Home Depot skimps on gifts
Corporate citizen donates, but peers are more generous

Home Depot skimps on gifts
Corporate citizen donates, but peers are more generous

By MATT KEMPNER
The Atlanta Journal-Constitution
Published on: 10/16/05

Corporate generosity, Home Depot CEO Bob Nardelli told Business Week magazine this year, is "just the right thing to do."

A company's civic work, he said in another interview published by The New York Times, can increase sales and provide a public relations boost. "But that's not why we do it," he said. "It's about showing corporate responsibilty."

Yet Home Depot's strong reputation for giving may be misleading when it comes to dollars and cents. Georgia's most profitable public company and the nation's second-largest retailer gives away a much smaller share of its profits than its big business peers, and lags several other major Atlanta companies.

An examination of Home Depot's philanthropy shows:

• The $35.5 million the company says it gave in philanthropy last year amounts to less than five-hundredths of 1 percent of Home Depot's $73.1 billion in annual sales. That equates to someone with a $100,000 salary donating less than $50 a year to charity.

• Home Depot gave about half as much as Coca-Cola did last year, though the retailer generated more than three times Coke's revenue. And while Home Depot had double the revenue of UPS, it gave about $4.4 million less than the Sandy Springs-based delivery company.

• Wal-Mart, the No. 1 retailer whose reputation has been sullied by complaints that it is stingy with workers and suppliers, outgives Home Depot. The Arkansas-based company gave away about three times the share of pre-tax profit that Home Depot did last year.

• Home Depot falls short even by the measure it helped develop so that business leaders could compare their corporations' giving with others. Using that measuring stick — giving as a percentage of pre-tax profit — Home Depot donated about one-third of what the typical large corporation gave. And that was in 2004, a brutal year of hurricanes that prompted Home Depot to donate more than it usually does.

• Of six big public companies in metro Atlanta whose charitable giving was analyzed, only one company donated a smaller percentage of pre-tax profit than Home Depot: BellSouth. The telecommunications com-

pany has a more regional focus than Home Depot, and generates less than one-third its revenues.

Though Home Depot lags many others in monetary giving, Nardelli promotes his company's big heart.

"Taking care of our people and giving back to the community are at the core of our corporate values and is a responsibility as well as a business strategy," he wrote in a newsletter for a business group stressing philanthropic giving.

Nardelli declined to be interviewed for this article and directed inquiries to the company's public relations staff. Home Depot spokesman Brad Shaw said he didn't think the company appeared stingy compared to other businesses.

"There is always more we can do, and we are well aware of that," he said. But a comparison of dollar giving "doesn't account for a lot of things we are doing that prove we are very generous."

"I define giving by total impact, including dollars and sweat equity," Shaw said. In particular, Home Depot has "one of the most robust and effective volunteer programs in the country."

Home Depot's organized approach encouraged workers to volunteer about 2 million hours last year, including time building playgrounds and fixing homes, according to the company. The retailer won a national Points of Light Foundation award earlier this year for volunteerism.

Still, Home Depot doesn't go as far with its program as some employers. Many big U.S. corporations donate extra money to nonprofit groups if employees volunteer for a certain number of hours. Some businesses allow employees to volunteer on company time. Home Depot does neither, though it pays one employee in each store up to two hours a week to organize volunteer events.

Sophia Muirhead questions whether Home Depot should take credit for the work employees perform away from the store.

"If they are volunteering on their own time, should [Home Depot] be taking credit for that?" asked Muirhead, who reports on corporate giving for The Conference Board, a New York-based nonprofit that does business research.

Michelle Nunn, chief executive of the Atlanta-based Hands On Network, said Home Depot deserves credit for strongly supporting its employees' volunteer work and called the efforts "highly laudable." Hands On Network organizes volunteers nationally, and Nardelli chairs its advisory board.

An image payoff

Businesses aren't required to give to charity. And there are some, including Nobel Prize-winning economist Milton Friedman, who think corporations instead should pass the money on to shareholders and let them make their own decisions about how to spend it.

Still, many companies — Home Depot included — say giving is part of their business strategy. They highlight their contributions in advertisements, press releases and annual social responsibility reports.

The emphasis makes sense, says Carol Cone, chairman of Boston-based Cone Inc., which specializes in helping companies with their giving image. Her firm commissions an annual telephone survey on consumer attitudes about corporate social responsibility.

"Nobody goes to a company just because it is engaged in the community," she said. More important for a business are the quality and price of their products and services, the employee benefits they offer or how well they abide by laws and regulations, according to Cone's 2004 survey of 1,033 people.

But in an ad-crowded world of competing companies, a corporation's reputation for social responsibility holds growing importance, she said.

Eighty-six percent of those polled said they were likely to switch to a brand associated with a cause if it was about the same price and quality of competing brands. And more than 80 percent said a company's commitment to a social issue was important in deciding where to work and which companies they wanted to see doing business in their communities.

The survey also showed that 70 percent consider the trait important in their decisions about which stock to buy. Others see benefits for employee morale.

"This is no longer a nice-to-do; this is a have-to-do," Cone said.

Nardelli acknowledges the need for a company to be generous with its giving.

"I think recent events throughout corporate America would illustrate that you definitely pay a price when you don't pay your civic dues," he said in The New York Times story. "Having some goodwill in the bank based on real efforts in your communities might at least earn you some benefit of the doubt when you otherwise might not get it."

Competitive giving

How much should a company give away if it wants to be known for its social responsibility?

"I don't go there," said Charles Moore, executive director of the Committee to Encourage Corporate Philanthropy, a forum of top business leaders headed by Citigroup Chairman Sanford Weill. "It's why they give and how they give that is important, as opposed to how much they give."

Nonetheless, one of the New York-based committee's biggest undertakings was setting up a way to allow member companies to measure and compare how much money they give away in relation to their peers. One reason: "There is a competitive context in corporate philanthropy," Moore said.

The committee doesn't publicly disclose comparisons or rankings of the giving levels of specific members, but it does report combined results of its surveys. In an interview for this article, Home Depot, which belongs to the committee and helped set up the measurement system, conceded that the data confirm that it gives a smaller percentage of pre-tax income than do other big businesses.

Last year, Home Depot gave away less than one half of 1 percent of its $7.9 billion pre-tax profit, or .45 percent. That contrasts with a median of 1.3 percent of pre-tax profits donated by 71 members surveyed by the Committee to Encourage Corporate Philanthropy. A separate survey by The Conference Board, a nonprofit research firm, found that the median for big companies was 1.01 percent of pre-tax profit.

Companies often give directly to charity or through foundations, or both. Home Depot said it primarily gave direct contributions, but its figures also include amounts it gave to its foundation, which also receives funding from the retailer's vendors.

The Committee to Encourage Corporate Philanthropy recommends that giving programs "should grow in proportion to increases in corporate profitability."

But Home Depot's giving as a percentage of pre-tax profit has dipped during Nardelli's reign, which began in late 2000. It dropped from an average of .46 of a percentage point for the four-year period pre-Nardelli to .39 during the most recent four years of his tenure.

Even under former leaders Marcus and Blank — men well known for their personal giving — Home Depot donated less than other big businesses.

Kim Shreckengost, a former Home Depot executive who has worked with Blank for years, said her boss looked at Home Depot's giving as a total package that included personal giving by himself and Marcus.

"I don't think anyone can dispute Arthur and Bernie's generosity," she said. She discourages comparisons with giving by other companies. "It wasn't a competition."

It's difficult to compare Home Depot's giving with archrival Lowe's. A Lowe's spokeswoman declined to disclose what the chain gives, only providing the figure Lowe's publicizes — $22.5 million last year, which it says includes money donated by vendors and customers.

Still, this much is clear: Compared to the median giving by big businesses overall, Lowe's — like Home Depot — fell short, even though Lowe's was boosted by the money donated by customers and vendors.

Good reputation

Home Depot declines to give a breakdown of how much it gives annually to each of its nonprofit beneficiaries.

But it makes clear that it gives heavily to the American Red Cross — with which it has a three-year, $6.6 million partnership to promote disaster preparedness — and KaBOOM, a nonprofit that builds playgrounds for communities. Earlier this year, Home Depot announced it would work on 1,000 playgrounds over the next three years.

The company also highlights its programs to employ Olympic hopefuls. And it issued a press release about its commitment to donate $2.5 million in cash for relief and rebuilding efforts after Hurricane Katrina — money that will go to the American Red Cross, the Salvation Army and others.

The giving helps more than just the nonprofits. It helps Home Depot.

In a 2004 study of the reputations of some of the nation's most visible corporations, Home Depot looked good to Americans surveyed. In the area of social responsibility, the Atlanta-based retailer ranked eighth out of 60 big companies in the survey by The Reputation Institute, which is run by a former business professor from New York University. Coca-Cola was No. 1 in terms of perceived social responsibility — a position Home Depot enjoyed four years earlier. The segment includes supporting good causes, being environmentally responsive and behaving responsibly in the communities in which it operates.

Not all reputations match what corporations are actually doing, said Charles Fombrun, the executive director of The Reputation Institute.

"There is a gap that develops sometimes between reality and perception," he said.

How has Home Depot managed to look so good without giving money at the same rate as other big companies?

Cone, whose company surveys consumers on corporate good works, said Home Depot had built much of its reputation through years of focused giving in areas that fit snugly with its core business ­— helping rebuild after storms and improving housing. The company's stores and employees provide an effective way for Home Depot to communicate those efforts, she said. And she cited memorable TV advertising by the retailer showing a Home Depot delivery truck changing its route to head toward gathering storm clouds and people in need.

Cone, who has worked with Home Depot but not in recent years, said the company deservedly retained "an excellent reputation" for social responsibility.

While "ideally you like it to be at the median level" in total dollar giving, she said, the bigger question is, "is it effective in terms of its business and social objectives?"

"I've seen many companies giving a lot more money and it's not as effective for reputation building and for the community," she said.

GIVING LEVELS BY HOME DEPOT

*Home Depot says 2004 was an unusually heavy giving year for it as it responded to several hurricanes in Florida.
**Numbers affected by rounding
Source: Home Depot, AJC analysis of Home Depot's filings with the SEC.

COMPARING HOME DEPOT'S GIVING IN 2004

• 1.3 percent: Median for 71 large companies (including Home Depot) from the Committee to Encourage Corporate Philanthropy
• 1.01 percent: Survey of large companies by The Conference Board *Delta had no profit in 2004
**Numbers affected by rounding
# BellSouth's pre-tax profit and giving figures do not include results or giving from Cingular.
+All Coca-Cola Enterprises figures are for the year 2003. Giving figures for 2004 are not available.
Source: The companies and organizations, AJC analysis of company filings with the SEC filing

© 2005 The Atlanta Journal-Constitution

Link (Very Long URL)