Does business have a responsibility to help the community?
David A. Koch, president and chief executive officer of GRACO Inc., Minneapolis, Minn., believes so and because of that belief is putting his corporate money where his mouth is.Koch (like coach) was involved in forming the 5 Percent Club in Minneapolis more than 20 years ago and Tuesday brought his ideas for presentation to the Salt Lake Area Chamber of Commerce and the Salt Lake Rotary Club.
The concept revolves around a company giving 5 percent of its pretax income to the community, whether it be medical institutions, United Way, human services, scholarships or the arts. If a company doesn't want to give 5 percent to the cause, there are many businesses in Minneapolis donating 2 percent.
"The public and private sectors need to define their roles," said Koch, who spent two years at Hill Air Force Base as a second lieutenant. "There are some who believe company shareholders are the only ones who should be considered in the profits, but I have the opposite view that business has a responsibility to help communities be strong," he said.
So far, Koch's philosophy had paid off, because GRACO, a manufacturer of pumps that transport fluids ranging from ketchup to lubricants, is a successful company while still being a member of the 5 percent Club.
Under Koch's guidance, GRACO pays $83 million in wages and benefits to 2,100 employees, sells $250 million worth of product to customers, pays $14 million in taxes, gives away $700,000 through the GRACO Foundation, and the shareholders still get a 14 percent return on their investment.
The combination of all aspects of this business benefits people and makes it possible for people to help people and reduce government help, Koch said.
Koch was president of the Minneapolis Chamber of Commerce in 1975-76 and along with his executive committee focused on several proj-ects for the year. "Our No. 1 priority was a corporate commitment to community projects," said Koch.
Wayne Hudson, former senior vice president of Dayton Hudson Corp., a large department store retailer who also belonged to the chamber, heard about companies in Cleveland donating 1 percent of their money to community projects, and the idea became a reality in Minneapolis with 23 members.
Now 80 companies give 5 percent and 40 companies give 2 percent.
"It takes plenty of work and commitment to the 5 Percent Club," Koch said, because companies easily can drop the giving idea when economic conditions change. He said the club must be associated with an on-going organization, such as a chamber of commerce.
Each company directs where the money is spent and also audits the expenditure so the money is used an intended. He cannot supply a figure on how much money the Minneapolis companies have donated because many companies don't make their financial figures available.
Is the money doing good?
Koch said his company's money focuses on human services and has helped neighborhood agencies provide athletic programs for youth and food programs for senior citizens. Another successful program is "Success by Six," which focuses on health care and preschool education for children born out of wedlock or to those who are disadvantaged financially.
Some companies donate to symphony orchestras, theaters or art institutions.
In an interview, Koch declined to say if it's feasible to form a 5 Percent Club in Salt Lake City. "Each community needs to look at its situation."
With the national average of corporate giving hovering near 1 percent, which is the amount Congress decided in the 1930s that business could take as a deduction, Koch believes business should donate more although it probably won't reach the 10 percent deduction allowance recently adopted by Congress.