Corporate Social Investing: The Breakthrough Strategy for Giving & Getting Corporate Contributions

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Details a practical, 10-step plan that can create exciting new relationships between businesses and nonprofits Weeden's plan could generate an additional $3 billion a year in corporate support for vital causes, improving quality of life for millions, while at the same time bolstering corporate profits Offers essential advice for businesses planning their corporate social investing strategies and nonprofits seeking corporate support Corporate philanthropy is on its way out. A new concept called "corporate social investing"-which requires that every commitment of money and/or product/equipment/land which a company makes must have a significant business reason-is taking its place. The transition has implications to every business and nonprofit organization in America. This book provides the strategic plan for making the transition to corporate social investing. By following the practical steps described here, businesses and nonprofits can forge creative alliances that can boost corporate profits while at the same time providing added resources for schools, colleges, cultural organizations, civic groups, and other important charities. Weeden's breakthrough plan, based on his innovative concept of corporate social investing, has the potential to dramatically change the way businesses and nonprofits interact. If widely implemented, it could substantially increase corporate support for nonprofits, turning the tide against cutbacks, offering profound benefits to businesses, and revitalizing the essential services nonprofits provide.

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1. The Confused State of Corporate Philanthropy

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Each year, companies spend billions on something called external relations, and they frequently do so without enforcing the same kind of tough management standards that they usually apply to other aspects of their businesses. Stakeholders are often left scratching their heads about the true value of a hodgepodge of “soft” functions that encompass community and public affairs, corporate social responsibility, and—most of all—corporate philanthropy.

Of all the activities that have been stuck into this curious corporate corner, perhaps nothing is more mystifying than the way businesses relate (or don’t relate) to nonprofit organizations and government institutions. If the public is left with a schizophrenic impression about what’s going on between the private sector and these outside audiences, it’s understandable. Consider the following two prevalent if contradictory impressions.

The evidence is indisputable that when it comes to supporting nonprofit organizations, corporations are getting parsimonious with both their fiscal and their human resources. Companies are donating less of their pretax earnings to nonprofits than they did only a few years ago. What’s more, it’s getting harder to squeeze employee volunteers out of significantly downsized corporations.

 

2. A New Way of Thinking and Acting

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Frank Sinatra had nothing on Herbert Stein when it cames to reviving a Golden Oldie. In 1996, Stein, the former chairman of Richard Nixon’s Council on Economic Advisers, wrote an oped piece for The Wall Street Journal. The lyrics may sound familiar: Corporate America—mind your own business!

To rely on “corporate responsibility” to solve major social problems—other than the problem of how to put our people and other resources to work most efficiently—would be a wasteful diversion.

The same song had been belted out by others in previous years. Maybe the most often-heard rendition was Milton Friedman’s, which was a hit back in 1970. That’s when economist Friedman wrote in a New York Times Magazine article that businesses had no business doing anything but generating profits. Friedman complained that corporate social responsibility costs a company money; ergo, a business has to either charge higher prices for its products or lower employee wages—outcomes that are contrary to the best interests of society. And then along comes Herb Stein, putting only a slightly different spin on the same old standard when he tells companies that they “discharge their social responsibilities when they maximize profits.”

 

3. Step 1. Moving from Corporate Giving to Corporate Social Investing

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The following is a true story.

Mary X is director of promotions for a large consumer company. She gets paid $100,000 a year plus a bonus to come up with ways to drive sales for a number of popular brands that can be seen in stores throughout the United States. She’s very good at what she does.

One summer day, X comes up with an idea. She wants to do a four-week campaign using a popular children’s charity to help push fifteen different products her company manufactures. Calling it cause-related marketing, her corporation would promise to send a nickel to the charity for each unit sold during the promotional campaign period. X says it will be a win-win deal—more dollars for the nonprofit organization and more market share for the products involved in the promotion.

X e-mails the corporation’s tax department. “Here’s my problem,” she says. “I don’t have the money in my marketing budget to carry the contribution to the charity. I do have the money to pick up the costs needed to advertise the campaign and to do in-store promotion.”

 

4. Step 2. Extracting Business Value from Social Investments

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October in the Northeast—not the time of year when people are yearning for a double scoop of butter pecan or strawberry swirl. Yet, here’s ice cream maven Ben Cohen wandering into, of all places, a Catholic high school to keynote its twentieth anniversary celebration.

What’s going on here? It doesn’t take the audience long to find out. The cofounder of Ben & Jerry’s Homemade didn’t accept the invitation from the Sisters of Saint Elizabeth to chat about banana splits.

“Business oppresses people,” Cohen tells the group.

There’s a rustling in the crowd—maybe from a few people checking to see if they might have wandered into the wrong auditorium. The stirring gets more intense as Cohen begins a history lesson. Religion was the first driving force in society, Cohen preaches. Then came the nation-state. And now (as you might have already guessed) it’s business that is running the show. Which brings the ice cream man to a theme that got him summoned to the parochial school in the first place: business is corrupting human spirituality by stepping all over our ethics. Corporations have become obsessed with how many goods can be produced, and corporate workers have become obsessed with the size of their paychecks. The private sector is besmirching our moral fiber.

 

5. Step 3. Which Nonprofits Qualify—And Which Don’t

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They come in all different sizes and shapes. Some operate on a shoestring and a prayer. Then there are others like the YMCA of the USA, which rakes in $2 billion a year to conduct its activities. There are quite literally hundreds of thousands of them and they are known as the citizens of the nonprofit world, an aggregation of all kinds of organizations that are becoming more and more of an economic powerhouse in America. Gross revenues of service groups, education institutions, community hospitals and certain other nonprofit operations exceed more than a trillion dollars a year according to some estimates, and that doesn’t include what many churches, synagogues, and other religious agencies are collecting.

Finding the most appropriate business-relevant organizations as candidates for support is what Step 2 of the corporate social investing process tells us that we need to do. This is quite a feat given the mammoth size of the options. So where does a corporation begin the sorting process? Believe it or not, the best place to start is by calling upon our friends at the Internal Revenue Service.

 

6. Step 4. Making a Declaration for Corporate Social Investing

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There are those who think Robert Haas is Mosewith a profit motive. The chairman of the world’s largest apparel maker has a reputation for leaving his San Francisco office and ascending into the Sierras to conjure up big ideas for Levi Strauss & Company. One never knows what Haas will bring down from the mountain. Maybe a new business development strategy. Or possibly something still dripping of transcendental meditation, like a notion to improve the “psychic ownership” of his company.

Haas isn’t just another California oddity who by some quirk of fate has been plopped onto the throne of one of America’s big businesses. The man has had remarkable success turning Levi Strauss into the archetypal values-driven company. The firm’s Aspirations Statement, written in 1987, is a model for employee empowerment and effective organizational leadership. The statement covers a lot of territory as it highlights everything from diversity to the need for striking a balance between personal and professional obligations. It is the company’s manifesto for enriching the business and the people who work for it.

 

7. Step 5. The CEO Endorsement

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Social investing doesn’t have a chance unless a company’s chief executive gives it the nod. Hence, this chapter is dedicated to every CEO—especially those whose companies are going to be in the black this year. If you’re a chief executive, please read the next few pages. If you’re an employee who doesn’t happen to be the company’s CEO or if you’re a stakeholder who has a special interest in a corporation, please mark this chapter and send the book to the individual sitting in the front office. Although it would be gratifying to have a CEO read Corporate Social Investing from cover to cover, enough information can be gleaned from this one chapter to do the trick.

David Rockefeller’s speech at the New York Economic Club in September 1996 bubbled through the senior executive ranks like a freshly popped bottle of Dom Perignon. The then eighty-one-year-old Rockefeller told corporate leaders that they should think seriously about “reassuming the role of what we used to call business statesmen.” With his usual polish, Rockefeller made this point: “In recent years, business leaders appear to have devoted themselves to making more and more money and find themselves with less and less time to devote to civic and social responsibilities and to sinking roots in their communities and showing their loyalty.”

 

8. Step 6. The Annual Social Involvement Report

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If you’ve put on a few too many pounds or if you think you look anorexic, the thought of slipping into a bathing suit and heading for the beach might not thrill you.

Such is the state of mind of most businesses in America after giving their corporate responsibility profiles a once-over. Do you really want to expose yourself when you presume that anyone who glances your way is going to be turned off?

There are a lot of good reasons why businesses aren’t pulling back the covers on their corporate philanthropy, community relations, and social responsibility activities. The primary concern is that showing off too much may be absolutely abhorrent to anyone who thinks money spent on external affairs is pure unadulterated business fat. Now along comes the next step in the social investing management model:

Step 6. Produce a written corporate social involvement report that includes a review of social investments at least once a year.

A nervous ripple works it way through the private sector. “Don’t take me there!” corporate captains implore. Business leaders usually learn (often the hard way) that the written word can turn on you like a mad dog. Particularly in light of the mixed views people have about corporate social responsibility, reducing a company’s corporate responsibility activities to print seems to be a ticket to the dark side. That kind of report might win a few kudos for the company, but it also could be a hand grenade for some angry, don’t-give-away-my-dividend shareholder.

 

9. Step 7. Committing to the Corporate Social Investment Model: Part I, Percentages

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Step 7 is big enough and important enough that it merits coverage in two chapters: this one and the next. Both chapters are essential reading for whoever is going to be given responsibility for corporate social investing within a business. They are also important for those nonprofit managers and volunteers who solicit support from the private sector. Others who have a general interest in corporate social investing but don’t need a deep understanding of the inner workings of the ten-step plan, can skim through these two chapters.

Presented in the pages that follow is the schematic for the corporate social investing model—a detailed explanation of how the social investment “motor” works and how much “fuel” is needed each year to keep the motor running. To make it easier to understand the model, the chapters dissect the plan so that each element can be studied separately. However, it is important to keep in mind that this is a management process that needs all of its parts. So, for those charged with planning and implementing such a program, remember to reassemble all of the pieces before activating the corporate social investment engine.

 

10. Step 7. Committing to the Corporate Social Investment Model: Part II, Strategic Plans

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Elizabeth and Robert Noyce split in 1976. With a divorce settlement worth $40 million, Betty left her home in California’s Silicon Valley and put a whole continent between herself and Intel Corporation, the company her ex-husband had founded. She relocated to Maine and drove her roots into a state not known for embracing outsiders, even if they happen to be rich.

Twenty years later, sixty-five-year-old Betty Noyce died, and an extraordinary thing happened. A couple of thousand dyed-in-the-wool down-easters showed up at the memorial to pay tribute to the remarkable woman they had made one of their own. They were there to honor a lady who had turned her wealth into a salve that had been skillfully applied to the bruised economic exterior of the southern part of the state.

Betty Noyce could have taken her fortune and lived the fabled life of a well-heeled divorcée. Instead, she inoculated her adopted state with an estimated $50 million as part of a personal crusade aimed at preventing a massive job exodus from Maine. At first, it was standard-fare charitable giving. But then she converted it into something else that would eventually be called economic philanthropy. Betty Noyce used her treasure chest to create and keep jobs in the region. As Boston Globe columnist Ellen Goodman put it, “She went into business without a profit motive.… She went into the charity of employment.”

 

11. Step 8. When Social Investing Should Be Postponed

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If Step 7 puts a knot in a CEO’s stomach, Step 8 should help untie it. This is corporate social investing’s emergency brake:

Step 8. Postpone some or all corporate social investing if projected business conditions warrant such action.

What a company budgets for social investing this year is largely a shadow of the corporation’s past; it’s the by-product of profits generated over the previous three years. When a corporation runs up a string of successes, everything is rosy. In the afterglow of its financial achievements, a company calculates how much it should be spending for social investing in the year ahead and plugs that amount into its budget.

But what happens if a company’s sales and earnings are projected to flatten out during the next twelve months, or worse, what happens if the crystal ball says the company is headed for an even more serious tailspin? This is when senior management puts its foot on the eighth step in the social investment management model.

In the best of times, corporate social investing comes with a huge upside for nonprofit organizations—more money, more corporate involvement in nonprofit activities, more partnerships that lead to added federal and private funding, and so on. However, like most things in life, higher rewards usually mean greater risk.

 

12. Step 9. Building the Management Team for Social Investing

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The Home Depot—the ubiquitous chain of building supply and home improvement stores—says that it directs about 45 percent of its philanthropy budget to “affordable housing” projects. This is a company that has its corporate contributions marching in step with its main business mission. What’s more, Home Depot has both a CEO and a president who make no bones about the firm’s concern for corporate social responsibility. Although this company may not have adopted all ten management principles, it has embraced many of the model’s components.

When the Home Depot opens one of its warehouse-sized stores in a new market, the business quickly hoists its community-relations colors. The company provides money and employee time to programs such as Habitat for Humanity (the Jimmy Carter—supported home-building initiative that constructs low-income housing around the nation). In some locations, the corporation even mobilizes Team Depot squads of employees to work on community-based home-rebuilding projects.

 

13. Step 10. The Day-to-Day Manager

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Corporate social investing has little hope of meeting its expectations without competent day-to-day leadership. The difference between a sluggish, lackluster program and a highly energized, robust initiative often comes down to a single individual—the person who’s holding the management reins.

It is not only essential to find the right corporate social investment manager but also critical that the individual be positioned at a level high enough in the corporation to (a) collect the information needed to make good decisions, (b) interact with other senior executives in the company, and (c) command attention and respect from those inside and outside the business. These points lead us to the tenth and final management step:

Step 10. Assign day-to-day management responsibility for corporate social investing to a position that is no more than one executive away from the CEO or COO.

This is a big change from the way corporate philanthropy programs have historically been managed in many—particularly large—businesses. The point person for a corporate contributions program is often several layers down from the chief executive. With corporate social investing, that won’t work. The function must be elevated to a higher executive level.

 

14. Making It Work

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The year was 1982.

“The major sandbag for the socially conscious executive is in the corporate world itself,” Thomas Drohan observed. The speech by the president of Foremost-McKesson was not only a statement of the day but a prophecy that would hold for nearly two decades.

“It is absolutely chilling,” Drohan went on to tell an executive symposium, “that fewer than 30 percent of all U.S. corporations give anything, and only 6 percent give more than $500 a year to charity.”

Drohan speculated about why corporations were so miserly when it came to supporting nonprofit organizations. He pointed to a “missing ingredient” that causes businesses to come up short in their charitable giving. “Like the Purloined Letter,” he said, “what’s missing is right under our collective noses.” Then he delivered the punch line: “That missing ingredient is very simply—a goal. No one really knows how much corporations in particular, or business in general, should be targeting.”

America’s private sector was mum. Drohan’s call for a common goal that all companies could use to calculate their philanthropy never did materialize. However, whether because of Drohan’s urging or for several other reasons, businesses began carving out a higher percentage of their profits for charitable giving, a trend that continued through the mid-1980s. Then in 1987, corporate generosity began to slide back. As we have already pointed out, by 1996 businesses were giving about 45 percent less of their profits to charity than they had been donating only ten years before.

 

15. The Power of Corporate-Nonprofit Alliances

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Amultitude of impressive corporate-nonprofit initiatives dot the private-sector landscape:

Aetna and U.S. Healthcare are spending $7 million to educate women about heart disease and stroke.

Microsoft and the American Association of Retired Persons (AARP) are collaborating to run Lifetime Connection seminars to educate older adults about personal computers.

Pfizer has a $5 million program involving several nonprofit institutions that is aimed at improving children’s health.

MCI donates a percentage of phone payments made by business owner customers to the Nature Conservancy or the Audubon Society.

These are examples of effective corporate-nonprofit partnerships that were born and raised without the helping hand of the ten-step corporate social investing model. And that leads to the obvious question: Is social investing really necessary if businesses are already forging strategic relationships with nonprofit organizations? The answer is yes for a number of reasons.

Many corporations deliberately keep their social responsibility activities in a dim light or in the closet because they aren’t sure how different stakeholders will view such commitments. In contrast, corporate social investing should encourage businesses to be more open about what they are doing with nonprofit organizations. Because the ten-step model makes it clear that a company is using its nonprofit investments to enhance the value of the corporation as well as to benefit society, businesses should be less inclined to want to hide such sensible, business-enhancing expenditures.

 

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