August 27, 2002

Demands on Donors Push our Corporations' Goodwill

Jeff Mahoney
The Hamilton Spectator

It used to be called "goodwill."

Now, it might be "branding." Or "corporate citizenship." Perhaps "corporate conscience" or "corporate ethics."

More cynically, it might be called "leverage."

But it's not the right word to describe the motivation behind a lot of very quiet, long-term corporate giving that many businesses do all the time.

Especially in Canada, where governments have increasingly withdrawn funding from many social programs, leaving individual and corporate givers to take up the slack.

As another United Way campaign is set to kick off, a question arises: Are our corporations keeping up? Can they, in a climate of constant capital campaigns by universities, hospitals and other causes?

Chamber of Commerce CEO John Dolbec points out that the corporate world is constantly being leaned on to give. "You start getting into a situation of donor fatigue."

Despite a booming economy, the past two years were the worst for corporate giving in the United States since the 1991 recession, not in absolute terms -- corporations gave $11 billion in 2000–but as a percentage of profits, according to a Conference Board survey.

In 2000, U.S. corporate giving was just over 1 per cent of pretax profits, $836 billion that year. In 1986, it was 2 per cent.

In Canada, the corporate giving trend is the reverse, though Canadian corporate givings, as a percentage of pretax profits, lagged so far beyond American givings in the '80s that we still haven't caught up.

There has been a program in Canada for the past 12 years called Imagine, conducted by the Canadian Centre for Philanthropy (CCP). The Imagine program asks corporate Canada to give 1 per cent of pretax profits to charities and non-profit organizations.

"For most of the last 12 years, corporate giving in Canada has been running at or close to that 1 per cent benchmark," says Gordon Floyd, CCP vice-president of public affairs.

From 1988 to 1997, giving has averaged 0.99 per cent of pretax corporate profits, says Floyd.

"But when we started the program, we had seen a protracted decline in Canadian corporate giving."

From 1980 to 1987, the average was 0.65 per cent of pretax profits.

Floyd says the chief reasons were fear of the effects of free trade; corporate perceptions that governments, with their big deficit budgets at the time, would "do it all;" and the growing celebration of "greed as good."

"This was the beginning of the idea that the only business of business is to make profit for shareholders," says Floyd.

Things have improved greatly. The figure of $800 million annually in Canadian corporate giving has been holding steady since the mid-'90s, says Floyd.

Corporate giving figures are imprecise because corporations in Canada don't get a tax break for charitable donations, as individuals do. They are just an ordinary expense, so they don't have to report them separately. For this and other reasons, it is hard to break down corporate giving by community.

"Anecdotally, Hamilton's business community, on a company by company basis, is very generous," says Dolbec.

But this city has far more potential receivers than givers.

Among the city's top seven or eight employers, only two–Stelco and Dofasco -- are private corporations.

The rest are the kind of organizations that would be seeking donations, not giving them -- Hamilton Health Sciences Corp., McMaster University and the City of Hamilton.

"We don't have a lot of large corporations," says Dolbec. "Of the top 100 companies in Canada, some have as few as 140 employees.

"By contrast, the not-for-profit sector in the city is increasing exponentially. So there are more and more demands on few companies."

Carolyn Milne, president and CEO of Hamilton Community Foundation, agrees.

"On an individual basis, Hamilton has a tradition of giving more than the national average," says Milne.

"I think it applies to our corporations too. We have a corporate family that, even in tough times, is there for the community."

Not surprisingly, the two biggest corporate givers in Hamilton are Stelco and Dofasco.

Dofasco, a participant in the CCP's Imagine program, gave just over $3 million in corporate and employee donations last year. Stelco was not able to produce a figure for its donations last year.

Many Hamilton corporations direct their donations to local causes, which is not unusual. Dofasco is especially noted for this.

Pioneer Petroleum, which is based in Burlington, is not on the scale of a Dofasco or Stelco, but is often mentioned as a strong donor. The Pioneer Petroleum foundation gives between $250,000 and $300,000 a year.

"If you are doing well and the community has supported you and you're profitable, it (corporate giving) should be part of what we do," says Murray Hogarth, chief executive officer of Pioneer Group Inc. and the chair and founder of Pioneer Petroleum.

"If you don't support your community corporately, then it falls to the government.

"We started the business in Hamilton in 1956 and our loyalty to the city is very strong. It (corporate giving) is the way in which a corporation can say, 'Thank you.' How else do you do it?"

Through various foundations and other vehicles, Hogarth and Pioneer have given, both personally and corporately, to a wide variety of causes–children's hospitals, McMaster University, several Hamilton capital campaigns.

Milne says such capital campaigns are here to stay.

Not just in Hamilton. Floyd, who is with the CCP, notes that in Montreal right now, there are two hospital capital campaigns going on.

"We've had 10 years of cutbacks on infrastructure spending and the consequences are hitting the fan right now–in education, arts, health, et cetera," says Floyd.

"The government has to put money into roads and sewers, things that donors won't support, but the government's share of hospital building is less and the corporations' share more than it used to be."

"You look at all the campaigns that are going on, this is going to be the reality," says Milne.

That means everyone–charities, corporations, foundations, individuals–has to be creative in finding new ways to meet increasing need with existing resources, says Milne.

"What we're seeing from the corporations' point of view is that giving needs to be tied in with the business's values, goals and strategies," says Milne. "There is less random giving and more questioning of outcomes."

Dolbec says, "With so many noses pressed against the glass, so to speak, a company may want to focus on causes directly related to its market, for instance, youth."

Strategic giving is not new. Cosmetic retailer Avon chose to support breast cancer research as its chief cause, not accidentally–the market connection is obvious.

And that puts us back into the debate about whether charity can ever be truly selfless.

In the United States, Tyco International caught flak when it disclosed that it paid one of its directors $10 million for helping secure an acquisition, then made another $10 million contribution to a charitable fund of which he was a trustee.

Here in Ontario, a researcher at the Toronto Hospital for Sick Children had to fight the hospital in court when it cancelled her promotion after her research cast the product of a pharmaceutical company in a bad light. That company was a big donor to the hospital. A more recent study challenges her research and says the product is safe.

"In truth, in Canada, we have seen a few situations where the corporate donor tried to exercise too much influence," says Floyd.

"But usually, they are very honourable."

In the United States, Enron is up to its ears in allegations that it used political and charitable donations to wrest favours from recipients. In the '90s, the company gave $1 million to The Prince's Trust, Prince Charles's charity to help disadvantaged youth.

When a charity accepts a corporation's gift, does it absorb some of the stain of subsequent scandal? When the Prince's Trust spent the Enron money, was it spending money that was never really Enron's to give?

Should charities accept money from companies that employ child labour or run Third World sweat shops? What if the company sells tobacco or alcohol?

As these questions were being asked, some firms grew circumspect about "political correctness." They positioned themselves as champions of social responsibility while maintaining a corporate conscience.

But as the decade wore on, some of those companies had their shiny fenders muddied.

Jon Entine, a writer on business ethics, noted that shortly before winning a humanitarian award, Starbucks was sourcing beans from export houses that paid Guatemalan workers below a living daily wage. And later the coffee chain became embroiled in a messy labour dispute with its workers.

Other companies have dropped or clawed back their charity and social responsibility agenda when it compromised the bottom line.

Some haven't. Vermont ice cream giant Ben & Jerry's has kept its reputation for corporate citizenship intact for many years. It gives 7.5 per cent of its profits to charity.

Levi Strauss chairman Robert Haas has written: "The organization needs to be an ethical creature -- an organism capable of both reaping profits and making the world a better place to live."

The company, which has a plant in Stoney Creek, once pulled $40 million of business out of China to protest human rights violations.

But there are those both on the right and the left who think there is no place for corporate charitable donations.

American author Jane Anne Morris circulated a petition in 1995 calling for a law prohibiting corporate donations. She argues that corporate donations–whether they are intended to or not–end up having much the same effect as has bribery money.

At the other end, bottom-line purists say that any money made by a corporation should be ploughed back into the corporation, either to its shareholders, or to build business.

Floyd says that there are corporations in Canada that aren't pulling their weight in meeting the Imagine program's benchmark.

"Some corporate leaders argue that businesses have no business in philanthropy," says Floyd.

"In the U.S., Jack Welch, former head of General Electric, is the most notorious for this position."

But he says that getting behind a cause not only improves company morale, it can help a corporation's public image and ultimately help, not hinder, the bottom line.

Says Floyd, "There are multiple motivations for giving."

And once a tradition of charity begins, the motivation behind it can evolve.

"In the earliest days, donors were trying to buy their way into heaven."

In the long run, says Floyd, the controversies that have accrued to certain instances of corporate charity are helping the corporate world face up to tough questions about its role in a changing economy.

"Scandals like Enron, from what I'm reading, are causing a lot of companies to do some real soul-searching about ethics and some hard thinking about what their real role is in society.

"We've moved well past cheque-book philanthropy, to looking at how we can add value to the community by contributing talent and expertise, to form partnerships with charities and develop employee volunteer programs," says Floyd.

In the U.S., according to a Conference Board survey, 28 per cent of corporate charity comes not in cash but in other forms, such as goods, products and volunteerism.

Dolbec says that in Hamilton, corporate volunteerism is a huge part of the non-profit machinery in the city.

Dofasco and Stelco employees, for instance, sit on many of the non-profit boards.

Former Hamilton Spectator publisher Pat Collins was the chairman of the Art Gallery of Hamilton in the late '90s and spearheaded a huge capital campaign.

"I remember one study about five or six years ago that showed that locally the Bank of Montreal, with about 250 employees, contributed thousands of hours of time in a year.

"That is a staggering amount of time."

Right now, for many non-profit organizations with staff stretched to the limit after years of government cutbacks, time just may be the best gift of all.

© 2002 The Hamilton Spectator