Butch Cassidy and the Chevron Kid Want Your Money
from
May/June 2002
by Sarah Max
Theymight seem an unlikely duo, but as co-chairmen of the Committee toEncourage Corporate Philanthropy, the actor and the oilman have puttogether a posse of almost 100 business leaders who have committedtheir companies to making larger donations to charity. Among them: AOLTime Warner chairman Steve Case, Charles Schwab of the brokerage firm,and Citigroup’s Sanford Weill. (See the box on page 77 for otherexamples.) The committee’s near-term target is $15 billion a year, upfrom the $10.9 billion companies contributed to various causes in 2000.Newman and Derr also argue that charitable donations should reflectprofitability in good times and hold steady during volatile ones. Asthey both point out, even $15 billion would leave corporate Americalooking like a tightwad compared with individuals and foundations,which together handed out $192.6 billion in 2000.
Newman, 77, is no stranger to business or charity. He’s the CEO ofprivately held Newman’s Own, which makes salad dressings, salsa,lemonade, and other goodies. The company has netted more than $110million over the past two decades and has given all of it away. Derr,65, who sits on the boards of AT&T, Citigroup, and Calpine, autility in San Jose, California, saw the benefits of a focusedphilanthropic program in the course of his career at Chevron, nowChevronTexaco. Newman and Derr spoke by phone and e-mail with CorporateBoard Member’ s Sarah Max.
Corporate Board Member: Mr. Newman, what inspired you to try to persuade public companies to share more of their wealth? Newman: I happen to believe that being charitable is just the rightthing to do, particularly for those of us who have resources that canbe shared. What inspired me was that during much of the ’90s it wasdifficult to find any news about corporate philanthropy among the manystories of instant wealth, booming economy, IPOs, and so forth.Corporations seemed to have mono-personalities focused on quarterly, oreven daily, market capitalization. Corporate giving as a percent ofpretax income had steadily fallen from its high in the mid-1980s andwas hovering at about 50% of that high. Actual growth in contributionswas flat throughout the better part of the decade. Corporatephilanthropic leadership seemed to be out of step with theopportunities before it and the resources with which it had to work.
As I thought about this more, however, it became increasingly difficultfor me to reconcile this perspective with other facts. Throughout ourhistory, Americans had built great businesses, and at the same timebusiness leaders were very involved and instrumental in nurturing thenonprofit sector. Today’s business leaders are some of thebest-educated, smartest, and most notable examples of the Americanexperience, and it just did not make sense to me that these executivesdidn’t see the business values inherent in corporate philanthropy or,indeed, care about the world they lived in. It also occurred to me thatI personally didn’t know many chief executives and it wasn’t fair tomake judgments on the basis of what I read, so I set out to meet somebusiness leaders and learn the facts firsthand. To my greatencouragement, the overwhelming majority of CEOs were solidly committedto growing corporate philanthropy and ready to join a forum dedicatedto that goal. What was needed was not so much to convince businessleaders of the rightness of corporate philanthropy but to create aleadership forum for the purpose that elevated corporate philanthropyto its rightful place as a noble as well as business-smart practice.
CBM: When did you become such a fan of corporate philanthropy, Mr. Derr? Derr: When I was at Chevron. I was very involved in ourcorporate-philanthropy program. I saw the benefits early on of what itcould do in really improving the reputation of your company and helpingemployee morale.
CBM: Can you give an example? Derr: We were trying to expand our overseas operations. What we weretrying to do was move into new countries and get new concessions fromtheir respective governments. We realized that they looked at not justour technical competence but at what kinds of things we did to helpother countries where we were already doing business. If we had areputation in one country for helping people, it helped us get a newproduction concession in another country. If we wanted to expand arefinery, our reputation within the community was very, very importantin helping get permits. Needless to say, philanthropy became a veryimportant part of our strategy.
CBM: How did Chevron management make charitable giving part of a strategic decision? Derr: In the old days, it was sort of whoever got on your list stayedthere. You kind of tended to do the same things year after year. Butonce we saw the difference charitable giving made in how well we wereable to do business, we took a harder look at who’d be thebeneficiaries. One of the first things we did was require that everyyear there be a 20% or 25% turnover among beneficiaries, so we wouldn’tbe just giving to the same old things. Then we got our operating peopleinvolved, and gave them a lot more control of the process and where ourmoney went. That way it became much more productive. If nobody couldthink of why a contribution could help you in business, you had a hardtime justifying it.
CBM: Are you concerned that aligning business interests withphilanthropic interests will leave some worthy causes out in the cold?
Newman: Good question. It goes right to the core of what makes forsmart corporate philanthropy. At Newman’s Own, we have a policy thatprofits earned in a particular market are contributed back to charitiesin that market. For instance, we do a good business in Australia, anddonate what we make in Australia to Australian charities. I have nodoubt that this policy encourages some Australian consumers to chooseour product over others, and therefore contributes to the vitality ofour business model. So in a real way, we line up our charitable givingwith our business interests. What we do not do is try to beprescriptive about what types of charities will or won’t receivedonations or exactly how the funds will be used by a charity. We wantthe charity to be legitimate and a good steward of its funds, butbeyond that we’re interested in supporting good causes, which can comein all shapes and sizes.
While business terminology is not my vocabulary, I’m told that whatwe’ve done is rationalize our giving program. If this is the case, Ithink it does make sense that a well-run business rationalize itsexpenditures, be they production, marketing, sales, or corporatephilanthropy, so that they make sense for the business—which, in thecase of publicly held companies, ultimately leads to the shareholders.
It does worry me a little, however, if businesses try to too narrowlydefine a quid pro quo-type relationship when it comes to theircharitable programs. It misses the point of real leadership, can leavemany important and worthy charities lacking, and can even backfire onthe company.
CBM: For example? Newman: Say a company is in the cartoon business and focuses 100% ofits philanthropic budget on scholarships to attend the CartoonInstitute. Should this company be surprised when it’s considered lessthan philanthropic by the public at large, or if one of the CartoonInstitute’s graduates goes on to lead an anti-animation movement? Itmight make sense for that company to continue to support the CartoonInstitute but double its contribution budget to support other charities.
Why this only worries me a little is because I think most companies area lot smarter and more comprehensive in their thinking, and even thosewho choose a too narrowly defined path won’t stay on it for too long.
Derr: Remember, companies represent just 5% of the whole charitablepie. Charities that don’t appeal to businesses are going to have to gettheir support from foundations or other sources. That should be easilydone.
CBM: Warren Buffett has said that companies have no business givingaway money without prior approval from the shareholders. Mr. Derr, whatwould you say to convince shareholders that corporate giving is intheir best interest? Derr: If you’re just giving money away willy-nilly, that’s one thing.But if you have a philanthropy program that is tied into your businessobjectives, which is what most companies have these days, then I don’tthink it’s giving money away. I think it is spending money wisely tohelp improve your shareholders’ return.
CBM: When you talk to CEOs about joining you, do you have to twist arms?
Derr: No. We call them or write them with information on the committeeand our mission. We don’t ask them to do a lot of work. We just askthem to support us, tell their friends about what we’re doing, and helpus come up with new ideas for spreading the word.
CBM: Have you ever gotten an outright no? Derr: Yes, we’ve had nos. Most people say that they’re too busy. Of course, that doesn’t mean we won’t try again.
CBM: What would you like to see the Committee to Encourage Corporate Philanthropy do in the future? Newman: I would like to see us continue to expand our membership to theinternational community, work more with business schools to integratecorporate philanthropy into the educational thinking, and get more ofthose who need to support corporate philanthropy, such as thegovernment, pension funds, and the media, to pay attention to thelong-term benefits of encouraging corporate philanthropy.
If the committee continues to grow as it has, then I couldn’t wish formore. The committee is all about leadership. It is the proof thatdespite some news to the contrary, corporate executives are concerned,informed, and generous leaders, and this is not incompatible with beingamong the most competitive and successful chief executives in theworld. If you look at the committee’s membership, you’ll see the namesof chief executives who are at the very top of the business food chain.It’s the active endorsement of the leader that sets the tone and willmake the difference.
