Corporate Charitable Giving After A Takeover

George Bunting, Jr. who became the CEO of the Noxell Corporation in 1973, a company founded by his father and primarily known for its sale of Noxzema cream in those blue jars, made a public pronouncement upon gaining his executive powers. He declared that Noxell would join “The Baltimore Five Percent Club”, a business and social group whose executives pledged that 5% of all corporate profits would be donated to support charities in the region.

Bunting’s charitable pledge on behalf of Noxell was about twice the national average. Companies that generated between $10 million and $200 million in annual profits donated almost 2.1% of their annual profits to their respective communities.

This creates a fall-out effect on regions that are regularly susceptible to the loss of leading corporations. For example, in 1980, St. Louis had twenty-thirty corporations that donated a blended average of 1.89% of their profits to local charitable causes, for a local charitably industry that approached almost half a billion dollars

Then, via mergers and acquisitions, by 2019, St. Louis had lost Anheuser-Busch, Apex Oil, Boatmen’s Bancshares, Centerre Bancorp., Chromalloy American, Consolidated Aluminum, General American Life, Interco, Kellwood, May Department Stores, Mallinckrodt,  McDonnell Douglas, Mercantile Bancorp, Missouri Pacific, Monsanto, Ralston Purina, Union Electric, Pulitzer, A.G. Edwards, Pillsbury, Sigma-Aldrich, and Wetterau. Had those firms remained in St. Louis, and had their giving rates remained constant, an additional $892 million would have been available to support the St. Louis community each year. That amount is absolutely staggering.

Many other cities, such as Detroit, Cleveland, Pittsburgh, and New Orleans, have grappled with similar storylines.

The problem is that most corporations focus their giving locally, where the executive team can receive praises and is on a first-name basis with the heads of the local charities, but these contacts have consolidated into about a dozen U.S. cities. It is a rare corporation that chooses to support the charities in a deindustrialized region where it is not headquartered.

Instead, the trend seems to be to either support charities locally, or give the money to a third-world country (e.g. Microsoft’s charitable giving is focused on its home state of Washington, as well as certain African and Asian countries, with only 8% of charitable giving occurring outside of these contexts. With Apple and Amazon, the figure is 6% and 0%, respectively.

The remedy is to reintroduce the consideration of local power and control and other regional considerations to the list of elements that are weighed as antitrust factors during mergers and acquisitions. The failure to protect regional businesses not only has an impact on jobs, but devastates charitable giving as well.