Grant Research and Writing: From Ideas to Action

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Presentation to The Centre on Philanthropy Third
Sector Conference 2007 Michael
Seltzer Bermuda June 2, 2007
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U.S. Philanthropy in 2004248.52 Billion to
Environment/animals7.613.1
Internationalaffairs5.342.1
Public-societybenefit12.965.2
Foundations24.00 9.7
Arts, culture, and humanities13.995.6
Unallocatedgiving 21.368.6
Religion 88.30 35.5
Humanservices 19.17 7.7
Health 21.958.8
Education33.84 13.6
Source Giving USA Foundation AAFRC Trust for
Philanthropy/Giving USA 2005
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U.S. Philanthropy in 2004 248.52 Billion, by
Source of Contributions
Corporations12.004.8
Foundations28.80 11.6
Bequests19.80 8.0
Individuals187.92 75.6
Source Giving USA Foundation AAFRC Trust for
Philanthropy/Giving USA 2005
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Corporate Giving in 2004

• Contributions by companies
• Totaled 12 billion in 2004
• Up from 9.05 billion in 2001
• Represents 1.2 of pretax net income
• Peaked in 1987, relatively flat since 1990
• Just 4.8 of overall U.S. charitable giving in
  2004

Source Giving USA Foundation AAFRC Trust for
Philanthropy/Giving USA 2005
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History of Corporate Philanthropy in the U.S.

• Until the early 1900s, corporate contributions
  was viewed negatively, as giving away
  shareholder assets without consent.
• The Internal Revenue Act of 1935 allowed
  companies to deduct 5 of pre-tax earnings for
  charitable contributions.
• Giving grew and expanded from 1950s-1980s.
• The Conference Board, 2002

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History of Corporate Philanthropy in the U.S.

• 1990s saw the growth of strategic philanthropy
  in the U.S., and corporate social
  responsibility (CSR) in Europe
• 2000-2005, CSR becomes an increasingly important
  issue for U.S.-based companies

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Giving by U.S. Corporations, 1964-2004
( in Billions)
Inflation-adjusted dollars
Current dollars
Source Giving USA Foundation AAFRC Trust for
Philanthropy/Giving USA 2005
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Giving by Source as a Percentage of Total
Giving, 19642004
Percentage
100
80
60
40
20
0
1964
1969
1974
1979
1984
1989
2004
1994
1999
Source Giving USA Foundation AAFRC Trust for
Philanthropy/Giving USA 2005
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Corporate Giving as a Percentage of Corporate
Pretax Profits, 19642004
Data are rounded.
1.5
1.4
1.3
1.2
1.2
1.0
0.9
0.8
0.7
Source Giving USA Foundation AAFRC Trust for
Philanthropy/Giving USA 2005
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Core Principles of Corporate Philanthropy

• 1. Corporate philanthropy is a sound business
  practice in the best interest of shareholders and
  should be institutionalized as an integral part
  of the mission of every U.S. corporation's
  national and international business practices.

Committee to Encourage Corporate Philanthropy
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Core Principles of Corporate Philanthropy

• 2. The need for business leaders to play an
  active role in civic affairs is greater than ever
  before, especially now that government has
  reduced its involvement and delegated much of its
  responsibility to the local level.

Committee to Encourage Corporate Philanthropy
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Core Principles of Corporate Philanthropy

• 3. Increases in corporate profitability should be
  matched with commensurate increases in corporate
  giving programs and stabilized in periods of
  volatility.

Committee to Encourage Corporate Philanthropy
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Core Principles of Corporate Philanthropy

• 4. Corporate giving programs should be managed
  strategically with clear objectives, established
  metrics, and reporting structures to senior
  management, similar to other key business
  disciplines.

Committee to Encourage Corporate Philanthropy
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Strategic Philanthropy is

• doing well by doing good
• focused programs that advance the
  interests of both
• the company and its communities
• ... more than just cash grants
• -- in-kind contributions
• -- employee volunteerism
• -- community partnerships
• -- collaborations with other departments
• (i.e., marketing, P.R., H.R., government
  relations)

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Companies engage in strategic philanthropy
because of

• Societal expectations
• Consumer expectations
• Employee expectations
• Opportunities for recognition/branding
• Alignment with business goals
• Concern regarding their reputation

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Societal expectations

• More consumers form their impression of a company
  on the basis of its corporate citizenship
  practices than do so on brand reputation or
  financial factors
• Millennium Poll on Corporate Social
  Responsibility, Mori, Inc., 1999
• (25,000 individuals in 26 countries surveyed)

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Societal expectations
8 in 10 Americans say that corporate support of
causes wins their trust in that company a
21 increase since 1997. 2004 Cone Corporate
Citizenship Study
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If consumers find out about a companys negative
corporate citizenship practices

• 90 of Americans would consider switching to
  another companys products or services
• 81 would speak out against that company among
  family and friends
• 2004 Cone Corporate Citizenship Study

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If consumers find out about a companys negative
corporate citizenship practices

• 80 would refuse to invest in that companys
  stock
• 73 would boycott that companys products or
  services
• 2004 Cone Corporate Citizenship Study

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Business benefits of strategic philanthropy
include

• Reputation management
• Risk profile risk management
• Employee recruitment, motivation retention
• Investor relations access to capital
• Learning innovation
• Competitiveness market positioning
• Operational efficiency
• License to operate
• The Business Case for Corporate Citizenship,
  Arthur D. Little, 2002

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Case Study

• Recognized as an exemplary corporate citizen
  because of
• creative use of resources
• willingness to share intellectual capital
• caring corporate culture
• emphasis on shared accountability
• Recent Awards
• Best Corporate Citizen, Business Ethics
  magazine, 2001 2002
• Change Award, Council for Aid to Education,
  2002
• Excellence in Corporate Philanthropy Award,
  Committee to
• Encourage Corporate Philanthropy, 2001

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Traditional American Formula for Corporate
Citizenship

• Corporate citizenship
• Corporate contributions
• Community involvement
• Employee voluntarism
• Executive service on nonprofit Boards

The Conference Board, 2002
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New Pressures on the American Formula

• Government retrenchment
• Bigger companies with more influence
• Negative images of corporate power
• Information revolution
• Globalization
• Employees everywhere
• Executives everywhere
• Consumers everywhere
• NGO activity everywhere

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New Expectations

• Sharp escalation, worldwide, in the social roles
  corporations are expected to play
• Companies under growing pressure to be
  accountable to
• Shareholders
• and
• Employees
• Consumers
• Suppliers
• Local communities
• Policymakers
• Society at large

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New Expectations
Nowadays, the image of a company, its corporate
identity, has become fundamentally important. An
organization has to be transparent and well
behaved just having a good quality product is
not sufficient anymore. -- Legislator, France
The Prince of Wales International Business
Leaders Forum
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New Citizenship Motives

• Reputation defense
• Building relationship capital
• Reducing risk and exposure
• Improving long-term returns
• Preserving the license to operate
• Attracting and retaining talent
• Promoting innovation and learning

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New Citizenship Motives
There is increased interest in the social and
environmental aspects of corporate performance by
pension funds, insurance companies and other
shareholders. Investment analysts, trustees and
portfolio managers appear to be taking these
issues more seriously than they were just a few
years ago. World Economic Forum, January
2004 Survey of CEOs, CFOs and investment
relations officers
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New Citizenship Practices

• Mixing cash, product, people and services
• Integrating branding, marketing, image and
  reputation with community involvement
• Building long-term partnerships with NGOs
• Developing global focus with local emphasis
• Greater alignment with business
• Communicating more frequently and openly

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New Management Challenges

• Measuring and reporting value
• The Triple Bottom Line
• Doing more with the same or less
• Strategic use of technology
• Staying focused in the face of competing demands
• Linking giving to company values
• Communicating company values across cultures

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New Operating Environment Scrutiny Higher
Expectations
KENNETH LAY 1942-2006 Enron's founder dies in
disgrace Company's fall supersedes his good deeds
Warren Buffett's Gates of philanthropy July 5,
2006 THE news that the world's second-richest
man is giving his money away to the world's
richest man points to significant shifts in the
business of corporate largesse. Warren Buffett's
decision to donate 10 million Class B shares in
his holding company, Berkshire Hathaway, worth
US37 billion (A49.8 billion) at today's prices,
to help Bill Gates run the world's biggest
philanthropic foundation, reflects changes in
expectations and approaches to philanthropy.
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New Operating Environment Scrutiny Higher
Expectations
Changing Our World, Inc. 2006
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Today

• Corporate citizenship
• Community involvement
• Internal External Business Practices
• Social Environmental Impacts

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Greatest Challenges to Implementing Corporate
Citizenship Programs

• Growing one global identity
• Integrating with business decision-making
• Measuring results
• Dealing with governments
• General complexity of the task
• Finding the best people for the job
• Gaining employee support
• Engaging the financial community
• Dealing with NGOs
• Dealing with shareholders
• Dealing with suppliers
• Engaging the CEO and top management
• Overcoming negative legacy

Corporate Citizenship in the New Century, The
Conference Board, 2003
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Traditionally, companies operated in silos
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Today, companies integrate some functions
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Good Corporate CitizenshipWhat It Should Look
Like
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Acknowledgments

• Many thanks to Lynn Stekas and Changing Our World
  Inc. for providing data for this presentation.