Corporate Philanthropy in the New Urban Economy:

 The Role of Business-Nonprofit Realignment
in Regime Politics

 

by

Leonard Nevarez

Department of Sociology

Vassar College

 

Accepted for publication in Urban Affairs Review

November 2000

 

 

PHILANTHROPY TO TRADITIONAL CHARITIES

 

Nonprofits in the first of my targeted fields are represented by the United Way in Santa Barbara and San Luis Obispo and the Boys and Girls Club in Santa Monica (which has no local United Way branch). Only Santa Barbara's United Way made available fund-raising data from which I could calculate contribution statistics; I therefore report new urban economy contributions to the Santa Barbara charity in Table 1 and report verbal estimates from traditional charities from the other two research sites. Below and in subsequent tables, I am less concerned to assess how generous individual firms and executives are (i.e., what most nonprofit staff wants to know) than how particular sectors align with certain nonprofit fields. Therefore, I report contributions per total firms in the local sector (and not the smaller group of contributing firms); the reader can read across each row to see which sector gave the most (indicated in bold text) per total firms and, in parentheses, in absolute dollars.

 

Table 1: Contributions per firm (total contributions) to Santa Barbara County's United Way

 

 

software

 

entertainment

 

tourism

 

banks

 

corporate

 

$142.80
($20,135)

 

$0.00
($0)

 

$0.00
($0)

 

$320.73
($16,357)

 

employee

 

$823.43
($116,104)

 

$0.00
($0)

 

$38.62
($25,606)

 

$320.73
($16,357)

Note: Individual gift amounts were calculated using mean values of reported gift ranges. Reported gifts only include the top 20 corporate gifts, the top 30 corporate employee gifts, and individual gifts over $1,000 (honored in the "leadership circle" ranks), which combined represent 48% of the 1997 campaign total.
Source: Contribution amounts come from Santa Barbara County United Way, 1997-98 Thank You Report. Total local firms derived from InfoUSA Inc. (1998).

 

Although Santa Barbara's software sector gave significant employee gifts, a few firms and individuals skewed its generosity for reasons I explain later. Otherwise, the traditional urban business community set a philanthropic standard that new urban economy firms did not meet. Besides their corporate-level significance in Table 1, banks in Santa Monica contributed about 10% of the largest traditional charity's 1997 income, equal to software and entertainment donations combined; likewise, banks gave more to San Luis Obispo's United Way than any new urban economy sector. In Santa Monica, six software companies contributed roughly 5% (mostly in-kind gifts to set up a computer lab) of the traditional charity's 1997 total income. In San Luis Obispo, only the oldest software firm and the largest local internet service provider represented software in the ranks of notably charitable businesses. Table 1 shows no entertainment philanthropy, although this is unsurprising given Santa Barbara's minuscule sector. Entertainment-heavy Santa Monica offers a more typical picture; roughly 5% of the Boys and Girls Club's 1997 income came from four entertainment firms (a few other entertainment firms gave much smaller gifts). Tourism philanthropy to traditional charities appears to be negligible; one Santa Barbara hotel offered the only cash donation, and in Santa Monica, no tourism firms gave cash in 1997. However, Table 1 may underestimate tourism's generosity, since informants from this sector said they prefer to make in-kind donations; indeed thirteen other Santa Barbara hotels and restaurants gave in-kind donations not incorporated into Table 1.

Voluntary service to traditional charities also suggests the new urban economy sectors lagged behind banks and, by inference, the traditional urban business community. In Santa Barbara, two bank executives sat on the United Way's board (and 17 other bank executives participated as campaign volunteers), as opposed to one software executive and no entertainment or tourism executives (although seven tourism executives served as campaign volunteers). In Santa Monica, the Boys and Girls Club board had two bankers but no one from a software, entertainment, or tourism firm. In San Luis Obispo, the only new urban economy representative on the United Way board came from the largest local internet service provider.

 

 

Circumventing the Traditional Urban Business Community

Several characteristics of business structure in the new urban economy inform these patterns. The first, cited by many software leaders, is that local philanthropy does not benefit companies serving a nonlocal market. One software CEO told me, "If [software] companies decide to give something away to get visibility, it's because ultimately they want the global PR associated with the gift." Two exceptions prove this apparent rule. San Luis Obispo's largest internet service provider gave because its customers are local business, government, and nonprofit institutions, some of whose leaders also sit on the United Way board. Also, tourism's hidden in-kind generosity underscores its strong dependence on local markets. Hotels and restaurants frequently donate door prizes or auction items and loan staff at reduced rates for fund-raising benefits. Some tourism firms also host fund-raisers and other charitable events, often the pretext for their in-kind donations. The probable value of these in-kind gifts not only suggests a greater level of tourism support for traditional charities than indicated in Table 1, but also that raising company profile before potential customers is not far removed from tourism's philanthropic motives. In exchange, community nonprofits plan their special event logistics with local hotels and visitors and conference bureaus. As a Santa Barbara chamber executive told me, "The hospitality industry is interested in getting its name out locally."

Another factor for weak philanthropy to traditional charities is implicated but not adequately explained in a claim that many human service executives make about software firms: these companies have no civic responsibility because their employees and their families do not use the charities' services. The Santa Barbara United Way's executive director stated in a newspaper editorial:

 

When I first started meeting with CEOs of major corporations 25 years ago, much more often than not I heard national, state, and local business leaders talk about the importance of services for their employees and families being available. In the past several years, except for a few standouts like Santa Barbara Bank & Trust or Macy's or United Parcel Service, more often than not the discussion never discusses community or employee services but reaching targeted audiences of influence (Didier 2000, G2).4
 

However, undermining this employee/service mismatch hypothesis is the fact that many software and entertainment firms give to charities that deliver human services like the United Way but, importantly, which operate outside the traditional civic arena. In entertainment, several informants told me they give primarily to "industry standard" charities, like the Entertainment Industry Foundation (Hollywood's equivalent of the United Way) and the T.J. Martell Foundation (a disease research nonprofit founded by music industry executives), that solicit paycheck deductions and corporate gifts from many entertainment firms&endash;often to the exclusion of the United Way. Movie studios, record companies, talent agencies, and entertainment industry organizations also have their own philanthropic foundations; for example, the National Academy of Recording Arts and Sciences (sponsors of the Grammy awards) is the primary benefactor of MusiCares, a national nonprofit that promotes music therapy and education. Human service philanthropy is admittedly less frequent in software, at least among younger firms; only one software informant had established a corporate foundation with a local human services component. However, amidst growing calls for technology tycoons to share their wealth, the emerging trend in technology sectors of "venture philanthropy," whereby corporate donors "lend business expertise, identify and support 'social entrepreneurs' hungry to shake up the nonprofit world, and quantify their results" (Kirsner 1999, n.p.), portends further neglect of traditional charities by software leaders. "The problem with older charities is that after awhile it's like a company. You get wedded to one approach," one CEO/venture philanthropist told a reporter. "Giving to the World Wildlife Fund is a total waste of money. All of it goes to overhead. Just like United Way" (quoted in Kirsner 1999, n.p.).

An important factor, then, in philanthropy to charities in the traditional civic arena (as opposed to human services more generally) is whether relationships exist between software firms and the traditional urban business community. If they do, local business leaders have a forum to urge software leaders to give to their favored charities and engage the traditional civic arena as the older business community does. This seems to explain the atypical generosity of Santa Barbara's software sector to the United Way. In Table 1, the four most generous software firms, whose combined gifts ($112,685) made up 80% of employee contributions and all corporate contributions from software, have resided in Santa Barbara since at least the mid-1980s; their corporate executives have typically worked previously for several firms and customarily participate in local chambers and high-tech trade associations. Such histories of local participation do not characterize most of the software firms I studied, as the statement of a Santa Monica land-use attorney who sits on the traditional charity's board suggests:

My sense is [software firms] are either doing a lot of wonderful things very quietly and I've missed it, or they're not doing a lot of wonderful things. I'm not aware of any of them taking an active role civically or charitably, although I may be out of the loop on that.

Similarly, entertainment's generosity comes from donor relationships with mid-level employees whose children use the Boys and Girls Club, a group that does not necessarily bring high-level entertainment executives into the "old boys network." The president of a Santa Monica bank that manages several local nonprofits' assets told me that entertainment firms are "hard to reach. They haven't been here like we have. They don't belong to any service club."

 

 

NOTES

 

4. This trend is more dramatic in Silicon Valley, where the United Way branch of Santa Clara County (the 30th largest in the nation) depleted its $11 million reserve fund in May 1999. As the branch's president told a reporter:

The Silicon Valley Way of life is one of the best in the country, but I don't know that there is a grasp on the part of residents that there are people who need basic social services&emdash;shelters for battered wives, mental health services. I dealt with a number of companies whose officials said, "Our employees make this much money and they do not need these services, so why are you here?" (quoted in Johnston 1999, 27)

However, United Way of America officials noted that United Way giving is up in other high-tech centers like North Carolina's Research Triangle and Seattle (Johnston 1999). Back to text.

 

 

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