Some of Minnesota's largest companies have quietly closed their foundations, shifting how they give back

Some of Minnesota's largest companies have quietly closed their foundations, shifting how they give

3M, General Mills and Thrivent have shifted in recent years to give money to charity through their company, not as a separate foundation. Some Minnesota nonprofit leaders worry that means less money to nonprofits and less public transparency.

By Kelly Smith Star Tribune

April 14, 2024 — 11:00am

3M was one of the first companies in the country to establish a charitable foundation in 1953.

But in 2022, the Maplewood-based company quietly closed its foundation, switching to control its philanthropy internally as a company, not through a separate charitable arm. In Golden Valley, General Mills did the same in 2021, while in Minneapolis, Thrivent shuttered its foundation in 2020.

While all three companies say their public generosity won't shrink without a foundation, some nonprofit leaders worry the closures will decrease transparency and could result in less funding to local nonprofits, especially at a time when foundation grants and corporate giving is declining nationwide.

"We find that corporations that have foundations are a lot more accountable to the public than corporations with just a corporate giving model," said Steve Paprocki of Access Philanthropy, a Minneapolis consulting firm that works with nonprofits on fundraising. "It's about transparency."

Without a tax-exempt foundation, corporations no longer need to file annual tax returns with the IRS that detail who is on their board, how much money they distribute and where their money goes. As a result, Paprocki said, nonprofits won't be able to tell where a corporation has been directing its giving.

"It's always better for them to know who you're giving to and where," he said, adding that he worries companies without separate foundations will give less money over time, too.

Corporate giving in the U.S. has declined over the years. In 2022, U.S. corporations donated 0.9% of their pre-tax profits, down from a peak in 1986 of 2% of pre-tax profits, according to the annual Giving USA report published by the Giving USA Foundation and researched by the Indiana University Lilly Family School of Philanthropy.

In a survey last fall by the Minnesota Council of Nonprofits, about a third of respondents reported that donations from individuals and foundation grants or corporate giving have declined — the highest number since the statewide association started tracking the data in 2020.

Corporations broaden efforts

Corporate foundations, which often are staffed by company employees, usually are funded by companies to give grants to nonprofits and other charitable causes.

Chief Executives for Corporate Purpose (CECP), a New York-based nonprofit that researches and advises companies on employee volunteering programs and related community efforts, found that, in 2022, 80% of companies they surveyed had a foundation and, from 2017 to 2021, 5% of companies stopped reporting on or likely closed a foundation while 4% started one.

Kari Niedfeldt-Thomas, CECP's chief operating officer, said the corporate foundation closures in Minnesota are an anomaly, and operating a foundation still is a popular method for companies nationwide to give back. Plus, establishing a separate legal entity allows companies to do things like give money to organizations internationally, which they can't do as a company.

"For every corporate foundation that may close, there's another one opening," said Niedfeldt-Thomas, who also is the mayor of New Brighton, adding that companies that end foundations may restart them under a different CEO. "The pendulum will swing ... corporate foundations are integral to a company's community connection."

Corporations also are broadening their community efforts beyond cutting checks, she said, including touting their sustainability work, bolstering diversity, equity and inclusion efforts and getting employees involved in volunteering and philanthropy. For instance, more companies offer paid volunteer time off as a benefit to attract and retain employees.

The 1980s was the heyday of corporate philanthropy in the state, with companies often publicly announcing their grants, said Jon Pratt, the former executive director of the Minnesota Council of Nonprofits who has researched the history of corporate philanthropy. That's not long after Minnesota corporate leaders started a "Five Percent Club," vowing to give away 5% of their company's pre-tax earnings to charity — the first group of its kind in the nation.

Since then, companies headquartered in Minnesota have expanded globally and face more demands now, Pratt said, so their philanthropy locally may be less visible.

Foundations close

Some of Minnesota's biggest corporations — including Wells Fargo, Target, UnitedHealth Group and Medtronic — still operate foundations that dole out millions of dollars a year.

Michael Stroik, vice president of 3Mgives, which includes 3M's philanthropy, product donations and the company's matching gifts to employees donations, said the decision to close 3M's foundation was an administrative change that resulted in efficiencies saving some money. But he said it's not a significant savings or the reason for the dissolution.

He said no nonprofits that were funded by the foundation lost funding this year or last year as a result of the change.

The company has been plagued in recent years by layoffs, litigation and sluggish sales. Stroik said that as the company's revenue has declined, so has its philanthropy, which is contingent on the company's finances. But he said 3M is dedicating the same percentage — 0.12% of its revenue — to cash gifts each year with or without a foundation, more money than the industry median.

That amounts to about $40 million in grants a year. In 2021, 3M was the fifth largest corporate funder in Minnesota, according to a 2023 report by the Minnesota Council on Foundations. Over the years, the foundation has funded everything from STEM (science, technology, engineering and math) in local schools to the Ordway Center in St. Paul.

At General Mills, spokesperson Jamie Bastian said switching the charitable giving model allows the company greater flexibility and impact and said that General Mills' charitable giving in the Twin Cities has increased by 17% since 2021, when its foundation closed.

At Thrivent, spokesperson Liz Erickson said the financial services company gave more than $4 million to nonprofits in the Twin Cities and Fox Cities in northeastern Wisconsin in 2023, about the same as when it operated a foundation. Erickson added in a statement that Thrivent can "still effectively engage in philanthropy through our corporate team without operating a separate entity."