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So much money is being raised through corporate marketing efforts that traditional philanthropists--nonprofit groups that rely on corporate giving--are beginning to feel threatened. "They worry that if companies are spending marketing dollars this way, they will be reluctant to spend philanthropic dollars as well," says Jerry Welsh of Welsh Marketing, who pioneered cause marketing at American Express in the 1980s.
There is some basis for that concern. Even though corporate charitable contributions have climbed to record levels in dollar terms, they have fallen to about 1% of pretax profits from more than 2% a decade ago. That's partly explained by a combination of tax-law changes, today's soaring profits and a shift to product donations in lieu of cash. Still, it's the kind of thing that makes traditional nonprofits sweat. And the latest bout of merger mania makes them even more uncomfortable. When two big companies--each with its own foundation--become one, only one foundation is likely to survive.
It doesn't help that many nonprofits have been torn by scandal and are perceived to be bloated with overhead. In March, New Era Philanthropy founder John F. Bennett Jr. pleaded no contest to charges of defrauding hundreds of charities and nonprofits of $135 million and siphoning off more than $3.5 million for his own use. Meanwhile, cash-strapped governments are no longer able to shoulder a broadening social agenda. If business wasn't stepping forward, despite its profit motive, where would the money come from to, say, restore the Statue of Liberty? American Express raised $1.7 million for that purpose in the early '80s in what is regarded as the first cause-related corporate-marketing effort.
Though individuals still account for the great bulk of giving (private donors gave 80% of the $144 billion raised by charities in 1995), some are worried that charities that aren't sexy enough to attract business support will suffer. Where would that leave relatively unpopular causes such as mental illness? "Ninety percent of the charity universe doesn't benefit from the hundreds of millions of dollars generated through cause marketing," notes Robert Bothwell, president of the National Committee for Responsive Philanthropy.
And how far into public-works budgets do we really want business to wade? Already, some local police and fire departments have official sponsors. In St. Clair County, Illinois, sheriff's department squad cars carry the logo and phone number of Barcom Electronics, a local alarm company. Barcom pays $6,000 a year to the county, which uses the money for a drug-awareness program. "Obviously, I get instant credibility," says Barcom executive Mark Bartle. But there's a danger too: if the department should come to rely on private funds for needs like vehicle maintenance, it could have to scramble to keep its fleet roadworthy if the sponsors drive off.
A deeper concern is that American business, which is now the envy of the world for its profitability and ruthless efficiency, could fall off that pedestal if it takes on too many social issues. "Business exists to make a profit," says John Hood, president of the John Locke Foundation, a North Carolina-based public-policy think tank. "When you lose sight of that, you lose the unique benefits that come from being highly focused in a competitive market."