Buddy, can you spare a corporate dime?

Mar 05 2009 by Nic Paton Print This Article

As the economy continues to spiral downwards, it's not just businesses and individuals feeling the pinch, but charities, arts and sporting bodies that have in the past been bankrolled by corporate largesse.

Last November, the Wall Street Journal reported that charitable donations and endowments were falling fast, with even organisations such as the Bill and Melinda Gates Foundation scaling back their activity.

Before its crash, Lehman Brothers was also well known for its charitable giving, operating, among other things, a European foundation supporting children from disadvantaged backgrounds.

Various charity galas have been cancelled over the past few weeks and months as struggling big-name organisations, many of them from the financial sector, look at all options to scale back their spending.

Now a survey by The Conference Board in the U.S has identified just how damaging the downturn has been to corporate philanthropy.

Its poll of 158 companies on their planned changes in corporate giving programme found a clear shift in activity and emphasis when it came to philanthropic activities.

"How their companies are faring overall financially is very much on the minds of leading U.S companies when allotting their corporate philanthropy monies," said Carolyn Cavicchio, senior research associate, global corporate citizenship at The Conference Board.

"There is a definite shift toward more critical business issues and an increased emphasis on measuring giving outcomes," she added.

More than half cited limits on budgetary resources as being a factor in how much they were now able to pledge, with just under half admitting they had had to look at their activity as part of a reassessment of their business needs.

The direction of the chief executive or board – often in the current climate of course a new team – was another important factor in determining how much, or indeed whether, an organisation gave to good causes.

One silver lining was that the economic crisis came late enough in the year so that it had only minimal impact on 2008 giving budgets, concluded The Conference Board.

By the end last year, more than eight out of 10 of companies had spent all of their allocated contributions budget, with just 13 per cent reporting contribution cuts in their fourth quarter.

But it is likely to be a very different story for 2009. Nearly half – 45 per cent – of those surveyed had already implemented a reduction in their 2009 giving budget, and 16 per cent were now considering it, the research found.

More than a third – thirty five per cent – said they would be making fewer grants this year and more than a fifth said they were considering doing so.

Nearly a similar percentage said they would be making smaller grants this year and more than a quarter said they were considering doing so.

When asked what they anticipated as being their biggest 2009 challenge, giving officers most often said an increase in the number of grant requests.

This was followed by inadequate financial resources, a decline in their corporate foundation endowment and the need for better measuring of results and outcomes.

In terms of where 2009's money was actually being spent, event sponsorship was seeing the biggest decrease, with resources falling for more than half of those polled.

Conversely, there was a big increase in volunteerism, with nearly half reporting a resources increase here.

Sponsorship and support for the arts and culture was seeing the biggest drop, with more than four out of 10 reporting a decrease in resources devoted to these areas.

The environment, sustainability and climate change were seeing the biggest increase, up 28 per cent, it added.

The principal management issue on the minds of most of those polled was how best to measure results and outcomes, which had increased in importance for more than half of those surveyed, a clear indication that a good business case is becoming even more of a prerequisite for securing funding these days.

When it came to reasons for giving, brand visibility/awareness was still the most important reason citied, rated as important by nearly half of those polled.

The next most important factor was the relationship between giving and broader corporate sustainability goals, cited by 46 per cent.

But it is also needs to be recognised that, in tough times, a record of corporate philanthropy can often stand an organisation in good stead.

Research by Brigham Young University back in 2005 suggested that a track record of corporate giving could protect a company, much like an insurance policy, in the event of accidents, lawsuits or harmful press coverage.

Though of course that was before we entered the uncharted waters of the global recession.

It is clear from the past few months that there are limits to how much protection this sort of activity can give. A record of corporate giving did not save Lehman, nor should it have done so.

Or take UK bank RBS. It has a strong, and laudable, record of philanthropic, corporate and social responsibility activities.

But in the minds of most of the general public right its reputation for "corporate giving" is now much more to do with the massive and controversial pension payout awarded to disgraced former boss Sir Fred Goodwin than any of its more positive activities.