Business and Society Stakehol... Chapter 18 The Community and the Corporation 395 396 Part Six Business and Its Stakeholders Salesforce.com, a cloud computing company based in San Francisco, develops software that helps companies and other organizations manage their relationships with customers The Business-Community Relationship 892 and other stakeholders. Since its founding in 1999, the company has embraced what it calls The term community, as used in this chapter, refers to a company's area of business influ- the "1-1-1" model of integrated corporate philanthropy: it donates 1 percent of its stock, 1 percent of its employee time, and 1 percent of its products to its foundation, which in turn ence. Traditionally, the term applied to the city, town, or rural area in which a business's operations, offices, or assets were located. With the rise of large, complex business orga- gives these assets to charitable causes. Over a decade and a half, the foundation has given nizations, the meaning of the term has expanded to include multiple localities. A local more than $85 million in grants, almost a million dollars' worth of community service, and merchant's community relationships may involve just the people who live within driving donations of software and other products to 25,000 nonprofits and higher education insti- utions. "Our industry has . . . done a phenomenal job creating value for the world through distance of its store. A bank in a large metropolitan area, by contrast, may define its com- our technology," said CEO Marc Benioff. "But we are not really an industry known for munity as the both the central city and the suburbs where it does business. And at the far extreme, a large transnational firm such as ING, ExxonMobil, or H&M has relationships giving that wealth back." Benioff set out not only to change that perception, but also to with numerous communities in many countries around the world. convince other technology companies to join Salesforce in taking the 1-1-1 pledge." Today the term community may also refer not only to a geographical area or areas but One of the leading financial institutions in the world, ING has operations in more than 50 countries. Based in the Netherlands, the company provides insurance, banking, and to a range of groups that are affected by an organization's actions, whether or not they are in the immediate vicinity. In this broader view, as shown in Figure 18.1, the geographical asset management services throughout Europe, with a growing presence in the Americas (sometimes called the site) community is just one of several different kinds of communities. and Asia. Recognizing that the needs of the many communities where it does business dif- Whether a business is small or large, local or global, its relationship with the commu- fer, the company has delegated responsibility for corporate citizenship programs to busi- ness unit managers, provided their decisions are consistent with the firm's core values. nity or communities with which it interacts is one of mutual interdependence. As shown in The result has been a remarkable diversity of community initiatives. In India, ING trained Figure 18.2, business and the community each need something from the other. Business depends on the community for education, public services such as police and fire secondary school heads; in the United States, it ran financial literacy classes for teens; in Malaysia, it worked on the conservation of rain forests. Across the globe, ING employ- 393 ees participated in a worldwide fund-raising effort for Creating Chances for Children, FIGURE 18.1 the company's partnership with UNICEF, with a goal of positively impacting one million The Firm and Its Community Interest children by 2015." Communities Site community Geographical location of a company's operations, Whole Foods Market is a natural foods retailer with stores in many communities in Source: Adapted from a offices, or assets North America and the United Kingdom. Founded in 1980 in Austin, Texas, the company discussion in Edmund M. Burke, Corporate Community Fence-line community Immediate neighbors believes that its business "is intimately tied to the neighborhood and larger community Relations: The Principle of Neighbor of Choice (Westport, Virtual communities People who buy from or follow the company online that we serve and in which we live." Whole Foods donates 5 percent of its net profit to CT: Praeger, 1999), ch. 6. Communities of interest Groups that share a common interest with the company he Community and he Corporation charitable causes and operates a foundation that supports rural economic development, as well as projects that support animal welfare, organic production, and healthy nutrition. Employee community People who work near the company Each of the company's 367 stores hosts a community giving day three times a year, with 5 percent of the day's total sales revenue contributed to a worthy local nonprofit organiza tion. Whole Foods also encourages its employees to volunteer their time and expertise to FIGURE 18.2 What the Community Business Participation Desired by Community Community Services Desired by Business the community. Employees have been involved in a wide range of service projects, include ing organizing blood donation drives, raising money for breast cancer research, developing and Business Want from Each Other Pays taxes Schools-a quality educational system community gardens, renovating housing, and delivering "meals on wheels." Provides jobs and training Recreational opportunities Why do businesses as diverse as Salesforce.com, ING, and Whole Foods Market invest . Follows laws Libraries, museums, theaters, and other in community organizations, projects, and charities? Why do they contribute their money, cultural services and organizations resources, and time to help others? What benefits do they gain from such activities? This chapter explains why many companies believe that being an involved citizen is part of their Supports schools Adequate infrastructure, e.g., sewer, water, 394 and electric services basic business mission. The chapter also looks at how companies participate in community life and how they build partnerships with other businesses, government, and community Supports the arts and cultural activities Adequate transportation systems, e.g., roads, rail, airport, harbor organizations. The core questions that we consider in this chapter are: What does it mean to be a good corporate neighbor? What is the business case for doing so? . Supports local health care programs Effective public safety services, e.g., police and fire protection "Salesforce Expands Its 'Pledge 1%' Philanthropic Model to New York Tech Companies," May 4, 2015, at http:/techcrunch Supports parks and recreation . Fair and equitable taxation .com/2015/05/04/salesforce-1-percent/; and "Marc Benioff's Philanthropic Mission: San Francisco," Bloomberg Businessweek, Assists less advantaged people Streamlined permitting services December 23, 2014. The website of the Salesforce Foundation is at www.ing.com/ING-in-Society. Contributes to public safety 2 Information on ING's community initiatives is available at www.ing.com/ing-in-society. Quality health care services See www.wholefoodsmarket.com/mission-values/caring-communities/community-giving. . Participates in economic development Cooperative problem-solving approach 395Business and Society Stakehol... The Community and the Corporation Exhibit 18.A Community Support for Professional Sports Franchises 398 Part Six Business and Its Stakeholders The ideas of corporate social responsibility and citizenship, introduced in earlier chapters, refer broadly to businesses acting as citizens of society by behaving responsi- 394 The professional sports franchise is one kind of business that has historically been particularly dependent on support from the community. Cities often compete vigorously in bidding wars to attract or keep football, bas- bly toward all their stakeholders. Civic engagement is a major way in which companies ketball, baseball, hockey, and soccer teams. Communities subsidize professional sports in many ways. Gov- carry out their corporate citizenship mission. As explained in Chapter 3, business orga- ernment agencies build stadiums and aren municipal bond pay for construction, give tax breaks nizations that act in a socially responsible way reap many benefits. These include an to owners, and allow teams to keep revenues from parking, luxury boxes, and food concessions. Some say enhanced reputation and ability to respond quickly to changing stakeholder demands that public support is warranted, becau ports facilities spur local economic devel By acting responsibly, companies can also avoid or correct problems caused by their opment, offer wholesome entertainment, and build civic pride. But critics argue that subsidies simply enrich affluent team owners and players at taxpayer expense and shift spending away from other more deserving operations-a basic duty that comes with their significant power and influence. They can areas, such as schools, police and fire protection, social services, and the arts. In this view, this is a case in win the loyalty of employees, customers, and neighbors. And by doing the right thing, which the relationship between business and the community is deeply out of balance. businesses can often avoid, or at least correctly anticipate, government regulations. All One of the most outrageous examples of this was the Paul Brown Stadium, built at an estimated cost to these reasons for social responsibility operate at the level of the community as well, via the public of $555 million to house the National Football League's Cincinnati Bengals after the team threat- civic engagement. ened to move to Baltimore. Hamilton County, where the stadium was located, issued bonds and raised its Another specific reason for community involvement is to win local support for busi- sales tax to pay for the new stadium, the most costly ever built at taxpayer expense. That was just the begin- ness activity. Communities do not have to accept a business. They sometimes object ning, because the county had also agreed to pay for m expenses and capital improvements to the presence of companies that will create too much traffic, pollute the air or water, going forward. The Bengals got to keep the revenue from naming rights, advertising, tickets, suites, and most or engage in activities that are viewed as offensive or inappropriate. A company must parking. The annual cost to the county was $35 million, about 16 percent of its budget, a huge strain as the earn its informal license to operate-or right to do business-from society. In communi- region struggled under the weight of a weak economy. "It's the monster that ate the public sector," said the ties where democratic principles apply, citizens have the right to exercise their voice in administrator of the juvenile courts, speaking of the stadium. The juvenile courts had just seen their funding determining whether a company will or will not be welcome, and the result is not always slashed, and had been forced to cut its programs for troubled youth positive for business 395 Sources: "As Super Bowl Shows, Build Stadiums for Love and Not Money," Bloomberg Businessweek, February 3, 2012; "A Stadium's Costly Legacy Throws Taxpayers for a Loss," The Wall Street Journal, July 12, 2011; and "Stadium Boom Deepens Municipal Woes," The New York Times, December 25, 2009. A website critical of public subsidies to sports facilities is www. Walmart has encountered serious local objection to its plans to build superstores fieldofschemes.com. and distribution centers in a number of local communities. Although some towns have welcomed Walmart for the shopping opportunities and jobs it brings, others have mounted intense opposition to the company's plans to move in. For example, in 2013 local activists organized to protest the arrival of a Walmart store in protection, recreational facilities, and transportation systems, among other things. In some Sherwood, Oregon, saying it would degrade the community's "small town feel." cases, businesses receive financial support from a community to locate a facility there. In The problem of community opposition seems likely to grow more complex for 2014, for example, the electric car company Tesla Motors negotiated a $1.3 billion pack- Walmart as it continues its expansion into international markets. age of tax breaks and other incentives from the state of Nevada to locate a lithium battery Through positive interactions with the communities in which its stores are located, factory in Reno.* On the other side, the community depends on business for support of the Walmart is more likely to avoid this kind of local opposition. arts, schools, health care, and the disadvantaged, and other urgent civic needs, both through taxes and donations of money, goods, and time. And, of course, business brings with it Community involvement by business also helps build social capital. Social capital has been defined as the norms and networks that enable collective action. Scholars have also jobs and economic development. described it as "the goodwill that is engendered by the fabric of social relations." When Ideally, community support of business and business support of the community are companies such as Whole Foods Market, described at the beginning of this chapter, work roughly in balance, so that both parties feel that they have benefited in the relationship. to address community problems such as blood shortages, hunger, and dilapidated hous- Sometimes, however, a business will invest more in the community than the community ing, their actions help build social capital. The company and groups in the community seems to provide in return. Conversely, a community sometimes provides more support to develop closer relationships, and their people become more committed to each other's a business than the firm contributes to the community. Exhibit 18.A discusses subsidies welfare. Many experts believe that high levels of social capital enhance a communi- 396 by communities to professional sports franchises, an instance in which the relationship ty's quality of life. Dense social networks increase productivity by reducing the costs between business and the community is sometimes perceived as out of balance. of doing business, because firms and people are more likely to trust one another. The development of social capital produces a win-win outcome because it enables everyone The Business Case for Community Involvement to be better off." The term civic engagement describes the active involvement of businesses and individuals Exhibit 18.A in changing and improving communities. Civic means pertaining to cities or communities, "Sherwood Residents Opposed to Wal-Mart Fear Collapse of Small Town Environment," May 8, 2013, at www.oregonlive.com. and engagement means being committed to or involved with something. Why should busi For the company's perspective on its community relationships, see www.walmart.com. nesses be involved with the community? What is the business case for civic engagement? Paul S. Adler and S. W. Kwon, "Social Capital: Prospects for a New Concept," Academy of Management Review 27, no. 1 (January/February 2002), pp. 17-40. For a more general discussion, see Robert D. Putnam, Bowling Alone: The Collapse and Revival of American Community (New York: Simon and Schuster, 2000). ""Nevada Gets Musked," The Wall Street Journal, September 17, 2014. Some benefits of social capital are described on the World Bank website at www.worldbank.org. 397 Page 416 of 593 397Business and Society Stakehol... Chapter 18 The Community and the Corporation 399 400 Part Six Business and Its Stakeholders Community Relations Economic Development 396 The organized involvement of business with the community is called community relations. Business leaders and their companies are frequently involved in local or regional eco- Some corporations have established specialized community relations or community affairs nomic development that is intended to bring new businesses into an area or to develop departments; others house this function in a department of corporate citizenship or corpo- workforce skills. rate responsibility. The job of the community relations manager (sometimes called the When the Distinct 89 nightclub closed in downtown Newark, NJ, no one had much community involvement manager) is to interact with local citizens, develop community hope that the abandoned lounge would provide jobs any time soon. But that programs, manage donations of goods and services, work with local governments, and Exhibit 18.A changed in 2014, when a startup called AeroFarms took over the space to test a encourage employee volunteerism. These actions are, in effect, business investments technology called aeroponics that used LED lighting, fabric, and nutrient-rich mist intended to produce more social capital-to build relationships and networks with import- to grow vegetables indoors. The experiment worked so well that the company ant groups in the community. Community relations departments typically work closely leased a former steel mill in Newark's Ironbound district, where it planned to hire with other departments that link the company to the outside world, such as public relations discussed in Chapter 19), as well as internal departments such as human resources. All 70 people to produce nearly two million ands of produce annually. The company these roles form important bridges between the corporation and the community choose its location because of strong community support, access to consumers, and a desire to support job creation. "We are very much focused on how we can drive An example of an executive with broad responsibility for building community rela- economic development and job creation," said the company's cofounder." tionships is Stanley S. Litow, vice president of corporate citizenship and corporate affairs at IBM Corporation and president of the IBM Foundation. Before joining Housing IBM, Litow headed a nonprofit think tank and served as deputy chancellor of the Another community issue in which many firms have become involved is housing. Life New York City Public Schools. "Community consciousness and civic engagement and health insurance companies, among others, have taken the lead in programs to revi- is part of the company's value system," Litow explained. One of the initiatives talize neighborhood housing through organizations such as Neighborhood Housing Ser- 397 he championed was the "smarter cities challenge," which sent teams of six IBM vices (NHS) of America. NHS, which is locally controlled, locally funded, nonprofit, and executives into 116 different communities, on the company payroll, to improve tax-exempt, offers housing rehabilitation and financial services to neighborhood residents. the way local governments delivered services. To celebrate the company's 100th Similar efforts are being made to house the homeless. New York City's Coalition for the anniversary, Litow organized a community service program that provided more Homeless includes corporate, nonprofit, and community members. Corporations also than 3 million hours of employee volunteerism worldwide." often work with nongovernmental organizations (NGOs) such as Habitat for Humanity to build or repair housing. Globally, businesses have also been active in housing issues, as Community relations departments are typically involved with a range of diverse issues. illustrated by the following example According to a survey of community involvement managers, education was viewed as the most important issue. Many companies had developed a specific focus on science, CEMEX, a global leader in the building materials industry that is based in Mexico, technology, engineering, and math (STEM) literacy among young people. Other critical was a longtime supporter of affordable housing in developing countries. In 2014, issues included poverty and hunger, disaster relief, and environmental sustainability. Fur- the company extended this commitment by joining the Business Call to Action, an ther down the list of issues, although still important, were education, health care, and the alliance of companies and governments supporting the United Nations' Millennium arts. (Figure 18.5, which appears later in this chapter, shows the issues to which com- Development Goals. For its part, CEMEX committed to ensure that 150,000 panies donate the most money.) Although not exhaustive, this list suggests the range of low-income families had access to safe and affordable housing by 2016. It planned needs that a corporation's community relations professionals are asked to address. These to meet this commitment through a range of programs that supported families with community concerns challenge managers to apply talent, imagination, and resources to the training, materials, and microfinancing needed to construct their own low-cost develop creative ways to strengthen the community while still managing their businesses housing safely and efficiently. "CEMEX is a company that is constantly striving as profitable enterprises. to innovate so that our products, services, and strengths contribute to improve the 398 Several specific ways in which businesses and their community community relations departments quality of life, particularly of vulnerable families," said the company's director of have addressed some critical concerns facing communities are discussed below. The corporate responsibility. 12 all-important issue of business involvement in education reform is addressed later, in the section on collaborative partnerships and in the discussion case at the end of the chapter, Aid to Minority, Women, and Disabled Veteran-Owned Enterprises which describes an innovative partnership between Fidelity Investments and a nonprofit Private enterprise has also extended assistance to minority, women, and disabled organization committed to after-school programs for middle-school children. veteran-owned small businesses. These businesses often operate at an economic disadvan tage. In some cases, they do business in economic locations where high crime rates, poor Center for Corporate Citizenship, "Advancing From the Core: Profile of the Practice 2103 Highlights," at http:/ccc.bc.edu. "Corporate Citizenship is Linked to Business Success, Says Stanley Litow, IBM Foundation," The Economic Times, February "Say Hello to the (Soon to Be) World's Largest Indoor Vertical Farm," Bloomberg Businessweek, March 17, 2015; and 13, 2015; and "Building a Smarter Planet," Leaders Magazine, 35(2), 2012. "Newark's Industrial Wasteland May Be the Next Farming Capital of America" [blog], April 21, 2015, at http://collectively.org. 10 "Advancing from the Core," op. cit. 12"Building the Link to Home Ownership, CEMEX Joins the Business Call to Action," press release, Febru www.businesscalltoaction.org Page 418 of 593 399Business and Society Stakehol... E Chapter 18 The Community and the Corporation 405 406 Part Six Business and Its Stakeholders in 2014." Foreign-owned corporations use foundations less frequently, although firms $10,000 worth of new laptops to a local school, it could take a deduction for this such as Panasonic and Hitachi use sophisticated corporate foundations to conduct their amount on its corporate tax return, provided this amount was less than 10 percent of its 402 charitable activities in the United States. Foundations, with their defined mission to benefit pretax income. the community, can be a useful mechanism to help companies implement philanthropic Business leaders and employees also regularly donate their own time-another form of programs that meet this corporate social responsibility. corporate giving. Volunteerism involves the efforts of people to assist others in the commu Forms of Corporate Giving nity through unpaid work. According to a report by the Department of Labor, about 25 percent of Americans aged 16 and older volunteered during the prior year, donating on Typically, gifts by corporations and their foundations take one of three forms: charitable average 50 hours of their time. "Many companies encourage their employees to volunteer donations (gifts of money), in-kind contributions (gifts of products or services), and volun- by publicizing opportunities, sponsoring specific projects, and offering recognition for ser- teer employee service (gifts of time). Many companies give in all three categories. vice. Offering such opportunities can benefit companies by attracting young employees, as An example of a particularly generous cash gift was one made by Intel, the com- new research shows. puter chip maker. Intel, together with its foundation, pledged $120 million over A 2014 survey by the consulting firm Achieve found that a company's volun- the 10-year period 2008 to 2017 to the Society for Science & the Public Interest. The purpose of the gift was to support this organization's Science Talent Search, teer policies had a big impact on where Millennials chose to work. One third of Millennials said that the opportunity to volunteer had influenced their decision to a prestigious science competition for high school seniors. The gift also included apply for a job, two-fifths said it had influenced their decision to interview, and funds for outreach to young people and mentoring for program alumni. As part of more than half said it had influenced their decision to accept an offer. "Millennials the competition, every year 40 finalists traveled to Washington, DC, to present their are blending who they are, what they do, what they stand for, and the causes and research to members of the scientific community. Awards included college scholar- ships and computers. Many former winners had gone on to distinguished careers in things they care about into the workplace," said the president of the consulting firm. An example of a company that was acting on this insight was ExactTarget, a science and entrepreneurship. "I can't think of a more critical time to invest in math cloud marketing firm, which ran a program that matched the interests of employees 403 and science education," said Intel's vice president for corporate affairs.2 with the needs of local nonprofits. The company's vice president for community The share of all giving comprising in-kind contributions of products or services has been programs reported she regularly received e-mails from employees saying, "It is so rising steadily for the past decade or so and has now surpassed cash contributions. Of U.S. fantastic to be part of an organization that is committed to giving back." "That is all corporate contributions in 2013, 19 percent were in-kind (noncash), 48 percent were cash, he evidence we need that we are doing the right thing," she concluded.27 and the balance came in the form of contributions from affiliated foundations."For exam- An important trend is what is known as skills-based volunteerism, in which employee Exhibit 18.B ple, high-technology companies have donated computer hardware and software to schools, universities, and public libraries. Grocery retailers have donated food, and Internet ser- skills are matched to specialized needs. For example, American Express established a con vice providers have donated time online. Publishers have given books. The most generous sulting program that sent expert teams into nonprofits to solve organizational problems, industry, in terms of in-kind contributions, is pharmaceuticals. In 2013, for example, Pfizer free of charge. At the Lower East Side Tenement Museum in New York City, AMEX contributed an extraordinary $3.1 billion to charity, almost all of it in the form of medi- consultants helped the museum learn how to better manage its relationships with visitors, cines and other products and services. Many of these donations were directed to under- significantly improving their engagement and loyalty. served communities around the world." Another approach is for companies to provide employees with paid time off for volun- In-kind contributions can be creative-and they need not cost a lot. Frito-Lay, for teer service in the community. For example, Wells Fargo offers a volunteer leave program, example, donated publicity to Do Something-a nonprofit whose mission is to encourage under which employees can apply for a fully paid sabbatical of up to four months to work young people to improve the world-by featuring photos of the organization's work on in a nonprofit organization of their choice. In recent years, Wells Fargo employees on paid 500 million bags of Doritos chips. "It drove fabulous recognition for our organization and leave have trained teachers in Afghanistan; built homes in Oaxaca, Mexico; and helped helped our Web traffic," said the grateful director."The contribution was a low-cost one renovate a facility for the mentally ill. A 2014 survey found that 21 percent of U.S. employ- for Frito-Lay, which would have had to print its bags anyway. ers allowed all or most of their employees to volunteer during regular work hours." One country where this trend is particularly strong is Brazil: in just a two-year period between 404 Under U.S. tax laws, if companies donate new goods, they may deduct their fair- market value within the relevant limits. For example, if a computer company donated 2010 and 2012, the proportion of employers allowing volunteering on work time increased from 35 to 60 percent. 50 2 Giving in Numbers, 2014 ed., op. cit., p. 30; and Giving USA 2015, op. cit., p. 20. 22 "Intel Encourages More Youth to Participate in Math and Science," press release, October 20, 2008, www.intel.com/ 26 "Volunteering in the United States, 2014," U.S. Department of Labor, press release, February 25, 2015. pressroom. The website of the Intel Science Talent Search is at www.societyforscience.org. ""Millennials Are Drawn to Companies That Offer Chances to Volunteer," Chronicle of Philanthropy, July 17, 2014. Giving in Numbers: 2014 Edition, op. cit., p. 17. 28 "Key Trends to Watch: The Next Wave of Growth in Corporate Pro Bono Service: 2014 Report," Taproot Foundation, at 24 "Corporate Profits Surge, But Cash Donations Creep Up Only 3%," op. cit. Pfizer's philanthropic initiatives are reported at www.taprootfoundation.org. www.pfizer.com/responsibility. 29 "2014 National Study of Employers," at http:/familiesandwork.org. 25 "Philanthropy: A Special Report: Firm Decisions: As Companies Become More Involved in Giving, Charities Are Glad to Get Aid Faster and with Less Red Tape," The Wall Street Journal, December 10, 2007. 30 Silicon Valley Community Foundation, Global Employee Engagement Report: Brazil, China, India, Sout United Kingdom (2015), at www.siliconvalleycf.org Page 424 of 593 405Business and Society Stakehol... Chapter 18 The Community and the Corporation 413 414 Part Six Business and Its Stakeholders The success of P-TECH illustrates the potential of collaborative partnerships that allow civic engagement, 397 community relations license to operate, 398 business to contribute its unique assets and skills to a broader effort to solve significant Key Terms collaborative manager, 399 return on social 470 community problems. partnerships, 41 1 corporate foundations, 404 investment, 410 Communities need jobs, specialized skills, executive talent, and other resources that community, 396 corporate philanthropy social capital, 398 business can provide. Business needs cooperative attitudes in local government, basic pub- community (corporate giving), 402 strategic philanthropy, 408 ic services, and a feeling that it is a welcome member of the community. Under these elations, 399 in-kind contributions, 405 volunteerism, 406 circumstances much can be accomplished to upgrade the quality of community life. The range of business-community collaborations is extensive, giving businesses many oppor- tunities to be socially responsible. Like education, other community challenges are, at their core, people problems, Internet www.bcccc.net The Center for Corporate Citizenship involving hopes, attitudes, sentiments, and expectations for better human conditions Resources at Boston College Neither government nor business can simply impose solutions or be expected to find www.pointsoflight.org Points of Light Foundation quick and easy answers to problems so long in the making and so vast in their implica- www.corporatephilanthropy.org Committee Encouraging Corporate Philanthropy tions. Moreover, neither government nor business has the financial resources on their http://philanthropy.com Chronicle of Philanthropy own to solve these issues. Grassroots involvement is needed, where people are will www.givingusa.org Giving Institute and Giving USA Foundation ing and able to confront their own needs, imagine solutions, and work to fulfill them www.onphilanthropy.com Resources for nonprofit and corporate through cooperative efforts and intelligent planning. In that community-oriented effort, government, nonprofit organizations, and businesses can be partners, contributing aid professionals working in the philanthropic sector and assistance where feasible and being socially responsive to legitimately expressed www.communityactionpartnership.com Community Action Partnerships human needs. http://foundationcenter.org Foundation Center www.businessfightspoverty.org Business Fights Poverty 411 Summary . The community refers to an organization's area of local influence, as well as more Discussion Case: Fidelity Investments' Partnership broadly to other groups that are impacted by its actions. Businesses and their com- munities are mutually dependent. Business relies on the community for services and with Citizen Schools infrastructure, and the community relies on business for support of various civic activities. Roy Fralin stood in front of a roomful of active sixth and seventh graders in an inner- Addressing a community's needs in a positive way helps business by enhancing its city public school in Roxbury, Massachusetts. The classroom walls were covered with reputation, building trust, and winning support for company actions. Like other forms flip chart paper, which were packed with diagrams, numbers, and terms like "savings," of corporate social responsibility, community involvement helps cement the loyalty of "budget," and "investment." A student stood at the front of the classroom. Fralin handed employees, customers, and the public. him a baseball cap to illustrate a loan with interest. "OK, when you give it back, you'll owe me how much?" Another student shouted out the answer. "Great!" exclaimed Fralin. . Many corporations have established community relations departments that respond to They exchanged high fives. "Now, how much are we putting away for your 401(k)?" The local needs and community groups, coordinate corporate giving, and develop strategies students punched their handheld calculators. for creating win-win approaches to solving civic problems Fralin was not a public school teacher, and teaching personal finance to middle school- . Corporate giving comprises gifts of cash, property, and employee time. Donations ers was not his regular job. He was a vice president and investment advisor at Fidelity currently average about 0.8 percent of pretax profits. Philanthropic contributions both Investments, where he worked mostly with high net-worth clients. But here he was, every 412 improve a company's reputation and sustain vital community institutions. Wednesday afternoon for 10 weeks, teaching a curriculum that Fidelity employees had . Many companies have adopted a strategic approach to philanthropy, linking their giv- developed called "How to Invest Like a Millionaire." The program was part of a partner- ing to business goals. Corporate giving is most effective when it draws on the unique ship between an innovative nonprofit called Citizen Schools and Fidelity Investments, competencies of the business and is aligned with the core values of the firm and with one of its corporate partners. "I just don't see any downside," Fralin later reflected in a employee interests. Increasingly, companies are measuring the return on their social clip posted to YouTube about his experience as a citizen teacher. "I think this is going to investment for both recipients and themselves. be a success." . The development of collaborative partnerships has proven to be effective in addressing In June 2015, Fidelity Investments was one of the leading providers of financial services problems in education and other civic concerns. Partnerships offer an effective model of in the world, administering $5.2 trillion in assets for 24 million individual and institutional shared responsibility in which businesses and the public and nonprofit sectors can draw clients. The company, which was privately owned, offered investment management. retire- on their unique skills to address complex social problems. ment planning, portfolio guidance, brokerage, and benefits outsourcing s operated its own family of mutual funds. Fidelity maintained its headquar Page 432 of 593 413Business and Society Stakehol... Chapter 18 The Community and the Corporation 415 416 Part Six Business and Its Stakeholders but had 10 regional operating centers and about 180 retail locations. In 2015, the firm 1. What evidence do you see in this case of the three kinds of corporate philanthropy employed 41,000 associates. Discussion discussed in this chapter: contributions of cash, in-kind products or services, and 412 In 2009, Fidelity set about rethinking its approach to community relations. For many Questions employee time? years, the firm had been philanthropically active, giving to a wide range of charities in its home community and elsewhere. But the company had come to believe that it could have 2. What are the benefits and risks to Fidelity Investments of its partnership with Citizen Schools? a greater impact by focusing on partnerships with a small number of what it called "best in class" nonprofit organizations. An issue of particular concern to Fidelity was education, 3. Do you consider Fidelity Investment's partnership with Citizen Schools to be an exam especially the shocking dropout rates in many of the communities it served; nationally, ple of strategic philanthropy, as defined in this chapter? Why or why not? 1.2 million students dropped out of high school every year, many of them as early as ninth 4. If you were a community relations manager for Fidelity Investments, how would you grade. In researching various options for making a difference, the company learned that the evaluate the impact of this partnership? What kinds of impacts would you attempt to middle school years were critical in determining whether or not students would go on to measure, and why? graduate from high school. To focus its resources on this issue, Fidelity chose to partner with Citizen Schools (CS). Social entrepreneur Eric Schwarz had founded CS in 1995 in Boston to operate after-school programs for middle school students, aged 11 to 14, in disadvantaged communities. The non- profit recruited volunteer professionals-"citizen teachers"-to offer after-school apprentice- ships in subjects they were passionate about in schools in the CS network. As a culminating experience, students would present what they had learned to friends, family, and teachers at what CS called "WOW!" events. In 2015, Citizen Schools had active partnerships with 29 schools in low-income communities in seven states, serving more than 4,800 students. Fidelity had contributed money to Citizen Schools since 1998, but in 2009 it signifi 413 cantly stepped up its commitment and the company went beyond charity, encouraging its employees, like Roy Fralin, to teach in Citizen School programs. By 2015, Fidelity vol- unteers had taught more than 180 apprenticeships in such wide-ranging topics as robot- ics, law, and financial literacy in 34 middle schools. More than 1,500 associates had volunteered over 20,000 hours of volunteer service. Several executives served on various advisory boards. The company also donated meeting space and equipment. For example, students who had learned about web design from a Fidelity employee were invited to use the Fidelity Center for Applied Technology for their WOW! event, presenting their work in a state-of-the-art facility. An external evaluation commissioned by Citizen Schools showed that its programs had "successfully moved a group of low-income, educationally at-risk students toward high school graduation and advancement to college, and [had] set them up for full par- ticipation in the civic and economic life of their communities." Seventy-one percent of Citizen Schools alumni completed high school in four years, compared with 59 percent of matched peers. Sixty-one percent of students who had participated in their 8GA (8th Grade Academy) program five or more years earlier had enrolled in college, compared with 41 percent of low-income students nationally. Fidelity indicated that in an internal survey, 89 percent of the company's employ- 414 ees who had participated in the Citizen Schools partnership reported feeling more con- nected to their colleagues, 78 percent reported improved team-building skills, and over three-quarters reported having improved communication skills. Most importantly though, Heidi Siegal, Fidelity's vice president for community relations, noted, "Our employees and our company enthusiastically support Citizen Schools because we know that they make a unique and significant impact on the lives of students in need." Sources: Corporate Voices for Working Families, "Fidelity Investments" (case study), 2012, at http:/employmentpathwaysproject org/wp-content/uploads/2014/04/Fidelity-and-Citizen-Schools-5.9. if; "Fidelity Investments," at www.citizenschools.org/ investors/current-investors/fidelity-investments; "Teaching Kids to Invest Like Millionaires," [Roy Fralin], at www.youtube.com "Guest Blog: At Citizen Schools, Volunteers Make STEM Relevant through Web design," at www.educationnation.com; and private correspondence with representatives of Fidelity Investments and Citizen Schools. The website of Citizen Schools is at www.citizenschools.org. The website of Fidelity Investments is at www.fidelity.com. Page 434 of 593 415