An investigative report suggests that the high-profile charity event, a favorite of its golf-addicted CEO Thomas Ryan, provides a way for suppliers to skirt ethics rules against expensive favors to company employees. Meanwhile, the charity itself spends most of its income putting on the event rather than giving.
David Armstrong's report "At CVS Golf Gala, Suppliers Pay for Access to Executives" (September 24, 2008) takes CVS to task for making an explicit exception to its own corporate ethics policies in promoting the annual event. (Wall Street Journal subscribers can find the article here, while other mortals may be able to find a blogged version of it here.)
Some CVS insiders have complained that the Charity Classic promotes a "pay to play" system, according to people familiar with the company, under which the ninth-largest U.S. retailer favors donors when deciding which products to promote and how they're displayed. Former employees say that donating to the tournament boosts suppliers' chances to be named a CVS "supplier partner," an award that signals to store managers which vendors are in favor with headquarters.
The CEO is behind the major corporate push for this event:
The driving force behind the Charity Classic is CVS Chief Executive Thomas Ryan, who is rated one of the top golf-playing CEOs by Golf Digest magazine. People familiar with the company say Mr. Ryan is instrumental in rallying CVS workers to the cause. Company employees solicit vendor gifts, help organize the event and comprise its entire 11-person board of directors. Mr. Ryan doesn't sit on the event's board.
Mr. Ryan does sit on the board of the nonprofit organization that has received the biggest checks in recent years from the Charity Classic -- Andrade Faxon Childrens Charities, named for Brad Faxon and Billy Andrade, two golf professionals from Rhode Island. From 2001 through 2006, Andrade Faxon received more than $1 million from the Charity Classic, according to federal tax filings. In 2005 and 2006, Andrade Faxon received the majority of its funding from the Charity Classic.
The Journal provided a copy of the program for the Monday night dinner gala showing the live auction offerings. The top item was a round of golf at Liberty National (billed as the most expensive golf course ever built), in New Jersey across from the Statue of Liberty. The fourth player in the foursome is none other than CEO Tom Ryan, and the bidding started at $100,000 and ultimately went for $130,000. The winner was not disclosed, but the past winners included Nestle Waters North America, vendors of Poland Springs water to CVS (explaining in part why plain old bottled water costs over a buck).
A glance at the Form 990 of CVS Caremark Charity Classic (EIN 05-0508742, Form 990) fees for the event brought in just $400,000 over the $7.6 million cost of the event, plus yeilding just $2.4 million in contributions. The organization then distributed $1.7 million in grants and $1.0 million on professional fundraising fees.
One of the largest expense items for the tournament is a $1.8 million management fee to a company owned by golf pro Peter Jacobsen. The sports management company bought apparel for the event from Summit Golf Brands, a company that CVS CEO Tom Ryan holds a stake in. Mr. Jacobsen says he didn't know about that.
The largest grant from the golf event was $225,000 to the Andrade Faxon Children's Charities (EIN 05-0476331 Form 990), a joint project of Rhode Island golf pros Billy Andrade and Brad Faxon. This organization has no programs of its own, it just distributes its income (mainly the check from the CVS Classic) in checks of $2,000 to $25,000 to about forty Rhode Island charities: schools, a food bank, Boys & Girls clubs, and the like.
Other large grants were $125,000 to the Barrington/Warren Rotary Club and $107,000 to an organization called Boundless Playgrounds (EIN 06-1512497 Form 990), a $3 million organization that promotes the construction of accessible playgrounds. There were about 75 grants in all, ranging upwards from $1,000.
Clearly something is amiss when the sports marketing firm promoting a charity golf event receives more from the event than the total of all the charity grants put together. And when the event raises money by selling access to its executives by would-be vendors. There's not much of a sense of giving back in this event—it's more like using charity as a pretext for some questionable corporate behavior.