Advancing TEI's social responsibility: on April 6, 2008, the Board of Directors of Tax Executives Institute adopted the following Report on Social Responsibility. Future issues of the magazine will discuss the implementation of the nine-point action plan approved by the Board.

Introduction--The Growth of Corporate Social Responsibility

Corporate Social Responsibility (CSR) is a concept whereby a company or other enterprise considers the interests of society by taking responsibility for the effect of its activities on customers, suppliers, employees (members), shareholders, communities, and the environment. This obligation is seen to extend beyond the statutory obligation to comply with legislation and envisions organizations' voluntarily taking further steps to improve the quality of life for employees and their families as well as for the local community and society at large.

The CSR movement gained popularity in the 1970s, and it continues to attract much attention, with the emphasis in recent years focused primarily on sustainability and other environmental issues. A core component of CSR is public relations, with companies and industries (and, increasingly, associations) seeking to expand and demonstrate their commitment to society to counteract the negative publicity generated by scandals or catastrophes. For example, there was a discernible uptick in the corporate community's emphasis on social responsibility following the Enron and WorldCom accounting scandals.

CSR is not a topic that is free of controversy. From the outset, it has been subject to discussion and debate. Proponents argue that there is a strong business case for CSR, in that corporations and other enterprises benefit in multiple ways by operating with a perspective broader and longer than their own immediate, short-term profits. Critics argue that CSR distracts from the fundamental economic role of businesses; others insist that it is nothing more than superficial window-dressing or an attempt to homogenize the solutions to complex issues (by directing resources to "approved" solutions); and still others argue that CSR is an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations.

The core argument against CSR is perhaps best summarized by the title of a 1970 article by economist Milton Friedman: "The Social Responsibility of Business is to Increase its Profits." This seminal article decries CSR as "pure and unadulterated socialism," essentially arguing that business leaders have no responsibilities other than to maximize profits for the shareholders, who in turn could use their dividends in any way they saw fit, and governments and communities could use the taxes that a company paid on those profits for any goal they saw fit.

To date, Professor Friedman's view has not prevailed. Quite the opposite. The strong anti-CSR rhetoric notwithstanding, support for CSR continues to grow, not only among business leaders (a group called Business for Social Responsibility boasts a diverse membership of more than 240 of the Global 1000) but government as well (e.g., the United Kingdom has a Minister of Corporate Social Responsibility and the Organisation for Economic Co-Operation and Development has developed a set of voluntary guidelines for multinational enterprises relating to "the positive contributions [they] can make to economic, environmental, and social progress.") Referring to the Friedman article, the CEO of one Fortune 50 company put it this way:

   [I]n my mind, what was most remarkable about that piece was how
   wrong it was. The idea that companies have no responsibility to the
   communities in which they operate; that in other words, we operate
   in a vacuum, or the idea that our actions have no consequences on
   the world around us is short-sighted at best, and it is certainly
   not sustainable for very long.

Whether the reason for the growth in corporate social responsibility is altruism ("the right thing to do") or enlightened self-interest ("the smart thing to do"), the movement shows no signs of waning. Indeed, social responsibility has emerged as a topic of discussion and action by associations and other voluntary membership organizations. (1) The American Society of Association Executives has established a Social Responsibility Initiative, and its literature stresses that "Social responsibility isn't about charity--it's smart business. Benefits to associations include potential cost savings, more engaged members and motivated staff, increased visibility, easier employee recruitment, better risk management, and higher member retention and recruitment rates."

The Historical Importance of Corporate Social Responsibility for TEI

Tax Executives Institute was born of a sense of social responsibility. Long before the term "corporate social responsibility" gained currency, long before Milton Friedman's 1970 attack on the concept, TEI's founders and members embraced--and, indeed, continue to embrace--their responsibility to do more than look out after their own interests. TEI was founded in 1944 by a small group of tax professionals who thought it was their duty, as a profession, to train themselves and their confreres and to work for fair and administrable taxation. For six and a half decades, the Institute and its members have worked to improve the tax law and the tax system, not merely because it would benefit themselves and their employers, but because they had an affirmative, societal obligation to do so.

In a 2005 interview, the daughter of TEI's founder, Paul Smith, spoke of the ethical underpinnings of TEI. Sister Carol Ann Smith talked about the obligation that her father and other founders felt toward "upbuilding the profession." She also spoke about how her father and the other early leaders of the organization travelled the United States, using their own (or their company's) resources to promote the fledgling tax organization.

To be sure, individual members benefitted from the network of tax professionals that was being created; they benefitted, too, from the educational programs that the Institute hosted and from the rapport that TEI established with government officials. But the founders were possessed by more than self-interest: They were driven by a sense of responsibility--of doing the right thing because it was the right thing to do.

Service has long been an Institute byword. When the Institute was selecting a theme for its 50th anniversary in 1994, it settled on "Service and Professional Growth," and its 50th Anniversary History is not only entitled, "Serving the Profession," but its chapters underscore the overarching theme of service: Serving an Idea. Members Serving Members. Serving Our Nation. Serving the Future. What is more, the Institute's Mission Statement (created as part of its 50th anniversary initiative) puts the idea of service front and center:

The mission of Tax Executives Institute is to enhance and improve the tax system and to service its members, their employers, and society generally by facilitating interaction among, and the training of, members and their staffs, by effectively advocating its members' views, and by promoting competence and professionalism in both the private and government sectors.

The Institute's Mission Statement makes clear that TEI's focus was--and remains--the tax system, and facilitating the members' full participation (and advancement) in the tax community. That said, the Institute's six-and-a-half decade history is replete with examples of members (and the organization proper) doing more than required to advance the members' short-term self-interests, including--

* Establishing scholarship programs in more than 30 chapters that in the last fiscal year resulted in the granting of more than $130,000 in scholarships (Chapter).

* Coordinating volunteer efforts by members in respect of tax preparation clinics (Chapter).

* Making donations to charities designated by speakers (Chapter) or by the families of deceased members (Chapter and Institute).

* Making donations to Hurricane Katrina Relief Efforts (including matching employee donations) and Post-September 11 Relief Efforts (Institute), as well as a Law School Library to replace books damaged by flooding (Chapter).

In assessing the evolving role of TEI in respect of possible social responsibility activities and or expenditures, the chapter's scholarship programs are instructive. When the subject of establishing scholarship programs was first broached at the Institute level in 1989, concern was expressed that the granting of scholarships was beyond the proper scope of Institute activities. Upon consideration of the topic, the Board of Directors determined that chapter-administered scholarships should be permitted under guidelines approved by the Board. The growth of the program since 1989 suggests that the reservations expressed by Board members nearly two decades ago for the most part have dissipated. (2)

Toward a Formal TEI Policy on Social Responsibility

A. TEI Task Force on Social Responsibility--Charter and Methodology

As part of the planning process for the current fiscal year, TEI established a Task Force on Social Responsibility whose objective was to review and make recommendations about how TEI can further its social responsibility, including the possible use of a portion of its fund balance for charitable purposes. To ensure a diversity of views and ideas, the membership of the Task Force included both members and non-members; the group included two recipients of TEI's Distinguished Service Award, three past Institute presidents and a former Executive Director, and members from a diverse range of chapters (Asia, Ft. Worth, San Francisco, Santa Clara Valley, Seattle, and Virginia). Specifically, the Task Force members are:

Robert J. McDonough

Michael P. Boyle

Sol Coffino

Lester D. Ezrati

Lynn B. Jordan

Michael J. Murphy

Pamela F. Olson

William E. Ramirez

Charles O. Rossotti

Mary E. Taniguchi

Timothy J. McCormally

Polaroid Corporation

Retired

Fremont Group

Hewlett-Packard Company

Performance Food Group Company

Sutherland Asbill & Brennan LLP

Skadden, Arps, Slate, Meagher & Flora LLP

Altria Corporate Services Inc.

Carlyle Group

Cash America Management LP

Tax Executives Institute

The Task Force, whose charter is attached as Appendix A, (3) conducted its work via conference calls and emails, and to expedite its work, divided itself into subgroups that focused on the following broad topics:

* Refining Our Objectives.

* What Are Other Organizations (such as the American Institute of Certified Public Accountants and the American Bar Association's Section of Taxation) Doing?

* What Are Our Chapters Already Doing?

* What Alternatives Should the Institute Consider (including (a) the making of matching gifts, (b) expanding the Institute's (currently chapter-based) scholarship programs, (c) making charitable donations, (d) granting employees time off to volunteer, and (e) facilitating the volunteer efforts of its employees and members assisting low-income taxpayers prepare their tax returns)?

* Pressure Points--What Will Be the Reaction from TEI Members, Sponsors, and Employees?

The Task Force devoted a significant amount of time to designing and conducting a survey of the Institute's 54 chapters. The survey focused not only on what the chapters were currently doing (in terms of scholarships and other charitable activities), but also on policy and practical concerns emanating from any expansion of the Institute's social responsibility activities. The survey instrument is attached as Appendix B.

B. Survey Results

Thirty-three of TEI's chapters responded to the survey, and their responses provided a treasure trove of information for the Task Force's consideration. The survey results are summarized in Appendix C. (4) Among the noteworthy findings are the following:

* There is support for the current scholarship program, even though there is concern in some chapters about the benefits (to TEI) of granting scholarships. In some chapters, there is a belief that the expansion of the program would be possible only with financial support from the Institute.

* While a majority of respondents favor the establishment of an Institute-level scholarship program, there is a belief by many respondents that a locally-administered scholarship program is preferable.

* Many respondents supported TEI's involvement in community outreach programs, but as a whole the group identified time constraints on individual members (and chapter leaders) as seriously affecting their (or their members') ability to participate in such programs. The respondents opposed (by 80 percent to 20 percent) the adoption of an Institute policy encouraging members (or staff) to volunteer. (Note, however, that a majority of chapters did not express a view on the issue.)

* Of the respondents expressing a view, 61 percent supported the Institute's making donations to charity. A comparable percentage of respondents supported the making of donations by the chapters. There was a split of opinion on whether donations should be limited to tax-related charities.

* Some respondents were opposed to the Institute's "straying" from its core mission, whereas others thought certain (measured) activities would be appropriate.

C. Task Force Findings and Recommendations

The Task Force did not view its charge as merely reporting the results of the chapter survey. Rather, it sought to place the survey results in a broader context of the general growth of corporate social responsibility; the Institute's traditions, prior practice, and financial wherewithal; and the activities of similar organizations. This view of its responsibility led the Task Force to formulate a multi-part plan of social responsibility. Specifically, the Task Force recommends that Tax Executives Institute build upon its 64-year history of volunteerism and service by--

* Creating an Institute-level award to recognize the pro bono (volunteer) efforts of individuals in respect of tax-related activities.

* Expanding the Institute's scholarship program, by

(a) Increasing the ceiling on chapter-level scholarships;

(b) Providing matching funds for chapters whose financial resources may inhibit their ability to grant scholarships; and

(c) Establishing a mechanism to make a limited number of scholarship grants at the Institute level.

* Authorizing the making of cash donations, by

(a) Authorizing the chapters to make cash donations (up to a specified amount); and

(b) Authorizing the Institute to make cash donations (up to an amount limited by a percentage of TEI's investment income).

* Encouraging TEI members to engage in volunteer activities by developing a resource guide promoting involvement in tax-related charities or government volunteer programs.

* Encouraging TEI staff to engage in volunteer activities by permitting them to volunteer two days a year without being charged leave.

* Developing a comprehensive public relations program to identify and highlight TEI's ongoing efforts in terms of social responsibility.

The proposed Nine-Point Plan of Social Responsibility is set forth in detail in the next portion of this report. The Task Force draws the Board's attention to the following:

* By itself, none of these steps should be seen as "radical" or perhaps even noteworthy, but collectively they should help enhance TEI's visibility, credibility, and effectiveness as a member of the tax community. At the same time, it is difficult if not impossible to quantify the benefits flowing directly to TEI or to the business tax community from the proposals. The enhanced scholarship program, for example, could well encourage recipients (or possible recipients) to pursue in-house tax careers, but any such benefit would be at best long-term in manifesting itself. As for the charitable donations contemplated by the proposal, it would be similarly difficult to identify any benefit to TEI or its members. That said, the absence of a direct connection between the donor's core activities and the charitable donations would also exist in respect of donations made by companies or company-supported foundations.

* The Task Force has striven to maintain an appropriate balance between Institute-level and chapter-level activities. Thus, it is significant that the Institute-level expenditures authorized under the plan would be less than half what the chapters currently spend on scholarships. The level of (and limitations on) Institute (and chapter) expenditures reflects of the Institute's sound financial position as well as the possibility that changes in the economic climate could affect the Institute's ability to fund scholarships and other charitable activities in the future. The Task Force contemplates that Institute and chapter leadership will continually assess whether the expenditures of funds is appropriate in light of the Institute's (or chapter's) current condition. (5) The Task Force also contemplates that chapter-level expenditures (for either scholarships or other charitable purposes) will continue to be wholly discretionary with the chapter. Thus, after assessing its financial condition, its proximity to schools having tax programs, and other issues, a chapter will remain at liberty not to have a scholarship program.

* The Task Force initially concluded that a major component of Social Responsibility Plan should be encouraging volunteer actions by TEI members, leaders, and staff. In light of the survey findings, however, which reveals both (a) a philosophical aversion to "imposing" a responsibility to volunteer on members and (b) pragmatic limitations on how much time members might have to volunteer (especially in light of the exponential growth of work-related obligations for many members), the Task Force scaled back its recommendations. Stated simply, the Institute has more money than its members have time.

* The Task Force recognizes that the guidelines will need to be developed in respect of Institute-level scholarships and charitable donations at both the chapter and Institute level. The Task Force anticipates that these guidelines would be subject to Board approval.

Task Force Proposal

The Task Force's proposed plan of social responsibility, which has been approved by TEI's Executive Committee, is set forth below:

TEI's Nine-Point Plan of Social Responsibility

Overview

Through a combination of chapter-based and Institute-level initiatives, Tax Executives Institute will acknowledge and encourage volunteer efforts by its members and staff, and will commit significant additional funds to scholarships and charitable works.

General

1. Develop a public relations program to identify and highlight TEI's ongoing efforts in terms of social responsibility, including the granting of scholarships, making of cash contributions, and the encouragement of volunteer efforts by TEI members and staff. The outreach effort--directed toward TEI members themselves, their companies' management, and the public at large--will enhance TEI's brand and credibility not only noting the Institute's historical commitment to volunteerism and social responsibility (manifested in FY2007, for example, by TEI's chapters granting more than $130,000 in scholarships), but by emphasizing that every member of the Institute agrees to abide by the Institute's Standards of Practice.

2. Create an Institute-level pro bono award for the TEI member whose volunteer efforts related to the tax system (on an annual or lifetime basis) exemplify a commitment to social responsibility. This non-monetary award would provide a mechanism for the Institute to recognize and encourage such efforts as they relate to the tax system.

a. Nominations are to be made by chapter representatives to the Institute Board of Directors.

b. The award recipient is to be selected by the Institute Board upon a recommendation the Awards Committee, pursuant to guidelines established by the Board.

   Examples of qualifying activities include volunteering at
   low-income tax preparation clinics; teaching tax (or tax [of
   finance] literacy); or promoting diversity in the tax profession.
   TEI activities (at either the local or Institute) may qualify. (6)

c. The award is to be commemorated by a plaque, with its presentation scheduled for an Institute conference or other meeting. Consistent with other Institute awards, the Institute would reimburse the recipient for his or her expenses in attending the conference.

d. Only one award will be presented in any year, and there is no requirement that the award be given each year.

   Consideration should be given to recognizing the efforts of all
   nominees (e.g., as honorable mentions), not just the award
   recipient.

Scholarships

3. Update TEI's Chapter Scholarship Guidelines: Raise the annual cap from $7,500 to $10,000; raise the recommended minimum chapter scholarship from $500 to $1,000; review other chapter scholarship guidelines.

Revisions to the guidelines will be subject to Board approval.

4. Create a "matching funds" program for chapters to encourage the expansion of the Chapter Scholarship Program, as follows:

a. If a chapter's financial balance as of the end of the fiscal year is less than the greater of (i) $10,000, or (ii) $100 per member, then

b. The chapter may request that the Institute provide up to $2,500 in matching funds to the chapter for distribution as scholarship grants.

   Consider creating a mechanism to ensure that qualifying chapters
   can take full advantage of the match despite any cash-flow concerns
   by, for example, (a) the Institute's being the payer of
   scholarships (following receipt of the chapter's portion of
   qualifying scholarships) or (b) the Institute's advancing the
   matching funds upon receiving documentation of a chapter's
   authorization of a specified amount of scholarships in a given
   year.

Note: Using TEI's FY2007 financial statements (and related chapter financial reports), 13 chapters would currently qualify for the matching fund program; if all the chapters took advantage of this proposal, the Institute would be obliged to provide $32,500 in matching funds.

5. Grant discretionary authority to the Executive Committee to make donations of up to $15,000/year in scholarships to tax students at accounting, law, business, or management schools (no more than $5,000 to students at any one institution, with the minimum grant being $2,500 per student).

The Institute will establish criteria (which will be subject to Board approval) to guide the Executive Committee in selecting colleges where the scholarships will be established. Among the possible considerations will be (a) whether a chapter program exists at the same college or in the same general location, (b) whether the scholarship will advance other Institute objectives (e.g., diversity), (c) the potential reach of the scholarship (e.g., in respect of an online tax program), and (d) the potential prestige associated with the scholarship.

Other Charitable Giving

6. Grant discretionary authority to the chapters to donate up to $500/year each to charities of their choosing.

a. Directed payments to charities made in lieu of a chapter's giving speaker gifts are not within the scope of this provision. Those expenditures (for example, where a speaker designates the recipient organization) will be considered operational expenses of the chapter and will not affect the chapter's authority to make a donation.

b. In extraordinary circumstances, a chapter may request a waiver of the $500 limitation. Waiver requests should be directed to the Executive Director who will take into account the purposes of the designated charity, the Institute's (or chapter's) link to those purposes, and the chapter's financial wherewithal.

Note: Currently, such donations are handled on an ad hoc basis.

7. Grant discretionary authority to the Executive Committee to donate up to the lesser of (i) $25,000/year or (ii) 5% of TEI's unconsolidated investment income as reported on the Institute's audited financial statements.

Members of TEI's Board of Directors will be invited to suggest possible charities, pursuant to criteria (and on a form) established by the Board that, among other things, specify the types of organizations or programs eligible (or ineligible) to receive grants.

   The Institute will establish guidelines (will be subject to the
   Board's approval) limiting donations to non-sectarian,
   non-political organizations qualifying under section 501(c)(3) of
   the Internal Revenue Code with full-time, paid professional
   management.

b. TEI's Advisory Committee to the President will review the suggestions to ensure compliance with the Board's criteria and annually develop a series of recommended donations (minimum donation to any single organization being $2,500).

c. Midway through the year, the Executive Committee will assess the Institute's financial condition and determine whether and to the extent donations should be made in the year. As necessary and appropriate, the Advisory Committee will adjust its recommendations to fall within any limitations set by the Executive Committee. The Executive Committee will then review the Advisory Committee's recommendations to determine whether any of the recommended donations should be increased, decreased, or eliminated all together. In no event may the aggregate amount of donations approved by the Executive Committee exceed the aggregate amount of donations recommended by the Advisory Committee to the President.

d. The Executive Committee will report annually to the Board on the Institute's charitable giving.

Note: Using TEI's FY2007 financial statements, the limitation for FY2008 would be approximately $16,000.

Volunteer Efforts

8. Develop a resource guide for use by both the chapters and individual members promoting their involvement in tax-related charities or government volunteer programs, including in the United States, the IRS's Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs, and comparable programs in other countries.

   The resource guide should specify local points of contact for
   volunteer programs and, as appropriate, be regularly updated to
   include descriptions of successful volunteer efforts undertake or
   supported by the chapters.

9. Encourage TEI staff to perform volunteer work by permitting them to volunteer up to two days per year without being charged leave. (Advance approval of charity required; scheduling subject to the Institute's workload.)

Note: If funds authorized under the plan were fully spent, TEI's outlay in the current year would be $70,000 ($32,500 in matching funds, $15,000 in Institute-level scholarships, and $16,000 in charitable donations), excluding time off granted to employees or scholarships or donations out of chapter funds.

(1.) In the association community, the word "corporate" is generally omitted.

(2.) In 1989-1990, the Institute considered establishing an Institute-level scholarship program. That aspect of the scholarship proposal was ultimately tabled without action.

(3.) Editor's Note: The appendices to the report are not reprinted in The Tax Executive, but are available on TEI's website, www.tei.org.

(4.) The results themselves run 56 pages in length; they will be provided upon request.

(5.) In 1990 (when the chapter scholarship guidelines were approved), the Institute's fund balance was less than $1 million, compared to more than $7 million now.

(6.) Editor's Note: In developing the social responsibility implementation plan for the Institute, TEI's Executive Committee concluded it would be appropriate to include finance-related literacy efforts within the ambit of the award.