The Business of Giving: Corporate Philanthropy

By C Warren Moses  JUL 16, 2008 8:17 AM

Helping brand image, needy in these tough times.


We’ve all seen the headlines, and many of us are quaking in our boots. Share prices at Fannie Mae (FNM) and Freddie Mac (FRE) have plummeted. The market is volatile and Chapter-11 filings are a daily occurrence. Even Starbucks (SBUX) is feeling the strain, as strapped consumers refuse to shell out $4 for a cup of coffee.

There’s no denying that big business is hurting right now. Corporate philanthropy may not be a priority. But now more than ever, corporate giving should be at the very top of your to-do list. In a weakening economy, those who need most are hurt most. When giving, our first obligation is to strengthen the society that nurtures us all.

Consider the stories behind the statistics. Foreclosure rates are at their highest point in nearly 30 years. This means that thousands of people are at risk of homelessness. Food prices are on the rise, as exhibited by milk topping $4 per gallon in some areas (a nearly 26% increase from last year).

Grocery store sticker shock is “the biggest risk we face economically,” said Rich Yamarone, director of economic research at Argus Research in New York. "There's nothing really worse than having a job, making money, and forking most of it over just so you can have the same amount of food. You're running in place, and it really weighs on you. So how can you help the average Joe who has trouble putting food on the table and keeping a roof over his head?

Consider what the New York Times Company (NYT) did earlier this year. Through the Neediest Cases Fund, its charitable foundation, the publishing giant established a $1 million endowment to prevent families from becoming homelessness after foreclosure. This includes homeowners as well as tenants in foreclosed buildings, who are the unwitting victims of their landlord’s inability to keep up with his mortgage payments. The fund is administered by the Children‘s Aid Society.

This was a genius move for the firm: It addressed a need straight from the headlines and helped create long-term shareholder value, according to the Committee Encouraging Corporate Philanthropy. The accompanying media coverage branded the New York Times as a company that cares about people going through rough times.

That last point is an important one, because let’s face it: Foreclosure has become a daily buzzword, and bankers and Wall Street are increasingly vilified by the millions of sleepless people worried about losing their homes.

So how can you avoid being seen as the bad guy? Here’s just one example: Analysts from Goldman Sachs (GS) and Citigroup (C) donated $189,260 to the Neediest Cases Fund in February. Fundraising drives were held to raise the money - including a bake sale at Goldman Sachs, if you can imagine it. The company matched donations and made its own contribution on behalf of the firm.

Now, a bake sale might not be right for your firm. But there must be some way to encourage philanthropy among your board members and your employees. In the end, it’ll be good for your business, and very good for those who are one step away from being swallowed up by our current economic crisis.
No positions in stocks mentioned.

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