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Corporate Philanthropy in America: Better to Give Than Receive

Mon, 11/06/2006 - 5:09am
Nancy Syverson, Editor-in-Chief
Times are tough, but manufacturers are still finding time to donate their time and money to charitable causes.

American industry has a long tradition of corporate giving. Since 1889, when Andrew Carnegie, founder of Carnegie Steel (today U.S. Steel) publically announced that the rich had a moral obligation to give away their fortunes, corporations have developed a wide array of charitable vehicles: foundations; non-profit and association umbrella groups; and community outreach programs.

In dollars and cents, charitable corporate contributions are on the rise. The Conference Board estimated that corporations gave away $12 billion in charitable donations in 2004, a big jump from only $3.88 billion in 2003. Targeted areas of contribution were health and human services; education; and art. In addition, international giving has also increased. More than $260 mln has been donated to Tsunami relief funding.

Even though corporations seem to be giving away more and more, their charity may not mean what it meant to Andrew Carnegie more than a century ago. By the time of his death in 1919, Carnegie had given away everything he had earned building his steel and oil empire.

Today, it’s not just about giving money away anymore, according to Curt Barratt, vice president of Wafer Fab Operations at RFMD Micro, Inc., in Greensboro, North Carolina. It’s more about relationships, strategies, and moving the brand outside the company’s four walls. There are paybacks: some tangible or financial, and others more on the feel-good side.

"For American businesses,” he says, “community involvement is less about altruism and more about recognizing the importance of external relationships, when competing in a global marketplace."

Here are five reasons to keep up a good corporate giving program, even in rougher economic times.

Grows Labor Pool. The shortfall of skilled workers began in 2005 and will grow to 5.3 million in 2010 and to 14 million by 2015, according to U.S. Labor Statistics. Almost one quarter of manufacturers polled in a Pricewaterhouse Coopers survey cited a lack of qualified workers as a potential barrier to growth. As a result of the labor shortage, recruiting costs to manufacturers will grow to $50 million over the next five years.

Through charitable donations to educational institutions and associations, Clips and Clamps, a small metal-forming company outside of Detroit, MI, has grown its skilled labor pool. Mike Aznavorian a 20-year auto manufacturer veteran runs the company. When he took over in 1985, the big three auto companies were discontinuing educational funding, he says, which left plenty of opportunity for a mid-sized company to establish apprenticeship, internship and awards programs. “We have been working with local high schools and technical schools to recruit men or women to participate in these programs,” says Aznavorian. This strategy replenishes the skilled labor pool and keeps their employees local.

In addition to the local training efforts, Clips and Clamps channeled $25,000 to establish the Precision Metalforming Association’s educational foundation. Each year the company donates another $3000 to a national scholarship, called the Clips and Clamps Industries Educational Institution award.

Corporate Giving Since 1965 (in billions of dollars)
 
Year
Charitable Donations
Pretax Profits
% of pretax profits
1965
4.59
496.90
0.9
1970
4.13
407.61
1.0
1975
4.17
528.28
0.8
1980
5.33
600.84
0.9
1985
8.40
467.30
1.8
1990
8.16
611.96
1.3
1995
9.42
864.15
1.1
2000
12.18
877.17
1.4
2005
13.77
1438.30
1.0


Provides Tax Incentives: When companies give away large sums of money for charitable purposes, they usually do it through a foundation or other charitable organization to take advantage of the tax benefits of a 501(c3) organization. “When we were doing some estate planning,” says Kathleen Aznavorian, whose mother Estelle Dul founded Clips and Clamps in 1954, “we realized that we could give the money to the federal government in taxes, or we could give it to charity. We wanted to support the education of our own workforce so we established the Dul Foundation.” In addition to the educational donations, the Dul Foundation contributes to other community organizations like the symphony, the Rotary, the historical society and programs for distressed teenagers.

The tax exempt status for charitable organizations was first provided in 1913. The idea was, in exchange for the favored tax treatment, a foundation or other charitable organization, would meet some need of the general public so the government would not have to provide any of its own resources. The Rockefeller Foundation was one of the first foundations established the year the tax incentives were implemented. Assets have grown to $3.4 billion. In 2004, the foundation gave away $109 million in grants, fellowships and programmatic investments.

To learn more about 501(c) 3 charitable organizations and donations, go to www.justgive.org. A company must be profitable to get a tax donation for their charitable contributions, and there is a limitation on what the IRS will allow.

Spotlight on Philanthropy:

Bert Miller, CEO Phoenix Closures, Naperville, IL
Bert Miller has been the CEO of Phoenix Closures, a manufacturer of injection-molded closures for 20 years. He has seen a lot of changes in manufacturing over the years and has this to say about the state of the industry today. “Manufacturing in America has to be one of the hardest things in the world. We don’t have a lot of energy left.” Still, he takes time away from his job to go into the inner city to the schools and talk about what it’s like to be in business and manufacturing. “My goal is not to try to attract workers to Phoenix Closures, it’s to impress on the students the kinds of things are out there. There are kids on the South side of Chicago, 15 blocks from Lake Michigan that have never seen Lake Michigan,” says Miller. I walk them through the manufacturing chain. The organization he volunteers for is called the Big Shoulders Fund. Their mission is to provide support to the schools in the neediest areas of inner-city Chicago. Big Shoulders Fund supported schools enroll nearly 27,000 students in 76 elementary schools and 17 high schools in the city of Chicago. 100% of the funds raised by the Big Shoulders Fund are used to support children through scholarships, special education programs, instructional equipment, much needed school facility improvements, faculty support, and operating grants.  The Big Shoulders Fund is a 501(c)3 non-profit organization.
Improves Community Relations. RFMD, based in Greensboro, NC manufactures wireless components for devices that transmit and receive signals. Corporate giving and community involvement are deep-seeded in the culture, says Ralph Knupp, RFMD vice president of human resources, and an integral part of the business strategy. “We embrace those activities as good business,” says Knupp. The company regularly invests in Habitat for Humanity, local educational institutions and a fundraiser bicycling event called Tour de Tanglewood.

In exchange for the company’s involvement in the community, Curt Barratt , RFMD vice president of Wafer Fab operations says he gets to rest easy at night. In case of emergency, he knows that the community agencies will respond because of the ongoing relationship that the company has built with the community. “We have Title V chemicals here, (especially gallium), which are extremely hazardous,” says Barratt. “The EPA requires that we develop a contingency preparedness plan, which requires an effective working relationship with the community.” Fortunately, an accident has not occurred in the almost 15 years that RFMD has been at the Greensboro site. But should there ever be one, Barratt says, the community will be right along with RFMD.

Facilitates compliance. When a company works in isolation from the community, compliance doesn’t have the same meaning. It’s just a check box on a regulatory document, and a chore. “But, embracing the regulations can be an opportunity to gain synergy with the community, says Barratt. “ISO 14001 compliance can be a pain in the neck, but factoring in the community makes it easier.” For example, the one of the requirements for ISO 1400 involves the abatement of oxidating greenhouse gases. “We’re not just going to do it, we’re going to exceed,” says Barratt. “We could get away with the minimal level but the community has to breathe the air too.

Clips and Clamps is also ISO 14001 certified. Aznavorian says that the company recycles everything, from steel to mop water. They have changed their procedures to reduce steel usage, and water used to mop the floor goes into a container and is hauled away to be cleaned and recycled. “Anything we can do to save power or water helps the environment…which helps us…which helps the community. When the auditors come in to look at what we’re doing, we get credit for that.”

Improves image. In their time, both Andrew Carnegie and David Rockefeller were known as the “robber barrons.” In 1882, Standard Oil, the company built by Rockefeller owned 90% of the kerosene in America. Both company and founder were often the subjects of both personal and anti-trust attacks from competitors and the media. In 1902, an audit showed Rockefeller was worth about $200 million, compared to the total national wealth that year of $101 billion. One of his advisors, Frederick Gates urged him in 1906 to undertake philanthropic ventures to distribute his wealth. "Mr. Rockefeller your fortune is rolling up, rolling up like an avalanche! You must keep up with it! You must distribute it faster than it grows! If you do not, it will crush you and your children and your children's children," advised Gates. Rockefeller took Gates advise, embarking on a 40-year philanthropic career. Today his name is synonymous with corporate giving.

Manufacturing sometimes gets a bad name, too. When Bert Miller, CEO of Phoenix Closures, Naperville, IL speaks to community organizations or kids in the school, he admits, he says that he does a little pitch for manufacturing. “Manufacturing is always characterized as the smokestack. I don’t have one smokestack in any of my three plants. I have a tent outside for a picnic area that we put up every May and take down every October. But no smokestacks. Every plant of mine is air conditioned. There is not a lot of physical labor; we train workers in high technology, like robotics here.”

“We want to be known as a ‘good’ employer,” says Ralph Knupp, RFMD vice president of human resources. So whether you’re passing the hat around or investing millions of dollars in philanthropic frenzy, it is always better to give than receive.
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