MCF Giving Forum, Spring 2006 - Corporate Philanthropy

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Spring 2006

Corporate Philanthropy:
Giving Derives from Role of Business in Society

by Jane Ferguson


	St. Paul Travelers employee Karla Smith reads with her student partner, Jackie, at Hayden Heights Elementary School in St. Paul. Photo courtesy of St. Paul Travelers Foundation

"Business is embedded in the community: it hires from the community, employees live and play in the community and many customers are in the community," emphasizes Mary Pickard, president and executive director of the St. Paul Travelers Foundation. "The whole enterprise is dependent on the health of the community. This symbiotic relationship between company and community defines business philanthropy."

Corporate philanthropy, say leaders in the Minnesota business giving sector, is different from other kinds of philanthropy due to this inextricable relationship of company and community.

Business depends on the goodwill of the communities in which it operates, and corporate philanthropy has become a subset of corporate citizenship, which is the array of attitudes and practices around serving shareholders, employees, the environment, customers and communities.

The relational aspects of business in society are not a new driver in business, but a focus on these relationships has resulted in ever more thought going into matching a company's giving with its corporate objectives. The current defining words are "strategic philanthropy."

Alex Cirillo, vice president of the 3M Foundation, notes, "Companies are more aware of the alignment of giving with corporate reputation and corporate goals. These connections have become stronger for corporations because of public opinion, greater regulation and the demands of shareholders in the interests of company citizenship."

For 3M, these forces intersect around education and the preparation of young people for the workforce. Like others, 3M is looking at the national crisis in education, especially among minority populations, which directly affects the corporation.

"One of 3M's goals is to increase the number of children going into the STEM disciplines –– science, technology, engineering and math," Cirillo says. "We have restructured our giving so that 50 percent is targeted to this purpose and a higher percentage of those gifts are going into the K-12 pipeline, where before the majority of our giving was for higher education."

Focus on Results

Companies are applying new grant-giving metrics to allow them to understand in a more sophisticated way the effects that their philanthropic dollars are having. "Certainly, corporations and other funders have become very focused on results, both results of individual grants and results on particular issues," comments Penny Hunt, vice president of community affairs, The Medtronic Foundation. "Over the last 13 years that I have been at Medtronic, we have become much more sophisticated, if you will, in asking our grantees to identify results from the grants that we give."

As far as "strategic" philanthropy, Hunt underscores that Medtronic's focus is in the areas of health and science education. She notes that Minnesota has been in the forefront in finding ways to be strategic in doing philanthropy and adds, "All corporate funders talk about strategic philanthropy, and good strategic philanthropy is, first and foremost, good philanthropy and, second, strategic for the company," says Hunt.

For St. Paul Travelers that good strategy often comes in the form of annual operating support, built on relationships that have developed over time and are important to both the business and the community. Pickard calls it an investment in community.

"Business is critically dependent on healthy infrastructure, which includes nonprofit institutions that do important work, leaders who lead these organizations and the sum of the people through this work who become civically engaged," Pickard observes. "We provide ‘venture capital' as organizations start up to build emerging leadership and support new ideas in the community. We then provide operating support to grow and sustain leadership so organizations can do what they are chartered to do."

A new reality is the changing role of government, resulting in communities being more dependent on the philanthropic community for its needs. Cirillo of 3M notes that the relative resources for nonprofits through government compared with foundations and corporations are "hundreds to one." As governments trim budgets and avoid tax increases, those most in need are most affected.

"While many private and corporate foundations have in their guidelines objectives to support the underserved and the neediest, it should be made clear that the scale of government cutbacks ca never be remedied by foundation or corporate giving," says Cirillo.

Visibility for Community Projects

Another trend in business giving is the use of company funding for visible community projects. Medtronic, for example, recently announced its sponsorship of the Twin Cities Marathon, now the Medtronic Twin Cities Marathon.

"Although the marathon sponsorship is not funded by The Medtronic Foundation, the foundation will support the sponsorship with community outreach and grants to schools, parks and other programs — all related to Medtronic's healthy kids initiative," says Hunt. "We can create more holistic programs that have a foundation effort as well as corporate funding, integrating the work of philanthropy throughout the activities. The creativity involved is great fun and we think the community will benefit from the new partnership."

Hunt also notes that companies are becoming more interested in getting recognition for the grants they make. She doesn't see this as a negative because funders should be proud of what they do. Visibility enhances nonprofits and the work they do, she notes.

As corporations gain visibility externally for community giving, they are also focused on communicating internally. Hunt says, "We spend a lot of time on the visibility of our giving within the corporation, particularly so employees take advantage of employee-based programs like Matching Gifts to Education and Time N' Talent programs." She has seen greater engagement among senior management in telling the Medtronic giving story when they meet with employees around the world.

Growth of International Giving

Over past decades, a focus had been on giving nationally and in non-headquarters communities, which have garnered percentages of overall company giving. Now, with globalization, more corporations are reaching out internationally, and the growing focus is on giving originating from global offices of multinational firms.

Cirillo notes two international giving mechanisms: working through organizations located in the U.S. with capability for delivering services around the world, such as CARE International, and working with 3M subsidiaries around the world."The first type of international giving is reported as U.S. giving. We depend on the international services organizations to provide the expenditure responsibility — substantiation that the money is being used by the people intended, for the purpose intended and for the results intended," says Cirillo. "The second mechanism is controlled by the subsidiary, and its managing director reports the giving from that nation and assumes expenditure responsibility."

Cirillo notes that international corporate philanthropy has become a two-way street. The South Asian tsunami drew significant contributions from U.S. corporations. Hurricane Katrina was the first major case of non-U.S. corporations contributing large amounts of disaster relief into the U.S.

Focus on Community Building


	A Best Buy store employee helps a student learn how to use a new technology from their te@ch award. Photo courtesy Best Buy

Last year's unparalleled disaster relief was a lesson in the importance of relationships in community building, according to Pickard of St. Paul Travelers. "One thing we learned from dealing with disasters is the absolutely critical importance of grassroots efforts, both short-term and long-term," Pickard says. "It makes the difference. It's about sharing and the habit of working in community together."

Since the early 1980s, St. Paul Travelers has funded afterschool programs to help young people of color be successful in school. That work has expanded to include K-12 teachers training and recruitment, kindergarten readiness, and in-school tutoring and mentoring by employee volunteers. A focus today is on helping young people in urban communities matriculate into college and graduate from post secondary educational institutions.

Investments in leadership and community infrastructure result in a web of services and amenities that make our communities what they are, according to Pickard. Over time, the leadership and infrastructure that comes from building community together creates resilience in our community. "When something bad happens, if the community fabric is in good shape, like muscle memory, it will rebound more quickly," she notes. "As we build our connections to each other, we can be more effective and create a stronger fabric."

St. Paul Travelers maintains a commitment to site visits because it is an opportunity to create relationships. It is a time to provide counsel, offer suggestions and listen and learn. Pickard notes that a recent site visit by an employee prompted a call from the nonprofit leader in Los Angeles who was "ebullient" and inspired that the company cared about what she did. The employee was equally inspired to see the impact of her work.

Pickard concludes, "If we look at what a company has to offer, it's not all about money. We have in-kind resources, leadership and facilities. We have employee volunteers and employees who serve on nonprofit boards. And we collaborate with government, with nonprofits and with their partners for a common good." GF

More Information from the Spring 2006 Edition of Giving Forum

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