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Humanitarian Needs, Company Presence Guide Charity
 

By Pamela Babcock  12/13/2011
 

Humanitarian needs and the size of a company’s workforce in the local market trumped current revenue streams, opportunities for business growth and potential for economic development as key drivers for U.S. corporations allocating international charitable contributions in fiscal year 2010, a recent study by The Conference Board found.

A majority of respondents (63.8 percent) said those two factors were top of mind when deciding where money should go, according to The 2011 Corporate Contributions Report, released Nov. 30, 2011. The survey, which was conducted from April to July 2011, was sent to 4,071 corporate members and clients of The Conference Board. Of that group, 139 companies responded.

Collectively, they gave $8.45 billion in U.S. and international contributions in fiscal year (FY) 2010. The study contains comparisons with contributions for FY 2008, the most recent period during which The Conference Board did a similar study.

In the survey, respondents were asked what criteria they use to allocate funding outside the U.S. In addition to humanitarian needs and the size of a company’s workforce, 42 percent said company revenues in the local market were a key driver, 40.6 percent cited the opportunity for business growth in the local market, 33.3 percent cited the potential for local economic development, and 11.6 percent said they had no clear policy on giving outside the U.S.

The study found that the vast majority (83.3 percent) of total FY 2010 contributions in the sample were made by the 25 companies with the largest giving budgets—those set at $50 million or more. Contribution budgets ranged from $5,000 per company to $2.11 billion.

Effects of Downturn

The economic downturn appears to be taking a toll on some programs, said Matteo Tonello, managing director of corporate leadership at The Conference Board and co-author of the report. One key finding is the reduction in median contribution levels from FY 2008.

“We found a larger number of companies with small contribution programs. Fourteen companies in FY 2010, compared to three in FY 2008, reported a program of $500,000 or less,” Tonello said.

Meanwhile, he said, FY 2011 projections showed no meaningful overall increase in corporate giving. The only exception emerged in the industry analysis: A 5 percent median increase in cash international contributions was expected in the service sector.

“We do not have raw data on future allocations or allocation plans. However, anecdotally and through our council of contribution and public affairs officers, we hear that companies hesitate to increase their corporate contribution budgets due to the economic uncertainties,” Tonello said. “Corporate contributions programs are increasingly strategic and are affected by the same risk-averse sentiment that seems to be pervading other aspects of strategic planning.”

Trailing Indicators

For the study, chief financial officers, corporate sustainability officers and heads of public affairs were asked for information on domestic and international (cash and noncash) charitable contributions made directly by their companies or through corporate foundations.

The report found that several contributions-related metrics are trailing indicators. While FY 2010 showed positive corporate performance indicators, Tonello said, the study showed that a contribution metric like total contributions per worldwide employee continued to rise into the financial crisis, presumably reflecting pre-crisis budgetary allocations.

Pharma Outpaces Others

Other highlights of the report:

  • The pharmaceutical sector outpaced other industry categories substantially with a median amount of $10,463 per worldwide employee (the FY 2008 median was $8,690). That’s primarily attributable to high levels of noncash contributions such as medications, medical and lab equipment, and employee volunteerism, Tonello noted.
  • Pharmaceuticals (1.27 percent), banks and finance (0.15 percent), consumer manufacturing (0.13 percent) and utilities (0.13 percent) surpassed the overall median ratio of U.S. contributions to worldwide sales (0.08 percent). Industrial manufacturing and insurance had the lowest level (0.03 percent), followed by chemicals, petroleum, gas and mining (0.06 percent).
  • Total contributions as a median percentage of consolidated pretax income were 0.81 percent in FY 2010, down from 1 percent in FY 2008. Total contributions as a percentage of worldwide sales were 0.1 percent in FY 2010, a level nearly equal to the 0.12 percent reported in FY 2008.
  • Direct cash contributions accounted for 85.78 percent of the total international giving, while only 6.44 percent of international giving was noncash. Most international contributions (88.3 percent) were made from U.S. headquarters rather than from local or regional business units.

More Key Trends

An October 2011 study by the Committee Encouraging Corporate Philanthropy (CECP) found that while aggregate giving increased and more money went to charity in 2010—$13 billion, up from $10.5 billion in 2007—companies have taken divergent paths since the economic downturn.

“That’s quite a spike, but the increase can be largely attributed to changes among a handful of sizable companies,” said CECP Director Margaret Coady. The group’s report, Giving in Numbers: 2011 Edition, compiled data from 184 companies, including 63 of the top 100 in the Fortune 500. Here are a few findings:

  • Extreme changes in giving: The economic recovery hasn’t been uniform across industries, and giving hasn’t been either. Since 2007, one-quarter of companies increased giving by more than 25 percent, while 21 percent slashed contributions by more than 25 percent. “Oftentimes you think of companies as a monolithic block; did giving go up or did giving go down?” Coady said. “But it’s not a homogenous story across the business landscape.”
  • Cash is making a comeback: Many organizations reined in cash grants at the onset of the downturn (67 percent reduced cash contributions from 2008 to 2009), and often they gave more products and pro bono services. In 2010, however, 61 percent increased cash contributions. Disaster relief, an increase in matching gift contributions and better business unit reporting were some reasons cited for the resurgence of cash giving.
  • Larger, more-targeted grants: Companies increasingly are concentrating philanthropy on one or two societal issues, particularly as they seek to understand issues that are “important to their communities and simultaneously important to the business,” Coady said.

Pamela Babcock is a freelance writer based in the New York City area.

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