With technology companies sitting on piles of cash and minting new millionaires by the day, you might expect this holiday season to be a good one for charities.
When it comes to producing philanthropists, the computer revolution--with the prominent exception of a couple of older companies such as IBM and Hewlett-Packard--has been a dud. Tech companies and their newly rich executives are notorious tightwads who do little in the way of helping out the less fortunate.
By one estimate, computer companies are giving half the percentage of profits to charity that they did even five years ago. And the San Jose area, the home of Silicon Valley, was rated worst in terms of individual contributions to charity as a proportion of income in a 1994 survey of 50 major metropolitan areas by the Chronicle of Philanthropy.
But these digital-era Scrooges may yet prove important to a nonprofit sector increasingly squeezed between government cutbacks and rising demand for social services. Although they aren't about to unleash a flood of money, many Information Age companies, in a fit of enlightened self-interest, are beginning to offer gifts that could prove to be just as valuable: technical skills, free technology and a results-oriented approach to getting things done.
Whereas 19th century industrialists promoted humanitarian efforts to improve corporate images sullied by environmental pollution and mistreatment of workers, high-tech companies today are beginning to see philanthropy as a way to push technology farther and faster into a sometimes reluctant society.
Microsoft was ranked as the top U.S. corporation for gifts to charities last year, according to the newsletter Corporate Giving Watch. But of its $73.2 million in contributions, only 15% was in the form of cash--the rest was software that was valued at the retail price but cost the company almost nothing to produce.
That doesn't mean the donations are necessarily less useful. Microsoft has launched an ambitious program to offer Internet access to a broader segment of the population by wiring public libraries and connecting them to the Internet. Sun Microsystems is doing the same with schools. Intel is contributing equipment and technical help to 100 learning centers that are working to expand computer use among seniors.
Like most corporations engaged in philanthropy, these companies hope to see their social standing improve.
These efforts may also help achieve strategic objectives. Sun wants to be seen as the leader of an "open" alternative to Microsoft technology. Microsoft needs to be seen as an important national asset if it is to continue to be allowed to hire foreign nationals at will and avoid closer scrutiny by antitrust regulators. Intel can keep growing only if new, sometimes untapped segments of society such as the elderly begin to see the advantages of using personal computers.
More broadly, though, technology companies have begun to recognize the obvious: that their long-term success depends on better schools and a more computer literate consumer. At the same time, they must preempt possible public resentment over technologies that often eliminate jobs and exacerbate the gap between society's haves and have-nots.
"Given the industry's broad stake in education, there is an argument for massive investments--read: massive philanthropy--in the ability [of society] to use computers," said Kirk Hanson, corporate ethics professor at the Stanford School of Business. "There is a sense that technology is responsible for putting people out of work."
If tech companies fail to deal with such issues as worker retraining and technology access for the disadvantaged, they could find themselves facing more radical proposals for dealing with the problems spawned by the high-tech economy.
For example, Jeremy Rifkin, president of the Foundation on Economic Trends, recommends in a recent book that computers and other technology be taxed and the money funneled to the nonprofit sector to help society deal with issues of social dislocation.
By partnering with nonprofits, argues Craig Smith, president of the Seattle-based think tank Corporate Citizen, high-tech companies can bring technology to society in a less threatening way and accelerate its adoption.
"The computer companies are asking us to make major changes in our culture," Smith said. "They are looking for relationships [with nonprofits] that will pave the way for these new kinds of behavior."
Take, for example, the effort by the Starbright Foundation, chaired by Stephen Spielberg, to connect children's hospitals across the country with broad-band networks so bed-bound kids can communicate and play computer games with each other.
Technology companies such as Intel leaped at the opportunity to participate.
"The image of technology is cold and hard-edged," said Tracy Koon, who handles grant requests at Intel. "This humanizes technology."
As these entrepreneurial companies work more closely with nonprofits, their results-oriented management styles are also triggering significant changes in the way philanthropy is carried out. In the past, corporations such as Exxon and Ford created foundations to carry on philanthropic activities separated from, and therefore untainted by, their business activities, but high-tech companies are beginning to use philanthropy aggressively as a strategic tool.
AT&T; is shifting the focus of its charity from national to local groups to reflect its new strategic push into local phone markets. IBM and Pacific Bell recently overhauled their charitable efforts to focus on projects that exploit and publicize their in-house technology and talent.
Once they build a relationship with a tech company, nonprofits find that the entrepreneurial instincts of corporate executives lead them to commit the capital and human resources needed to get the job done.
When William Gray, president of the United Negro College Fund, approached Microsoft last year for free software to help "close the technology gap among African Americans and whites," Microsoft agreed to donate $10 million worth of free software to be distributed to the 40 private black colleges that are members of the fund.
"Now we are at the second stage," said Gray. With Microsoft executives excited by the opportunity to have a major impact, Gray said, he had little trouble persuading the company to help the schools train technical personnel, overhaul computer science programs and establish internships.
Certainly, the nonprofit sector can use all the help it can get. Although Americans donated $144 billion to more than 600,000 charities last year, nonprofits still get about a third of their budgets from government--a source that is rapidly drying up.
Regions such as San Jose and Seattle are making a concerted effort to tap the new wealth created by the rapidly growing high-tech companies.
Paul Brainerd, who sold a successful software company he founded and put a substantial sum into a Seattle-based foundation, is urging his colleagues to spend more on charity.
James Carreker, chief executive of Aspect Telecommunications, a successful San Jose-based company, is leading an effort to get more medium-sized Silicon Valley companies to contribute.
"Many Silicon Valley CEOs don't even think about community involvement for years and years," said Hanson, the ethics professor. "Given the needs of the communities and the pullback by government, 1% to 1.5% is totally inadequate. I would hope to get it to the 2.5% range."
It isn't an easy sell. Although cities such as Minneapolis have "5% clubs" in which member companies commit themselves to giving 5% of their profits to charity, Silicon Valley charities have set a far more modest goal of 1% for most of their local companies.
"The entrepreneurial nature of people in the valley doesn't promote community responsibility," said Becky Morgan, chief executive of Joint Venture-Silicon Valley, a nonprofit group raising money to support community projects. "They chafe under the expectation of being at 2%. They don't want to be told what to do."
Tech executives also feel such measures as targeting 2% of profits are unrealistic.
"It's a curious index to apply to our business because we are so darn profitable," said Bill Neukom, the Microsoft chief counsel who oversees the company's charitable activities. "We are in the business of innovating or dying. We keep plowing profits back into the business. We have a considerable need for profits to be nimble."
Some in the nonprofit sector are sympathetic.
"These are young industries with young people at the helm," said Jack Shakely, president of the California Community Foundation. "I'm not going to beat these people up. They made their money in a flash. Who is to say they won't lose the money in a flash."
But make a good case for using technology to boost efficiency or offer new services, and the new entrepreneurs will pull out their wallets.
In Charlotte, N.C., IBM is helping the school system develop software, based on its Lotus Notes program, which allows teachers to share information about their students with parents on an ongoing basis. Researchers from IBM's Watson Research lab are working with the Cincinnati school system to develop technology that will allow schools to customize their curriculum to allow for an extended school year.
In cooperation with the American Library Assn., Microsoft is helping to establish a network of 42 library systems, including the Los Angeles Public Library. In addition to providing $12 million worth of cash and software, the company is using its management skills to help shape the project.
The company made a deal with Gateway 2000, for example, to offer libraries a standard PC configuration to make it easier to train library personnel to support the equipment. Microsoft also made special changes in its software so it could handle heavy public use without crashing.
"For [Microsoft founder Bill] Gates to emerge as having done for libraries [in the computer era] what Carnegie did in the 19th century would be an enormous business advantage for Microsoft," said Smith of Corporate Citizen.
Telecommunications companies, which have long been major contributors to charity, are also refocusing their efforts to make their giving more in line with their corporate strategy.
Pacific Telesis is spending $100 million on wiring California schools to the Internet and offering initial free service as part of a business strategy, in hopes the schools will eventually develop as important customers. The Pacific Bell Foundation is helping out by providing 12 pilot schools and an expert to train teachers and help them determine what to do with their Internet connections.
In the past, regulations prohibited phone companies from donating phone-related services to charities. Now, says Jere Jacobs, president of the Pacific Bell Foundation, a major goal of the foundation is to help nonprofits make better use of communications technology.
"In the past, we might have funded specific programs," Jacobs said. "Now we will ask them how they can leverage the dollars to expand their capacity."
Even if the firms become more involved, Harry Saal, founder of the Silicon Valley company Network General and a longtime philanthropist, doesn't think the new moguls should be given so much slack.
"The Gates and Ellisons ought to be the Rockefellers and Carnegies of today," Saal said. "Their goal should be to manage their wealth to zero."
That's unlikely. After being chastised by his late mother, a trustee of the University of Washington, for not giving enough to charity, Gates quietly put $200 million in a personal foundation two years ago and may soon raise that amount. But he insists he will keep his share of Microsoft above 20%.
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The Business of Giving
Technology companies are but one example of an increasing number of corporations that are donating products and services to charities in addition to cash. These efforts aren't totally selfless--many firms are using charitable contributions to further business goals and to polish their images. Major noncash givers (25% or more of their donations in 1995):
Company: Microsoft Corp.
Noncash gifts (millions): $62.2
What they donated: Computer equipment, software
Percentage of total giving: 85.0%
Company: Apple Computer
Noncash gifts (millions): 6.0
What they donated: Computer equipment
Percentage of total giving: 80.0
Company: Hewlett-Packard Co.
Noncash gifts (millions): 6.3
What they donated: Computers, printers, medical and scientific equipment
Percentage of total giving: 79.1
Noncash gifts (millions): 10.0
What they donated: Medical supplies
Percentage of total giving: 74.1
Company: Bristol-Myers Squibb
Noncash gifts (millions): 35.0
What they donated: Pharmaceuticals, consumer products
Percentage of total giving: 62.5
Company: Minnesota Mining & Manufacturing
Noncash gifts (millions): 26.7
What they donated: Medical, printing and cleaning supplies
Percentage of total giving: 60.1
Noncash gifts (millions): 16.5
What they donated: Computers
Percentage of total giving: 54.5
Company: Sara Lee
Noncash gifts (millions): 11.7
What they donated: Bakery food items, clothing
Percentage of total giving: 49.8
Company: MCI Telecommunications
Noncash gifts (millions): 3.0
What they donated: Long-distance telephone service, Internet access
Percentage of total giving: 42.9
Company: Johnson & Johnson
Noncash gifts (millions): 30.6
What they donated: Medical and health-care supplies, pharmaceuticals
Percentage of total giving: 40.0
Noncash gifts (millions): 25.5*
What they donated: Computer equipment
Percentage of total giving: 38.5
Company: General Motors
Noncash gifts (millions): 25.2
What they donated: Vehicles
Percentage of total giving: 28.4
Sources: Chronicle of Philanthropy; "Giving by Industry: A Reference Guide to the New Corporate Philanthropy"
Researched by JENNIFER OLDHAM / Los Angeles Times