Smarter Corporate Giving
On Nov. 9, with the lights of Avery Fisher Hall twinkling overhead and black-clad waiters weaving about bearing trays of champagne, New York's philanthropic A-list gathered at Lincoln Center for the Performing Arts to toast one of their own. No, the applause was not for a Rockefeller or a Hearst or a Soros. It was for Altria Group Inc. (MO ), parent to the maker of Marlboro cigarettes -- a company that, in many circles, wears a corporate black hat. But in the world of philanthropy Altria is viewed very differently -- as an old friend and treasured supporter.
It's not just dance troupes and opera companies that sing the company's praises. Altria, which also owns Kraft Foods Inc. (KFT ), has spent more than $1 billion in cash and in-kind gifts over the past decade to combat domestic abuse, feed the ill and elderly, and respond to disasters such as Hurricane Katrina. Altria's 2004 cash gifts totaled $113 million, earning it third place in BusinessWeek's ranking of corporate givers.
Such contributions will never be enough to overcome the issues inherent in making a lethal product. But over the years, through consistent philanthropy and careful responses to grassroots needs, Altria has managed to build a deep reservoir of goodwill in charitable circles. Eight or nine years ago, Altria Vice-President for Contributions Jennifer P. Goodale says she couldn't attend a press conference without fielding questions about Altria's ulterior motives. Today that's rare. The rebound of the company's reputation is the result of many things. Altria's once-towering legal and political challenges have begun to look less daunting, and shareholders are sweet on the stock, which is up 38% in the past 12 months. But as the event at Avery Fisher Hall shows, generous giving has been a major aid in turning the corporation's image around. Lincoln Center's chief fund-raiser, Tamar C. Podell, has only good things to say about the company. "They have stood with us, supporting a huge range of arts, and took major risks," she says.
Altria executives grasped the power of a form of enlightened self-interest earlier than many of their peers. Although companies are not handing out much more on the whole -- last year's giving equaled 1.2% of total corporate profits, the average over the past 40 years, according to the Giving USA Foundation -- they are taking a more businesslike approach to charity. The goal: to get the most out of every philanthropic dollar by tracking giving, measuring its impact, and helping nonprofits work more efficiently. Today companies such as Altria see giving as a way to please customers, motivate workers, and be a good corporate citizen at the same time. "Businesses succeed because they're results-oriented," says Steve Rochlin, director of research and policy development at the Center for Corporate Citizenship at Boston College, which is trying to create a tangible measure of philanthropic effectiveness. "It's a waste of resources for the community and companies not to get more rigorous about the kind of results they want to achieve."
Like many heavyweight cash givers, Altria is making a repeat appearance this year. Eight of the 10 biggest corporate donors in this year's list were there last year, too, including Wal-Mart Stores Inc. (WMT ), which gave $188 million this year and kept the No. 1 slot. The two newcomers to the list are Target Corp. (TGT ) ($107.8 million) and Wachovia Corp. (WB ) ($81.7 million). It's easier for the big guys to give big, of course, so to figure out who's really making a sacrifice, BusinessWeek also compared giving (both cash and in-kind) with pretax corporate profits. This is a change from last year, when we looked at those gifts as a percentage of revenue. We think the change sheds a clearer light on who's really digging deep. Of the mega-companies, only Target survives this cut, giving out cash equal to an impressive 3.6% of pretax profits. Those who handed over the largest slice of profits to charity in cash include retailers, grocers, and tech companies. Drug manufacturers dominate the list of in-kind givers.
Companies boast about this good work for good reason. At a time when corporate behavior is scrutinized by everyone from consumer bloggers to Sarbanes-Oxley-empowered regulators, philanthropic goodwill is a highly prized commodity. A KPMG International study published in June found that 52% of the world's 250 largest corporations filed separate reports on corporate responsibility in 2005. That's up from 45% in 2002. Target, Wal-Mart, and many other companies have funded national ad campaigns promoting their good works. In the October issue of In Style magazine, branding expert Carol Cone counted more than 25 "cause" ads, the vast majority of which were companies heralding their support of breast cancer research and prevention.
The push seems to be working. In 1993, Cone found 26% of the people she surveyed could name a company that stood out as a strong corporate citizen. By 2004, 80% could. "Philanthropy before was quiet," says Cone. "Now, if you're doing it with authenticity and credibility, you can tell people about it."
A company sets itself up for a higher level of scrutiny overall when it crows about its good works, however. Home Depot Inc. (HD ) is well known as a big supporter of employee volunteerism and projects such as its recent vow to build and refurbish 1,000 playgrounds in 1,000 days, much of which it and its partners publicize in press releases. But CEO Robert Nardelli found his company's giving the subject of two unfavorable stories in his hometown paper, the Atlanta Journal-Constitution, on Oct. 16. When translating giving as a percent of profits, the paper found Home Depot to be a low cash giver relative to other local employers. Nardelli defends his employees' good works and shot off an e-mail to employees in response, with a three-page addendum outlining their volunteerism and the company's good works. "I don't do it for the PR," says Nardelli.
The best defense against all such criticism is to build a true business case for giving. It isn't always easy, but the best companies are constantly working to develop metrics that prove the value of their gifts. Altria, which on its Web site lists all of the 464 initiatives it supported in 2004 and the size of its gifts, doles out a lot of unrestricted money to a wide variety of causes. That has made it particularly hard to create a single measure that proves its gifts to institutions are working. Traditionally, Altria has relied on site visits and testimonials to assess its work. The company also recently launched a program with Rensselaerville Institute, a think tank near Albany, N.Y., to try to help nonprofits better measure and communicate their impact. And the company's giving is reviewed at the very top. Once or twice a year, Altria CEO Louis Camilleri meets with the giving staff to discuss their work, and he personally approves any gift above $50,000.
More directed giving is easier to track. General Mills Inc. (GIS ) kept close track of how its pink-topped Yoplait yogurt sold this past October. Customers who sent the tops in to the company earned a 10 cents gift to the Susan G. Komen Breast Cancer Foundation. Sales were healthy, says Chris Shea, president of the General Mills Foundation. At Kroger Co. (KR ) supermarkets, the major form of corporate philanthropy -- aside from product donations to food banks -- is the discount gift-card program. Hundreds of thousands of local nonprofits, from Boy Scout troops to PTAs, buy cards at 95% of the face value to resell at 100%. They get to keep the difference. Last year, $460 million in cards were sold. In addition to shoppers spending that money at the stores, Kroger also got a $23 million tax write-off for the 5% discount it gave on the cards.
Increasingly, companies are looking beyond customers to their own employees for a philanthropic payoff. Businesses from Wachovia Bank to General Mills say low employee turnover is one of the benefits of their philanthropic focus. More companies are trying harder to track their workforce volunteers. AngelPoints in Sausalito, Calif., which sells a program that helps companies track employee volunteering, has added 60 clients in the past four years, mostly blue chips. And more companies are using employee volunteer interests as a means of directing their giving. Hilton Hotels Corp. (HLT ) donates $300 to any group to which an employee volunteers 50 hours a year. And the company's volunteer of the year can send $5,000 to a favorite charity. Wachovia gives six paid days off for volunteer work a year and $100 to any nonprofit where an employee spends 25 hours in a year. Hilton even determines a percentage of executive bonuses based on time spent volunteering in the community.
One downside for charities is that as companies become more focused on measuring the results of giving, they're less willing to give unencumbered funding that helps pay ordinary operating expenses. But that may force charities to become smarter about measuring their impact. Lincoln Center, which is in the midst of a building-expansion drive, commissioned a study of its economic role in the community in October, 2004. Included in the 41-page analysis: Its local real estate appreciated 2,161% more than the Manhattan average, a difference equal to $2.2 billion. Lincoln Center also hit up Altria for $60,000 to make a fund-raising film about the center this year. The company that built Marlboro into a giant brand knows the value of good marketing -- for philanthropies and businesses.
By Nanette Byrnes