Recession dampening corporate giving

[Editor’s note: A longer version of this article, including data on specific corporations, appeared in The Cohen Report, a publication of The Nonprofit Quarterly.]

Rick Cohen
Rick Cohen

Rick Cohen

Many nonprofits depend on corporate donors for critical philanthropic support, but can they count on corporate donors through this economic turmoil?

There has always been something counterintuitive about corporate philanthropic grantmaking during recessions.

Although one would think the shrinking corporate bottom line would dampen their philanthropic spirits, the data have shown — at least in the past few recessions — that corporations did not deep-six their charitable instincts despite squeezed profit margins, especially compared with the bravado of endowed private foundations.

How will corporate philanthropy actually fare during this recession-closing-in-on-depression?

Despite early indications of confidence, economic realities have begun to temper corporate philanthropic predictions.

First, some facts:

Of the total $15.7 billion in corporate giving in 2007 calculated in Giving USA 2008, only $4.4 billion flowed through corporate foundations.

That is the portion whose grant recipients must be disclosed and reported on IRS Form 990.

The remainder comes directly from the corporations’ marketing or CEOs’ offices and is exempt from disclosure.

And a small number of corporations account for the majority of corporate philanthropy.

The Conference Board survey of corporations and corporate foundations, for example, counted $11 billion in philanthropic contributions made by its 197 respondents, representing roughly 70 percent of all corporate philanthropy in 2007.

Similarly, the latest survey of corporations conducted by the Committee Encouraging Corporate Philanthropy examined 155 companies that accounted for $11.6 billion in charitable contributions in 2007.

Even among those corporate givers, a small proportion of corporations accounted for the bulk of the grantmaking.

Logically, evaporating profit margins lead to less discretionary money available for corporate philanthropy.

But what about conditions when corporations evaporate along with their profits?

In 2006, six of the 10 largest corporate foundations in terms of grantmaking were from the banking and financial sector, which the financial crisis has hit hard.

Count that as philanthropy sharply diminished.

While corporations such as the Bank of America Foundation have made public commitments to maintain their 2008 grantmaking into 2009, even after swallowing Countrywide’s toxic portfolio, it is difficult to imagine that other banks such as Citi, trading on the New York Stock Exchange like penny stocks, will be able to do the same.

And then there is the attitude of the American public:  Many of these banks are receiving significant infusions of taxpayer funds through the Troubled Asset Relief Program (the “bailout” bill or TARP).

The latest Treasury tabulation of completed TARP transactions suggests major corporate grantmakers are tapping TARP funds.

It isn’t clear how taxpayers, now that they are partial owners of preferred stock in these institutions, will react to banks that receive TARP infusions distributing millions in philanthropic grants.

During the crises of September 11th, Hurricane Katrina and the Southeast Asian tsunami, corporate philanthropy responded.

But the breadth of this economic downturn suggests corporate America may not be able to respond quite so generously this time around.

The Conference Board’s 2009 Corporate Philanthropy Agenda survey, conducted from January through mid-February, paints a stark picture of the future.

Among the 158 respondents, 45 percent have already cut their 2009 giving budgets, 16 percent are contemplating doing so, 35 percent say they will make fewer grants and 22 percent are considering doing the same.

Perhaps more than traditional private and family foundations, corporate foundations are considering shifting or reducing the topical areas they might address with their grantmaking.

Among the respondents, 24 percent are reexamining their focus areas, 29 percent are considering reexamination, six percent have already eliminated focus areas and 11 percent are thinking about elimination.

While much of corporate charitable giving involves products, not cash, many corporate grantmakers, particularly banks, have been great
general-operating-support philanthropists.

And cutbacks by some corporate grantmakers, mainly banks and government-sponsored enterprises, or GSEs, such as Freddie Mac and especially Fannie Mae, will hit nonprofit housing and community development groups on the front lines of fighting the foreclosures, housing abandonments and homelessness that represented the first wave of impacts from this economic downturn.

The usual list of fundraising tips and ideas for helping nonprofits make their pitches to corporate grantmakers may look a little silly when a corporate grantmaker may have turned off the spigot or actually closed its doors.

This recession will be tough for the parts of the nonprofit sector that rely significantly on corporate support.

Rick Cohen is national correspondent for The Nonprofit Quarterly.

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