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Corporate philanthropy: Of charity and class

By ROBERT WHITCOMB McClatchy-Tribune News Service

Publication: The Day

Published April 27. 2014 4:00AM

Philanthropic contributions by very rich people get a lot of attention. An example is Thomas Ryan, a former head of CVS who recently gave $15 million to the University of Rhode Island for a brain-science center to be named after his parents.

Besides the satisfactions of giving per se and the plaudits of the general public, gifts are sometimes meant to show other rich people how successful the givers are. This explains why so much new money rushes into already very rich "nonprofit" institutions, such as Ivy League colleges and big art museums. Wouldn't giving a pile to, say, a community college serving poor people do more for society than adding yet more to Harvard's $31 billion endowment?

And this is not the age of the anonymous contribution. Of course, nonprofits, besides appealing to altruism and ego, know that publicizing the names of the donors may encourage an arms race of giving by other rich people.

Anyway, URI alumnus Ryan commendably gave to a local and grossly underfunded public institution. A few years back, the arena at URI was named after him as a result of gifts by him and CVS. In his last 14 months as CEO, he made $124 million, reported Dow Jones. Of course, if the very rich paid a tad more in taxes, then public institutions could more often build such public facilities out of public money and not always be selling "naming opportunities."

Large public companies' senior execs have rarely been romantic altruists. But there's no doubt that they have adjusted their missions, and sense of civic duty, in the past 30 or so years via tax and other legal changes engineered by their lobbyists.

Most of these companies used to consider themselves as having a fairly wide range of stakeholders - not just senior executives and other big shareholders but nonexecutive employees and the communities within which the companies operated. The idea was that the long-term success of the companies would depend on addressing the welfare of all constituencies.

Now the aim above all is to maximize and speed compensation for senior execs, on which, because of lobbyists' success in creating tax dodges, many pay remarkably little tax, considering their wealth. Investment gains via stock options, etc., are much tax-favored over wages. (The quickest way to maximize their personal profits is to lay off and/or cut the compensation of lower-level employees.) This explains in part, along with globalization, computerization, automation and the loss of local ownership in many places - laying off your neighbors is tough - explains some of the woes of the middle class the past 30 years or so.

Then there's American feudalism. The Walton family has a fortune of about $100 billion. They have so much money, in part, because their company pays its employees so little. Some Walmart stores have food drives for impoverished Walmart employees.

The holders of current and future dynastic wealth arrange through tricky trusts (including the creative use of charities) and other perfectly legal mechanisms to pay remarkably little or no estate or gift taxes and thus help ensure the self-perpetuation of power and wealth for their heirs. Readers should read about the wonders of "donor-advised funds" for charities - also a cash cow for financial firms - and "charitable lead annuity trusts," used to boost dynastic wealth by avoiding taxes.

Some more reasons that the government is broke.

Among other benefits, this dynastic wealth gives favored families access to the fanciest schools with the best-connected faculty and students, which, in turn, reinforces the vast advantage that the lucky heirs already have. Thus there's less social mobility in America than in most of its developed world competitors.

The public might want to at least consider whether society would be better off if the very rich shared a tad more of their wealth further upstream rather than through the charities they create to do good works, glorify their names and/or avoid paying taxes that pay for public services such as URI.

Robert Whitcomb is a former editorial-page editor of The Providence Journal and former financial editor of the International Herald Tribune. Readers may send him email at rwhitcomb51gmail.com.

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