Recession Driving Changes in Corporate Philanthropy

Instead companies pushing greater volunteerism.

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Give to get. And reasons for cynicism are not hard to find: Microsoft gives away its software, but it reaps a tax benefit (deducting the full retail cost of the software from its taxes) and cements its dominance of the software market. Likewise with pharmaceutical companies—Pfizer alone reported more than $2 billion in donated drugs in 2009. Companies can form think tanks or advocacy groups that are ostensibly nonprofit but that serve the interests of the company (say, by promoting lower taxes or less stringent regulations). An emphasis on win-win programs, worthy as they might be, can leave out other important goals that could hurt a company's bottom line. For instance, the need for cheap labor could conflict with the ideal of raising incomes in poor manufacturing countries.

Given the strenuous public relations efforts that usually accompany corporate philanthropy, it's easy to ask whether a company's intentions are genuine.

The idea that corporate philanthropy should be win-win "is a very appealing proposition. You can have your cake and eat it too! But it's an illusion, and a potentially dangerous one," wrote Aneel Karnani, a business professor at the University of Michigan, in a Wall Street Journal editorial in August. In most cases, he said, "doing what's best for society means sacrificing profits. This is true for most of society's pervasive and persistent problems; if it weren't, those problems would have been solved long ago by companies seeking to maximize their profits."

This new paradigm has also left some out. Arts and cultural organizations, like theaters, museums, and public radio, have all seen their donations drop. The Atlanta Opera had to cut one of its productions scheduled for next season because of a budget shortfall. The stalwart United Way has had steadily declining revenues the past several years.

Close cooperation with businesses can carry risks for nonprofits as well. After the BP oil spill, the environmental group Nature Conservancy came under fire from some of its supporters because it had taken BP money and worked collaboratively on some programs with the company. After the spill, the organization's chief executive wrote on its website that it was "difficult to fathom the tragedy" that was unfolding but added that "now is not the time for ranting," a statement that some critics said amounted to a sellout.

But defenders of this form of philanthropy say that, as self-serving as it might be, it's better than the old approach, which too often was just writing checks with no strategy. "I would much rather see a McKin­sey consultant doing strategy for a nonprofit organization than swinging a hammer for Habitat for Humanity," says Tim Ogden, editor of the blog Philanthropy Action. "Lots of companies do things well that are of use to the nonprofit sector," he says. Wal-Mart, the largest corporate donor in the United States, has taken on hunger as its primary cause. "Most food banks are terrible at logistics, but Wal-Mart is great at it," Ogden says.

Like it or not, a more hands-on approach to corporate philanthropy will likely become more common. "Social problems will become increasingly complex and widespread over the next decade," the CECP report said. "At the same time, societal expectations that companies should take a substantial role in addressing those issues will escalate." Pressure from shareholders, however, means that companies will likely have to act in ways that improve the bottom line as well. It's a balancing act that will challenge CEOs for years to come.

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