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Corporate philanthropy's balancing act: charity vs. PR

Corporate foundations want charitable dollars to do double-duty: one is community betterment, a selfless goal; the other is public relations, a self-serving goal.

In 2006, Minnesota's top 25 corporate foundations gave approximately $100 million to nonprofit organizations in the state, according to the Minnesota Council on Foundations. That's a sizable sum with a definite impact for nonprofits.

But when all the giving shakes out, does corporate philanthropy address pressing needs or simply finance feel-good initiatives that help polish corporate images? As long as the money goes toward worthwhile projects, does it matter how it's spent?

Can corporate foundations effectively serve two masters — the selfless one and the self-serving one?

The questions aren't new, but they surfaced at two recent nonprofit events.

'Public' and 'strategic' philanthropy

Jay Kiedrowski, senior fellow at the Humphrey Institute's Public and Nonprofit Leadership Center, discussed the need for "public philanthropy" at a late May event: "The State We're In: Fulfilling Human Service Needs in a Time of Economic Uncertainty."

Kiedrowski said a lot of philanthropy is focused on special interests — the interests of the donors and foundation boards. He questioned whether that type of philanthropy effectively addresses core public needs.

"I think some of our philanthropy is going to nice things," he said. "But I think we have, in today's environment, far more significant core needs of our society that are being unaddressed or inadequately addressed."

The next day, David Etzwiler, executive director of the Medtronic Foundation, spoke about "strategic philanthropy" at the Minnesota Council of Nonprofit's Philanthropy Leaders Breakfast.

In 2006, Medtronic Foundation ranked second among Minnesota's corporate foundations in total grants: $37 million-plus, including $9.5 million in Minnesota.

Etzwiler discussed finding the balance between doing "good" and "improving our business context." He called it corporate philanthropy's "sweet spot."

Medtronic Foundation supports the Teach for America's Math and Science Seminar, which attracts some of science's best and brightest. "There is a great benefit for having them understand who we are as a company," Etzwiler said.

HeartRescue, which receives grants from Medtronic, brings attention to sudden cardiac arrest. Since Medtronic sells defibrillators, that donation has a business context. Medtronic also supported the Public Broadcasting System's "Mysterious Human Heart" series, an opportunity to reach stakeholders.

"It is great philanthropy, and it is great strategy," Etzwiler said. "It gets to brand and visibility. That is part of what I take back to the corporation and say, 'This all fits together extremely well.' "

Pushing the discussion forward
It's probably too much to think that corporate foundations would engage in old-fashioned, anonymous philanthropy.

Bill King, president of the Minnesota Council on Foundations, says people will differ on what is a top priority. Philanthropy is voluntary, based on a donor's interests, he said. "For one group to say that my issue is more important than your issue, that is a matter of opinion."

Still, I have a nagging question about strategic philanthropy.

Say I donate to a charity and it sends me a monthly magazine. When I itemize my deductions, the Internal Revenue Service says I need to subtract the magazine's value from my charitable gift.

Say a corporation makes a donation that helps the community but also meets strategic corporate goals. Does that "strategic investment" revert to taxable income, like my magazine?

The IRS tells me the same rules apply. However, it also says donations that get building naming rights are still charitable — the benefit is considered "tenuous and incidental."

That seems like a stretch to me, but contributions that don't meet the charity test can probably get knocked off the bottom line as a business expense.

Enough of tax law. Simply give Etzwiler and Kiedrowski credit for elevating the issue of "public" and "strategic" philanthropy.

They both are in good positions to raise questions. Etzwiler is a board member of MCF, and starting this year, for the national Council on Foundations.

Kiedrowski says the Public and Nonprofit Leadership Center would like to hire a senior fellow to research philanthropy and engage the giving community.

"The state of Minnesota is well-known for its philanthropy. We think we should have somebody in partnership with the foundations really looking at it in a scholarly and a practical way," he said.

How will it get funded?

"We are going to the foundation community," Kiedrowski said.

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Comments (2)

Really good question, Scott and one that I've never heard seriously debated (reflecting upon whether corporate donations that also accrue "marketing or brand" benefits back to the corporation qualify for full deductibility. ) I wonder if Target would care to comment on that one?

slh

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