, the CEO had not reduced his goal. So, the marketing director told the university that they could either help him reach his goal or forget about a grant the following year.

I worked closely with the university, and we developed a plan. The corporation was named in all campaign materials since they were providing a challenge grant. In addition, alumni were encouraged to go into one of the chain’s retail outlets to get a special university video rental card and be entered into a drawing for a free cruise. The cruise was donated by a cruise company that was thrilled with the targeted advertising reach.

The result was that the video rental company exceeded its marketing targets and, therefore, renewed its support to the university. The university was able to conduct its first-ever phone campaign which exceeded expectations. The alumni were happy because they had an opportunity to win a cruise while supporting their alma mater and having that support magnified by the challenge grant. And, the cruise company benefited through successful advertising to a target market it valued. Everyone won. But, it wasn’t altruistic corporate philanthropy. It was a corporate investment that benefited the university.

So, if you want to raise more corporate dollars, especially during these challenging times, don’t submit a grant proposal simply thinking that a corporation should give-back by giving to your organization. Instead, think how your organization can deliver value to the corporation. The value may be delivered in the short-term or the long-term. The value may simply be goodwill, or more video rental members, or it might be a vibrant arts scene that makes it easier to attract top-notch executives to the area. However it is defined, the more value you can reasonably and appropriately demonstrate, the better your chances will be for getting your request funded.

That’s what Michael Rosen says… What do you say?

UPDATE (10/10/11): I will be interviewed on Blog Talk Radio’s program hosted by Philanthropy Plus. The topic will be: “There’s no such thing as Corporate Philanthropy!” The interview will air live on Wednesday, Oct. 12, 2011, 11-11:30 AM EDT, at http://ow.ly/6Teu0. A recording of the interview will also be posted at that site for those who are unable to listen to the live event.

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12 Responses to “There’s No Such Thing as Corporate Philanthropy!”

  1. You’re absolutely right Micheal, you’ve raised some really good points.

    In my career thus far, I’ve only encountered one corporation that donated/sponsored money to one of my clients where it was completely altruistic…in a way. They DO NOT want any recognition whatsoever and the benefits they get from the sponsorship portion of the contribution is used to give guided tours and organize activities for other charities.

    In essence, they leverage their gift internally by showing their staff they are a good corporate citizen and they also encourage them to contribute as well.

    • Ligia, thank you for sharing your insights. Sometimes corporations will contribute money to nonprofit organizations in order to generate goodwill with their employees. Their belief is that the goodwill generated helps them attract and retain talented staff. I know of a number of corporations whose corporate giving is exclusively or largely in the form of matches to employee giving; in that way, the corporations earn goodwill by not just supporting nonprofits but the nonprofits that the employees support. Because the employees know their gift will be matched, it encourages them to give. For corporations, its still giving with self-interest in mind.

  2. A very good article, Michael, and one that will hopefully open the eyes of a great many in our industry.

    Yes, philanthropy is an industry which, by the way, is not a dirty word.

    But there is, or shall I say, are other sides of the story.

    Take for instance, the large bank from south central New Jersey, which recognized the benefit of associating itself with a small local nonprofit organization that benefitted individuals with developmental disabilities. Without going into the details of the bank’s corporate involvement, one of the bank’s senior vice presidents, a runner, who, was aware of the bank’s involvement with the small nonprofit, was out one evening for his workout, and his track took him past the organization’s office. For some reason (perhaps a board meeting) the lights were on. I do not know what was going through the runner’s mind, but he stopped running, entered the building, and asked someone “Just what do you people do here?” Well, from there he spoke to someone in authority, and I guess was impressed what he heard, and long and short of it, within a few months became finance chair for that organization, a faithful annual contributor, and an advocate for the organization in the community.

    There are several other instances of this sort of thing happening over the years that I have witnessed. Take for instance, the corporate secretary from a chemical company in New Jersey, which only tacitly supported a few local charitable organizations.

    Mostly chotckies.

    The secretary in question, single, elderly, and who had been with the chemical company for 40 years, remembered that a friend from her church was involved with one of the charities, and following service that weekend, asked her friend about the mission of the charity. Well, I guess something clicked, and in this case in a big way. When the secretary from the chemical company ultimately passed away, it turns out she left her entire estate, in excess of $1.5 million to that charity.

    So, I guess what I’m saying to the faithful, is take heart; certainly, businesses and corporations have vested interests in supporting charitable causes. But at the same time, it’s important to remember that human beings, many with big hearts and deep (and not so deep) pockets work for and are investors in those businesses and corporations.

    This is also why it’s important to reach out and thank those human beings on a regular basis for their big hearts and deep (and not so deep) pockets, because one never knows who may be out jogging some evening.

    • Michael, thank you for taking the time to share your comments. Corporations are nothing but a collection of people. It’s important for development professionals to remember that. Of course, it impacts the way that corporate giving decisions are made. And, contacts with the corporation, handled well, can also lead to individual giving. I serve on the board of directors for the Philadelphia Children’s Alliance, an organization that brings justice and healing to the victims of child sexual abuse. We have a number of corporate donors. We have one, in particular, who has deccided to bring all of their employees to our site for a tour; they’re accomplishing this by sending small groups of employees to us on a regular basis. The employees learn about their employer’s giving, the work of the Children’s Alliance, and the organization’s needs. This has resulted in a number of the employees personally supporting the organization. By handling the relationship effectively, the organization was able to generate both corporate and individual support.

  3. Agree 100%, Michael, just like boomer donors aren’t calling it charitable giving, they’re calling it “social investing” there is indeed no such thing as “corporate philanthropy.” It’s all just marketing (which is what the IRS and CRA calls it too!).

    Want to make a good pitch? Know your value proposition and don’t give away the barn to save the cows.

    Great post!

    • Paul, thank you for your comment. When corporations give, they do it to derive benefit. Just because there’s no such thing as “corporate philanthropy” does not mean there is no “corporate giving.” There’s plenty of corporate giving. But, to get a piece of it, you’re quite correct in saying, development professionals need to know their value proposition.

  4. You’re right, of course, Michael. WIIFM is the key. Except in the rarest of instances, corporate philanthropy manifests itself in the form of enlightened self-interest. To the extent a cooperative fundraising venture with charity helps improve the bottom line, a company may be described — euphemistically, of course — as being philanthropic.

    I never cease to be amazed at the pervasiveness of naïveté in the charitable community, which has been seduced, time and time again into unfavorable cause-related marketing schemes such as the lopsided American Express Statue of Liberty-Ellis Island campaign, in which ONE PENNY per card transaction was donated to the statue’s renovation, while Amex opened an unprecedented number of new accounts and generated record high revenue and profits.

    Even when it comes to corporate grants, most charities follow a flawed strategy, competing with numerous other nonprofits for a small slice of a dwindling pie (e.g., philanthropy budgets) rather than focusing on a company’s marketing budgets, which are typically exponentially larger. One example that stands out is a major library that routinely received annual contributions ranging between $500 and $1,500 from Fortune 500 users of their business library, plus a few slightly larger gifts never exceeding $5,000.

    We subsequently decided to develop marketing campaigns (bus and subway ads) for several of the companies, simultaneously creating awareness for the library’s unique programs and services, while burnishing the companies’ images. The campaigns each brought in between $75,000 and $300,000, half of which paid for actual advertising and production costs, with the remainder going to the business library as unrestricted gifts.

    My advice to fundraisers is to follow the lead of Willie Sutton, and disregard the folks who dispense charitable dollars and go right to the marketing directors and brand managers.

    • Jeff, thank you for sharing your insights. While it’s always good to receive a comment from you, I especially appreciate hearing from you when we agree! The public transit advertising campaign that the library conducted is a terrific example of how a nonprofit can tap into corporate marketing dollars. Thank you for sharing this excellent story.

  5. On the CharityChannel LinkedIn Group, Jerold Kappel, CFRE, posted a comment about this blog post. I thank him for sharing his thoughts and for his permission for me to post his comment comment below:

    I basically agree with you. There was a landmark study done by the IU Center on Philanthropy in 1992 that was prepared by The Consulting Network titled “Managing Corporate Support: Responses to Challenging Times.” The report was not directed to development directors that “manage” corporate support, but to those within the corporation charged with managing the corporate support of the corporation. I found the report enlightening then, and rereading it today, I find that it still holds true. Consider the first paragraph of the Introduction: “Across the nation, companies have had to adjust virtually all operations because of corporate staff reductions, mergers and acquisitions, and changes in senior management. These issues also have dramatically affected how contributions and company relations managers conduct their business. At a time when demand for increased corporate involvement seems unending, senior management is asking for more accountabiity and results.”

    This report is from 19 years ago! That paragraph could have been written today.

    When I used to teach corporate fundraising in Washington, DC, some years ago, I used to lead off the class by asking to whom was the corporation responsible. It always took prodding to get the class to respond “shareholders.” Anything corporate leaders do must add value to the corporation for the shareholders–or they will not keep their job. On “60 Minutes” last Sunday, Lesley Stahl was interviewing GE CEO Jeffrey Immelt. The following exchange is critical as to how corporations think of their civic responsibility, although the subject was jobs, not philanthropy:

    Stahl: Shouldn’t American corporations – don’t they have some kind of civic responsibility to create jobs? No?

    Immelt: My name is not above the door. I work for investors. Investors want to see us grow earnings and cash flow. They want to see us be competitive. They want to see us prosper.

    I am not criticizing corporate civic responsibility in this comment, just commenting on the approach fundraisers need to take to corporate fundraising.

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