Calling the Piper's Tune: Corporate Funders and Charity Endorsements

Too often big donors' pressure on charities remains behind closed doors and affects only organizational issues or patronage. But sometimes the unseemly behavior of funders becomes a matter of record and should not remain unchallenged.

Charities being urged to support controversial public policy actions pursued by their corporate funders presents exactly such a moment.

Setting the stage for an investigation I just conducted in the nation's capital, a recent example was revealed when the New York Times reported that friendly and politically-allied nonprofit groups funded by Comcast wrote to regulators in support of its now-discredited proposed merger with Time Warner Cable. More distressingly, the Times went on to note 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 practice of corporate funders using grantees to support their cause is not new. It was raised to a high art by tobacco companies and continues coast-to-coast today as, for instance, major sports team foundations in California push a charity raffle proposal that would benefit their associated for-profit franchises. CalNonprofits CEO Jan Masaoka 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.

But that's small change compared to what's going on today in the District of Columbia.

More than thirty disparate charities in DC have written to government regulators in support of a popularly-opposed regulatory action sought by a local funder, many even lending their logos to full-page newspaper ads.

Pepco, a regional electric utility that serves DC (and the mid-Atlantic) wants to sell itself ­to Exelon, a national energy company with a bad reputation among environmental groups and consumer advocates. The overwhelming majority of the charities endorsing this acquisition in letters to DC's Public Service Commission (DCPSC) share a couple of things in common -- (1) they have no environmental mission or apparent expertise on energy issues, and (2) they received or benefited from Pepco funding, a "philanthropy" Exelon promises to continue for 10 years.

Being offered a premium of 24% over its market value is enough to convince Pepco to seek approval to sell this electric distribution network. The opportunity to become the largest utility company in the country and to use Pepco's significant ratepayer base to dilute its nuclear electric generation investments and business model is much sought by Exelon. But what's in it for local charities?

A big part of the answer came from the regional development director 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 DCPSC, that policy was not made in her office, and that she spoke only for the fundraising arm and was not authorized to speak for UNCF itself (none of that is clear from her letter).

Although the Washington Area Women's Foundation directly refused to discuss its support letter with me, they likely made a mistake when (in addition to citing the virtue of Pepco and Exelon funding them and other nonprofit organizations) they asserted that "Furthermore, 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 concluded that as proposed the acquisition is not in the public interest.

Yet, 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, and others all submitted letters urging approval of the proposed Exelon acquisition -- 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.

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

I gave up on asking nonprofits' directors to chat before getting around to the Friends of the National Zoo, Covenant House, Greater Washington Urban League, Leukemia & Lymphoma Society of the National Capital Area, Columbia Lighthouse for the Blind or the many others charities urging approval of an important corporate funder's contested plans exactly because of its philanthropy.

The tone, tenor, even the structure of most of the nonprofits' submissions betrays another commonality among endorsing organizations beyond a funder. After reading their letters (basically in two versions), it strains credulity to suggest that they were not solicited nor writing guidance provided.

Pepco refused to make anyone available for an interview and required that my questions be sent in writing to their media relations staff. They then declined to answer them, instead issuing a public relations statement to obscure the sought details about its solicitation of grantees, saying only that they had "actively shared" information with their "nonprofit partners."

A few of those "partners" did agree to chat about their letters, or sort of -- the head of Samaritan Inns said that he was "not in a position to comment on that" when asked to discuss what brought him to pen 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 staffer at Goodwill of Greater Washington regretted failed efforts to set up an interview with their president/ceo and instead prepared an emailed statement. In response to the question "...did Pepco or Exelon solicit the letter...?" he said that although Pepco had funded them for a number of years "they neither required nor demanded that we write a letter in support of the merger." (emphasis added)

The director 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 phrased in his letter) and because of support provided in poor and minority communities even if environmentalists and others protest the corporations' plans.

Mary's Center elaborated a similar perspective in a written statement but refused an interview request and failed to respond to emailed questions. 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 their letter.

But is it truly philanthropy? 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 -- as well as Comcast and major league sports -- are certainly not alone among corporate grant-makers.

And too many charities pipe the funder's tune.

Those nonprofits should be embarrassed by their submissiveness to funders, especially when they're on the wrong side. That should prove the case for charities supporting Comcast since it was forced to withdraw its bid for Time Warner after it became so widely recognized as being against the public interest that it clearly would fail regulatory review.

Pepco may not have "required or demanded" that grantees behave similarly in supporting 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 made intimidating suggestions.

We must be sympathetic with charity leaders who have the imperative to financially sustain organizations doing vital work. Yet, we must vigorously condemn bullying by "philanthropy," and soundly castigate nonprofit officials whose buckling to funders' will is a gross disservice to the rest of us and a violation of the public trust.

Versions of this piece also appear in The Chronicle of Philanthropy and PhilanTopic.