Feature

Marilyn Laurie is president of Laurie Consulting, Inc., which develops branding and public relations strategies for corporations and nonprofit organizations.

At AT&T, as executive vice president, brand strategy and a member of the executive committee, she was the highest-ranking woman in the company's history. Laurie led AT&T's brand-building activities worldwide; was accountable for communications to the media, customers and shareowners, as well as a 350,000-person global workforce; and was leader of all communications and brand development surrounding the spin-off of Lucent Technologies. In addition, she served as chair of the AT&T Foundation. She was also a cofounder of Earth Day.

The following text is excerpted from a speech Laurie gave at the opening session for corporate grantmakers at the Council on Foundations' 56th Annual Conference in San Diego in April.

When I look back on the early days of corporate foundations, the job of giving money away was something of a no-brainer. Between CEO whims, local community needs and an occasional big idea, the task of "giving back" was hardly the most complex job in the company.

Of course, a whole lot has happened since then and, when I thought about our meeting this morning, I was reminded of the old Chinese curse: "May you live in interesting times." A profound challenge facing businesses today—many feel equal to the financial challenge—is regaining the public's trust. Building confidence that a company can have a social conscience and will behave ethically is fundamental to the mission of a corporate foundation. But, in our diverse, divided and increasingly cynical society, this is getting to be one tough job.

The trust-busting scandals of Enron, Arthur Anderson and WorldCom that ignited public shock and anger are being replayed in the newspapers yet again as their leaders trod through the justice system. But they are actually retreating into the zone of iconic examples of corporate malfeasance.

New Wave of Ethical Scandals

A new wave of turmoil has been created by white knight Eliot Spitzer, riding his noble steed into the back offices of insurance and financial services companies to slay a whole new army of alleged financial scoundrels. While some wondered if business got the message from the earlier round of scandals—we heard an awful lot about "a few bad apples"—there's no question that a stark definition of business ethics is in—and in big—across the business world today.

Let's look at a [few] examples of what's happening around us.

• This spring, a story on page one of the New York Times noted the stunned reaction of two senior investment bankers who had been abruptly fired for doing something that only a year ago would have been considered routine. They had not broken any regulations, but had acted on a confidential tip from a rival banker to get in on a deal. Because of a new "zero tolerance policy" on ethical behavior, they were both expelled from Bank of America.  
• CEO search firms report that they are now pressured to examine a candidate's private conduct as well as business accomplishments. Cheating on expense accounts, unwanted sexual advances, drinking problems . . . any breach of integrity—like not telling the truth to your employees, your secretary, anyone you do business with—or a couple of indiscreet e-mails—and you're toast.  
• When the Wall Street Journal writes a lengthy piece about the threat to Warren Buffet's reputation because of Berkshire Hathaway's tangential connection to AIG's problems, you know times have changed. "There is no executive in American business," they point out, "with a deeper well-spring of good will and good reputation from which to draw." Buffet, author of the oft-quoted line "Lose money for the firm and I will be understanding; lose a shred of reputation for the firm and I will be ruthless" has been an ethical hero for an entire generation. But as the Journal concluded: "Companies and executives are being held to new standards, even in hindsight. And, as Mr. Buffet is finding out, no one is exempt."

Which brings us back to the climate for corporate foundations. What are we to make of this new torrent of ethical scandals and the public demands to raise the bar on business behavior?

The Holy Grail in this environment is adding to the company's reservoir of trust and its good name—the basic responsibility of corporate foundation leadership. But let me say emphatically, given the harsh public scrutiny, it's also important not to become a target—accused of improprieties that end up engulfing your entire company because something was overlooked in your own shop. As GE's CEO, Jeff Immelt, put it: "In this environment, incompetence looks like fraud." You, too, can become the star of someone's blog or the hot topic on the employee chat boards.

Three Key Questions

I want to focus on three questions this morning:

• First, will your approach to governance add to your credibility or make you a potential bull's-eye?  
• Second, can a foundation contribute substantially to a company's ethical reputation and simultaneously to its competitive advantage?  
• And finally, what does all this portend for foundation leadership?

Starting with governance and accountability . . . just as boards of directors of public companies are much more concerned today about their fiduciary obligations—and vulnerabilities—so, too, foundation governing bodies are taking their responsibilities more to heart.

Nevertheless, I suspect they are not feeling the same degree of heat because they feel more protected within the overall framework of the company and, after all, they are engaged in "doing good works." I'm sure I don't have to tell you how dangerous this attitude can be.

As night follows day, the same standards the public applies to business investing will soon apply to social investing. Conflicts of interest among foundation board members can bring down a firestorm of criticism just as easily as your "Big Board." Grants to nonprofits that use the funds irresponsibly are fodder for the 6 o'clock news, and no stories about lapses in process are going to suffice. Also, the expectations for business transparency have changed dramatically. While many foundations are reasonably open, everyone needs to anticipate demands for even greater openness and communication about how grants are managed, who is managing them and what philosophy underpins your overall program. You need to allow outsiders in. Permit employees to touch and feel what's going on. Recognize that everything—from the foundation leader's salary or payments to trustees to a project's connection to an elected official—is likely to become public. This is a genuinely new world—a world in which blogs, file-sharing, employee postings on the Internet and the 24 by 7 news media have all conspired to take away your ability to keep things private. Are you still playing by the old rules?

Just because Sarbanes-Oxley does not directly apply [to your foundation], doesn't mean you aren't expected to live up to the spirit of those regulations. Just because the PATRIOT Act has impossibly cumbersome processes regarding checking to ensure funds don't go to terrorists, doesn't mean that your stakeholders will understand if you have no new safeguards in place. For example, what's your policy for matching gifts when your very diverse employee body funds a very wide variety of unfamiliar organizations? All these new requirements may steal funds from your philanthropy budget, but there is no choice.

In a way, the scandals and headlines have made updating the governance and accountability part of the job easier. There are many best practices to study and the Stewardship Principles [for Corporate Grantmakers] themselves offer a fine roadmap for strengthening your performance. Let's get on with it and leave the big "bull's-eye" to Target's brand advertising.

Strategic Philanthropy

Our second question—Can a foundation contribute to a company's ethical reputation and simultaneously to its competitiveness?—may be a more difficult challenge.

Everyone here knows that the best corporate foundations operate at the intersection of corporate interests and public needs.

You know it is not enough to define that space. You need to distribute money well. You need to apply your distinctive corporate resources to important social challenges. You need to get meaningful results. And measure outcomes. And, on top of all this, you need to be relevant to corporate strategy and connected to the efforts of other departments. Whew!

Let's touch on three of the critical issues for more strategic philanthropy:

• Organizing grantmaking strategically  
• Applying business expertise to improve outcomes  
• Aligning with company operating strategies.

Let's start with organizing grantmaking so that it more clearly fulfills the mission and values of both the foundation and the company. Here, I'm a fan of the approach of Harvard Business School professor and strategist Michael Porter.

Porter suggests thinking of your grantmaking as a portfolio with about one-third dedicated to visibly responding to the needs of the communities in which you do business as a good corporate citizen. Roughly another third of your grants should go toward maintaining the relationships that underpin your company's broad license to operate. Systematically identify your company's key stakeholders and their priorities. Collaborating with important business partners, supporting appropriate government initiatives and enhancing relationships in communities where regulations or politicians or NGOs affect business flexibility fall into this category.

The final third is designed to improve the company's ability to grow and compete effectively by investing in a social issue that is also a long-term constraint to your business. Here's where GE and IBM have gone deeply into education, for example. Ask business unit executives what major social problems they see as affecting their long-term competitiveness. These questions are particularly pertinent as you deal with international regions, where poverty, lack of pure water or education or job training—or even perceived cultural insensitivity or anti-American sentiment—may reduce your potential pool of employees or customers.

How much you invest in each of those three categories is the heart of your strategic plan.

Working with operating peers in this kind of team approach can even point the way to later business opportunities. Citigroup, according to the Wall Street Journal, funded some microfinance initiatives in developing countries for decades. Last year, it decided to appoint a banker to develop services and products in Mexico and India for their micro-lending programs. The company doesn't expect to make profits from these projects anytime soon, but it does hope to learn the practical dimensions of expanding in developing countries. GE's CEO, Jeff Immelt, sees the future the same way. Looking at the developing world, he believes there's money to be made from providing solutions to what he calls the "economics of scarcity." "It's going to be about how you get more healthcare into people's hands," he says. "It's going to be about how you get more energy into the system. It's going to be about providing access to commodities like water."

These are all areas in which philanthropy by global companies can provide opportunities to understand problems and the culture in which appropriate solutions can be applied. In short, they can provide long-term learning about conditions that affect future business success. Is that how you are talking about your global initiatives?

If you also organize philanthropy in these three categories—community, relationships and relevant social issues—and then sort your options in terms of the geographies most important to the expansion of your business—guided by input from business unit leaders—you can create a strategic plan with as much credibility as any operating unit.

Using Expertise

Once you have structured your philanthropy strategically, it's vital that you build in all the available business expertise to ensure that the programs you decide to fund really deliver value and the organizations you fund are truly effective. This is analogous to the way the company sets performance standards for its operating divisions.

I worked with a corporate foundation recently that held a board retreat—including its community representatives—to achieve more focus and to determine priorities for the next two to three years. After some probing, a board member who was a respected educator noted that some of the mentoring and jobtraining programs that were being supported by the foundation would not, in his view as an expert in the field, deliver really meaningful results. While they were "well-intentioned," they were not the best of the best. Meanwhile, other operations representatives identified the single most important social issue and demographic group to the business in the United States and around the world. By day's end, funding priorities in the company were shifted in the search for ever-improving performance.

Role of Employees

Of course, one of the most powerful assets any corporation can bring to bear on a social issue—or even on relationship building, for that matter—is its own people. Their enthusiasm and technical expertise often add value that outweighs corporate contributions. Cash is good. But cash plus people—now that's a multiplier effect. And, always remember, people trust people more than they trust companies.

While employee participation can be integrated into all program categories, some companies focus on employee-driven philanthropy as a program unto itself. For example, Boeing has done an amazing job with employees—building the largest employee volunteer program in the country. They encourage local employee councils, with employees making the decisions and directing community grants. Starbucks' "Make Your Mark" program donates $10 for every hour an employee devotes to a community project or charity. It may seem like just another "dollar-for-doers" program, but, given their low-wage business, they feel it helps reduce employee turnover. CEO Orin Smith says, "One way to inspire employees is to create a company they feel proud to be part of." Work with Human Resources on how to engage employees in a way that enhances your corporate culture and HR goals. The collaboration itself can bring further support for your foundation's role inside the company.

Our third strategic approach is creating signature programs and weaving them into the overall corporate program to increase the business value of your philanthropy. Highly differentiated or branded projects can certainly break through the clutter. At a minimum, if you pursue them with discipline and stick with them, they enhance your relationships, credibility and trust with the stakeholders they're aimed at. Think about Johnson & Johnson's support for nurses or Avon's long crusade to reduce breast cancer.

ConAgra, which wants to be seen as a food company, operates cafés around the country to feed warm meals to poor kids after school. It is community altruism wrapped into a program closely aligned with the identity of the company. But American Express is a real champion in this arena. It has three terrific signature programs that effectively integrate philanthropy into company strategy. Its Economic Independence program relates to its financial services business. It targets the underprivileged and underserved with programs stressing financial literacy and self-sufficiency. American Express' Performing Arts program relates to credit card usage and not only funds wonderful artists but provides client entertainment opportunities for the entire company and benefits to preferred customers.

The World Monuments Protection program is an environmental program aligned with American Express' global travel business. It has huge local appeal because it protects important symbols of each country's history. So it delivers enormous public relations benefits. American Express Company President Mary Beth Salerno tells of a recent trip to Spain to deliver a grant. It stimulated an extraordinary turnout of senior officials, coverage in ten newspapers and an appearance by local royalty. The objects of the program are so important to the Spanish people that they dramatically enhance the significance of the cash grant.

Leadership

I want to close on the issue of leadership—your idea of yourself in your role at your foundation. Excruciating stresses, competition for resources and demands for greater results are nothing new inside a corporation. But this certainly is a new era of performance expectations for corporate foundation leaders. Only the CEO has more stakeholders to satisfy and more interests to balance.

Let's admit that the pressures on many corporate foundations have become overwhelming. Between widespread layoffs, mergers and demands for profits, it has become increasingly difficult to defend imaginative or risky grantmaking. Some marketers press for narrower and narrower focus, leaving less and less flexibility to meet community needs. Unless something fits totally within the box of what they define as supportive of their business, they won't fund the foundation. Strategic philanthropy has been taken to such extremes that some foundations are creeping right up to the line of self-dealing. The pressure continues to have more direct giving and complete control. How's a foundation leader to cope? Well, it ain't easy.

You have to make the highest and best use of your personal resources, as well as your foundation assets.

It takes a deep knowledge of the business plus political savvy to bring your operating colleagues along. It takes a talent for advocacy to sell a broader benefit for the company than the needs of one department or one quarter. It takes management skills to create a strategic plan that can stand proudly next to operating unit plans. It takes courage to stand up for what you think is right when you are giving money away, not bringing it in. So grab every opportunity to enhance and grow your leadership capabilities, because that's what it takes to get the job done today.

I've talked a lot this morning about the "perspiration" part of the job…but it's ultimately all about "inspiration."

Exercise leadership, and you need not get dragged along by other departments. You can be the catalyst for bringing a stellar, differentiated, social responsibility program forward for the whole company that helps change our world for the better. Exercise leadership and you can help shape your corporate culture, creating the loyalty and pride in your employees. Exercise leadership, and you will bring real value to shareholders, real benefits to your community and real satisfaction to yourself.

So…the question is not whether you can adopt the Stewardship Principles (available online at www.cof.org). It is how can you not adopt them? It's not how long will it take . . . it's how soon can you start? The only prudent course, I would argue, is to stretch as far as you can and apply as many of the principles as fully as possible. Open yourself up to the many great solutions that have bubbled up in other companies. Find at least one great new idea this very morning.

In this way, you become a more strategic asset to your company. You strengthen your performance as a foundation. And you will stand proudly as an ethical example for all your stakeholders.