A New Model for Corporate Charitable Giving

Patagonia, a designer and distributor of outdoor clothing and gear, has long prided itself on being green. For nearly two decades, it has given 10% of pre-tax profits or 1% of sales, whichever is larger, to environmental causes. And the Ventura, Calif.-based company earmarks its gifts for grassroots groups such as New York’s Residents Committee to Protect the Adirondacks and Wyoming’s Jackson Hole Conservation Alliance.

 

“Our thrust is to support the smaller groups that may have difficulty getting funding from more conventional sources,” says Lu Setnicka, Patagonia’s public affairs director. “They might be more edgy and controversial.”

 

But as it handed out grants, Patagonia discovered that the groups needed more than just money. They needed know-how. They had plenty of passion and local knowledge, but often little expertise in marketing, fund-raising and communicating with the media, Setnicka says.

 

So Patagonia started its Tools for Grassroots Activists Conference, which lately has been held in Lake Tahoe. It’s a forum where Patagonia can share its knowledge and access to experts with its activist friends. “We have found that our core competency is marketing, and the activists are marketing, too,” though they may not realize it, Setnicka points out. “They are marketing a polluted river or a clear-cut area.”

 

Patagonia’s conference is an example of “venture philanthropy.” Though the term lacks a precise definition – or rather, different people define it differently – it points to a shift in the world of charitable giving. Increasingly, philanthropists of all kinds – rich individuals, independent foundations and, lately, corporations – see themselves as active partners, rather than passive benefactors, of the groups they support. They don’t just hand over money and check back a year later on a particular program’s progress. They lend their energy and expertise to try to ensure projects’ success. These sorts of givers might say Jesus got it wrong. Instead of handing out loaves and fishes, he should have handed out fly rods.

 

The Goldman Sachs Foundation calls the approach “high-engagement grant making.” Nike, the Beaverton, Ore.-based athletic clothing and equipment maker, and the McCormick Tribune Foundation, which is affiliated with Tribune Co., a Chicago-based media company, call it partnering.

 

Regardless of the name, the outcome is the same: a new model for corporate charitable giving. Patagonia, for example, carefully choreographs its invitation-only conference, which is held every 18 months, to ensure maximum learning for the participating activists. It invites only 80 activists and pays for everything except their transportation. And it limits media coverage to allow for free-flowing discussions; only occasionally does the company include reporters, and then only one at a time.

 

Patagonia staffers got the idea from examining the marketing materials of some of the groups the company supported, Setnicka says. The materials lacked the polish of Patagonia’s mail-order catalog, which is famed among outdoor-sports enthusiasts for its high-quality photographs and creative text.

 

Patagonia’s environmental internship program – the company pays staffers while they work temporarily for environmental groups – sprang from the same insight. An intern “might be a graphic designer to help a group design promotional materials and its logo,” Setnicka notes. “That might be more useful than an actual cash donation.”

 

Partnering with Pro Athletes

The Goldman Sachs Foundation, which was created by the New York investment bank’s partners when their firm went public in 1999, operates much the same way. It’s happy to give cash – it has handed out more than $43 million since inception – but it expects the recipients to welcome its participation, too. “Traditional philanthropy involves giving money,” says Stephanie Bell-Rose, the foundation’s president. “We combine funding with the services and time of Goldman Sachs volunteers, enhancing the grants with their talents and expertise.” Personnel from the investment bank, for example, serve as mentors and sit on charities’ boards.

 

The foundation’s staff, too, takes a hands-on approach. “We’re not, ‘See you at the end of the grant,’” a spokesman explains. “We’re hand-in-hand with the grantee throughout the life of the grant. We’re very involved in program design and making sure benchmarks in the proposal are hit.” As a result, Goldman gives fewer grants than charities of comparable size, but they tend to be large; the average is $700,000. One recipient of Goldman’s aid is the Center for Talented Youth at Johns Hopkins University in Baltimore, which serves 400 middle-school students. Besides giving money, investment-bank staffers coach students in writing business plans. And at the end of the year, they judge the students’ business plan competition.

 

The McCormick Tribune Foundation in Chicago is 10 times as big as Goldman’s foundation, so it can’t get as deeply involved with its grantees. It has $2 billion in assets, mainly stock in Tribune Co., which owns such newspapers as the Chicago Tribune and the Los Angeles Times. Tribune also owns television and radio stations as well as the Chicago Cubs baseball team. The foundation is legally independent from the company, though they reside in the same landmark building in downtown Chicago.

 

Like Goldman and Patagonia, McCormick Tribune has designed its grant programs to try to ensure that they have an impact. Take its matching-grant program. With it, the foundation pairs up with media outlets, including many owned by Tribune, and professional sports teams to raise money for charity. Among its 44 partners are teams such as the Cleveland Cavaliers in basketball, Chicago Bears in football and the Colorado Rockies in baseball, says communications manager Holly Simpson. The foundation matches, usually at 50 cents on the dollar, the money raised by, say, a local newspaper. The funds are then given to charities in the newspaper’s town.

 

Part of the motivation for the program was the sense among foundation staffers that media outlets weren’t doing as much charitable giving as other businesses, despite their high visibility, Simpson says. “The feeling was that we had access to them, and they had a lot of clout in their communities,” she adds. “Everybody knows the newspaper.”

 

Helping Others Get Wired

The Verizon Foundation, too, stresses helping charities operate more effectively, not just handing out money. It takes as its mission connecting nonprofits to the Internet. “We’re trying to eradicate the digital divide,” says foundation president Suzanne DuBose.

 

Verizon is the country’s 4th largest foundation, granting $75 million a year and operating in every state except Alaska. (“We don’t do any business in Alaska,” DuBose explains.) Its corporate parent is Verizon Communications, a New York-based telecommunications company.

 

The foundation’s assistance to fellow charities can be as simple as making sure they have at least a minimal connection to the Internet. To that end, it hands out $240 grants and lets the recipients pick their Internet service providers. It typically does about 750 of those grants a year.

 

Verizon takes on far more complex projects, too, though the theme – helping charities get wired – remains. It, for example, helped 115 chapters of the Urban League around the country link to each other electronically, “like an intranet over the web,” DuBose explains. That gave them all e-mail access and web pages and let them consolidate databases. “It was a $2 million grant. We started in 1995, and they were all up and running in 2000.”

 

Similarly, the foundation this year began helping Boys and Girls Clubs on Native American reservations create computer centers with Internet access. It has set up five so far. In most cases, one of DuBose’s staffers will go into the field to make sure that the nonprofits are hooked up correctly. “With the Urban League, I went to a lot of centers myself,” she says.

 

One difference between DuBose’s foundation and many others is that it goes out looking for groups to give money to, rather than waiting for nonprofits to apply. About 60% of its grants begin that way. “Most corporate foundations act like ATM machines,” DuBose says. “I don’t want that.”

 

Like the other companies that practice venture philanthropy, Cisco Systems, the San Jose, Calif., maker of Internet routers, is “about more than just checkbook giving,” says spokeswoman Abby Smith. Cisco has a broad-based philanthropic program, with both a corporate philanthropy division and a separate foundation.

 

But perhaps its most innovative program is one that let it turn difficulty for the company into a windfall for the nonprofits it supports.

 

At the onset of the current economic slowdown, Cisco did its first layoff ever. But rather than just cutting everyone loose, it proposed an unusual arrangement to a few “high-potential employees,” Smith says. It offered to keep paying a third of their salaries if they would go and work at nonprofits for a year. “We placed about 85 people in 21 nonprofits,” including food banks in San Jose and the Raleigh-Durham area in North Carolina, where Cisco has a large operation, she notes.

 

The Cisco staffers were able to help the charities deploy technology to operate more efficiently. The San Jose food bank, for example, estimated that the amount of money it saved “was equal to 2 million extra meals,” Smith points out.

 

The program was so well received by the employees and the charities that Cisco extended it another six months. After 18 months, over 40% of those people returned to Cisco, including a North Carolina staffer who moved to California and became the executive director of Cisco’s foundation. A few others remained in their nonprofit jobs, including one who became a group’s chief information officer.

 

PE in a Box

Another company that says it is committed to partnering in its philanthropy is Nike, which has joined with Boys and Girls Clubs around the country to promote physical fitness among kids and teens. Nike calls the campaign NikeGO and has loaned the initiative its considerable marketing muscle.

 

For example, the company created a website and has recruited as spokespersons two athletes who use its gear – baseball player Jason Giambi and sprinter Marion Jones. Nike is giving out grants of $50,000 each, half in cash, half in products, to clubs around the country. So far, 32 clubs in 16 cities ranging from New York and Los Angeles to Honolulu and Denver have received grants, says Molly White, Nike’s director of U.S. community affairs. (The program is independent from the Nike Foundation, which in its 2001 fiscal year gave $29 million in cash and products to charity.)

 

NikeGO also is funding repairs to city playgrounds and game courts. And it’s working with a physical-education research center at San Diego State University to develop what White calls “PE in a box.” Designed for 4th and 5th grade teachers, it will provide a curriculum guide and custom-designed equipment for “fun, actively moving, inclusive PE – not kickball,” White explains. “It’s so that teachers can [offer] PE even if it’s been cut out of their school’s budgets. Schools are prioritizing spending to deliver results against standardized tests, and a lot of programs like PE and art are being cut.”

 

Yet at the same time, research says that kids today may have shorter life expectancies than their parents because of inactivity and obesity. NikeGO will roll out the program in New York, Los Angeles, Chicago, Portland, Ore., and Memphis, Tenn., this year. Says White: “We’re trying to have an impact.”

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