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Giving By Objective

For five years now, Capital Research Center of Washington, DC, has been putting heat on U.S. corporations merely by focusing …

For five years now, Capital Research Center of Washington, DC, has been putting heat on U.S. corporations merely by focusing attention on how much money they donate to nonprofit organizations, and to whom. The center’s reports, showing which issue-oriented organizations receive corporate grants, consistently have been denounced by certain executives-usually those whose companies are on the annual “corporate misgivers” list.

Capital Research president Willa Johnson has all but been tarred and feathered, and the independent scholars who conducted the studies-all of whom are affiliated with leading universities-have been vilified. When you cut through the semantic fog and overblown indignation, business’ main complaint has been this: How dare these free-market types tell the truth. Don’t they understand?

The problem is we do understand: Many corporations are paying hush money to their most vocal critics. And it isn’t working.

BIZARRE DONATIONS

The latest edition of Capital Research’s Patterns of Corporate Philanthropy, written by University of Texas professor Marvin Olasky, shows, for example, that 15 large U.S. corporations provided major funding in 1989 to an organization called the Environmental Law Institute, an organization vigorously promoting the bizarre legal theory that accidents should be considered criminal offenses. Figure that out.

The volume also provides some encouraging evidence: At least a handful of CEOs are starting to understand that it’s the height of stupidity-and an abuse of shareholders’ money-for U.S. corporations to fund organizations that pursue policies that weaken the U.S. free enterprise system. We all know the organizations I’m talking about-nonprofits with emotionally charged names and mission statements that involve saving the planet and its inhabitants, human and reptilian alike, from all possible harm. Outfits like Gay and Lesbian Cowpersons for Political Correctness, Friends of the Fern, and the National Fill-in-the-Blank Legal Defense Fund.

The good news from Capital Research’s latest volume is that there has been modest improvement in the way companies dole out dollars to policy-oriented organizations. But there’s also bad news: When we say “modest improvement,” we do mean modest. For every dollar business gave in 1989 to organizations favoring free market capitalism and opposing government intervention in our personal and business lives, it gave more than twice as much to organizations which think Big Brother knows best. Studies such as this, of course, never paint a complete picture. And how could they-more than 100 of the 250 companies surveyed by Olasky refused to identify the organizations to which they gave money. Moreover, most of the money companies give away typically goes to organizations that are seen as nonpolitical: health charities, colleges and universities, museums, and so forth. Though virtually all such organizations are involved to some degree in issue politics (lobbying for more research money or government grants, for example), such organizations fall outside the purview of the Capital Research studies. Indeed, in the grand scheme of things, donations to public affairs research, lobbying, and litigation organizations account for just a small part of the typical company’s philanthropic budget.

PUBLIC RELATIONS PLOY

To be honest, the driving force behind most corporate giving programs is PR. Making donations to hospitals, symphonies, colleges, United Ways, and the local women’s crisis center improves a company’s public image. If it produces other beneficial results, all the better, but producing results has rarely been a prerequisite.

To some, giving money away to win PR chits makes as much sense as giving it to antibusiness organizations, though it is far more benign. Nobel Laureate Milton Friedman, for example, argues quite persuasively that self-interest should be the sole reason for corporate giving. If improving a company’s public image also increases sales, or encourages additional investment in the company, or helps recruit a better workforce, he’s all for it. Otherwise, he says, public charity is not the reason corporations exist; they exist to produce goods and services. In the process, they also create wealth and jobs, which together with the goods and services make for a stronger, healthier society. Rashly giving corporate funds to any charity that comes along is a huge mistake.

While community spiritedness is as much an admirable trait in a corporate executive as in anyone else, some executives believe that giving corporate money away, even to charities, without having a firm objective in mind is to squander that money. Some companies-Bristol-Myers Squibb, Arco, Arvin Industries, Golden Rule Insurance Company, TRW, and a handful of others-are even putting this belief into practice.

‘MEASURABLE RESULTS’

As Arco chairman and CEO Lodwrick Cook put it in a recent Arco Foundation annual report, “From the viewpoint of the corporation, ‘giving’ and ‘investing’ seem to have entirely different meanings. We don’t think so.

“We take the same pains with corporate philanthropy as we do with all other investments of shareholder assets-and we expect a return. Not in the sense that it would be incorporated into our profitand-loss statement but, nevertheless, a measurable result that will be reflected in a healthier society.”

This concept of “measurable results,” so much a part of the corporate business mentality, probably would make the typical company contributions officer get the cold sweats. “Whaddaya mean asking for results?” But some companies are asking, and more should-especially when you consider that corporations gave away about $4.75 billion to nonprofit organizations last year.

TARGETED INVESTMENTS

What kinds of results are they asking for? What objectives do they have in mind? Bristol-Myers Squibb during the past 14 years has “invested” about $34 million in primary medical research. Most corporate grants in the health field usually go to programs and institutions that provide services: hospitals, clinics, hospices, ambulance services, and so on. Bristol-Myers Squibb and a few others are seeking more lasting results: cures for cancer, chronic pain, and such neurological diseases as Alzheimer’s and Parkinson’s. Said chairman and CEO Richard Gelb at the company’s annual cancer awards banquet: “As a company whose business is health care, we recognize that the key to achieving longer and healthier lives is progress in basic biomedical research. We believe encouraging such progress with our financial support is one of the most important things we can do.”

Other companies are looking for results in education. Everyone knows that many U.S. schools are failing America‘s children. So what does the typical corporation do? It donates computers to classrooms where the kids can’t read or write at grade level. When a results-oriented corporate executive gets involved with education, the objective is clear-improving the schools. That’s why a number of corporate officials are playing leadership roles in the push for school choice: David Kearns, when he was chairman of Xerox, Jerry Hume of Basic American Foods, James Baker of Arvin Industries, and Golden Rule Insurance chairman Pat Rooney and president Jack Whelan.

EDUCATION ALTERNATIVE

Golden Rule, for example, took money that another company might have spent on computers and recently established the CHOICE Charitable Trust. The trust will provide some $1.2 million in scholarships to low-income Indianapolis families, enabling them, in Whelan’s words, “to walk away from bad public schools” and into better private schools. Such competition, Whelan and the other executives believe, will force the public schools to clean up their act.

Meanwhile, this isn’t the first time Capital Research has highlighted corporate America‘s propensity to give away its money without a well-defined purpose. In a previous edition of the center’s Patterns of Corporate Philanthropy, authors Roger Meiners and David Laband of Clemson University found that the nation’s biggest oncerns gave millions of dollars in 1986 to self-proclaimed public interest groups promoting anything but the public interest.

Indeed, such groups received far more in corporate donations than those advocating policies to liberate business from unreasonable tax and regulatory burdens imposed by Washington. Since the 122 companies responding to the authors’ inquiries contributed $35.4 million to public affairs groups in 1986, even back then, more than peanuts was at stake. This was serious money that could make a real difference if used strategically.

Corporate giving-whether to traditional charities or public affairs organizations-is big business. And it deserves the careful scrutiny of the executives sitting in the boardroom. Anything less does stockholders a disservice.


Edwin J. Feulner, Ph.D., is president of The Heritage Foundation, a Washington, D.C.-based public policy research institution. He also serves on the boards of several other foundations and research institutes. Dr. Feulner is the author of Conservatives Stalk The House.

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