On May 12, 2010, in the U.S. Capitol, Wal-Mart Vice Chairman Eduardo Castro Wright made a stunning announcement. His company would donate $2 billion in food and cash over a five-year period to “fight hunger in America.” Key Congress members and anti-hunger organization executives gushed on stage about Wal-Mart’s leadership in this arena.
Fast forward two and a half years. We’re half-way through the time period of this commitment. How has Wal-Mart done on their pledge? It’s a good time to hold the retail giant accountable. According to the company’s Web site, it has distributed 594 million pounds of free food, about halfway toward their goal of 1.2 billion pounds. According to Mike Moran, Oregon Food Bank’s Food Resource Development Director, most of the food they receive from Wal-Mart is of excellent nutritional value, but no longer sellable because of looming expiration dates or declining quality.
With regard to its cash donations, Wal-Mart has distributed $122 million in anti-hunger grants, also about halfway toward their $250 million goal. Overall, the vast majority of Wal-Mart’s anti-hunger funding has been directed to food banks and food pantries. Of the grants listed in their 2010 and 2011 tax returns, 74 percent went to food banks and pantries, 12 percent to senior feeding programs, six percent to nutrition education, and the remaining seven percent to advocacy organizations. The choice of food banks and pantries as Wal-Mart’s primary non-profit partners is emblematic of the proclivity for corporate philanthropists to fund middle of the road organizations that deal with symptoms (hunger relief) instead of solutions (eliminating the root causes of hunger).
While corporate America has become more focused on using their donations as a tool for enhancing a company’s political and financial standing (known as strategic philanthropy), in general, these giving programs have not been completely subsumed to business interests. In Wal-Mart’s case however, the purposefulness of its giving transcends garden-variety strategic philanthropic goals of broadly building a firm’s image or improving employee morale. It is much more targeted, and as such more brazen than virtually any other company’s giving, except perhaps Phillip Morris (which used its giving programs to combat anti-smoking ordinances).
The company’s giving–for hunger and other causes–has dramatically increased in many cities. For example, in Boston, the company has increased its giving four-fold in 2011. Chicago and New York non-profits have seen similar influxes of cash. Accompanied by intensive PR and lobbying campaigns, the purpose of this giving is to overcome opposition from labor and environmental interests to the firm entering lucrative urban markets. The donations are intended, according to scholar Peter Dreier, as “honest graft” to buy the support or at least neutrality of nonprofit organizations, for the company’s expansion plans.
Deconstructing the Economics
How much is Wal-Mart’s $2 billion commitment actually costing them? After discounting tax deductions, reduced garbage pickup fees, and inflation, they are undoubtedly saving hundreds of millions of dollars. In addition to these savings and write-offs, the company benefits from its donations in a variety of ways.
Charitable giving programs not only can improve a company’s image, but they can also provide a buffer against future wrongdoing. Researchers at Brigham Young University measured the impact of negative events such as the initiation of a lawsuit, or announcement of regulatory action on stock values. They found that companies engaged in “social initiatives” preserved greater share value after these negative events than those who did not participate in “social initiatives.” They estimated that socially uninvolved companies lost on average $72 million per negative event as compared to $23 million for socially engaged firms. Given the number of class action lawsuits, bribery scandals and complaints by government agencies taking place against Wal-Mart, their philanthropy as reputation insurance could be quite valuable to their shareholders.