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The Corporate Givers


Last fall Pfizer Inc (PFE) pharmacist Dennis Vargo left his wife and two sons in East Lyme, Conn., for a three-month stay in Kampala, Uganda. Pfizer footed the bill for the trip and paid him his full salary. In Uganda, Vargo, 50, worked for an aid group at Makerere University Faculty of Medicine and lectured on how different drugs affected patients. He advised entrepreneurial students about starting pharma companies of their own. Every Wednesday afternoon, Vargo led students on rounds of a nearby clinic to observe patients suffering from diseases that had become curable in the U.S. decades ago. Says Pfizer Corporate Affairs Senior Vice-President Robert Mallet: "People have called on multinationals to be stronger partners in the Third World, and we've accepted."

Vargo is one of Pfizer's Global Health Fellows, a group of 30 skilled professionals -- from business experts to scientists -- that Pfizer has loaned to aid groups in developing countries for up to six months. Informally dubbed "Hank's Peace Corps," the program started last year when Chief Executive Henry A. McKinnell Jr. decided to use the company's greatest resource -- its braintrust -- to address public health problems. The program pays Pfizer some hefty dividends. Global Health Fellows builds employee morale and polishes the company's reputation. And Pfizer's efforts produce some undeniably positive social results: Last year, Vargo trained all of the 18 students who went on to form Uganda's annual class of new pharmacists.

Global philanthropy is one of the hottest U.S. exports these days. Intel Corp (INTC). now has computer clubhouses providing Internet access and technology training to children in 32 countries, including South Africa, India, and, in the West Bank, the Ramallah Clubhouse. Avon Products Inc. (AVP) provides breast cancer programs to 50 countries, sponsoring research, donating medical gear, and subsidizing mammograms. This year, General Electric Co. (GE) pledged $20 million to construct 11 hospitals in Ghana. Total corporate giving abroad rose 13.82% from 2002 to 2003, according to the Conference Board's annual report on corporate contributions. International programs now account for 16% of U.S. corporate giving.

LESS DISTANCE

U.S. companies have more reason than ever to fund charitable causes overseas. For one, that's where much of their new business and production is headed. At least 22% of corporate revenues come from abroad. Showing a friendly face in Uganda, for example, can help when they start selling their wares there or hire a local workforce. Activists, meanwhile, empowered by the Web, have ratcheted up pressure on companies to address social issues. And with the rise of anti-American sentiment abroad, there's a sense that the problems of the rest of the world can no longer be held at a distance. Says Gap (GPS) Foundation Vice-President Dotti Hatcher: "Our backyard is increasingly larger."

Altruism only goes so far in the executive suite, of course. Many CEOs subscribe to economist Milton Friedman's creed that the job of business is to make money for shareholders, who can decide for themselves which causes to underwrite. Total cash donations made by Standard & Poor's 500-stock index companies that weighed in for BusinessWeek's second annual survey of the top corporate givers totals $3.26 billion. The top five individual givers alone gave $6 billion.

For BusinessWeek's second annual Survey of the Top Corporate Givers, we again asked S&P 500 companies to report their charitable contributions. As expected, some of the largest gave the most: Wal-Mart Stores Inc. (WMT) is again our overall top giver, having hiked its 2003 gifts by 13% over 2002, to $176 million. Also ranking in the top five a second time were Ford Motor (F) ($120 million), Altria Group (MO) ($114.9 million), and Exxon Mobil (XOM) ($97.1 million). Johnson & Johnson (JNJ) ($99 million) joins the elite class this year. To more accurately gauge generosity, BusinessWeek then ranked companies based on a ratio of their gifts to their revenues. Top cash givers on this basis were mining companies Freeport-McMoRan Copper & Gold (FCX), glass maker and telecom giant Corning, and beauty-supplier Avon Products (GLW). Top in-kind givers -- that is, those who donated products and skills -- were hospital chain HCA (HCA), biotech company Genzyme (GENZ), and pharmaceutical giant Merck. (MRK)

One-quarter of the 203 companies that disclosed their philanthropic practices told BusinessWeek they have international giving programs, many of which grew significantly this year. Nike Inc. (NKE), for example, has increased its global gifts to 39% of overall contributions, from 20% in 2000. Citigroup (C) has lifted its global giving to nearly 30%, roughly in line with the percentage of revenue it pulls in from abroad and up from 20% in 2000. IBM (IBM) has boosted its global contributions to 30.4%, from 12.4% in 2000. That share is expected to hit 40% by 2006.

Many companies reported that their philanthropy helps in their profit-making mission by giving workers access to better health care, building employee loyalty, and burnishing the company's reputation. Take No. 10-ranked Citigroup, which has increased its support to micro lenders in developing countries over the past five years. In India alone, the company has provided grants for small loans to 900,000 women. As Citi positions itself to be the banker of choice globally, it is already building a name for itself in the developing world. In addition, CEO Charles O. Prince is trying to clean up Citi's image after highly publicized regulatory problems this year in London, Tokyo, and elsewhere. Philanthropy plays a starring role, says Citigroup Foundation President Charles V. "Chip" Raymond: "It's critical to helping us."

BAD (AND GOOD) NEWS TRAVELS FAST

Executives see this type of philanthropy as a form of social insurance in an era in which bad news about a company can circle the globe in a heartbeat. Hasbro (HAS) Chairman Allen G. Hassenfeld says that if something goes wrong at the factories that make his toys, activists will use the Internet to make sure shareholders and customers know about it before he does. Philanthropy increases the chances that customers will think of the company as a good corporate citizen, softening any potential blow to its reputation. For Hasbro, which gave $5.2 million last year in cash and products, that means years of offering grants for childhood health care and education and giving toys to needy kids.

Like Hasbro, many companies find that successful philanthropy requires going beyond monetary gifts to embrace a cause and make a visible impact. Indeed, 88% of young people say they believe companies have a responsibility to support social causes, according to data to be released on Dec. 1 by research group Cone Inc. Some 86% say they'll switch brands to another associated with a social issue. "Writing checks is not enough," says Steven A. Rochlin, director for research and policy development at the Center for Corporate Citizenship at Boston College. Thus, businesses increasingly publicize charitable endeavors through cause-marketing campaigns as well as in their annual reports.

"GREENWASHING"?

Companies are also getting more strategic about their gifts of products and skills. Years ago, in-kind gifts referred mostly to unused products. Now some companies are harnessing their core competencies to solve social problems. Last December, IBM (IBM) launched its global on-demand community, an Intranet site that allows IBM volunteers to access company technologies for volunteer projects, such as rewiring a child's classroom. The payoff: Volunteers become walking billboards for the company.

These projects also build employee loyalty and attract potential hires. A Deloitte & Touche survey says 72% of job seekers prefer to work for a company that supports a social cause. Some 85% of BusinessWeek survey respondents say employee morale is one of the main reasons for their philanthropic giving. "There's a war for talent, and [philanthropy] is about being competitive," says Reeta Roy, Abbott Laboratories' vice-president for global citizenship and policy.

In some industries, philanthropy is the price companies must pay to conduct business. Consider Newmont Mining Corp., the world's biggest gold producer and No. 4 on our list of cash givers. Indonesia alleges the company illegally dumped contaminated waste from a nearby mine into the ocean and sickened villagers. Activists call Newmont's community-development initiatives, launched under a pact with the Indonesian government, "greenwashing." They ask how projects such as eight elementary schools Newmont has built for villagers can offset the depletion of natural resources or the health hazards of improper waste disposal. A Newmont spokesperson denies having harmed villagers but concedes: "We're not perfect. But we strive to do the best we can, and we try to work with the local community as partners."

There are further practical reasons. Companies that hope to attract customers and workers in the developing world often are faced with poor health care and education. Improving those institutions through philanthropy can help lay the groundwork for future business opportunities. And true to the spirit of philanthropy, they pay impressive social dividends in the process.

By Jessi Hempel and Lauren Gard

With Michelle Conlin, David Polek, and Joshua Tanzer in New York


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