April 28, 2015

When Charities Act as a Shill for Corporate Interests, the Public Good Suffers

In philanthropy, much of the pressure that big donors apply to nonprofits is subtle or remains behind closed doors. No charity leader wants to complain out loud when a big benefactor seeks help pushing her business or getting his kids into a good school.

But some of the unseemly things that happen in philanthropy do come out in public when a corporate grant maker needs regulatory approval for a controversial potential deal. The most recent national example came a few weeks ago when The New York Times’s Business Section featured a look at how nonprofit beneficiaries had been touting to regulators all the good that would come from a Comcast and Time Warner merger.

After reporting that friendly Comcast-funded research and politically allied groups wrote on their behalf to regulators, it noted that “A similar pattern is evident with charities like the Urban League and more than 80 other community groups that supported the media company and that also accepted collectively millions of dollars in donations from the Comcast Foundation over the last five years, documents reviewed by The Times show.”

This pattern of corporate funders using grantees to support their cause is not new. It was raised to a high art by tobacco companies and continues today as, for instance, major sports team foundations in California push special charitable raffle legislation that would benefit their associated for-profit franchises. CEO Jan Masaoka said CalNonprofits is dismayed that the leagues are contacting nonprofits that have received grants from team charities, seeking to influence a public policy matter on an issue far afield from the nonprofits' missions.

And a similar thing is happening big-time with Exelon, a national energy company with a bad reputation among environmental groups and consumer advocates.   The company has its sights set on buying Pepco, an electric company in the nation's capital which serves the mid-Atlantic.

I have spent a few weeks trying to piece together just what kind of influence peddling goes on between nonprofits and their benefactors when companies get engaged in this kind of high-stakes deal, and what it reveals about a self-serving and deeply unsettling subservience among nonprofits.

My curiosity was piqued when I learned that more than thirty charities in the District of Columbia wrote to government regulators in support of the Pepco sale, and that many of them even lent their logos to full-page newspaper ads supporting the deal.

The overwhelming majority of the charities endorsing this acquisition in letters to DC’s Public Service Commission share a couple of things in common – they have no environmental mission or apparent expertise on energy issues, and they received or benefited from grants made by Pepco. Such local support of nonprofits is something Exelon promises to continue for 10 years.

It's easy to see why Pepco, an electric distribution network, wants to sell: Exelon offered 24 percent more than the value of the company.  Exelon would become the largest utility company in the country if acquired Pepco and would capture this huge customer base for its nuclear-generated electricity. It also would spread the risk of its increasingly questionable business model across a larger number of ratepayers. But what’s in it for local charities?

A big part of the answer came from the regional development director, Meta Williams, in the United Negro College Fund Washington, DC Area Office.  She explained that Pepco and Exelon are very important donors to UNCF, provide a great deal of support to other charities, and that that community involvement alone made the corporations’ plans worthy of endorsement – which she said wasn’t solicited. 

She said that she did not consider environmental, energy or other issues in deciding to write to the DC public service commission, that her office did not set organizational policy positions and that she spoke only for the fundraising arm and was not authorized to speak for UNCF itself. None of that is clear from the letter she sent to regulators, however.

Still, Ms. Williams was more forthright than nearly any of the other charity officials I sought to interview. Most refused to talk to me.

The  Salvation Army of the National Capital Area, Urban Alliance, American Red Cross of the National Capital Region, Latin American Youth Center, YWCA of the National Capital Area, Homeless Children’s Playtime Project, all submitted letters urging approval of the proposed Exelon/Pepco deal – and they declined or rebuffed requests to discuss what led them to take action on such a controversial issue seemingly unrelated to their principal mission. 

Here's a sampling of responses I received from others who wrote letters in support of the Pepco deal:

  • The head of Samaritan Inns, Larry Huff, said that he was “not in a position to comment on that” when asked to discuss what brought him to write his endorsement other than to say that “Our relationship with Pepco is a very valued one and I need to leave it at that.” 
  • A marketing officer, Brendan Hurley, at Goodwill of Greater Washington regretted failed efforts to set up an interview with the organization's chief executive and instead prepared an emailed statement.  In response to the question “…did Pepco or Exelon solicit the letter…?” he said that although Pepco had supported the charity for a number of years “they neither required nor demanded that we write a letter in support of the merger.” 
  • Executive director Joe Harris of the Anacostia Community Outreach Center said that he did not receive “direct funding” from Pepco, was not asked to contact the DCPSC, and that he often wrote unsolicited letters regarding important policy issues.  When asked if he had been aware of the opposition by environmental, energy, and consumer groups and by public officials when he wrote, he insisted that he endorsed Pepco’s proposal because it “is firmly rooted in a culture of philanthropy” (as he said in his letter) and because of support provided in poor and minority communities even if environmentalists and others protest the corporations’ plans. 
  • Director Maria Gomez of Mary’s Center, a family healthcare and service center, elaborated a similar perspective in a written statement but refused an interview request and failed to respond to emailed questions.  She said they were grateful for Pepco’s provision of priority emergency electric service in support of their life-maintaining medical equipment and supplies, and for its philanthropy, but would not discuss her letter.

Charities’ silence on this matter and their refusal to be accountable for their actions is simply unacceptable. While the financial health of an organization may seem paramount to its leaders, forsaking the broader common good for its benefit cannot be abided. 

And it's hard to argue that the letter writers really were focused on the common good.

The tone, tenor, even the structure of most of the nonprofits’ submissions have so much in common it is hard to believe they wrote for any reason other than the desire to please a powerful funder. After reading their letters (basically short or long versions), it strains credulity to suggest that corporate benefactors did not solicit them or provide writing guidance.

Pepco refused to make anyone available for an interview to discuss this matter, and said it would only consider written questions sent to its media relations staff. They then declined to answer them, issuing only a public relations statement that didn't answer any of my questions about whether they had solicited and aided grantees’ intercession with regulators, saying only that the company had “actively shared” information with their “nonprofit partners.”   

I was particularly troubled by one such Pepco partner’s letter, but the Washington Area Women’s Foundation declined to speak with me about it. If its president, Jennifer Lockwood-Shabat, had talked to me, I would have asked why, after citing its philanthropy and other claimed attributes, she said “…Exelon’s reputation as a leader in environmental policy… augers well for citizens of the region.” 

In fact, myriad local environmental organizations such as the Sierra Club, Climate Action, Environmental Network, Solar United Neighborhoods, Empower DC, Energy Justice Network, Friends of the Earth, Food and Water Watch, Green Neighbors, Interfaith Power and Light, Mid-Atlantic Renewable Energy Coalition, Nuclear Information & Resource Service, and others all oppose the very action that the Women’s Foundation wrote to support.

So too did several DC Councilmembers, the Attorney General of Maryland, the Institute for Energy Economics and Financial Analysis, and every one of the Advisory Neighborhood Commissions that took a position (19 of 41 ANCs) on the issue.  ANCs are composed of representatives elected by DC residents to give them a better voice in government, and they are doing their job on this issue: 50 percent of voters have an opinion on the proposed acquisition – 44 percent oppose it and only 6 percent support Pepco and Exelon.  The DC Office of People’s Counsel too concludes that as proposed the acquisition is not in the public interest.

So how did we get to a point where some funders and their beneficiaries are operating so contrary to what their communities really need?

Decades ago when corporations started to put their independent foundations under their marketing, communications and public relations departments, it became clear that company executives had moved away from concern for the public good and instead were focusing on private profit. 

In applying this maxim, Pepco and Exelon – like Comcast and major league sports teams – are certainly not alone.  And far too many charities pipe the grant maker’s tune. 

Pepco may not have “required or demanded” that grantees support Exelon’s acquisition bid, but when they and nonprofit leaders assiduously avoid discussion of what brought charities to support the corporations, it leads one to conclude that the funder at least made intimidating suggestions that letters be written, and even provided templates.

We must be sympathetic with charity leaders who have the imperative to sustain organizations doing vital work.  Yet, we must vigorously condemn implicit bullying by “philanthropy” and castigate nonprofit officials whose buckling to grant makers' will is a gross disservice to the rest of us.  

Mark Rosenman is professor emeritus at Union Institute & University.