Stop the Slide in Corporate Philanthropy : Charity: The aid often accomplishes what government can’t, and business and the community get a stronger base.
The recent decision by Arco to substantially cut its foundation staff and reduce its community donations is part of a disturbing national trend in corporate philanthropy. Recent data show no overall growth in corporate giving and reductions by many companies and industries.
Reversing this trend obviously concerns nonprofit organizations, the apparent beneficiaries. But it should be of equal concern to corporate and government leaders and the general public. The diminished involvement of corporate foundations in civic and community affairs undermines corporate interests as well as the national movement to reinvent government and to shore up the nation’s economy.
Corporate foundations and giving programs have a distinctive role in philanthropy. Combined with the contributions of family, religious and community foundations, they bring a corporate discipline to grant-making. The ability to turn benevolence into a business produces high yields for shareholders and the community.
The field of affordable housing illustrates how community problems are well-served by corporate involvement. The federal low-income housing tax-credit program allows corporations tax credits in exchange for investments in affordable housing, providing shareholders considerable returns from tax savings. These, however, are typically not passive investments. Corporate foundations play an active role in the creation of the program and continue to protect corporate shareholder interests. Corporate grants programs provide the critical operating support, capacity building and gap financing for affordable-housing developers.
The impact of this results-oriented approach to charity on reinventing government is startling. Corporate investments and contributions are doing the work that government has been unable to do alone. The National Journal recently reported that $425 million in tax-credit allocations in 1993 is expected to produce about 100,000 housing units. By contrast, the 1994 government appropriation of more than $500 million for public housing is expected to yield fewer than 7,000 new units.
If the Arco Foundation’s collapse presages a swift and irreversible downward spiral in corporate participation in community affairs, either taxpayers will pay or vulnerable groups will suffer, or both.
In a shrinking economy with fewer discretionary funds, corporate foundations still play a critical role in community and economic affairs. These foundations can offer considerable intellectual capital to national concerns about poverty and economic growth. The Arco Foundation, as co-chair of a working group of public and private funders, community organizations and economists, helped lead a research effort to link the growth industries in Los Angeles to low-income residents and communities. The goal was to find strategic ways to make distressed communities economically viable and in turn shore up the region’s economy.
With a small grant and its joint leadership in an 18-month planning process, the foundation helped attract $2.5 million in funding from the National Community Development Initiative, a consortium of national foundations and HUD. These funds helped launch an initiative designed to improve health services and provide health-related jobs and business opportunities in distressed communities.
The Arco Foundation’s corporate clout and business know-how leveraged scarce corporate resources, attracted national funds to local concerns and, more important, worked to build a stronger business climate for its own bottom-line concerns. This is smart grant-making, good business and it benefits the entire community.
Corporations are key participants in building effective partnerships to tackle seemingly intractable urban problems. Communities can’t do it alone, and government doesn’t always do it well. Collaborative efforts provide new opportunities for joint problem-solving, risk-sharing and for achieving greater impact and scale. Reducing corporate philanthropy runs the risk of leaving the important leadership and service components of corporations to caprice and neglect.
Perhaps Lodwrick M. Cook, Arco’s chairman, said it best. In June, 1993, Cook wrote: “I hope that you will see our social investments as I do--as a commitment to our friends, neighbors and customers and as seed money to encourage workers of small, important miracles.” We call on corporate America to not only maintain but to strengthen its leadership role in reinventing society and renewing hope. Let us hope its shareholders and the general public will do so as well.
