How Corporate Giving Will Fare in This Recession

First, some facts:  For the corporate giving calculated in Giving USA 2008, a total of $15.7 billion in 2007, the bulk  does not come through corporate foundations.  Only $4.4 billion flowed through corporate foundations, the portion whose grant recipients must be disclosed and reported on IRS Forms 990, the remainder coming directly from the corporations' marketing or CEOs' offices and exempt from disclosure.

A small number of corporations account for the majority of corporate philanthropy.  For example, the Conference Board's survey of corporations and corporate foundations counted $11 billion in philanthropic contributions made by its 197 respondents, roughly 70 percent of all corporate philanthropy in 2007.  Similarly, the latest survey of corporations conducted by the Committee Encouraging Corporate Philanthropy examined 155 companies that accounted for $11.6 billion in charitable contributions in 2007.   Even within these corporate givers, a small proportion of corporations accounted for the bulk of the grantmaking.

Logically, evaporating profit margins lead to less discretionary money available for corporate philanthropy.  But what about conditions when corporations evaporate along with their profits?

In a piece we wrote for Shelterforce magazine, we noted the problems of major corporate givers potentially disappearing from the ranks of corporate philanthropy:

  • In 2006, six of the ten largest corporate foundations (in terms of grantmaking) were from the banking and financial sectors:  Bank of America ranked second, behind Aventis (a pharmaceutical company) and ahead of Wal-Mart, with $144.8 million in giving; the JP Morgan Chase foundation was fifth at $79.9 million; the Citi Foundation sixth at $73.9 million, followed by the Wachovia Foundation with $64.4 million in grantmaking and the Wells Fargo Foundation also at $64.4 million. Adding in the GE Foundation ($88.3 million in grants), now a major player in financial services, makes six of the top 10 corporate foundations in the banking and finance sector.
  • Prior to its collapse, Washington Mutual (WAMU) ranked as the top U.S. thrift by assets in 2006, just ahead of Countrywide Financial. According to the Foundation Center, in 2005, Washington Mutual’s corporate giving program handed out $44 million in charitable grants for community and economic development; elementary and secondary education; housing and shelter; and human services activities.  Count that as philanthropy lost.
  • From 2003 through 2006, the Foundation Center tracked $161.7 million in Wachovia Foundation grants to 2,658 recipients: $48.8 million to education; $41.2 million to philanthropy and volunteerism; $30.3 million to arts and culture; $14.5 million to human services; and $14.2 for community development, housing, and shelter.  It is hard to imagine that the M&A partner that gets Wachovia will maintain Wachovia's pre-collapse philanthropy.
  • The GSEs, especially Fannie Mae, deserve special attention. Between 1998 and 2004, the Fannie Mae Foundation (not counting what might have been awarded directly by the corporation outside of its foundation) handed out $119 million in grants of $10,000 or more for housing and shelter. For each of those years, Fannie ranked first or second in the nation among all foundations, not just corporate foundations, making grants in the housing arena, often surpassing the totals of independent foundations such as the Ford Foundation, the MacArthur Foundation, and the Lilly Endowment. Among the nation’s largest 1,000 or so foundations, it accounted for just about one out of every 10 foundation dollars for nonprofits addressing housing and shelter. During the period when the foundation put $138 million into housing groups and projects, the Fannie Mae Foundation was a major grantmaker in the realm of community improvement and development, distributing $106 million through 2006.

While corporations such as the Bank of America Foundation have made public commitments to maintain their 2008 grantmaking into 2009 (even after swallowing Countrywide's toxic portfolio), it is difficult to imagine that other banks such as Citi, trading on the New York Stock Exchange like penny stocks, will be able to do the same.

And then there is the attitude of the American public:  Many of these banks are receiving significant infusions of taxpayer funds through the Troubled Asset Relief Program (the "bailout" bill or TARP).  The U.S. Department of Treasury reports aren't particularly easy to navigate, but an eyeball glance of the latest Treasury tabulation of completed TARP transactions (March 16, 2009) suggests that many major corporate grantmakers are tapping TARP funds:  $50 billion for Citigroup, $45 billion to Bank of America, $25 billion for Wells Fargo, $25 billion to JP Morgan Chase, and $10 billion apiece to Morgan Stanley and Goldman Sachs -- and roughly $25 billion to Chrysler and General Motors. It isn't clear that how taxpayers, now that they are partial owners of preferred stock in these institutions, will react to banks that receive TARP infusions distributing millions in philanthropic grants.

During the crises of September 11th, Hurricane Katrina, and the Southeast Asian tsunami, corporate philanthropy responded.  But the breadth of this economic downturn suggests that corporate America may not be able to respond quite so generously this time around.  The Conference Board's 2009 Corporate Philanthropy Agenda survey (conducted from January through mid-February) paints a stark picture of the future:

  • Among the 158 respondents, 45 percent have already cut their 2009 giving budgets and 16 percent are contemplating doing so.
  • Along similar lines, 35 percent say they will make fewer grants and 22 percent are considering doing the same.

Perhaps more than traditional private and family foundations, corporate foundations are considering shifting -- or reducing--the topical areas they might address with their grantmaking.  Among the respondents, 24 percent are reexamining their focus areas and another 29 percent are considering that action.  In contrast to defining their focus areas, 6 percent say that they have already eliminated focus areas and 11 percent are contemplating the same.

For corporate philanthropy, these are understandable reactions:  Most corporate philanthropy is "strategic", focused on the corporation's bottom-line in terms of building community support, public image, brand-awareness, and consumer allegiance.  If philanthropic dollars might be tight, honing in on the best ways for advancing corporate agendas through grantmaking is a matter of business logic.  This shows through in the factors corporate grantmakers will consider in setting priorities for their 2009 philanthropic agendas:

  • Limits on budgetary resources -- 56 percent
  • Current economic downturn -- 50 percent
  • Aligning more closely with business needs -- 47 percent
  • Directions from the CEO and/or the Board -- 46 percent

The area of the biggest cutback in corporate philanthropy?  Event sponsorship, as reported by 55 percent of the Conference Board respondents.  Perhaps related, the focus area most in line for cuts according to the respondents is culture and the arts, cited by 41 percent of respondents. Other studies, such as LBG Research Institute's survey of corporate giving plans for 2009 confirm the Conference Board finding.  LBG reports nearly half of its corporate survey respondents indicating cutbacks in their arts and culture grantmaking.

The area of the largest predicted growth in 2009?  The non-cash expenditure of volunteerism, reported by 45 percent of the respondents.  Among respondents, the focus area most frequently identified to grow is "environment/sustainability/climate change" (28 percent), probably for many respondents an area of corporate vulnerability warranting a corporate philanthropic response.

While much of corporate charitable giving, for example, from the pharmaceutical companies, is in-kind, in products, not cash, there are many corporate grantmakers, particularly the banks, that have been great general operating support philanthropists.  For some corporate grantmakers, again the banks and the GSEs above all, their cutbacks will hit the nonprofit housing and community development groups on the front lines of fighting the foreclosures, housing abandonments, and homelessness that were the first wave of impacts from this economic downturn.

The usual list of fundraising tips and ideas for helping nonprofits make their pitches to corporate grantmakers may look a little silly when the corporate grantmaker may have turned off the spigot or actually closed its doors.  This recession will be tough for the parts of the nonprofit sector that rely significantly on corporate support.