The Best Use for Corporate Cash

Corporate America has gotten a terrible reputation lately. Many blame Wall Street greed for the economic difficulties we've all suffered through in recent years, and corporate excess in compensation is well-documented.

But despite all the ill will that businesses generate as they seek to maximize their profits, many companies make huge contributions to help the communities they rely on for their well-being.

Big money

We're not just talking chump change, either. Here's a list of the top 10 corporate grant-making foundations, by the amount they gave in their most recently reported year, according to the Foundation Center:

Corporate Foundation

Amount of Giving

sanofi-aventis (NYSE: SNY  )

$321.4 million

Wal-Mart (NYSE: WMT  )

$216.6 million

Bank of America (NYSE: BAC  )

$186.1 million

General Electric (NYSE: GE  )

$97.6 million

Wachovia/Wells Fargo (NYSE: WFC  )

$93.2 million

Citigroup (NYSE: C  )

$91.9 million

JPMorgan Chase (NYSE: JPM  )

$77.1 million

ExxonMobil

$73.5 million

Wells Fargo

$68.4 million

Lucasfilm

$63.7 million

Source: Foundation Center.

Moreover, those figures only include the money given by the corporate foundations themselves. In many cases, business owners set up their own individual foundations, such as the Bill & Melinda Gates Foundation.

You know firsthand the benefits that individual and family giving have, both on your personal finances and your community. But corporations aren't people and so don't have the same reasons to give. What motivates corporations to make such massive charitable contributions?

Everybody wins
Obviously, corporations expect to get something back when they make charitable gifts. Since corporations have duties to their shareholders, spending millions on something that doesn't provide tangible benefits is an invitation to a shareholder lawsuit.

But looking at corporative giving as just a waste of shareholder money misses the point. Even though that money costs the company in immediate profits, the gifts that companies make within the communities they call home make potential customers more tolerant of their profits. Without those good deeds, you'd see many more initiatives aimed at curbing corporate greed.

What it means for companies
Simply put, companies help themselves by making smart charitable gifts. Giving programs can:

  • Inspire customer loyalty. If your customers believe in a particular cause, supporting it will make them want to do business with you.
  • Make employees feel important. Workers want to be with a company that makes a difference in their community.
  • Make potential workers smarter. Skilled workers are harder to find than ever, so companies have to take steps to build skills within their local communities that will help them find good employees. That's a smart investment, even if it takes years to pay off.
  • Make a difference locally. Often, how a business interacts with local government and business groups makes a huge difference in its ability to succeed. Even the largest companies depend on each of their local markets to get the job done for the entire company.

Why corporations need financial literacy
That last point ties into what we're doing this year in our 2010 Foolanthropy campaign. Just as many businesses concentrate their efforts on promoting charitable work in the areas they serve, we're encouraging Fools to donate their time to a worthy charity in their local communities. Here at Fool HQ, we've once again chosen Thurgood Marshall Academy, a D.C.-based charter school, as the focus of our time and attention.

And, there's still a way you can help from afar -- for every comment you make on this or any Fool article throughout the campaign (Nov. 29 to Jan. 7), we'll add another $0.10 to our campaign pledge. At the end of the campaign, we'll give the entire amount -- up to $20,000 -- to the school. In addition, Fools have already taken advantage of various volunteer opportunities since we first chose Thurgood Marshall last year, as well as teaching financial literacy workshops to students and parents.

As you're looking at companies as potential stock investments, don't forget to look at their corporate charitable giving programs. Those programs can generate a huge positive impact, along with goodwill that can translate into big profits over the long haul.

To learn more about Thurgood Marshall Academy, or to make a donation, you can visit the TMA's website here.

Fool contributor Dan Caplinger has worked with charities for more than 15 years. He doesn't own shares of the companies mentioned in this article. Wal-Mart is a Motley Fool Inside Value selection and a Motley Fool Global Gains recommendation. The Fool owns shares of Bank of America, ExxonMobil, JPMorgan Chase, and Wal-Mart. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy helps keep it real.


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