WEEKLY ADVISER: A Diplomatic Challenge: Contributing to Charity Without Becoming One

Every nonprofit group trying to raise money seems to turn first to banks and other financial institutions.

Every ad journal, school newspaper, symphony program, and list of sponsors of art exhibits hits these institutions and - judging from the number of bank ads and sponsorships we see regularly - they do a pretty good job of soliciting.

Community banks get hit worst. Every junior high newspaper and school play has the local bank as an advertiser or program sponsor. And this can get expensive! Without proper coordination, banks have realized that groups will hit the main office and each branch for the same project. Only when total contributions are added up at the end of the year do these banks realize what they have supported so generously.

What makes these operations such good targets? Naturally, since banks rely on business and individual deposits, it is pretty hard to turn down a top customer who says, "My son's class is planning to put out a magazine, and they need an advertiser for the back cover."

Other cases are pure and simple blackmail.

The CEO of one institution with an investment banking operation told me of a visit he had from the people putting out an ad journal to accompany the sale of a local government bond issue. The visitor suggested that he buy the back cover, and at a hefty price.

"Are we gong to be appointed manager of the issue if we buy the back cover?" the CEO asked.

The response: "Well, I don't know about that. But I can assure you that if you don't buy it, you will certainly NOT be the manager."

Sometimes the contributions of time and money pay off royally. Many a community bank has credited its policy of supporting every local nonprofit venture with money, time, and expertise for its success in beating its larger rivals for local deposits and borrowing business from nonprofits and regular businesses and individuals in town.

Sometimes, however, the support of the nonprofit is really a waste of money and has been undertaken because of inadequate analysis or because of the CEO's special interests or ego needs.

I remember one major bank that gave much of its charity budget to support the local art museum, in large part, no doubt, because the CEO was chairman of the museum's board.

The CEO who succeeded him recognized that only a minority of the bank's customers cared very much about the museum. This was a venture serving the interests of the former CEO rather than those of the bank.

So the new CEO substantially cut the museum contribution and used the money instead to develop a fleet of minivans to give mobility to senior citizens in nursing and old-age homes. It had a far better PR impact and undoubtedly served some of the bank's richer customers to boot-because young people borrow and older ones save, as a rule.

The keys to effective charity policy are coordination to avoid duplication and a determination to make the bank look good, rather than concentrating on what makes the top officers feel charitable, useful, and important.

What does your bank do to handle the question? What is its policy on distribution of charitable funds, and how does it carry out these principles?

Please let us know. The winner gets to be president for a day of Schmidlap National Bank, with a framable certificate to prove it.

Please send your responses to 14 Friar Tuck Circle, Summit, N.J. 07901, or fax them to 908-273-7309.

We guarantee that Schmidlap National will not ask you for a charitable contribution to publicize your responses, even though we have ended up as a nonprofit institution.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER