General Ramblings: We Can’t Hear You Now

There’s a commercial running on television for a data delivery company where a woman who was late to knowing about a neighbor’s newborn child is the loudest when acknowledging a gift sent by other neighbors.

That’s just about the way the for-profit sector treats its philanthropy. “Look at us. Look at us. Aren’t we great?” There is a conga line of companies lining up for the new “benefit corporation” status in California. For-profits all want to scream about how much they do for their communities and for philanthropy.

When the new GivingUSA numbers (see Page 1) were posted and compared to recent events it was incredible to see that one stock transaction – Facebook’s initial public offering – raised more money than was given by all of corporate America during 2011. Estimated donations by corporations and their foundations hit $14.55 billion, a 0.1 percent decline in current dollars, or a 3.1 percent decline as measured by inflation-adjusted dollars.

Facebook netted $16 billion from its IPO.

Giving by corporations represented just 5 percent of total giving. According to the Federal Reserve, at the end of March 2012 nonfinancial corporations had $1.74 trillion in liquid assets, $12.6 billion more than at the end of 2011. The gain on liquid assets sitting on the sidelines for three months was just $2 billion short of all corporate largess during 2011.

For all of the ribbons on products, the commercials about doing good and the banners of support at walks and special events, American corporations finished dead last in giving back. There are some amazing corporate partners for the sector, such as Newman’s Own, Target, Macy’s, American Express, UPS, Starbucks and McDonald’s. These corporate foundations not only write checks, but also participate by contributing expertise to the sector.

It is stunning, though, when you compare numbers and see just how little Corporate America is doing. This isn’t just a headline of Wall Street bankers lighting cigars with $100-bills while people starve in the streets. This is a case of misdirection: “Look over here. Don’t look over there.”

Corporate America is attempting to create all sorts of new entities so that consumers will think they are giving back. There’s the aforementioned benefit corporation, known as the B Corp, the low-profit limited liability company (L3C) and the flexible purpose company (FlexC). All are designed to let consumers know that folks who care run these corporations. Right now, none of these bestows a real tax incentive. The key phrase is “right now.”

If a company wants to do good and have it as part of its DNA, that’s great. There is no reason to legislate rules to allow them to do so. It’s confusing to the untrained and there will be donor backlash against the sector when the inevitable corporate sweatshop stories hit the media. The sector needs to make its corporate partners more accountable. Most boards have a give-or-get policy. There should also be a minimum contribution from corporations wanting to look good.

Here’s something to legislate, mandate that corporate foundations pay out at least 15 percent each year, instead of the paltry 5 percent of the value of the foundation’s net investment assets that is currently required. If a for-profit entity wants one of these new corporate umbrellas, mandate a level of profit that must be paid out and ensure the giving isn’t simply switching pockets into the corporation’s own foundation.

It’s time for Corporate America to stand up and do more. The charitable sector needs to demand more participation from its corporate supporters. NPT