Business Philanthropy - Report by David Gonski AO

David Gonski AO, is the Chair of the Australia Council. Recently he delivered a speech titled ‘Business Philanthropy and its importance to the Arts in Australia’, at an Australian Business Arts Foundation (AbaF) breakfast.

He prefaced his speech with a tongue-in-cheek reference to the leading US businessman, Warren Buffet. Business Week Magazine had been scathing of Buffet – placing his wealth at approximately A$70 billion – however he had ‘only’ given $450 million to his foundation (0.6%). This was widely viewed as not enough. Put in an Australian context this amount would be significant!

This is an edited version of that speech providing a status report on Australian business philanthropy.

The background:

In 1997, corporations gave $386 million to charity.
In 2000-2001 they gave $586 million. An increase of more than 50%.
In 1997, total corporate giving and sponsorship in Australia was $1.3 billion.
In 2000-2001, total corporate giving and sponsorship was $1.447 billion. That’s an increase of 11%.

Modest you may think but 2001 in the US saw corporate giving drop 14.5% and as a percentage of profits, it has dropped 50% over the last 15 years.

Business support took the form of money support (63%), goods (17%) and services (20%).

In 1997-1998, $541 million was the subject of deduction by taxpayers for gifts to charity.
In 2000-2001, $651 million was sought for deduction.
In 1997, $172 per taxpayer was donated to charity.
In 2000-2001, $210 per taxpayer was so donated.
In 1995-1996, 3,189,400 people, representing 24 percent of the civilian, adult population volunteered during the year to provide some assistance to charities.
In 2000-2001, there were 4,395,600 volunteers, constituting 32% of the civilian adult population.
This meant that in 1995, 512 million hours of voluntary work was done.
In 2000-2001, 704 million hours of voluntary work was provided.
Great improvement but now comes the rub:

Our $210 per taxpayer is less than Great Britain’s $375 and massively less than the US’s $1,000 (56 cents in the dollar).

Even our level of volunteering at 32% is less than Great Britain’s 48% and the US’s 55%.

When we look at the levels of private giving, including sponsorship, by major performing arts companies over the 5-year period 1997 to 2001, we see an increase from $17.9 million to $28.8 million – the growth over the last 4 years was 37%. We can be proud but not complacent.

Of the $1.447 billion given by corporations in 2001, a healthy 43% of total business giving went to sport and only 5% went to the arts and culture.

What is staggering is that Australia’s non-profit sector constitutes a massive 7.2% of total employment, greater by 1% than Great Britain and not much smaller than the US at 7.8%.

Costs of securing sponsorship/gifts and maintaining them has increased immensely over the period. Corporations and donors want to make investment in fewer, more focused long-term sponsorships. Greater emphasis on corporate benefits.

In 1997, we identified it right – philanthropy was on the way – and a number of facts assisted the 2000 numbers to prove that the Sydney Olympics in 2000-2001 provided more volunteering opportunities and a general good feeling within the whole of Australia. Business was reaching new heights in 2000-2001; as was the stock market in part of that period and there was a feeling of well being coming from the great heights of excitement in the US, etc.

There was active encouragement by the government contained in awards, speeches, etc.
The feeling of well being has eroded. Business has fallen, interest rates are rising. However, still suggest that the figures will stay as high, if not increase, for the following reasons:

The inter-generational changes, which even the Treasurer talks of, go on.

The government continues to reward, award and make speeches on partnering and assisting the community – eg, AbaF – 800 people in Melbourne with awards, etc.

The tax system has been changed – in 1997 a gift of a non-cash item was not deductible at all. Today it is.

In 1997, there was no carry forward of deductions; now you can obtain such for non-cash gifts and from 1 July for cash gifts as well.

In 1997, bequests were not tax exempt. Indeed, taxable. Now they are tax exempt.

In 1997, people on PAYG had to wait for deductions. Now, they can obtain these immediately.

In 1997, gifts of environmental covenants were not deductible. Now they are.

In 1997, it could take forever to establish a charitable foundation. Now, private philanthropic funds are much easier to establish and 82 have been formed by individuals over the 5 year period, which when added to the other grant-making trusts in existence, go know where near the 56,600 grant-making trusts that exist in the US.

Change in corporate attitude. Corporates have to win back their constituents and are aware of such. Giving/sponsorship is seen as one of the ways of doing so. WorldCom, Enron, HIH, etc have seen the corporate establishment damaged. They now need to improve themselves.

There is a growing realisation within corporations that “good works” carefully adjudged and administered can increase corporate acceptance, customer loyalty, employee satisfaction and ultimately individual profits for the company. The other day I heard an MD describe it as the building of the group’s “goodwill”.

There is a start of partnerships with charities, the virtues of which are extolled by AbaF in the arts and other welfare organisations.

Charities are starting to get more organised and professional about the “Ask”. Finding ideas from airlines etc, theatre groups, art galleries and the like are finding ingenious ways to urge donations, such as VIP rooms at performances, etc. These professionals are meeting similarly trained professionals on the donor side.

Where to from here?

Further tax amendments are needed and some are underway:

Benefits (get rid of ruling of last year). We are working with Treasury and these should occur.

Deductions for living bequests: retained assets; more gifts to the arts’ type inducements; bigger deductions for lower income earners/workplace giving.

The relevant Ministers have said the right things but their deputies should now start maximising plans in setting an example. They may have to go further.

There is also a need to define “charity” so all know where they stand and the approach of the legislation is up to date (eg, groups which champion the cause of the disabled cannot get deductions whereas the disabled can).

There is also a need for a charities commission to monitor charities and to assist them to go forward.

There is a need to help smaller organisations to be able to raise monies so many arts groups do not have the DGR status and the resources and expertise in fund raising. The AbaF is in a very important position to be involved in this. If one needs proof, 55% of the corporate giving to MPAB went to only 5 arts groups – 60% from New South Wales and 83% from New South Wales and Victoria.

There is need for discussion amongst the business community on whether it is right for corporates to give gifts, particularly arising out of the discussion in HIH. There may even need to be a change in the law to make it absolutely clear.

Corporations and philanthropists alike will require innovation in the way funds are disbursed. The big donors in the US are targeting their giving and monitoring it closely. This requires flexibility and understanding on the part of the done.

Education of staff of corporations has begun on workplace giving. We now have the most lenient scheme we can have. More corporations have to instigate matching schemes and inspire their staff to be involved.

However you look at it, the bus is moving and I believe in the right direction. Those who do not board it will miss out on the chance to do something right which feels good.

The web site link to the AbaF is www.abaf.org.au.