Get as good as you give
Four years ago, Ken Lewis shouldered a shovel to move dirt and shape public opinion. Bank of America Corp.’s CEO helped plant 38 dogwood trees in Boston’s Franklin Park, settling a Super Bowl bet with FleetBoston Financial’s former boss after the New England Patriots beat the Carolina Panthers, who play their home games just a few blocks from BofA headquarters in downtown Charlotte. But the real payoff, he later told a forum sponsored by the Greater Boston Chamber of Commerce, was BofA’s commitment “to making the communities where we do business economically healthy and inviting places to live, work and play.”
Within the year, the bank gave $1.5 million to the Institute of Contemporary Art in Boston, $100,000 to the Pan-Massachusetts Challenge bike-a-thon and $1 million to Children’s Hospital Boston. It was a series of what New Englanders call “wicked smart” moves. Two months before the tree-planting ceremony, BofA had completed the $47 billion acquisition of FleetBoston. Employees predicted layoffs. Community groups feared contributions would trickle south. Customers fretted that service would suffer and fees increase.
But like any skilled suitor, BofA knew what the object of its advances needed to hear: Don’t think about what you’re losing but what you’re gaining, its gestures said. It had plenty of practice in wooing this way. For example, immediately after the 1998 merger with San Francisco-based BankAmerica, it unveiled what it called the largest charitable foundation in the U.S. financial-services industry, put 15,000 employees to work on volunteer projects and pledged a total of $1 million to 100 communities nationwide. Time and again, well-publicized good deeds helped pave its way to becoming the nation’s second-largest financial institution. “They were hugely important,” former CEO Hugh McColl says. “They helped us a great deal. No doubt about it.”
BofA, of course, isn’t the only company that uses philanthropy to sway public opinion, and it’s not just for taking the sting out of acquisitions. Corporate giving and community-development programs attract customers, strengthen brand loyalty, improve employee morale and lessen the negative effects of scandal or crisis. Nationwide, corporations gave $12.7 billion to charity in 2006, up 30% from five years before, according to the latest statistics from Glenview, Ill.-based Giving USA Foundation. “Philanthropy in the ’70s and ’80s was still sort of a check-writing process, with the check written by the CEO and going to the opera and the arts,” says Thomas Knowlton, vice president and director of New York-based consultancy TCC Group. “Now, it’s much more strategic.”
The state’s five largest public companies based on market capitalization — BofA, Charlotte-based Wachovia, Mooresville-based Lowe’s, Charlotte-based Duke Energy and Charlotte-based Nucor — have charitable foundations that together give away hundreds of millions of dollars a year. Foundations belonging to BofA, Wachovia and Duke have been ranked among the 50 most generous in the country by the Foundation Center, a New York-based nonprofit. Many other Tar Heel companies — including Charlotte-based Ruddick, Winston-Salem-based BB&T, Raleigh-based Progress Energy, Greensboro-based VF and Charlotte-based Piedmont Natural Gas — also have extensive philanthropic programs.
But nowhere in North Carolina has the evolution of corporate philanthropy played out on such a grand scale as it has at BofA. What started with pet projects of bank executives — including downtown revitalization — has become an institutionalized operation that in 2006 gave away nearly $200 million. The 30-employee charitable foundation has a president, Andrew Plepler, who also oversees the bank’s community-development division. The division covers BofA’s responsibilities under the Community Reinvestment Act, a 1977 federal law that, among other things, requires banks to do business with low- to moderate-income customers and maintain a presence in poor neighborhoods.
The foundation’s main program, the Neighborhood Excellence Initiative, also is its strategy: build stronger communities by responding to their needs. It’s a shift from the tendency to donate money to national groups, which had marked BofA giving in the 1990s, but it’s not so different from the thinking that started it all decades ago.
McColl doesn’t mince words or try to convince anyone that his philanthropic activity as BofA boss was free of ulterior motives. When, as president of NCNB, he donated $30,000 of the company’s money to the Junior League in 1975 to restore the old Berryhill house in Charlotte’s Fourth Ward, he saw a way to benefit the community and the bank. “That came out of what I call enlightened self-interest.” It started a revitalization that created affordable housing for the bank’s lower-level employees and made downtown more vibrant.
Whether warmhearted gestures or coolheaded tactics, the bank’s community-development policies of the late ’70s were tied to the personality of its president, both in their conception and execution. “Hugh had a very strong vision of what he wanted the city to become,” says Rolfe Neill, retired publisher of The Charlotte Observer. “He was walking Charlotte, literally, block by block, street by street. He had an intimate familiarity with the real estate as well as a wide, diverse acquaintanceship within the community.”
But it was the strategic angle, not the personal involvement, that set NCNB apart from many contemporaries. While corporations had long known the public-relations value of a check to a high-profile local charity, such as a library, hospital or theater, few did anything more comprehensive. In the bank’s efforts to revitalize downtown Charlotte, it not only donated money, it entered into business relationships that carried little ostensible benefit, such as making loans at reduced rates so people with lower incomes could move into town houses that were being built — before the CRA forced other banks to do likewise. “You could argue we got goodwill from people who might not have had a lot of political power or who might not have had a lot of money,” McColl says. “But it’s good to have goodwill, no matter who it’s from.”
He believes this mentality proved invaluable as NCNB began years of interstate maneuvering and controversial mergers. It also helped win over regulators, according to Ross Yockey’s 1999 biography, McColl: The Man With America’s Money. When the CRA was passed, NCNB had been working with low- and moderate-income customers for two years. As it acquired other banks, that experience helped it avoid delays that gummed up deals between banks accused of noncompliance, such as the 1990 merger of Atlanta-based Citizens & Southern National Bank and Norfolk, Va.-based Sovran Financial. NCNB gobbled up the surviving entity in 1991, creating its next incarnation, NationsBank.
NCNB’s philanthropy also helped avoid problems when it wasn’t buying banks. In 1984, during his bid for the Democratic nomination for president, Jesse Jackson marched a crowd into the lobby of the bank’s Greensboro office to protest its business dealings in South Africa, which was still in the grip of apartheid. McColl defused some of the criticism by pointing to things such as the $4 million line of credit it had made available to the Urban Foundation, a South African organization building affordable housing for blacks.
Courting public opinion is important for banks and other companies — such as retailers and utilities — that rely on the good will of consumers. It’s less critical for corporations whose customers are other businesses. The foundation of steel maker Nucor, North Carolina’s fifth-largest company by market cap, gave only $1.1 million in 2006, while smaller companies more dependent on broad-based goodwill contributed more. Manufacturers often focus philanthropic efforts on building employee morale. Nucor, for one, tailors its giving to local charitable programs supported by its workers, company director Peter Browning says.
While it has long been common for corporations to engage in philanthropy, the practice is still evolving. In 2003, just before its merger with Fleet, BofA hired Plepler, who broke the mold by coming to the bank from a nonprofit. Predecessor Lynn Drury had started at the bank in 1987 doing communications and media relations. Plepler had worked for the Washington, D.C.-based Fannie Mae Foundation, where as senior vice president of housing and community initiatives he oversaw grant making by regional offices. Under Plepler, BofA launched its Neighborhood Excellence Initiative, which — among other things — provides grants of up to $200,000 to nonprofits focused on community development. “We try to work with leaders in the local communities to identify what’s most relevant, trying to direct a large percentage of our giving toward those priority areas, recognizing that priority areas can differ across the country.”
Instead of donating to high-profile projects, it gives money for day-to-day financial needs. That allows nonprofits to decide how to allocate the money, which is key to long-term viability, says Trisha Lester, vice president of the North Carolina Center for Nonprofits in Raleigh. Once a company decides that a charity fits the corporate mission, helping it survive provides continuity and predictability.
Though BofA gives the most money of any Tar Heel public company and its charitable organization is among the most complex, other businesses are awakening to the benefits of strategic philanthropy. Even smaller companies are trying to get into the game, sometimes by pooling their resources, says Nicole DeVilliers, vice president of client services at Charlotte-based Foundation for the Carolinas, which works on charitable-giving programs. “Businesses are increasingly creating a culture of corporate philanthropic engagement, moving beyond just grant checks to more strategic and impactful giving.”
That culture will survive, but the amount of money might dip, at least in the short term, as the nation struggles with an economic slump. In 1992, nationwide corporate giving, which had risen steadily during the preceding 20 years, decreased as the country slipped into recession. Though companies may give less during hard economic times, their programs usually aren’t abandoned, Browning says. “It becomes a case of, ‘Maybe not this year but next year.’”