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Tech giants should give away their money instead of their products


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Anything helps, yes. But there’s a limit to even a billion dollars in donations: “Can’t make payroll on ad credits.”



Google CEO Sundar Pichai in 2017.


Tech giants over just the last week have announced more than $1 billion in relief for those harmed by the Covid-19 coronavirus outbreak, promising some money but mostly everything from credits for ads to free video conferencing software.


But old hands in the tech philanthropy space say that these announcements can often be quite misleading — and that the headline figures can oversell the impact that these gifts make. That’s especially important, nonprofit leaders say, because what the destitute truly need is cold, hard cash.


To be sure, any help offered by corporations at a time when the social safety net seems to be crumbling is a boost to those in need. Many Americans right now are dependent on the generosity of companies and their products and philanthropists and their grants, and so any corporate giving helps. Plus, companies likely cannot donate as much in cash as they can in product.


The two biggest charitable gifts across the entire globe in response to Covid-19, according to one ranking, have come from Google and Cisco, which donated $800 million and $220 million, respectively. Despite those huge numbers, veterans of the space say some games with how this is all computed can be played. And this lack of clarity can obfuscate the fact that the neediest aren’t being as well-served by tech companies as they could be, critics say.


It is easy to gloss over the details and draw a snap, gushing judgment when you see references to hundreds of millions of dollars. But for people that are living on life’s edge, this isn’t some academic question.


“Can’t make payroll on ad credits,” quipped Chuck Brown, an adviser to Bay Area nonprofits. “You’re just giving them a coupon to use their services and entrench their platforms into your nonprofit. It’s clearly a huge benefit for them — where if you truly supported the nonprofit sector, you would put cash on hand and you would give them zero restrictions.”


The main way that headline figures are inflated is through “in-kind” donations, or the gifting of resources that the company already has. In-kind gifts made up 93 percent of Cisco’s commitment and the lion’s share of Google’s donation.


Akhtar Badshah, who oversaw corporate philanthropy at Microsoft for a decade, said that made the big numbers that companies parade “meaningless.”


“If a nonprofit has no money, there is no amount of ad dollars that will help them at this point,” he said. “I think it’s great that Cisco is giving these credits or Google is giving these

credits or anybody that is doing in-kind donations to the nonprofit community or any community. But I feel that this is really the time where a lot of these companies can afford the cash that needs to go out, and I think that’s what needs to happen.”


Badshah went so far as to say that the contributions of TikTok, which announced it would give away $10 million in cash, would be “far more valuable” than those of Cisco, which claimed a headline donation that is over 20 times as large (Cisco did set aside $8 million in cash).


How companies come up with the “size” of the donation


It’s not as though tech companies are alone in the shading and vagueness in some of these announcements. The third-biggest gift from an American company came via scandal-tarred Wells Fargo, which issued a press release saying its foundation was “accelerating” $175 million in planned giving over the next three months. But only $55 million of that is in additional funds — the other $120 million was repurposed from other planned giving.


Silicon Valley corporate philanthropists describe in frank terms how some perverse incentives can lead to inflated figures: The PR value and tax deductions are correlated with the size of the claimed gift. There is often an ambition to one-up the size of the announcement offered by a rival. And there is limited transparency and accountability in this work — it is hard for outsiders to independently verify the followthrough on commitments, for instance — allowing many companies to claim whatever they’d like.


“Most organizations are trying to show you the largest number possible,” said Sonal Shah, a former philanthropy executive at Google and Goldman Sachs. “The wording is very carefully crafted.”


How the companies estimate the value of the product that they donate is one way in which the figures can be inflated. Companies are supposed to apply a so-called “fair market value” on the inventory. But people who do this professionally say there is ample wiggle room in making that decision — the cost to the company to produce the product is much less than the company would sell it for, for instance — with one corporate philanthropy expert at tech companies saying that they would often assign the “highest defendable amount.”


Cisco didn’t return requests for comment on how they valued the $210 million price tag they placed on their WebEx and Security services, which they are now offering for free.


Ad credit values have their own games, too. Google pledged $340 million in a balance that small businesses can use at any time in 2020. That’s relatively straightforward as this is revenue that Google is forgoing, although corporate philanthropy experts pointed out that this carries some assumption that the companies would ordinarily buy those ads. The “ad grants” to international groups like the WHO are helpful, but Google is likely forgoing minimal revenue since these agencies are not typically large advertisers. And one-quarter of Google’s $800 million is in low-interest loans, providing needed help for sure, but that’s also money that would be repaid.


A Google spokesperson told Recode that they focused on ad credits and loans intentionally, as the company is “designing the interventions around what the need is.”


But Shah, the former Google exec, said she was critical of Google and other Silicon Valley companies for prioritizing the wrong things: “What companies need is cash. They don’t need credits.”


How well-meaning companies could do all of this better


This goes beyond inside-baseball accounting gimmicks. There are real nonprofits and businesses that could use money today. And they’re being disserved when they’re given video conferencing and advertising credits that rank way down on the priority list, experts say, which, again, don’t cover payroll.


Silicon Valley philanthropy veterans counter that this isn’t a one-to-one tradeoff. It isn’t as though Google would be cutting an $800 million check for Covid-19 relief if it didn’t give the ad credits and loans (though it certainly is one of the few companies that could, given its $100 billion cash reserve). After all, it is “cheaper” for the company to give away a resource that it owns and has in infinite supply. There’s also a new trend for companies not to give cash and to provide support in a medium that aligns with a corporate mission.


But there is a way to thread this needle. The largest US tech company that appears to have given direct cash is Netflix, which set aside $100 million to pay people working on Netflix productions, along with donations to arts nonprofits. (Facebook also committed $100 million for small businesses in a mix of ad credits and cash grants.) Netflix could be a model — especially because the company paid it to support people in the creative community, fitting with the trend.


And certainly, the half-dozen Silicon Valley philanthropists who spoke with Recode all agreed that the companies could do more than they are doing now, especially given the goodwill that these announcements engender, which could be useful to the tech giants on the other side of the crisis.


Liba Wenig Rubenstein, who oversaw social impact at Tumblr, said companies’ attempts were “admirable” — but that shouldn’t let them off the hook.


“We need to not simply say, ‘That’s a big number. That company is good,’ or overlook everything that we’ve been critical of them for,” Rubenstein said. “Any company that wants to stand up and beat its chest has to be prepared to back it up.”



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