DATELINE: December 11, 2007, Chicago
We don't like socially responsible investing and we don't like those who argue that charities should turn down money if the source is tainted, as determined by the political correctness of the critic. Why just last week the Chronicle of Philanthropy reported on what we viewed as two misguided attacks on donors. One suggested that a charity should not accept money from a prostitute because the source of the funds was tainted. The other objected to the use of Playboy bunnies at a fundraising event sponsored by the Taser Foundation. As has been said many times before, "The only tainted money is 't'aint enough." Only people with...
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an overabundance of wealth could ask the poor to turn down money offered by a prostitute.
Well, we may be hypocrites, but we do have our limits. Today, the Chronicle reported that thirteen banks have teamed with United Way in a new program to increase charitable giving. Elizabeth Schwinn, Banks Offer New Effort to Spur United Way Gifts, December 11, 2007. Operating under the Pennies for Change moniker, the program calls for the banks to enlist their credit and debit card customers in a new program where every time a customer uses his or her credit card, 1¢ will be added to the charge and directed to United Way. The hope is to add more banks, with the expectation that the United Way would eventually receive $40 million a year in additional revenue. Fifty-five percent of the 1¢ donation is directed to the local United Way and the other 45% goes to the national United Way to develop or expand programs that can be adopted by local United Ways.
Before we discuss our objections to this program, we want to make the following predictions: Other charities will try to inject themselves into it. It's just a matter of computer programming, so why not give the cardholder more choice? As more charities are added to the list, we bet cardholders will ask to be permitted to allocate their 1¢ contribution between different charities—10% to United Way, 25% to Planned Parenthood, 5% to Second Harvest, 15% to their church, and so on. We also are willing to bet that cardholders will be offered the opportunity to increase the amount to a nickel or a dime per transaction. Once again, it is a matter of just changing a computer program. As the program becomes more involved, disputes will arise. Right to lifers won't like it if Planned Parenthood is on the list, and those liberals out there will object to contributions to Oral Roberts University. This will lead to standard setting committees. If you don't think this is a possibility, consider the controversy that has plagued the Combined Federal Campaign in recent years.
Now back to the basics: Why do we object to the program? We object on several grounds. First, and most important, it degrades charity by trivializing it. Joe Football gives a penny to charity when he buys a $5,000 60" plasma TV so he can watch the big game on Sunday. The donation feels a bit disproportionate to us.
Second, it is a slick marketing campaign that uses the "doing good" mantra to slide the marketing angle past consumers. To the extent that it influences behavior—more use of credit and debit cards—it tries to disguise that fact. We recall the credit card ad that promises cash back, with the result that "you are saving by spending money." That is a false economy. You are not saving when you get cash back and you are not giving to charity in any meaningful way when you give a penny.
Third, the campaign transfers 45% of the funds to the national United Way to develop programs. We will undoubtedly take some heat for this comment, but in our view that is a transfer to cover administrative expenses and overhead. We find it hard to believe that local United Ways routinely transfer 45% of their donations to the mothership. We suspect most donors would stop giving if they knew such a large portion of their donations were leaving the local community. We wonder how many donors will recognize what is happening to their 1¢ donation.
Fourth, these days we hear so much about transparency and donor governance. The automatic and small nature of the donation doesn't exactly provide donors with the incentive to determine whether United Way is a good steward of the money. So much for transparency and donor governance.
Fifth, and not really its fault, but the nature of this program really counters much of what we hear about how donors are demanding a new philanthropy, one in which they are involved at every step of the process. Quite the opposite is the case when there is automatic withdrawal. Most donors will soon forget that they are donating money, just as most employees soon forget about the money being withheld from their paychecks for income taxes and most of us forget about the automatic charges every month for any number of digital services.
Sixth, there are administrative costs to this program. Don't think so? If your mailbox is like ours, it contains at least two pieces of junk mail from credit card companies and banks every day. Now these pests will have another reason to send us more junk mail. "Aren't we wonderful, we have teamed up with United Way in this innovative program that benefits a good cause. Sign up today and we will give you 2 bonus airline miles." Everybody would be better off if the banks donated the added costs to charity and donors simply wrote slightly bigger checks. How much people give to charity is their business. They don't need big business playing games to get them to give more.
Seventh, this program, together with other marketing campaigns tied to charity, could actually end up reducing total contributions to charity. Time will tell, but will some donors start to reduce their checkbook contributions, believing that they gave to charity through their bank, Whole Foods, and any number of companies that give pennies on the dollar to charity as part of slick marketing campaigns? It would be ironic if some people stopped giving to United Way through the traditional workplace campaign because they already give to United Way through this new program.
Now, if United Way and the banks want to improve the program, we offer the following modification. The banks should stop withholding the 1¢ per transaction and replace it with a lottery of sorts. If a cardholder enrolls in the program, then once a year, on a random basis, the credit card company would deny the merchant's request to authorize the transaction. Instead of the typical "Transaction Approved" message, the merchant would receive a notification, saying "The customer has agreed to forgo the goods or services you thought you just sold him or her. Please advise the customer that this is the transaction that will be converted into a charitable contribution, with what would have been the purchase price being donated to the United Way." In practice, our proposal would work like this. Ah, don't have money today? Don't fear, just whip out your credit card to pay for that Eggnog Latte at Starbucks--with the added benefit of knowing that you are wasting everybody else's time who is in back of you in the line. That's a $4.50 charge, but it's your unlucky day. No Eggnog Latte for you. The $4.50 goes to United Way because this is the one transaction this year that is being converted to a charitable contribution. You would have liked to have given more, but you never were lucky at cards.
If it's your lucky day, the transaction goes something like this: You took off work this morning to high-tail it over to Bergdorf Goodman. You just found the perfect size 6 Giorgio Armani Lace Cocktail Dress for the charity ball at the Regency Hotel next weekend, but you will be going in your not-so-chic gown from last season because the credit card company just told your sales clerk that the $7,650 purchase price was going to United Way. Ah, you have such a warm feeling. It will make great dinner conversation and you are such a generous person.
At the end of the day, rather than focusing on gimmicks, charities should be asking themselves why their stories and the good they do apparently are not compelling enough to inspire the public to make larger direct contributions.
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