The breakthrough strategy for giving and getting corporate contributions

"If social investing is working properly, the funds paid to nonprofit organizations are creating conditions or stimulating markets that are advantageous to the business." Pg 70

Contributions made to overseas public institutions of organizations which equate to 501(c) (3) type of firms can be taken as US tax deductions. Pg 120.

Alcoa has a small factory in Brazil. Alcoa in Brazil found that it could make a medical facility that could be used by everyone, including its employees and setup a US Foundation to fund it. The parent corporation could get a tax deduction for the funds given to the US foundation. This is a kind of pass-through which can not be used by all companies. pg 171 & 172. I expect a similar concept could be used by Skyaid facility for access to medical help.

Aetna and U.S. Healthcare $7 million to educate women about heart disease and stroke

Microsoft and AARP – Educate older adults about personal computers

Pfizer $5 million with several nonprofits improve children’s health

The author has been directly or indirectly responsible for distribution of $1 billion in corporate contributions over the past 20 years (Johnson & Johnson, etc.). Recently founded and is the director of Business & Nonprofit Strategies (bnsinc.com) which manages the Corporate Contributions Management Academy in Florida

Table on contents

Each year companies spend billions on something called external relations, and they frequently do so without enforcing the same kind of tough management standards that they usually apply to other aspects of their businesses. Stakeholders are often left scratching their heads about the true value of a hodgepodge of "soft" functions that encompass community and public affairs, corporate social responsibility, and -- most of all -- corporate philanthropy.

It seems that many American companies are not connecting to the world outside the workplace the way they could or should. They are pulling back into themselves, consumed with a passion for reorganization and restructuring as they chase the dream of becoming the leanest profit-making machines on the face of the globe. One consequence of this inward focus among corporations is that nonprofit organizations that rely (at least in part) on business donations and volunteers are being turned away at the company gate.

The amount of tax-deductible corporate contributions made each year has been and still is a good indicator of how businesses related to social issues and needs. These cash, product, equipment, and land donations are the mercury in the social responsibility thermometer. The latest temperature reading inside many companies is unsettling as it becomes apparent that philanthropy isn't keeping pace with the rapid rise in annual profits. To put it another way, many businesses are more closefisted than in the past when deciding what size slice of their earnings they should carve out for grants and contributions to the nonprofit world. And this new attitude about philanthropy is causing aftershocks being felt in college quadrangles, museum galleries, soup kitchens, and community health centers all over the country.

Something else is perceived to be wrong, too. Some shareholders of publicly held companies have a growing concern that corporate contributions are being misused by senior management. The complaints center on gifts and grants going to nonprofits that are of personal interest to CEO's and other high-level executives, organizations that have little or no affinity to the corporation's business concerns.

This kind of business and executive self-centeredness may be disrupting an unusual and remarkable alliance in America. Corporations, government, and hundreds of thousands of nonprofit organizations have long been intertwined in a way that defines our quality of life in the United States. According to Impression A, this delicate coalition may be unraveling. Company leaders appear to be turning a blind eye toward nonprofit organizations at a time when government is trying to off-load more of its human service responsibilities onto these same institutions.
These days, the sounds coming from nonprofit organizations and agencies caught in the middle of this commotion are hardly screams of joy.

Suddenly, nonprofits are in the business of profit sharing. They are splitting the take from cause-related marketing campaigns, endorsements, and sponsorships. New kinds of deals are being cut that rewrite the rules for corporate-nonprofit relationships. Here are some recent examples:

Corporations usually consider these kinds of transactions as marketing expenses, not as charitable grants or gifts. The money handed over to outside organizations in this way rarely gets mentioned in any public statement the company makes about philanthropy or social responsibility.

As for the receiving team, the organizations that get cash from these corporate spigots aren't complaining. The dollars are just as green whether they are paid as part of a marketing arrangement or handed out as a donation.

The reality is that business connections to the "outside" world are not what they used to be. Some marketing and promotion executives are circumventing corporate contributions or community relations personnel in order to build their own bridges to nonprofit organizations. In at least a few companies, manufacturing departments are producing goods for charities without any coordination or oversight by managers in other parts of the firm. In this very unsettled atmosphere, many philanthropy, public affairs, and community relations staffers are struggling to figure out their roles and responsibilities. Because of all of this, the public gets a jumbled picture of where companies stand when it comes to these external activities.

Relations between the private sector and the nonprofit world started changing back in the early to mid-1980's. It was a time when losing weight -- shedding excess baggage that was standing in the way of efficiency and improved profits. Wall Street hovered over businesses like Richard Simmons with an attitude, screaming at top management to sweat off every bump and lump in their organizations. The weigh-ins came very quarter, and if companies didn't look better than they had the day before, the Street tolerated no excuses.

Over the years, businesses impulsively grabbed any weight-loss plan that was put in front of them. These plans came with different names -- reengineering, downsizing, rightsizing. In many instances, the crash diets actually worked. So much so that the corporate bottom line took on a very appealing shape, which investors greeted with wolf whistles. Slimmer, trimmer companies basked in the glow of their financial success.

As businesses became increasingly absorbed in their own appearance, their attitudes changed about what was going on outside the corporate walls. After a period when companies had been pumping up their philanthropy spending until it reach more then 2 percent of their pretax earnings, the private sector did an about-face. Businesses began assigning less importance to philanthropy. Year by year, corporate gifts and grants eroded until the percentage of profits set aside for philanthropy fell to nearly half of the spending levels in the mid-eighties.

During the same era of extraordinary economic success, many educational institutions, charities, and other nonprofit organizations were taking it on the chin. Government funding was drying up, private foundations were increasing their spending only modestly, and personal donations were erratic. Meanwhile, politicians threatened to negotiate a new Contract with America that would shift more tax-funded human service activities to the nonprofit field -- and a goodly number of corporate executives cheered the idea. Shell-shocked charities mulled over the prospect of doing more while at the same time coming to the harsh realization that their share of the corporate profit pie was steadily eroding.

A Shift in Philosophy
There have always been those within the business world who have held that corporations should not spend their resources or time worrying about matters that don't directly affect their ability to make money. The business of business is -- business! Make a profit and provide jobs. That's a corporations ultimate responsibility. Every since the 1930's, when the IRS declared that corporations could consider charitable contributions as legitimate business expenses, executives and shareholders have debated how much of a company's profits or energies should be directed toward supporting nonprofit institutions. Although there are those who argue corporations have a moral obligation to assist outside causes and issues, the let's-keep-business-focused-on-business approach has gained ground in recent years.

Herdism
There's something about straight-out corporate philanthropy that makes companies head for the middle of the pack. Corporations give (or don't give) based on what other businesses are thought to be giving (or not giving). Few companies dream about running ahead of the pack when it comes to spending money on contributions. Without enough businesses taking the lead, corporate philanthropy tends to remain stuck in place while the rest of the economy marches on. And that is exactly what has happened over the past decade. Although pretax profits have soared since the mid-eighties, the dollars spent on corporate charitable contributions have crept ahead at a much slower rate of growth.

The difference is greater than you might think.

When focusing only on nonreligious organizations (health, education, civic, cultural groups), corporate charitable donations represent one dollar out of every ten raised by these organizations. For some nonprofit institutions, corporate support is absolutely essential for survival. For other, it provides the seed money needed to raise funds from other sources (private foundations and government, for example). For still other nonsectarian groups, corporate giving comes with a bonus that might prove more important even than the company's tax-deductible gifts: time and commitment from corporate executives and employees.

There is a good chance that a nonprofit that gets major financial support from a business also has an executive from that company on its board or one of its advisory committees. This not only means free management consulting for the nonprofit but can also open doors to other services that are quietly donated on the side -- for example, printing, accounting, meeting rooms, and so on. These "added value" benefits are likely to fade away along with the company executive serving on the board of the nonprofit organization if a business decides to cut back or eliminate its contributions support.

As mentioned earlier, there is a bright side to this picture that is largely overlooked in any accounting of corporate social responsibility. Although traditional philanthropy has taken a beating in recent years, there has been an upsurge in new kinds of relationships between businesses and nonprofits. Sponsorship, quid pro quo contracts, marketing deals -- all are part of a growing trend. Examples:

Are these marketing relationships sucking away money that otherwise might have been donated via "usual" contributions channels? Probably not. This is a relatively new kind of revenue stream running into charity's pond that may eventually become a river of change.

The following chapters explain in-depth how companies can go about taking these steps to replace philanthropy with corporate social investing.