Establishing a Corporate Giving Program

Promoting the greater good can also advance the bottom line

Genesis of a Giving Culture
In 1858, at the age of 12, William G. Howard lost his left arm to a McCormick Reaper. No longer able to farm, he returned to school as the only student to study beyond the eighth grade. Neighbors pooled their money and sent him to Kalamazoo College. After earning the privilege to practice law, William returned home to serve the community of friends who had supported him in his time of need.

After William’s son and grandsons joined the practice, Howard & Howard’s culture of giving continued to evolve. The firm pursued unpopular causes such as the Kalamazoo desegregation case, took pro bono cases and matters by court appointment, encouraged community service, and supported charitable causes.

Like most organizations at the time, our financial contributions followed the “checkbook charity” paradigm. We made contributions on an ad hoc basis to what we believed were worthwhile causes without focusing on accountability, efficiency, outcomes or advancing the business interests of our organization. Like many small and mid-sized companies, we failed to recognize the opportunities offered by a focused program of targeted giving.

As the business of law became more sophisticated and competitive, our giving philosophy evolved into a formal corporate giving program (CGP). In 1986 we established the Howard & Howard Community Reinvestment Fund (H2CRF). The H2CRF is an employee-funded, donor-advised fund, administered by a community foundation. The program maximizes our human capital and financial resources, enhances job satisfaction, aids in employee recruitment and retention, increases brand awareness, and promotes profitability. Since its inception, the H2CRF has distributed nearly $3 million to not-for-profit organizations that are important to our employees, clients, prospects and referral sources in the communities we serve.

CGP Program Structure
Giving programs can take on many forms and be funded in several ways. A well-run United Way campaign always offers a good introduction to the giving community. The most effective campaigns fully utilize the promotional resources of the United Way staff and volunteers to educate employees about the myriad of giving opportunities and the impact each employee can make on the community. A matching grant program consistently increases employee involvement and plays a critical role in maximizing participation.

A formal program to encourage volunteerism also serves a vital role in many CGPs and directly promotes the business interests of an organization. Some organizations loan employees to specific organizations for discreet projects or extended campaigns. Some include more general volunteering obligations as components of job descriptions and performance appraisals. Some compensate employees who volunteer for causes that advance the company’s interests in the form of salary increases, bonuses, gifts and time off work. Some make financial contributions to organizations for which employees volunteer. Most acknowledge employee volunteer contributions through internal communications, newsletters, bulletin boards and websites. All successful organizations recognize that community service fosters the relationships that drive business development and creates leadership development opportunities for employees.

Another giving model is the direct giving program. In this model, the organization funds charitable gifts and takes a direct tax deduction, subject to IRS limitations. Sponsorships and gifts that do not qualify as charitable contributions may nevertheless be deducted as business expenses when computing corporate income tax obligations.

Many large organizations establish a corporate-funded foundation that operates as a distinct entity with an independent board of directors. This model is generally too complex and expensive for small and mid-size companies to administer.

Such organizations, like Howard & Howard, are better served by establishing a donor-advised fund administered by a community foundation or other third party that, for a modest fee, assumes responsibility for satisfying tax and regulatory requirements. A donor-advised fund may be funded by employee contributions, company contributions or a combination of both. Under this model, the company makes recommendations for gifts from the fund to the third-party administrator, who is free to accept or reject each proposal. As a practical matter, assuming the recommendation is to a 501(c)(3) organization, the foundation funds it. The donor-advised fund model has served our philanthropic needs well.

Establishing the Decision-Making Process
Determining who decides what to give, to whom and why is critical to a successful CGP. Some companies charge a single corporate giving officer with responsibility for making the business case to the CEO for recommended gifts. Other companies enlist a committee to make such recommendations. Some, like Howard & Howard, with multiple office locations, establish an allocation committee comprised of senior management and representatives of each location who make recommendations to the committee based on the consensus of the employees at each particular office. In our experience, an effective CGP benefits from a large and diverse allocation committee.

A successful CGP also includes specific themes and rules that govern distributions. This approach focuses giving and maximizes the overall impact of charitable dollars. For example, a company that may be perceived as contributing to environmental problems may adopt a “karmic credit” approach and target “green” projects to offset these perceptions. A company that uses recycled products might focus on projects encouraging recycling. At Howard & Howard, we focus our giving to organizations that benefit children, education and the arts.