Starting and Leveraging Corporate Foundations as a Mid-Market Company
Is your company currently engaged in philanthropic giving? Maybe you have a corporate social responsibility (CSR) initiative or a workplace giving platform for your company and employees. Or maybe you’re interested because you’re tired of supporting nonprofits in an unorganized fashion, not receiving the recognition deserved for charitable support, or your employees don’t feel engaged with your corporate philanthropy. Perhaps it’s time to look into other opportunities?
Donor Advised Funds are a great option that allow for both corporate and employee philanthropy, satisfying both parties while increasing employee retention and customer recognition. Below is a summary of the benefits of the three top options and how they can benefit your company:
- Corporate/Donor Advised Fund
- Direct Giving Program
- Corporate Foundation
Option 1: The Best of All Worlds - Corporate Advised Funds
With Corporate Advised Funds, “I have seen companies truly deepen employee engagement and loyalty and even attract a wider client base,” said Scott Jackson, CEO of Global Impact.
Accordingly, he is offering a special package for CEO Connection members called Growfund that allows companies to easily set up a DAF. This philanthropic giving option is called a Corporate Advised Fund (a type of Donor Advised Fund or DAF). It allows your company to reap the benefits of a traditional Direct Giving Program and a Corporate Giving Program. Traditionally these were established through a Community Foundation, but times have changed. DAFs are now an inexpensive and easy way to create a Corporate Foundation and include your employees. DAFs are established for each employee and integrated with the company foundation.
DAF benefits for employees:
- The company matches gifts. Employees can contribute to their own DAF, or to a separate company account.
- Contributions are immediately tax deductible.
- The funds can be invested and grow in value until distribution to a registered nonprofit.
- Distributions can be made at any time to any registered nonprofit.
Option 2: Direct Giving Program
Another approach is to establish a Direct Giving Program (or “workplace giving”). Direct Giving Programs are not separate legal entities and do not allow the employee to save or accumulate money to later direct towards a nonprofit. Funding flows from corporate and employee contributions, and funds are usually dispersed to employee-selected charities or to local community organizations. Corporate Foundations (see below) and corporate Direct Giving Programs are usually closely tied to the company’s business interest, but this is not a requirement.
Option 3: Corporate Foundation
A Corporate Foundation is another form of corporate giving. A Corporate Foundation is a separate legal entity from the corporation, which maintains close ties with the company and follows the laws governing private foundations. Funding for the Corporate Foundation flows from the parent company and can be invested until distributed.
One of the benefits of establishing a corporate foundation is the ability to spread the ups and downs of yearly profits contributed to the foundation over good and bad years. Thus, philanthropic support can be leveled out even during bad economic times. Here, the foundation will receive requests for support versus the C-Suite leadership receiving them. Replying to solicitations for support can be time-consuming and sometimes awkward for mid-market companies. As a separate legal entity, the foundation can relieve the executive of this burden. Contributions made to the foundation are tax deductible.
Summary of Options
In summary, establishing a Corporate Foundation allows a mid-market company to strategically develop a corporate philanthropic initiative. This initiative can be centered on a CSR issue or conceived as a broader, community-focused tool for giving. Corporate Direct Giving Programs generate employee participation but limit the direct corporate engagement. Donor Advised Funds combine the best of both. DAFs allow corporate and employee philanthropy tailored to the needs and desires of both parties—thus generating increased company recognition and increased employee satisfaction.
Click here to learn more about the Growfund DAF program for CEO Connection member companies.