We are the most marketed-to people in human history. Advertisements for products and services have insinuated themselves into every nook and cranny of our lives, leading most of us to develop a healthy skepticism about the sales pitches to which we are so constantly exposed. But recently, some businesses have emphasized a new wrinkle in their marketing: philanthropy. Buy their products, the ads exhort, and feel good, knowing that some of the proceeds are going to causes worthier than the mere bottom line.
While the definition of “socially responsible” remains murky (the term is used by liberal and conservative groups alike), the term’s marketing cachet is quite clear. The question for philanthropy is, How much are you actually helping the causes you support by patronizing these companies? The answer: Surprisingly little.
American Express, to pick just one example of equivocal charity from among many, spent heavily last year on an advertising campaign touting its support for Share Our Strength, a hunger relief organization. A barrage of slickly produced holiday season TV commercials showed desperate, hungry children, while expensive full-page ads in the New York Times, Wall Street Journal, and other national newspapers promised that “every time you dine out and use the American Express card, you could help provide a meal for someone hungry. Every time you use the American Express card during November and December, American Express will donate funds to Share Our Strength.”
But before you take the family out to dinner in order to help feed the starving kids in the ad, take a look at American Express’s fine print. Its actual donation is a whopping 3¢ per card purchase. That means that if you had used the card to pay for a $30 restaurant dinner every night in November and December (cost to you: $1,830), you would have raised a grand total of $1.83 for Share Our Strength. Actually, you would have raised $1.83 if American Express hadn’t reached its $5 million cap on contributions (which was reached in each of the four years of the campaign). Still more fine print helpfully informs us that “This donation is not tax-deductible for Cardmembers.” That’s right, the company, not you, gets the tax deduction. Charity begins at home, after all.
Perhaps best known in the “socially responsible” world, Working Assets offers credit card and energy services, but is known primarily as a long distance provider offering rates that are “competitive with” (read: “more expensive than”) those offered by AT&T and MCI. But the reason customers aren’t supposed to mind paying higher rates is that Working Assets promises to donate 1 percent of each billing to its stable of nonprofits. Working Assets ads proclaim that “[t]he money goes to groups working for peace, human rights, the environment and economic justice—at no additional cost to you. So the more calls you make, the more change you make.” Sounds pretty good—help groups you like simply by performing a mundane chore (paying your bills) that you’d have to do anyway. Alejandro Levins, a Working Assets customer for six years, told USA Today that “Without really doing any work at all or lifting a finger, I’m generating donations for groups I believe in.”
But do the math. On a $30 monthly long distance bill, just 30¢ goes to charity. That totals up to $3.60 a year. Most people, I think, would be embarrassed to show their “support” for a group that they truly “believed in” by mailing them an annual check for $3.60. By comparison, you could use AT&T instead and just mail your nonprofit group whatever money you saved over Working Assets. Even if you saved a mere five bucks over the course of a year, that would still represent a nearly 50 percent increase in the amount of money that you had “raised” for your charity. Moreover, by sending the money yourself, you may be able to deduct the gift from your own taxes. Of course, that $3.60 that you would have “donated” by using Working Assets is written off on the company’s tax return.
In other words, both you and the nonprofits you support would wind up with more money by making the gift yourself.
The “socially responsible” trend has its origins back in the 1960’s with mutual funds that assured investors they would not hold stock in companies involved in the arms trade. Since then, such mutual funds have grown: there are now more than 45 of them, with combined assets of $162 billion, according to the Social Investment Forum.
“Investing with a conscience” —as its proponents like to call it—may or may not be a sound idea from a profit standpoint. According to Lipper Analytical Services, a firm that tracks mutual fund performance, “socially responsible” firms as a group have achieved significantly lower investment returns than the average mutual fund over the past one-, three-, and five-year periods. But not all. The Domini Social Equity Fund—the largest such mutual fund—posted a cumulative return of 135 percent between 1990 and 1995, slightly better than the S&P 500 during that period.
Are “socially responsible” firms making a difference? Indisputably. They have channeled millions of dollars to the causes they support, money that these nonprofits might not otherwise have received. But are you really making a difference? Or are you just getting cheap self-satisfaction by creating a virtue of necessity (paying your phone bill) or making a self-indulgent purchase (like a dinner out on your Gold Card), without giving time, thought, or—when it comes right down to it—money to the causes you ostensibly support?
As columnist James Glassman recently wrote, “I can’t understand why anyone would turn over moral decision-making to a mutual fund manager. If you want to pick and choose with ethics as your guide, do it yourself.” After all, charity is a two way street, valuable—in both a spiritual and cultural sense—as much for what it means to the donor as to the donee. Should we really be that enthusiastic about the promise of “supporting the causes we believe in without lifting a finger?”
Thomas Riley is Senior Analyst at the Statistical Assessment Service, a nonprofit research organization that analyzes public policy statistics. He is also Wine Editor of the Washington Culinary Calendar.