These Companies Are Giving Money Away

Times are clearly tough. Our stock market lost more than a third of its value in 2008. We're looking at national unemployment rates near 10%, and companies have been reducing dividends at a rate not seen in more than 50 years. So, are companies cutting back on their charitable giving? Well, actually, many are not!

According to the folks at the Committee Encouraging Corporate Philanthropy (CECP), who surveyed 140 corporations, 53% of respondents upped their giving during 2008, down a smidge from 56% who did so in 2007. And these increases were often substantial, too, with 27% bumping up their donations by 10% or more. The median annual giving totaled almost $31 million.

You might assume that the 53% were companies that fared rather well during the downturn. But no -- among firms with pre-tax profits down in the period, fully 51% still upped their giving.

Good or bad?
So, that's all good news, right? In many ways, yes, absolutely. There is clearly a lot of need in the world, and corporations tend to have a lot of money.

But there's a dark side to corporate giving: The money that companies donate isn't really the CEO's money to give -- it belongs to the shareholders, who rarely have a say in where the money is sent. Berkshire Hathaway's (NYSE: BRK-A  ) (NYSE: BRK-B  ) Warren Buffett and Charlie Munger recognized this long ago and set up a system whereby their class-A shareholders could each direct where their portion of the company's annual gift would be sent. If you owned some A shares, you could have a donation sent to the charity of your choice.

The status quo is not all bad, though. Corporate philanthropy has its benefits. It can boost a company's reputation, for example, warming the hearts of customers. This year, for example, you might be impressed to learn that CECP gave its "Large Company Award" to Western Union (NYSE: WU  ) for its $50 million, five-year commitment to spreading education and economic opportunity. Merck (NYSE: MRK  ) won the award when it was first offered in 2000, and other past honorees include Cisco Systems (Nasdaq: CSCO  ) , General Electric (NYSE: GE  ) , and IBM (NYSE: IBM  ) , among many others.

Learn more about how companies can do well by doing good:

Longtime Fool contributor Selena Maranjian owns shares of General Electric and Berkshire Hathaway. Western Union and Berkshire Hathaway are selections of both Motley Fool Stock Advisor and Motley Fool Inside Value. The Fool owns shares of Berkshire Hathaway. Try our investing newsletters free for 30 days. The Motley Fool is Fools writing for Fools.


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  • Report this Comment On June 24, 2009, at 4:55 PM, ForAmusementOnly wrote:

    Sadly, Berkshire Hathaway ditched their program for "A" shareholders to direct where the corporation would donate money a half-dozen years ago. It was one of those unfortunate situations where some vocal opponents of where some of those contributions went, were able to "put the squeeze" on a Berkshire subsidiary. So the end result? Berkshire still donates money, but the shareholders no longer get a say in it.

    http://www.berkshirehathaway.com/news/jul0303.pdf

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