In 1952, Caterpillar established its corporate foundation in East Peoria, Ill., channeling its giving to local efforts around its headquarters, like a firehouse and local chapters of the United Way, the American Red Cross, and Junior Achievement. Starting in the 1970s, the foundation expanded its scope to charities in other U.S. cities and towns where Caterpillar had built offices and plants.
Then, in the decades that followed, the Caterpillar Foundation aligned its philanthropic priorities with its parent company’s increasingly international business goals, supporting groups focused on STEM education, disaster relief, and sustainable infrastructure projects, with much of the grant money going abroad.
Caterpillar also moved. Twice. In 2017, it left Peoria, its home for more than 90 years, for Deerfield, Ill. Five years later, the company announced plans to relocate again, joining a slew of other corporations moving their headquarters to tax-friendly Texas.
Although Caterpillar continues to give to Peoria nonprofits — it remains one of the largest employers in Peoria and the state as a whole — many of those groups are turning not to the company itself but to a different source for gifts: Caterpillar employees.
In 2020, Jada Hoerr, chief resource officer of the Peoria’s Midwest Food Bank, learned that Caterpillar Foundation grants to support her organization’s food-relief work would sunset over the next three years. But what might have been a blow to the nonprofit was mitigated by a countervailing shift: That same year, Caterpillar expanded its employee matching-gift program, enabling employees and retirees to contribute up to $10,000 annually to their favorite charities for total gifts of $20,000. Last year alone, the company gave $21.1 million in matching contributions.
“In the end, we received more money from Caterpillar through the matching gifts of their employees than when [the company was] giving us grants,” Hoerr says. “It was a net positive.”
What’s happening with Caterpillar in Peoria is a case study in shifting trends in corporate philanthropy. Initial evidence suggests that as companies move headquarters to find more favorable terrain for their businesses, the nonprofits left behind see a decline in corporate contributions. That prompts nonprofits to turn to corporate employees, often high-net-worth executives, to meet their fundraising goals.
Indeed, that is what concerns Hoerr about Caterpillar’s departure: the C-suite charitable contributions. Most of Caterpillar’s 230 corporate employees will relocate to the new Irving headquarters in the Dallas-Fort Worth area over the next few years, and following that may come a falloff in philanthropic gifts.
“It’s less about dollars from the company and more about the high-income earners that are personally contributing when a company relocates,” she says.
Corporate philanthropy today is at a crossroads. While corporate contributions have increased in inflation-adjusted dollars over the past few decades, totaling $29.5 billion in 2022, companies are donating a smaller share of pretax profits — down by half since 1982. Although corporate giving remains a relatively small slice of overall philanthropy — just 6 percent of donations last year came from businesses — for the nonprofits that do receive their support, it can be a meaningful part of their revenues.
Individual donors, particularly high-net-worth individuals, provide the largest share of all philanthropy in the United States. So as corporate executive pay has skyrocketed, the primacy of the wealthy individual donor has increased. Fundraising experts indicate that building relationships with wealthy executives, rather than just with corporate social-responsibility offices, is the more lucrative fundraising strategy. That’s especially true as many large companies have taken a more global approach to giving or have homed in on causes that mesh with their business interests, giving larger but fewer grants.
This shift presents a challenge for local nonprofits aiming to drum up support from companies headquartered in their backyards. Data from Chief Executives for Corporate Purpose, which conducts an annual survey of corporate giving, suggests that, on average, companies that relocate their headquarters pull back on overall giving. Some nonprofits say they see more benefit from employee matching contributions or recruiting executives to their own boards than from direct corporate grants.
Texas — home to 55 Fortune 500 companies, the most in the United States — is perhaps the best place to examine the changing winds of corporate philanthropy. As more companies and their workers put down roots in cities like Austin, Dallas, and Houston, it’s worth asking: Is Texas on the brink of a philanthropy boom? Or is the age of big, local corporate philanthropy coming to a close?
Strategy Shifts
Texas’s business climate has been a magnet for multinational companies, thanks to its lack of corporate income tax, highly skilled and expanding work force, and thriving economy. Following the Great Recession, as energy prices rose and the Texas economy boomed, the corporate migration trend picked up. Over the past decade, more than 280 companies have relocated to the state, according to YTexas, which tracks corporate relocations.
Headquarters relocations, expansions, or mergers often signal changes in giving and corporate social-responsibility strategy, says Kari Niedfeldt-Thomas, managing director of corporate insights and engagement for Chief Executives for Corporate Purpose, a coalition founded by the late Paul Newman to promote social impact in the business world.
That was the case for Toyota, which in 2014 announced plans to relocate its North American headquarters to the Dallas suburb of Plano after deciding that maintaining three hubs in Southern California, Northern Kentucky, and Michigan was unwieldy. Each of those Toyota locations had its own bucket of philanthropic money to spend in its community.
Those three hubs supported whatever they wanted, says Mike Goss, who leads the Toyota USA Foundation, but “we weren’t really working together.”
Goss explains the move to Plano allowed the company to pool resources and develop a more cohesive strategy focused on STEM education, which it now supports through the foundation and its corporate entities, Toyota Motor North America and Toyota Financial Services.
In its first five years in Plano, Toyota contributed more than $30 million to Dallas-area nonprofits. That represents about 12 percent of the company’s total U.S. grants and cash donations from 2018 to 2022.
Its biggest contribution was $5 million to help open a STEM school for pre-kindergarten through eighth grade in West Dallas in collaboration with the Dallas Independent School District and Southern Methodist University. The success of that effort prompted the automaker to put $110 million behind a nationwide STEM education effort.
But not every new multinational company headquartered in Texas has localized its philanthropy as Toyota has. To assess the impact of relocation on giving, Chief Executives for Corporate Purpose reviewed data from 150 U.S. companies that completed its annual “Giving in Numbers” survey in 2014 and 2021 in an exclusive analysis for the Chronicle.
The survey, which is the largest set of historical data on corporate giving, tracks direct donations of corporate cash, noncash donations, and corporate foundation grants. It’s tough to draw broad conclusions from the small pool of companies — just eight respondents relocated during that time. But among those that did, their total giving declined by a median of 30 percent, while dollars granted through corporate foundations increased 31 percent. This may be because priorities changed in the new state, because there are new policies or new employee decision makers leading corporate giving in the new headquarters, or because it takes time to ramp up giving after a move.
Meanwhile, the analysis suggests that companies involved in a merger or acquisition tend to double down on their giving. The 82 respondent companies that merged increased their total giving by a median of 38 percent, while those that didn’t move or merge increased their giving by a median of just 6 percent.
While the surveys suggest the importance of corporate foundations when companies move, data on where corporate money is spent remains elusive, says Niedfeldt-Thomas with Chief Executives for Corporate Purpose. “Just because their headquarters is in a place doesn’t mean that that’s where the money goes,” she says.
Josh Birkholz, CEO of BWF, a fundraising consultancy that works with many large charities, sees companies using their philanthropy to enhance their reputation with employees and customers.
“I don’t think it’s like it used to be like where you’re winning over a geography,” he says. “Now I think you’re winning over a brand. What makes a corporate brand look good?”
Historical Changes
Corporate philanthropy significantly expanded in the 1950s and ‘60s after court rulings and legislative changes gave businesses more leeway to support charities.
By the 1960s, most large U.S. companies established their own in-house foundations at their headquarters, which often gave to causes where their employees lived. Many gave through their local United Way, which distributed the funds to health and human-service charities in the companies’ backyards.
In the 1980s and ‘90s, companies began to more closely align their philanthropy with business strategy and functions, providing support through their marketing and human-resource departments in addition to donations of cash.
Companies today are giving a smaller share of their profits than they used to. Charitable contributions from businesses have hovered around 0.8 percent of pretax profits in the past couple of decades — a substantial decline from the 1.6 to 2 percent of those earnings they donated in the early 1980s, according to “Giving USA” data.
That may be because businesses are expanding their definition of giving in ways that don’t only involve cutting checks to charities through their corporate foundations, says Una Osili, associate dean for research and international programs at the Indiana University Lilly Family School of Philanthropy.
For example, big banks like JPMorgan Chase and Bank of America pledged billions of dollars to advance racial equity in the wake of the police murder of George Floyd in 2020, but much of those commitments came in the form of special loans rather than charitable grants.
“Giving is much more broadly defined than it used to be,” Osili says.
Companies increasingly want to show that they are making progress on environmental, social, and governance goals that often include adapting their own business practices to reduce environmental harm or address labor and human-rights concerns. Those changes may sound philanthropic but are considered business expenses, Osili says.
In recent years, there’s been an expansion of how companies conceive of their role in and impact on society, says Andrew Winston, who advises businesses on sustainability strategy.
“For years and years, everything sustainability was equivalent to philanthropy in companies’ minds. It was all just giving money away,” Winston says. “There’s a greater separation between philanthropy and the environmental and social agenda than there used to be.”
Today, it’s also more challenging for companies to reach consensus on local giving campaigns than it was in the 1970s and ‘80s, Osili says. Companies’ work forces are more dispersed because of globalization and remote work. They’re more diverse, and rates of turnover are high.
“There’s a lot more heterogeneity within these consumer-facing companies,” she says. “That means that taking care of your stakeholders — your employees, the community members and shareholders, and the general public — is more challenging.”
Cultivating Top Executives
When companies announce plans to move headquarters, nonprofits jockey to recruit wealthy executives to their boards and build relationships.
“We are unapologetically aggressive in reaching out,” says Jennifer Sampson, who leads the United Way of Metropolitan Dallas, which has seen an increase in new giving and volunteerism from big corporations and their employees, including some that have moved to the region in recent years.
In 2018, the organization brought in $6.9 million in major gifts and grants. That grew to $30.6 million in 2022, fueled primarily by its efforts to partner with Texas-based companies and create programs that align with United Way’s priorities of improving health and economic well-being.
With AT&T, for example, United Way of Metropolitan Dallas helped develop a program to close the digital divide, providing refurbished computers, wireless hotspots, and digital literacy programs to local families. In September, the company committed $1 million more to that effort, on top of the $1.2 million AT&T had already provided to the technology and training programs.
Sampson says building relationships can take time. Often corporations want to get their employees involved and engaged in meaningful volunteerism before they make financial investments, she says.
Yet some charities struggle to get a foot in the door with big companies that move to their region.
“Nonprofits either meet a company’s priority or they don’t,” says Missy Gale, a fundraising consultant based in Fort Worth.
And when companies’ budgets and priorities shift, as happened in the wake of the pandemic, some nonprofit leaders say it has become even harder to secure grants from corporations that have long been anchors of local philanthropy.
Before the pandemic, for example, Circuit Playhouse, a Memphis theater company, received support from the corporate foundations of companies like FedEx, AutoZone, and International Paper, says Michael Detroit, the executive producer.
Businesses are expanding their definition of giving in ways that go beyond cutting checks to charities.
But going back to those companies now has been challenging, he says. They have less money to give, are giving in fewer areas, or are more specific about what they’ll support. Some companies say they are spreading their philanthropic money across many locations represented in their supply chains.
“There’s a lot more hoops to jump through,” Detroit says.
That’s a challenge at a time when nonprofits are struggling to pay their employees competitively and provide services in their communities. Detroit says his organization has its eyes set on more aggressively and creatively connecting with top executives.
This focus on top paid executives is playing out in Texas, too, where many charities see more potential from individual donors employed by relocated companies than from the companies themselves.
Research suggests this may be the more lucrative strategy. Attracting or retaining a corporate headquarters in a city yields millions of dollars in annual contributions to local nonprofits, according to a 2009 report published in the Journal of Public Economics.
But the benefit to local charities comes almost entirely from the increased presence of highly paid individuals employed by large corporations, according to the analysis from economists at the University of California Berkeley and Cornell University. The study found little evidence that the presence of publicly traded companies in a city benefits local charities directly through corporate donations.
The Power of Individual Donors
Indeed, a primary trend in corporate philanthropy is the generosity of wealthy executives.
In the same time period that donations of corporate pretax profits have shrunk, executive salaries have skyrocketed. The CEO-to-worker compensation ratio reached 399 to 1 in 2021, a new high, according to a report from the Economic Policy Institute. That’s up from 59 to 1 in 1989, the report found.
“There’s been a very powerful trend toward companies doing one thing and individuals should donate if they want to,” says Winston, the corporate sustainability adviser.
Any time the economy has taken a big hit — the dot-com bust in the late ‘90s, the Great Recession, the disruption of the pandemic — “all of those things have changed philanthropy and, in most cases, pushed it upstream with more dependence on individuals,” says Birkholz of BWF.
“Nonprofit business models are evolving to focus on the high-net-worth individuals,” he says. That change in focus may mean less attention is going toward corporate donors and less affluent individuals.
That’s playing out in Austin, which has seen its population of millionaires more than double, to 30,500, in the past decade.
Austin is feeling more like Silicon Valley of the early 2000s as it grows into a major tech hub, says Amy Lampi, associate vice president at BWF. Lampi spent several years in the early 2000s raising money for a Palo Alto theater company before returning to her native Texas. She cautions that “just because the wealth entered the community didn’t necessarily mean the wealth was philanthropic.”
Case in point may be Tesla, which moved headquarters to Austin in 2021. Tesla CEO Elon Musk has said he considers his businesses to be a form of philanthropy and thus do not require corporate philanthropies. The company has not made public commitments to nonprofits in its new hometown, though Tesla did pledge $37.5 million to support STEM education in Nevada, where its battery factory is based. The company launched an employee volunteer program in 2020 but so far has not matched employee donations.
Musk himself pledged to give Tesla shares to communities on the Texas-Mexico border — $20 million to schools in Cameron County and $10 million to revitalize downtown Brownsville, home to one of the company’s rocket-production facilities and close to the launch site near his SpaceX spaceport.
Despite Tesla’s hard-to-read philanthropic stance, some Austin nonprofits hope the company will provide philanthropic support. Angela Osborn, who previously led development at the Austin Humane Society and now works at the Austin Parks Foundation, said a Tesla community-outreach staffer visited around 50 nonprofits when the company was preparing to move, but no money followed.
“That didn’t feel very special,” she said. A Tesla spokesperson declined to comment for this article.
Homegrown companies tend to be much more generous than the newcomers, Osborn says. Still, she adds, some of the Humane Society’s largest donors have been local Apple employees who took advantage of the company’s matching contributions.
Since 2013, Apple has manufactured its Mac Pro device in Austin and ranks as one of the city’s largest employers. The company continues to expand its footprint with a new campus that will initially accommodate 5,000 additional employees with the capacity to grow to 15,000.
For now, all eyes are on the individual donors, and it remains to be seen whether Texas’s corporate transplants will become a larger part of the local philanthropic landscape.
“We are definitely not seeing the potential yet of these companies moving in and being part of the community and giving those major gifts,” Osborn says. “They’re really letting their employees make their impact the way they want to make their impact.”
Reporting for this article was underwritten by a Lilly Endowment grant to enhance public understanding of philanthropy. The Chronicle is solely responsible for the content. See more about the Chronicle, the grant, how our foundation-supported journalism works, and our gift-acceptance policy.
