ARCO Cuts Unsettle Corporate-Giving Field

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The sudden firing of the president and most staff members of the Atlantic Richfield Company's foundation has underscored the vagaries of business philanthropy in an era of corporate downsizing.

The move last month also raised uncertainty about ARCO's role as one of the leading contributors to education-reform projects in Los Angeles, the company's headquarters.

The dismissal of the ARCO Foundation's longtime president, Eugene Wilson, a national leader in the corporate-giving field, shocked many officials in the world of philanthropy.

"This is very disturbing," said Diana W. Rigden, the vice president for precollege programs at the Council for Aid to Education. "It reflects a real backing away from a serious commitment to education."

A strong supporter of K-12 education and minority-achievement programs, ARCO was recently rated the number-one contributor to minority and ethnic populations in a study of the nation's 25 top for-profit corporations.

A company spokesman dismissed speculation that ARCO will make drastic cuts in giving following the staff cuts at the foundation.

"We are committed to this community, and unfortunately there was a misperception that ARCO is backing away from its role as a leading contributor to programs and causes," said Albert Greenstein, the spokesman. "That is not true."

He said it was too early to tell whether, or by how much, ARCO's grants budget would shrink.

In 1993, the foundation gave away $12.5 million, down from a high of $37 million a decade ago. Most of the donations go to the Los Angeles area and other parts of the country where ARCO has business interests.

Help for L.A. Reforms

The ARCO Foundation was one of the early backers of the Los Angeles Educational Alliance for Restructuring Now, and over the past decade has given more than $1 million to the Los Angeles Educational Partnership, one of the nation's largest public education funds.

In recent months, foundation representatives had participated in strategy sessions with Los Angeles educators and community leaders seeking to capture some of the school-reform money available as part of the philanthropist Walter H. Annenberg's $500 million gift to public education. (See Education Week, June 8, 1994.)

"Clearly, the ARCO Foundation has been one of the philanthropic leaders in the Los Angeles community, and Gene [Wilson] had provided personal leadership to that effort," said Theodore Mitchell, the dean of the graduate school of education at the University of California at Los Angeles. "All of us ... are saddened and concerned by ARCO's decision."

"But we also understand that, given the state of the economy in Southern California, this is something we're going to have to deal with."

Although ARCO's giving has declined in recent years, it still ranks among the largest foundations in Los Angeles, said Lon M. Burns, the president of the Southern California Association for Philanthropy.

Mr. Wilson estimated the company will give some $3 million this year to groups in Southern California, most of which are concentrated in greater Los Angeles.

Broader Downsizing

The changes at the ARCO Foundation are part of a larger downsizing at the parent oil and gas company. ARCO plans to cut $400 million from its annual budget and eliminate 3,300 employees.

Earlier this year, the foundation reduced its staff from nine to six. But the latest dismissals caught many by surprise.

Mr. Wilson himself learned the news while en route to give a speech, when he called his office from a pay phone off Interstate 70 in Colorado to check his messages.

Mr. Wilson said he expects to remain at the foundation until the end of December. Stephen J. Giovanisci, ARCO's vice president for public affairs, will succeed him.

The Los Angeles Times reported in July that the entire staff of the foundation would be dismissed, but the company later decided to retain two program officers. "The company has reacted to public concern, and we have revisited that whole issue," Mr. Greenstein said.

As some of the country's top companies continue to downsize, corporate-giving officers must work harder to communicate to senior management "the strong linkage between the work that we do in the community and the lessons we learn for the corporation," said Patricia L. Willis, the president of the BellSouth Foundation in Atlanta.

Ms. Rigden of the Council for Aid to Education and other observers speculated that the cutbacks at the ARCO Foundation were tied to recent changes in the company's leadership.

ARCO's president, Mike R. Bollan, was named the chief executive officer in July, succeeding Lodwrick M. Cook, the chairman and C.E.O. Mr. Cook will remain chairman until his retirement next year.

Mr. Greenstein said the foundation cutbacks were unrelated to the leadership change. "This restructuring has obviously been thought through since the beginning of the year," he said.

Series of Shakeups

Recent shakeups in giving programs have followed a C.E.O.'s departure at other corporations, notably RJR Nabisco.

Under Louis V. Gerstner Jr.'s leadership, the RJR Nabisco Foundation pledged $30 million to pay for the development of innovative schools through its "Next Century Schools" initiative.

After Mr. Gerstner's departure last year for the International Business Machines Corporation, however, most of the foundation's staff and consultants were dismissed. Although RJR will pay out the remaining grants through the program's scheduled end in May 1995, its future commitment to K-12 education is uncertain.

"Our giving is still pretty much on hold," acknowledged Joellen Shiffman, RJR Nabisco's director of philanthropy. "Our focus really is on maintaining and managing those relationships we already have, rather than taking on new commitments."

At the Scott Paper Company Foundation, the manager has been laid off as part of a similar downsizing at the parent company that was accelerated by the new chairman and C.E.O., Albert J. Dunlap. A company spokeswoman said no final decision has been made about the future of grant programs.

"I think the ARCO story makes [foundation officers] nervous because they also worry about how C.E.O.'s influence each other's behavior," Ms. Rigden said.

Conversely, philanthropic initiatives may sometimes follow a C.E.O. to a new company. I.B.M., for example, recently announced plans to significantly boost its giving to K-12 education.

The number of corporations supporting K-12 education may begin to wane over the next few years, said Paul M. Ostergard, Citibank's vice president and director of corporate contributions and civic responsibility.

"Companies that have been funding so-called systemic school reform have found that too many of the large urban school bureaucracies are resistant to change," Mr. Ostergard said.

However, he added, educators may find increased support from healthier sectors of the economy, such as the auto industry or financial-services companies.

"My hope is that corporate giving will begin to increase a little more over all in 1995," he said, "because corporate earnings in many sectors seem to be improving."

Vol. 14, Issue 01, Page 12

Published in Print: September 7, 1994, as ARCO Cuts Unsettle Corporate-Giving Field
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