Promoting Corporate Citizenship.

The best managed companies in today's fast moving global economy are doing more than producing good returns for investors. They are adding new value to the communities they serve in very businesslike ways.

World-class companies are those that go beyond delivery of competitive consistent-quality goods and services worldwide. They are also preferred employers, preferred investments and preferred neighbours wherever they operate. To help achieve their non-financial objectives, many have adopted corporate creeds or ethic statements to govern their behaviour. They measure their performance on balanced scorecards that include involvement in the communities they serve. Each knows that its entry into new markets will be judged on the basis of its past performance elsewhere. This self-interest helps to assure that corporate citizenship considerations are imbedded into day-to-day business decision-making.

While most global companies are experienced at competing for customers, talent and investment worldwide, competing for reputation as a good citizen is fast becoming a high priority as well. To be a preferred neighbour in distinct communities across five continents requires a company to think globally and act locally. Traditional community relations management, with an emphasis on charitable support for local organizations, is not enough. This is especially true for companies that have delegated community grant-making to local business heads, with no company-wide guidelines. In such cases, a single company can find itself simultaneously supporting an AIDS walkathon in one market, a beach clean-up in another, and a jazz concert in yet another. While each of these is worthwhile in its own right, in the aggregate they do not speak clearly about what a company stands for or can best achieve in its communities worldwide. Moreover, grants alone rarely differentiate the work of one company from another. Tapping other corporate resources, especially those linked to a company's business strengths, can. A business-related strategy can engage employees, encourage them to participate in community problem-solving and share in the pride of accomplishment. Leveraging business strengths can also help companies build shareholder confidence in a company's community investments by demonstrating that healthy communities and healthy businesses prosper hand in hand.

Not surprisingly, the world's leading companies are rethinking their community involvement along these lines and becoming much more strategic about it. They are prioritizing community issues common to markets they serve and assessing how particular business strengths can be organized to make a measurable impact on them. As they do this, they often seek to partner with Governments to assure that the strategy they have adopted is consistent with public initiatives.

Citigroup, as an example, has determined that improving public education and stimulating community development are concerns shared by almost all the communities where it does business. Likewise, the company has a stake in speeding up knowledge-based economic development and building a customer base comfortable with changing technologies in the delivery of financial services. In this connection, Citigroup has developed an interest in wedding classroom technologies with financial literacy to excite students about learning and help them gain skills useful to their advancement in higher education and careers. As regards community development, Citigroup has extensive experience in lending for expansion of affordable housing and job creation, strengths valuable to community revitalization. This confluence of community needs and business strengths caused it to create two multi-year initiatives. One is "Banking on Education", a $25-million ten-year initiative to increase numbers of work-ready and university-ready st udents within low-income families. The other is "Banking on Enterprise", a $10-million five-year programme to expand micro-enterprise lending worldwide to provide small business capital to some of the world's poorest people. The company and its foundation target 70 per cent of the resources they devote annually to community involvement to these two priority interests. The remaining 30 per cent is targeted to a second tier of interests which includes arts education and health and human services.

To accomplish its objectives in each area, Citigroup searches for non-governmental organization (NGO) partners that have successful track records and a capacity to operate across borders in multiple markets. One educational partner, for example, is Classroom, Inc.-a New York-based organization that creates industry-based computer simulations, including one on branch banking for middle schools and a more sophisticated financial services company simulation for high schools. Under an agreement with the Sioux Fails (South Dakota) schools, Classroom, Inc. agreed to train teachers in the use of its simulations in its schools, with Citigroup underwriting.

One of Citigroup's co-Chief Executive Officers (CEOs) is the founder of the Academy of Finance, which began as a school-to-work programme for inner-city students. It has since become a strong influence on students to pursue more education based upon their exposure to the skills required in the modem world of work. The Academy's parent--the National Academy Foundation (NAF)--will launch next year an Academy of Technology, in partnership with companies such as Lucent. NAF now has academies in more than 300 schools. Citigroup also supports Junior Achievement (JA) and Young Enterprise programmes in many of its markets in the United States and around the world, again enlisting employees as volunteer instructors. The Company's other co-CEO recently met with a JA chapter in Tokyo to discuss the impact of the banking situation there on the Japanese economy. Cross-border programmes present Citigroup with the opportunity to "success transfer" innovations made by one Citigroup location to JA chapters in other countries , using the company's formal and informal networks. JA Argentina developed, for example, a computer-based interest setting simulation called "Banks in Action". It has since become the basis for an inter-country competition among Citigroup-sponsored teams in neighbouring South American countries. The simulation has also been reformatted for use in Poland, Slovakia, Hungary and the Czech Republic, as well as the Russian Federation.

At the university level, Citigroup funds cross-border study and teaching to develop talent and ideas, and reinforce the company's global image. At the Charles University in Prague, for example, Citigroup is funding the Center for Research and Graduate Education, a United States-style Ph.D. programme in economics, designed for students from transitional economies in Central and Eastern Europe, and from the former Soviet republics. The graduates return to their countries to work in finance ministries, central banks, regulatory agencies and private companies. Citigroup also underwrites cross-border student exchanges through programmes such as the Fulbright and Eisenhower exchanges. It funds internships across borders with L'Association Internationale des Estudiantes en Sciences (AIESEC).

The Company sees these investments in education and training as contiibuting to its economic development initiatives as well. Community revitalization draws upon skills that a financial services company hones every day. As a matter of business self-interest, American banks with large investments in urban centres began involving themselves in community rebuilding, long before the enactment of the Community Reinvestment Act in the l970s. Citigroup businesses and the Foundation partner with government agencies and NGOs to develop affordable housing, generate incomes and secure an array of support services to sustain revitalization in low-income communities. An example is support for the Enterprise Foundation Daycare Development Fund, to fund affordable day care and train women in low-income neighbourhoods for positions in this field.

A harder task in combating poverty is stimulating local economies to create jobs and incomes. Community development financial institutions (CDFIs) that look and act like banks in such neighbourhoods have made progress in funding not only affordable housing but small business startups and expansions in poverty-stricken areas. Citigroup provides grants to CDFIs, induding micro-lenders, across its markets. More importantly, the company has developed an array of business relationships with CDFIs, which indude lending, cash management and letters of credit. In the short term, the company and CDFIs are learning from each other. In longer term, the company plans to use its business relationships to help draw CDFIs closer to capital markets. In this connection, Citigroup helped host the first Micro-Credit Summit in Washington D.C. in 1997. It has also established working relationships with the World Bank, the Inter-American Development Bank and the United Nations Development Programme to advance the micro-credit movement.

The experiences of world-class companies with strategic community involvement on a global basis can serve as examples for smaller local companies as well. In Central Europe, for example, the Foundation for a Civil Society and its afliliates, together with Citigroup, have created corporate citizenship awards in the Czech Republic, Poland and Slovakia. These initiatives encourage leading citizens to help define what corporate citizenship means in each country, to design competitions that fit with the role local companies can best play, and to select winning companies as models of good corporate behaviour.

As the global economy accelerates and becomes even more interdependent, well-managed companies will play helpful roles in setting standards for community involvement. They will increasingly focus their energies in areas where they can leverage their core-business strengths, target their resources and return the best value to their communities, their employees and their investors.

Paul M. Ostergard is Chairman and Chief Executive Officer of the Citigroup Foundation. He serves on many education and community development boards worldwide, and writes and speaks frequently on trends in corporate philanthropy. Mr. Ostergard participated in a forum on "Public Relations and the United Nations: The Private Sector and Social Responsibility" in June.