Big Oil Is a Big Cheapskate to Charity

ExxonMobil and its brethren have enjoyed record profits recently, but they continue to pull up the rear when it comes to charitable giving

At the same time ExxonMobil's (XOM) record-breaking profits are making news, the company is running ads touting its philanthropic support for health and education programs in the U.S. and abroad. ExxonMobil's commercials were especially evident during the 2008 Summer Olympics, when 30- to 60-second spots costing hundreds of thousands of dollars attempted to convince viewers that the company's philanthropy is as deep and rich as its oil wells.

Unfortunately, such is not the case.

Strip away these choreographed, self-aggrandizing messages and you will find a corporation that needs to cut back on spin and instead pump up its charitable giving. ExxonMobil is in fact out-and-out chintzy when it comes to charitable giving—but then so are the other two largest U.S. oil producers, Chevron (CVX) and ConocoPhillips (COP).

Annual donations by the Big Three oil companies as measured by a percent of pretax net income (the standard yardstick for gauging corporate philanthropy) are consistently below half the national average for businesses that make tax-deductible charitable contributions.

In 2007, these three oil giants donated a combined $348 million, according to a survey conducted by The Chronicle of Philanthropy. That's a lot of money, for sure, but it is far short of the $1 billion the companies would have contributed if they had simply given at a level equal to Corporate America's philanthropic midpoint, which is 8/10ths of 1%. And that $348 million is a small fraction of the $27.9 billion in net income that the three companies earned just this last quarter!

An analysis of corporate tax returns shows a fall-off in overall corporate giving as a percent of profits following the Sept. 11 attacks in 2001. Helping to drag down the private sector's average is the oil industry. It has a history of running at the back of the philanthropy pack. For the past three years, annual giving by the Big Three oil companies hasn't even reached four-tenths of 1% of pretax profits—below 50% of the national average. At their level of astronomical earnings, every tenth of 1% of giving for just these three companies alone equates to around $125 million each year.

And this hard-to-justify "shortfall" in corporate giving by three of the most profitable companies in U.S. history is of course happening while enormous stresses rippling through the U.S. economy are eroding charitable giving on the part of many independent foundations and individuals.

Expected Excuses

The Big Three oil companies' CEOs and directors should be pressed hard as to why they are so philanthropically parsimonious. Most likely, they will try to hide behind one of the three dodges frequently rolled out by other businesses that consistently underfund their contributions and other social responsibilities:

• Profit fluctuation.

Giving 1% of pre-tax earnings today could create unrealistic expectations among nonprofit groups that sizeable cash payouts will keep on flowing even if profits take a dive tomorrow. Of course, most nonprofit organizations would quickly respond by saying, "Give us your donations now. We'll worry about tomorrow, tomorrow."

• Shareholder push-back.

Committing 1% of pretax earnings could add up to so much cash that investors might get riled. This concern quickly evaporates, however, when shareholders are reminded that not only does charitable giving lower a company's tax bill, but a contributions program also can be administered in a way that helps satisfy a host of business needs, from being an effective employee-recruitment tool to building brand recognition.

• Just not our thing.

Companies aren't designed or intended to be philanthropic enterprises, some CEOs insist. Others will say that they "just don't have the management resources in place to carry out the job effectively." While this may be true for some small companies, most larger businesses are well-staffed with trained and competent contributions and community relations managers. The problem isn't a manpower shortage. Rather, it's a lack of commitment to be truly socially responsible.

With their entire industry desperately in need of public and community support right now, the oil companies would do well to let the public know that beginning in 2009, they intend to become more respectable corporate citizens. And an important step in this direction would be their pledge to immediately begin making charitable grants equal to at least 1% of this year's anticipated pretax profits.

And should they want to share the nation's lead in philanthropy, they would make an even bolder move and announce that they are emulating the generosity of Target (TGT), General Mills (GIS), and hundreds of other companies that have already boosted their annual charitable giving to 5% of pretax income.

Now those would be 30- or 60-second commercials worth running.

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