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The Downsizing of Corporate Philanthropy

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There is a dark side to the corporate downsizing that is going on in this country which has been unrecognized by politicians, policymakers, and ordinary citizens.

In the early stages of corporate restructuring, a strong case was made for the removal of excess layering and for the streamlining of decisionmaking, product development, and marketing. More recent downsizings create quite a different picture.

Caught up in the psychology of short-term profit increases, many companies are eliminating some of the functions and people most responsible for creating and maintaining their roles as corporate citizens.

This trend may have started late in 1993, when new management at RJR Nabisco sought both to restructure the company and to remove the corporate-citizen image of the previous chief executive officer, Louis V. Gerstner Jr. The result was the dismissal of almost the entire staff of the RJR Nabisco Foundation and the halting of any further work--including the evaluation--of RJR's Next Century Schools program.

On the heels of this development, the Atlantic Richfield Company last summer downsized its foundation, dismissed most of the staff, and substantially curtailed its financial philanthropy. (See Education Week, 9/7/94.) Actions last fall by Unocal Corporation and Merck & Company Inc. reveal that this trend continues and may be accelerating. These actions have had an impact on the corporations' community-relations obligations, including those related to school reform. And consistently, those of us who rely in part on corporate philanthropy are being told that companies are putting their giving on hold while they reassess, restructure, and reorder their priorities.

These three R's of corporate giving are resulting in a refocusing by corporations away from national, umbrella organizations and programs. Instead, companies are tying their philanthropy to communities where they operate. Company employees volunteer locally--tutoring children and adults, working in health-care facilities, and participating in arts and environmental projects. They channel their companies' charitable dollars to fund the agencies, schools, and museums that they support as volunteers.

This trend is extremely helpful to local organizations providing front-line services, but it is a decided disadvantage to organizations concerned with national policy, research, and technical assistance. While it is vitally important for corporations to support local organizations, organizations with a national perspective need to be supported as well. National organizations provide a depth and breadth of experience, often serving as catalysts for change in national as well as local programs.

In the current economic climate, however, even local philanthropy is not immune from downsizing. Besides the drive for short-term earnings, the corporate climate has changed radically. We have a crop of mobile corporate executives and managers. It is becoming the exception when corporate decisionmakers have been lifelong residents of the communities in which they work. Their investment in their communities may be transitory, and the recipients of support may change with each new crop of managers. Contrast this with the pattern of corporate-community leadership that was practiced as communities developed throughout the 19th and much of the 20th centuries.

Moreover, the phenomenon of corporate mergers and takeovers has gobbled up countless "hometown" industries and corporations. Pittsburgh lost Gulf Oil Corporation; San Francisco lost Weyerhaeuser Company; and Hartford, Conn., has lost more than one major insurance company.

The irony in the trend toward philanthropic retrenchment is that it comes at a time when we have elected a Congress and a majority of governors and state legislators committed to a long-overdue reduction of government. With the same breath that makes the pledge to downsize government comes a plea for the private sector--philanthropies, corporate-giving offices, and nonprofit agencies--to pick up the resultant slack.

If the portrait of corporate philanthropy appears bleak, it is; but it is not hopeless. There are of course exceptions. Several major corporations--American Telephone and Telegraph Company, BellSouth Corporation, CitiCorp, Exxon Corporation, the Procter & Gamble Company, and United Parcel Service of America Inc. (to cite a few)--have maintained and even expanded their commitments.

As Congress considers tax reductions and tax-code changes, it would do well also to consider adding incentives for companies to maintain and expand their role as philanthropic citizens concerned with the common good. Corporate boards should be asking tough questions of management about their philanthropic activities and commitments. The Securities and Exchange Commission, stock exchanges, and investors should not penalize companies for fulfilling their good-citizen functions and should design ways to honor exemplary performance.

If positive actions are not taken, the result will be a considerably weakened nonprofit sector and communities where committed corporate leadership is but a dim memory and effective corporate leadership and leverage for change are vanishing. If that occurs, we will all be losers, and children will suffer the greatest losses.

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