Despite the PR’s stance, corporate philanthropy is at its lowest level in 25 years. To put it more seriously, corporations should pledge to donate 1% of their pre-tax profits, tell us Leo Hirley Jr. and Curt Weeden
An article by Leo Hirley Jr. and Curt Weeden translated by Nathalie B
When corporations abandon their broadly defined social responsibilities or use manipulation to deliberately construct an overly exaggerated image of corporate citizenship, the result is an unbalanced private sector and civil society.
These days, heavily promoted self-produced fragments are all too prevalent, intended to prove how well companies are coping with their responsibility to society. Paid advertisements – which wave banners to claim that companies are tackling the problems of global warming, reducing the cost of medical care, or improving the education system – are often screens intended to hide a double trend: the significant reduction in corporate contributions to charities.
Twenty-five years ago, companies gave about 2%, on average, of their pre-tax profits to donations and grants, according to a report by the American Giving Foundation and the University Center for Indiana on Philanthropy. Today, companies are about three times less generous. According to an analysis of the income statement announced by the IRS (Internal Revenue Service) (which of course has not been the subject of media hype) charitable deductions from companies now average only around 0.7% of their pre-tax profits. (These numbers don’t take into account employee overtime, since the IRS doesn’t allow companies to withhold overtime, even if it’s paid time off.)
Certainly, measuring the social responsibility of all companies requires more than a simple analysis of a company’s philanthropic donations. Fair behavior towards employees, the production or sale of safe products, the payment of taxes, and the respect of environmental standards are all essential ingredients in the cooking of social responsibility. As important as these things are, however, there is nothing more important than a company-wide commitment to use a decent percentage of that company’s pre-tax resources to address critical issues that affect employees, communities, the nation, and the planet.
A significant voluntary commitment on the part of the business community is then seriously necessary to ‘harden off’ a minimum budget in order to contribute to corporate philanthropy. A reasonable obligation for any company that defines itself as ‘a good corporate citizen’ should spend at least 1% of its pre-tax profits for the previous year on philanthropic purposes.
It might seem a daunting, if not impossible, task to convince government officials to increase rather than decrease a corporation’s philanthropic budget, especially at a time when the profit picture of all corporations is become so blurry. But if executives understand that an effectively managed contribution program can give a company big profits, then 1% of pre-tax profits should be seen as an investment, not a gift. Rather than a self-imposed ‘tax’, a levy can actually be managed to become a powerful tool. This happens when, to reasonable extent, corporate donations are made to nonprofits that align with the interests of company employees, communities, and the objectives of the company. At the same time, a company’s contribution should not be solely intended to advance the interests of that company. If the contributions are only intended to support the bottom line, if they are used to pamper the projects of the general managers or those of the members of the administration, or if they are purely selfish in their intentions, we believe that they are lacking to defining what it means to be seen as behaving as a good corporate citizen.
This snap proposal aims to be the final step on the corporate citizenship ladder. Businesses that are ‘best in class’ in corporate philanthropy also need to strategically manage contributions that exceed the recommended 1% of pre-tax profit. Some companies have already paid this maximum limit. In Minneapolis-St. he year before Tele-Communications (TCI), of which I was CEO, merged to form AT&T, TCI donated slightly more than 1% of its operating cash flow to charities. Like our counterparts who work in the cable industry, TCI has suffered significant pre-tax losses from write-downs and depreciation.
To reverse the downward trend in corporate donations, we need a cadre of self-motivated and responsive CEOs to lead the way. We need men and women who will match their words with action by making corporate charitable contributions, coupled with community initiatives that are backed by adequate resources at the right time, rather than by these small quarrels which follow the electoral campaigns and the press releases.