CEOs roundtable discussion: Does giving pay?

updated 10:48 a.m. ET April 22, 2008

According to the Committee Encouraging Corporate Philanthropy (a group of top business executives advocating greater giving by corporations) less than 1 percent of corporate profits, on average, go to charity and philanthropy — even amid stepped-up talk by business groups, from The Conference Board to the U.S. Chamber of Commerce, that companies ought to do more. But there is no consensus: roughly one-third of the 34 CEOs surveyed in 2007 by the CECP and Reuters News Service said corporate boards already spend enough time on the subject of corporate giving — about 5 percent of their time, on average. There have been signs of change since 9/11. Corporate giving, overall, has been on the rise in some quarters: the nation's 81 largest companies increased their giving by an average 6 percent in 2006, according to a survey by The Chronicle of Philanthropy. Meanwhile, corporate giving has become more strategic, more focused on the win-win for the business bottom line than ever before. Indeed, more companies—from drug firms to consumer products corporations—are paying for some of their philanthropic initiatives out of their marketing budgets. But is it enough? To discuss the latest trends in corporate giving, CONTRIBUTE Editor-in-Chief Marcia Stepanek convened a roundtable of six chairmen and CEOs in midtown Manhattan. The participants—all members of CECP's board—included: Jean-Paul Garnier, CEO of GlaxoSmithKline; Alan G. Hassenfeld, chairman of Hasbro, Inc.; Arthur F. Ryan, chairman and CEO of Prudential Financial, Inc.; Michael I. Roth, CEO of The Interpublic Group of Companies, Inc.; Peter L. Malkin, chairman of Wien & Malkin LLC; and Robert H. Forrester, who is both chairman and CEO of Payne, Forrester & Associates, LLC, and the vice chairman and chief operating officer of Newman's Own Foundation.What follows is an edited transcript of that conversation.

The survey numbers are in and once more, Corporate America is getting slapped for spending too few dollars as a share of its profits on philanthropy. Your own group, the Committee Encouraging Corporate Philanthropy, says that share comes to less than 1 percent of profits, on average. What's up here? Isn't philanthropy good for business?

Dan Demetriad / Contribute magazine Michael I. Roth

ROTH: In the past, there was always the question in the corporate environment of whether the duty to the shareholder to make profits was consistent with the philanthropic notion. You know, you'd always run into shareholders who said, "I'll decide where the contributions go, I don't need the company to do that. Just distribute the dividends and I'll make the contribution." We're now seeing a lot more inquiries, including from people we're trying to recruit, asking us, "Does your company stand for something other than [profits] and how could I, as an individual working for your company, participate in that perspective?" So I think the old viewpoint is starting to evolve to a point where being a good corporate citizen is not necessarily inconsistent with being a well-run business.

GARNIER: I agree. In our case, the issue of employee recruitment is particularly important. We try to recruit the best scientists in the world. Many of them are idealistic. They want to join a company that does much more than just meet financial guidelines every quarter. They want a company that has a human face, and philanthropy is that face. Shareholders get it. We invested last close to $600 million of our profits in philanthropy [in 2006], and I haven't had any criticism from them. They understand that philanthropy and reputation go together, and companies with good reputations make their shareholders rich.

HASSENFELD: The late economist Milton Friedman always said that the business of a company is the bottom line. But I think he'd agree that people really are looking at the softer side of a company now if they're going to invest in it.

Is there a Top Ten list of causes that are of particular interest to those you wish to recruit?

RYAN: No, I think it's pretty diversified. We use philanthropy to both encourage employees but also to get them committed back to us by supporting causes they back. But I'd like to add that I think more of us in business now believe that we can help solve some of these social problems. I, for example, have spent a lot of time in education, especially K-12, and for years, it was, well, You guys just want to recruit people who are automatons to go in and do what your company wants them to do. Virtually every survey we look at now says that the skills to be successful in higher education and the skills needed to be successful in business are identical. You need analytical skills and you need to understand technology—whether you work on the factory floor or whether you work in the marketing department. Business can do a lot more than simply give money or educate teachers and so forth. We can work to see results, and use those results to do even more.

As a nation, we've just entered what many say will become a protracted recession. Over the past year, how has the economic climate clouded corporate philanthropy? Will companies now give even less?

ROTH: Certainly given the concerns about the economy, everyone is looking very closely at various corporate programs. I don’t think you’ll see major cutbacks in the normal sustainable programs that corporations have been involved in, such as in our own industry's pro bono public service announcements, for example. But the spot contributions—the cash contributions—are the ones that I think companies might take a closer look at now, given the issues surrounding the economy.

Do you think companies will give more to global causes than to domestic ones?

ROTH: I think some of the big global companies are more likely to put global programs in place or expand the ones they've got. A big trend now is for larger global companies to expand their global footprint, and the whole notion of philanthropy is expanding to a more global perspective. Will more corporate money go to global efforts versus domestic ones? Certainly volunteerism and in-kind giving are part of the existing programs that many global companies currently have and will be likely to sustain. Cash has always been an important component of corporate giving, of course. But when the economy is tight, it might be easier to do a volunteer program or an in-kind program.

When corporate philanthropy is discussed, there is often a reference to the "post-Enron world." In surveys, Corporate America still isn't getting a lot of points for public trust. Can philanthropy have an impact on turning that around?

Dan Demetriad / Contribute magazine Alan G. Hassenfeld

HASSENFELD: First of all, there is a real difference between philanthropy and corporate responsibility. And I think some people are confusing the two. Philanthropy is just one of the legs of this idea of corporate social responsibility. Assets, human rights, environment, codes of conduct—all of those things go into the stew that makes up CSR. And I think that many times (and it's beginning to get me angry), people are giving a lot of money and hoping it will give them a good name. Was Enron philanthropic? Yes. Were they corporately socially responsible? No.

Now, believe me, I'm neither a socialist nor a lunatic, but some of the greed in the CEO area we have seen in recent years—some of these pay packages—have not struck me as being corporately socially responsible. The companies giving out these big pay packages, in many cases, are very philanthropic, but I'm wondering about their corporate social responsibility when I see these types of packages allowed by a board. I’m causing trouble right now, aren’t I? [laughter]

Please continue.

HASSENFELD: I guess what I’m saying is that I'm passionate about philanthropy but not for some of the same reasons that maybe other people are.

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