Corporate Russia reaches into its pockets

Visit a McDonald’s restaurant in Moscow and, if you happen to glance down as you’re wondering where your Big Mac and fries have got to, you’ll see a charity box attached to the counter. The boxes earn around $8,000 a year for good causes – a valuable addition to the $4.5 million the company has donated to various charities in Russia since 1990.

Yekaterina Ivanova, McDonald’s senior charity programs coordinator, said the firm has focused on helping children with its charitable donations, and now gives $200,000 to $250,000 a year to support a sports center for physically and mentally disabled youngsters in Moscow.

But the really good news, observers say, is that the fast food giant is not alone in its efforts. After a slow takeoff in the years following the fall of the Soviet Union, spending money on charity is fast becoming the thing to do in corporate Russia.

Charitable giving strengthens a company’s corporate image and increases its market value, participants say.

“Companies that demonstrate their social role become more attractive for investors,” said Sergei Litovchenko, head of the Russian Association of Managers (AMR).

Businessmen seem to agree.

“Russian business is maturing,” said Hugo Erikssen, international information department director for Yukos oil company, one of Russia’s biggest charity spenders. “Companies are starting to understand that they answer to their shareholders.”

Research conducted by several Western organizations shows Russian companies spend a total of $150 million a year on charity projects, according to Yevgeny Vodopyanov, head of the Russian Union of Charity Organizations (SBOR).

Last year, almost a third of the national charity total of $41.3 million came from Yukos. The company plans to increase its donations by 19 percent this year, said Mikhail Vilkovsky, the director of Yukos’ charity department.

So far, Yukos has opened Internet centers for students in 25 Russian cities and provided funds for 1,000 scholarships, Vilkovsky said. It also allocated $743,000 to repair last year’s flood damage in the town of Lensk and gave money to help rebuild Primorye’s heating system.

“Living in a financially weak country, we often have to shoulder responsibilities that are not [normally] taken on by business,” Erikssen said.

Research conducted by AMR last year shows Yukos is not the only generous company in Russia. Some 90 percent of general directors here feel that “participation in society’s development is a profitable investment that will pay for itself in the long term,” said Litovchenko. Still, only 42 percent of that number actually gives to charity.

The AMR chief added that some 34 percent of companies involved in charitable donations have increased their donations over the last few years, although another 17 percent have cut back on this spending.

One way of encouraging more giving, companies say, would be to allow tax breaks for donations. The few breaks that did exist were scrapped in January. Yevgeny Vodopyanov, first vice president of the Union of Russian Charity Organizations (SBOR) – which was founded in 2000 and has 37 members – said that decision “lacked any reasoning.”

Most corporate givers have remained dedicated to their causes, however, Litovchenko said, and did not reduce their charity donations after tax breaks were withdrawn.

Erikssen, like other businessmen, was diplomatic about the government’s new policy, only saying that the law was very different from that in countries like the UK and the United States.

“We consciously spend resources [on charity] from our net profit; we live in an imperfect world and accept our responsibilities,” he said, adding that Yukos has actually boosted its charity spending since tax breaks were scrapped.

Litovchenko said, however, that Russian companies mainly support one-off charity projects, which means there is a dearth of long-running social schemes. Meanwhile, although official state statistics show there were 7,000 charity organizations in Russia in 2001, many businessmen say they are reluctant to trust them with donations and fear the money will be stolen or misused.

Litovchenko said almost 24 percent of managers say a negative image of the charities that receive the cash raised by corporations hinders a full development of the relationship between business and social needs, as it is seen in many Western countries.

“All these charities as a rule spend part of [their donations] on rent, mobile phones and security,” said Alexander Gafin, vice president and head of PR and advertising at Alfa Bank, which has run its own charity programs for the last eight years and spends more than $1 million on good causes annually. Alfa Bank’s net profits reached $85 million last year.

Alfa Bank donates to three orphanages, a special facility for orphaned infants up to the age of 4 years, and several hospitals and hospices in Moscow. Along with charity programs in the nearly 40 regions where it operates, the bank has a special fund for catastrophes and natural disasters. It has also pledged to pay an unspecified grant to 75 children of Kursk crew members – killed when the submarine sank in the Barents Sea in August 2000 – when they turn 16.

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