Wells Fargo has pledged to dramatically increase its philanthropy, largely through its Minnesota-born foundation, with plans to give away $400 million to nonprofits, schools and other good causes this year.
The dramatic boost in giving — up 40 percent from last year — is motivated by corporate tax cuts, more socially conscious consumers and a desire to heal the bank’s tarnished image after a series of scandals that hurt Wells Fargo’s bottom line, company officials said. Starting in 2019, Wells Fargo is aiming to donate 2 percent of its earnings after taxes — a giving strategy with deep roots in Minnesota. More than 14,000 organizations across the country will share in that.
Wells Fargo is headquartered in San Francisco, but the Wells Fargo Foundation is registered in Minnesota, a holdover from when Norwest Bank merged with Wells Fargo. Foundation President Jon Campbell is also based here and says Wells Fargo’s corporate social responsibility has been influenced by Minnesota’s culture of giving.
“We are only as successful as the communities where we do business,” said Campbell, executive vice president of corporate responsibility. “This is a virtuous circle.”
After all, Minnesota was home to the “Five Percent Club” started by the Dayton family, which committed 5 percent of pretax business profits to charity and urged other companies to follow suit. Today, that’s evolved into the Minnesota Keystone Program, run by the Minneapolis Regional Chamber of Commerce. That program recognizes companies that donate at least 2 percent of their pretax earnings to the community.
“I grew up in the Five Percent Club. That is what I grew up knowing,” said Campbell, who has worked for Norwest and then Wells Fargo for four decades. “There is a deep legacy and culture with the Wells Fargo Foundation that started here in Minnesota.”
Ultimately, it was Wells Fargo CEO Timothy Sloan who made the decision, Campbell said.
The foundation will spend $200 million on larger national charity efforts and $200 million on more localized efforts in communities across the country. About $12.1 million was given away to 500 Minnesota nonprofits in 2017.
The money goes to programs including workforce development, small business development, down payment assistance for home buyers, financial education, environmental causes and safety net programs for people in crisis.
“Unfortunately, there are a lot of basic needs not being met. We want to help support those basic needs,” Campbell said, citing Greater Twin Cities United Way as a key partner.
Wells Fargo remains the third largest private employer in Minnesota, with 19,000 employees who gave an additional $7.1 million to charities via workplace giving campaigns last year.
Higher-profile giving makes business sense, and Wells Fargo is more willing to tell their story now, Campbell said. Research shows that people look at an institution’s values when deciding where to work, shop and invest, he said.
“Mass market consumers, especially the millennials, they want to do business with someone whose corporate citizenship and corporate responsibility match up with theirs,” Campbell said. “Someone who is doing good while doing well will have an advantage over someone who doesn’t have that same commitment.”
Campbell said the company is highlighting its long history of philanthropy as part of its “Re-Established 2018” campaign in the wake of several high-profile scandals, including overcharging fees and opening up unauthorized accounts in customers’ names. In April, federal regulators fined Wells Fargo $1 billion.
“We’ve become more transparent about the good things we do. We are trying to rebuild trust,” Campbell said. “We know things like this make a difference to people, influencers, consumers and our team members.”
There can be some public cynicism that arises out of more public displays of corporate philanthropy. Some of that is justified, said Marianne Bertrand, professor of economics at the University of Chicago.
Bertrand co-authored a recently published analysis of corporate giving that estimated that 7 percent of U.S. corporate charitable giving is politically motivated, designed to influence politicians and decisionmakers. But she said corporate giving can also be motivated by a desire to recruit employees, attract customers and burnish a brand.
“Customers may like the idea of doing business with a bank that is more involved in the community,” she said. “We don’t have much good empirical data on this, but corporate social responsibility can be reputation management.”
A pair of professors from the Netherlands and Singapore recently authored a paper that found that “charitable donations are positively related to financial performance and firm value” and may actually benefit shareholders of publicly traded companies.
Corporate giving is on the rise nationally, according to Giving USA’s annual report on philanthropy in 2017. Corporate giving climbed 8 percent in a year’s time to $20.8 billion.
But individuals still donate the most, giving an estimated $286.7 billion in 2017. Foundations gave $66.90 billion and giving by bequest totaled an estimated $35.7 billion.