Alliance Online - March 2007
Charity rather than change still the order of the day for Mexican corporate philanthropy
Patricia Carrillo Collard and Mónica Tapia Álvarez
Every year, more companies in Mexico invest more financial and in-kind resources in a variety of causes. Among the 21 companies interviewed for a recent study on Mexican corporate philanthropy alone, these resources are estimated at almost US$150 million. In an emerging economy, with international donors leaving, who are the local private sector donors stepping forward to take their place? How much do they give, and what determines their giving? These were among the questions the study set out to answer. The findings suggest that, some attempts to formalize it notwithstanding, decisions about corporate giving in Mexico tend to be made on the basis of personal relationships, with little regard for impact, the intent being amelioration rather than change.
The study was initiated by United Way International, which wanted to get a better understanding of how its model of philanthropy could respond to the changing nature of corporate giving in Mexico.[1] Carried out between June and August 2006, the study consisted mainly of in-depth interviews with a group of 21 companies and an online survey of a further 48.[2] Corporate philanthropy was defined as company actions or programmes that involve the donation of financial or in-kind resources.
Giving is not new in Mexico. Of the 21 companies interviewed, 12 reported a history of philanthropic activities of more than 20 years; and 83 per cent of those that participated in the online survey said they started their activities more than five years ago. Their main motivations are ‘to give back to society’, to be ‘good corporate citizens’, to follow the philanthropic traditions of their owners or founders, and to attend to the basic needs of the communities where they operate.
Who do they give to?
None the less, behind this interest in doing good, we found that most companies do not consider philanthropy a strategic part of their business. On the contrary, they see it as something they do as private individuals, understanding it more as philanthropy ‘of the rich’ than as philanthropy ‘of the company’. Many talked about their responsibility to society: they recognize the country’s persistent inequality and poverty and are motivated to act because of their privileged position. They do not generally see their actions as an investment, nor do they place them in a broader context of business playing a role in the country’s social development.
These tendencies are reflected in the types of programme supported through the main areas of social investment – education, health, children, environment and natural disasters – which are oriented more to assistance than to change. In the meantime, as can be seen in Table 1, topics such as human rights, addictions, HIV/AIDS and microcredit go largely unattended.
Table 1 Areas of social investment
| Areas of social investment | Percentage of participants (%) |
| Education | |
| Children | |
| Health | |
| Natural disasters | |
| Environment | |
| People with disabilities | |
| Arts and culture | |
| Seniors | |
| Nutrition | |
| Indigenous peoples | |
| Women | |
| Housing | |
| Rural development | |
| Addictions | |
| Microcredit/income-generating projects | |
| HIV/AIDS | |
| Human rights | |
| Science and technology |
For many companies, giving started as owner-driven charity or when organizations knocked on their door. For others with a more strategic approach, it started as a tool that helped them smooth their way into the community where they carry out their business activities. Only one-third of participants (32 per cent) said they had a corporate foundation to manage their philanthropic activities, which had been set up mainly to make their actions more coherent and to give them more visibility and focus. Interestingly, three of the companies interviewed have corporate foundations in the US but not in Mexico. The reason for this may be that the Mexican legal framework does not provide incentives for the incorporation of foundations and the paperwork involved thus outweighs any fiscal benefits.
Companies that have corporate foundations do not necessarily operate them as independent entities. In some cases, the company covers part or all of the operating expenses of its foundation. In others, the company and the foundation share the same staff. Only 23 per cent said the staff who run philanthropic activities are dedicated only to this task. Human resources and public relations/communications departments often handle philanthropic activity (37 per cent of cases), while the remaining participants reported handling them through the finance department, the executive director or other departments.
In general, philanthropic activities have a low budget and a low profile: 38 per cent said they have only one staff member or only volunteers, and 26 per cent said they have 2 or 3 people. Moreover, only 15 per cent of participants reported philanthropy staff having backgrounds in philanthropy, the third sector or corporate social responsibility.
A common practice among Mexican corporations is to continue supporting the same organizations, which means they work with a relatively small number of organizations every year. Of the 54 who provided information on this topic, more than half (54 per cent) reported working with 10 organizations or less, while 35 per cent reported working with more than 20.
How much do they give?
Levels of corporate giving vary greatly. While 12 per cent of respondents did not disclose amounts, around one-third (30 per cent) mentioned annual philanthropy budgets of $70,000 or less and another third (32 per cent) reported budgets above $1 million.
Among the companies that participated in the online survey, there appears to be some relationship between annual income and philanthropy budgets. Nevertheless, one-third of companies in the highest income group had philanthropy budgets of $70,000 or less.
Another factor that seems to have a strong relationship with the size of philanthropy budgets is the existence of a corporate foundation: half the companies that do not have foundations (52 per cent) mentioned budgets of $70,000 or lower and only one-fifth reported budgets of more than $500,000. In the case of companies with corporate foundations, only 28 per cent had budgets of $70,000 or less, while almost half (43 per cent) said their budgets were more than $500,000.
As regards the average amount given, one-third (35 per cent) reported giving average amounts of $3,000 or less, while only 17 per cent mentioned amounts above US$30,000.
Criteria for deciding where to give
The study also looked at the criteria and procedures used by companies in selecting organizations or projects to support. In this area, one of the most salient characteristics is the reactive way in which companies provide support and the subjectivity in their decision-making. Only two of the companies interviewed said they use a public call for proposals for the selection of projects and one more mentioned a similar process for selecting individuals for educational grants. By contrast, seven talked about giving through agreements with non-profit organizations, through organizations that implement the company’s philanthropic programmes, or through direct invitations issued by the company to applicant organizations. In the case of companies surveyed online, two-thirds (68 per cent) mentioned the need for organizations to present an application, although this can vary from a simple letter to a specific application form.
In terms of prerequisites, the most commonly mentioned were being legally incorporated (68 per cent of participants) and having tax-exempt status (56 per cent). This suggests that companies do not necessarily look for fiscal benefit from their giving, since a significant number do not require donations to be tax-deductible. Some companies support individuals or communities directly, instead of working with legally incorporated organizations.
A similar tendency towards informality emerged when analysing the criteria used by companies to select projects. Among companies interviewed, three mentioned that, to receive support, an organization needed to be ‘known as solid and transparent’, ‘very well known, with an impeccable history’, or ‘very accredited’. Beyond that, only one-third of companies interviewed mentioned specific selection criteria. Among companies participating in the online survey, two-thirds (69 per cent) said they looked at the sustainability of the project, and half mentioned economic viability. None the less, half the companies that answered this multiple-choice question chose ‘previous knowledge and trust in the applicant organization’ as one of the criteria used.
These findings illustrate the lack of formal procedures and the importance of personal connections in companies’ decision-making processes. They underline that many corporate donors are not open to giving to organizations they do not know personally or to younger organizations that are not well-established in business circles.
Little attempt to assess their philanthropy
Finally, we looked at how corporate donors follow up their giving. It was evident that companies usually understand follow-up as verifying how resources were used, and only a few try to ascertain the impact on the problems they are trying to address. By far the most common type of follow-up mentioned by participants was site visits (72 per cent), with written reports (36 per cent) and accounting for expenses (34 per cent) the next most numerous. Ten per cent of participants said they do no follow-up at all.
The study also shed light on the networks that companies develop to carry out their philanthropic activities. Companies work mainly with other companies or with the government in the field of corporate philanthropy, and their ties or partnerships with civil society organizations are few. They know very little about the third sector or how to work with civil society organizations. Considered in conjunction with the preference for in-kind donations, which denotes mistrust in civil society organizations, it illustrates a divide between the sectors – a divide that hinders joint work and the achievement of common goals.
State-owned companies: a special case
Throughout this analysis, state-owned companies (paraestatales) constitute a particular case.[3] Their legal framework does not contemplate donations or actions related to social responsibility, nor does it allow for the incorporation of foundations, nor for adjustments in operating structure that would permit them to carry out philanthropic activities more efficiently. The fact that they operate with public resources increases the complexity of their work, because it implies long bureaucratic timeframes and obstacles in decision-making that make them slow to respond to requests from CSOs. Moreover, these companies have the disadvantage of being perceived as government representatives, which increases the pressure from communities for them to contribute resources to meet their demands.
In summary, the study shows a mixed picture. There are some tendencies towards professionalization in the operation of philanthropic programmes – understood as establishing clear grantmaking procedures and goals – but these seem to be found more often in those companies that have a corporate foundation and participate in groups that discuss corporate philanthropy activities. Such companies also tend to set formal criteria more often than the rest. Another sign of increasing professionalization is that some companies are hiring staff to develop and run their philanthropy activities.
However, Mexican corporate philanthropy still has many of the characteristics of charity, looking at the symptoms of problems instead of attacking their roots, and building capacity among communities, organizations and individuals. More often than not, the people in charge of philanthropic activities are not specialized in terms of either function or knowledge. In conjunction with the tendency to support organizations that companies already know and have relationships with, it suggests that businesses use grantmaking more as a marketing/public relations tool than as a way to promote social change. Corporate philanthropy is part of the discourse of Mexican companies nowadays, but their limited commitment to it is shown in the small amounts of money given by some of the largest companies. The fact that they do not see themselves as having a role as contributors to the social development of the country, beyond the creation of jobs, can be seen from the fact that, regardless how much money they put into it, they are usually not that interested in what it achieves.
More and more international donors are moving out of emerging market countries, in the belief that their place will be taken by national donors. In the case of Mexico, however, this presents a great challenge. For many CSOs, data on potential national donors is difficult, if not impossible, to find, since companies are reluctant to publicize their grants and make calls for proposals. Among many of the participating companies, even the largest ones, no information on corporate giving was available on their website. (Several companies refused to take part in the study precisely because of this reluctance to make their philanthropic activities known. Some actually cited the biblical passage: ‘Do not let your left hand know what your right hand is doing.’) Few links exist between CSOs and business, and the ones that exist are mainly through personal ties. In Mexico, corporate giving is still viewed as a private decision to compensate for the privileged position of business and most corporate donors are far from being promoters of social change.
1 This article summarizes the results of a study carried out for United Way International (UWI) and its Mexican affiliate, Fondo Unido México, which was financed by the General Electric Foundation. UWI contracted with Instituto Tecnológico Autónomo de México (ITAM), a Mexican university, and ITAM in turn engaged the services of ASPEA to conduct this survey of corporate philanthropy practices.
2 Half the companies that participated in the study (52 per cent) are included in the list of the 500 biggest companies in Mexico. Fifty-eight per cent are located in Mexico City.
3 Companies called paraestatales are owned and operated by the state. Their legal and fiscal framework is different from that of private sector companies, and sometimes they have to abide by legislation designed for government agencies. Some of these, like Petróleos Mexicanos and Comisión Federal de Electricidad, are among the biggest companies in the country, in terms of both income and number of employees. They were considered relevant to the study due to the amount of resources they donate to different causes.
Patricia Carrillo Collard and Mónica Tapia Álvarez work with Alternativas Sociales en Planeación y Evaluación (ASPEA), the consulting branch of Alternativas y Capacidades, a Mexican non-profit that provides training and research on social issues (www.alternativasociales.org). Email pcc@alternativasociales.org
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