Arco to Eliminate Staff of Foundation : Business: Step is called a major blow to corporate philanthropy. Firm’s officials reaffirm commitment to area.
In a major blow to corporate philanthropy in Los Angeles, Arco is eliminating the entire staff of its respected Arco Foundation, staffers said.
Arco officials said the cuts do not represent a change in the company’s philosophy of community involvement, but acknowledged that the amount of money it gives--now $13 million a year--may decline because of drops in the company’s profits.
Leaders in the world of corporate giving said the severe downsizing of the Arco Foundation is a disturbing symbol because Arco has been seen as a national pacesetter in corporate philanthropy, as well as one of the corporations most committed to the Los Angeles region.
The foundation’s staff is credited with setting an example for other corporations in the way it has carefully scrutinized the projects it funds, including millions devoted to post-riot community building in Los Angeles.
“This will send shock waves across the country,” said Lon Burns, president of the Southern California Assn. for Philanthropy.
Burns said Eugene Wilson, president of the Arco Foundation, whose position will be eliminated within months, “has been viewed as one of the visionaries of corporate philanthropy, arguing strenuously that corporations address root causes (of social problems) and not just give away money.”
Foundation staff members were informed Wednesday that their positions would be terminated in the fall. Wilson, who was on vacation, said he got the news when he checked in by phone that day. The job of six foundation staffers will now be done by one person in the community affairs section.
Hard-hit by falling oil prices in recent years, Arco announced earlier this week that it would cut 1,250 positions companywide, including several hundred at its Downtown headquarters. The restructuring is being led by Arco’s new chief executive officer, Michael Bowlin. He took over July 1 from Lodwrick Cook, who remains chairman of the company. Neither executive was available for comment.
The change at the foundation “doesn’t signal a change in philosophy,” said Stephen Giovanisci, vice president for public affairs, who will take over the title of president of the Arco Foundation. “The commitment by this company in the community is still there.”
Giovanisci noted that many other departments have suffered cuts during Arco’s downsizing.
However, philanthropy experts said that regardless of whether Arco reduces its donations, the foundation staff cuts are disturbing because foundations like Arco’s can act as crucial social catalysts, spreading information and advice to improve nonprofit programs.
This year the Washington-based National Committee for Responsive Philanthropy ranked Arco first among U.S. corporations in its giving to minority populations.
“Arco was going out on a limb funding lots of new and different organizations,” said Kate Conover, assistant director of the group.
Without the expertise of its foundation staff, Arco “may not have the man-hours to find out what the community needs,” Conover said.
Paul Powers, assistant director of the Jaime Escalante Math and Science Program on the Eastside, said that Arco has been a major funder of the program, which has had great success in preparing inner-city students for the advanced placement mathematics exam. He said Arco staffer Gloria DeNecochea has helped him make contacts at other foundations and given crucial advice on the best way to prepare grant proposals.
“Oh my God. That’s terrible,” Powers said upon learning that the Arco Foundation staff was being eliminated. “That doesn’t bode well for our program.”
Jennie Lechtenberg, executive director of the PUENTE Learning Center in Boyle Heights, said Arco did not just respond to requests for funding, but sometimes initiated projects. Lechtenberg said that last year, Arco Foundation staffer Russell Sakaguchi approached her organization with the idea of establishing an adult job training center at the site of a South-Central Arco gas station burned out during the riots.
The center is scheduled to open next week with computer-equipped classrooms after receiving $700,000 in funding from Arco in addition to donation of the site, worth $300,000.
Arco has been the largest single corporate donor to the Los Angeles Unified School District’s education reform initiative, called LEARN, giving $150,000 a year for the past three years. Mike Roos, head of LEARN, said the staff of the Arco Foundation has been an important resource.
“Because of their intelligence, interests and passions, they have acted as a switchboard of information for people doing things in education,” he said.
Craig Smith, president of the Seattle-based think tank Corporate Citizen, said Arco seems to be following a trend among large corporations that are under increasing pressure to link their philanthropy to their bottom line.
At a time of widespread layoffs and declining profitability among many large corporations, contributing to a community simply out of a sense of obligation is considered “foolish unless it gives added benefits that (other companies don’t get),” said Smith, who recently published a Harvard Business Review article on how companies can use their philanthropy for strategic purposes.
Social pressure for corporations to give has waned in the 1990s, Smith said. “Companies will not cut their philanthropy if they feel they’re losing something with strategic value. (But) the message from the public is, you won’t lose brownie points if you cut corporate giving. The research shows that the general public doesn’t care that much.”
