Wall Street... Generosity?
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Corporate philanthropy held steady last year, according to a new report from Giving USA. Big businesses gave $14.55 billion throughout 2011.
Plot twist: Wall Street accounts for some of America’s most open-handed benefactors. And overall, corporate giving is a total mind trip. Philanthropy’s list of Top Corporate Givers shows that some of America’s most hated companies are also its most charitable.
Wells Fargo (NYSE: WFC), which has a history of generous corporate philanthropy, gave $213.5 million to 19,000 non-profits throughout 2011. Even during the recession, it managed to donate at least $200 million annually.
Bank of America (NYSE: BAC) gave similarly throughout the recession and recovery. Though its website has not yet listed a total sum for 2011, it is in the middle of a 10-year, $2 billion philanthropic program.
Goldman Sachs (NYSE: GS) has come under fire this year for scaling back on giving. It set itself up with a hard act to follow in 2010, donating an impressive $315 million. Goldman Sachs makes no secret that its charitable activities are affected by its earnings-- which is surely more comforting to shareholders than not-for-profits.
Despite its reputation for hurting communities by crowding out small businesses, Wal-Mart (NYSE: WMT) claims it's a "store of community" that supports "more than 100,000 charitable and community-focused organizations."
Likewise, Halliburton (NYSE: HAL) notes that "in 2011, [its] giving totaled $3.9 million, and the company made in-kind donations totaling $1.7 billion mostly in the form of software grants and donations to educational institutions across the globe."
Corporations' charitable donation should be considered in the context of bigger political developments. Wall Street in particular has been a political whipping boy since the recession hit. Mounting expenses for corporations have accompanied the regulatory onslaught. That’s a broad topic, but just look at the most costly new developments. Like Dodd Frank, for starters. The Congressional Budget Office has estimated it will cost lenders and financial companies billions in new fees and assessments. With 400-plus new rules in the works, compliance costs alone are huge.
Moreover, an overzealous Congress has created pervasive regulatory uncertainty.
Given all this, it’s a virtual miracle that corporations are willing to part with cold hard cash, even for a good cause. And even when they do, shareholders may have a problem with it. The idea that corporate philantropy is the equivalent of shareholder theft has bounced around for several years.
Nevertheless, there are myriad ways companies-- and their shareholders-- benefit from philanthropic giving.
The obvious benefits include good publicity, the creation of local-level connections, and tax deductions.
Less predictably, a 2010 study by the City of London found that employees at companies that provide philanthropic opportunities are actually happier and more committed. Many of these big-giving companies encourage their staff to participate, either by creating chances for them to volunteer, or by matching employees' donations. Surprising but true, this helps retain talent.
And as the Harvard Law School Forum on Corporate Governance and Finanical Regulation noted in a blog last year, "contributions can stimulate innovation as grants to universities and other organizations provide companies with new ideas, access to technical expertise, and opportunities for research and development collaboration."
But companies and their investors have another, less obvious reason, to support philanthropic giving: Needy causes aren’t going anywhere, so businesses or individuals can give to worthy causes of their own volition-- or government can do it for them, and with their money. Just watch President Obama’s Life of Julia ad, and you get a pretty good idea of where this ends up.
Corporations may well be wondering if they can afford not to donate.
JillianKayM has no positions in the stocks mentioned above. The Motley Fool owns shares of Bank of America, Halliburton Company, and Wells Fargo & Company and has the following options: short APR 2012 $21.00 puts on Wells Fargo & Company, short APR 2012 $29.00 calls on Wells Fargo & Company, short OCT 2012 $33.00 puts on Wells Fargo & Company, and short OCT 2012 $36.00 calls on Wells Fargo & Company. Motley Fool newsletter services recommend Goldman Sachs Group, Halliburton Company, and Wells Fargo & Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
