Under Lata Reddy, Prudential is blunt about tying its philanthropy to its bottom line. Is this the future of corporate giving?
By Nicole Wallace
As published in The Chronicle of Philanthropy, Volume 29, Issue 12, October 2017.
Newark, N.J. – In its heyday after World War II, Hahne & Co. competed with Saks Fifth Avenue as a shopping destination. Generations of Newark-area residents have fond memories of shopping and eating at the grand department store.
But after it closed in 1987, the building sat abandoned for almost 30 years, on nearly a full square block in the middle of the city. The boarded-up windows on the once-elegant façade were a heart-breaking reminder of the city’s deep economic slide— and the poverty, crime, and other problems that came with it.
Slowly, though, Newark is starting to change. Construction sites bustle with activity and cranes hover above the skyline. And the iconic Hahne building is part of the revival. In January, it reopened as a combination of apartments and retail and office space after a three-year renovation spearheaded by Prudential Financial’s office of corporate social responsibility. Prudential invested almost $50 million in the project.
Prudential wants to make social responsibility part of its business strategy, not something nice that happens off to the side.
Sixty-four of the 160 apartments have been set aside for low- and moderate-income residents. Rutgers University-Newark runs a 50,000-square-foot arts and cultural center in the restored building, which is also home to the city’s first Whole Foods Market and other stores. Celebrity chef Marcus Samuelsson plans to open a restaurant in the building by the end of the year.
It’s exactly the mix of social purpose and smart business that Lata Reddy, senior vice president for diversity, inclusion, and impact at Prudential, is set on creating. The restoration increases the city’s affordable housing stock and has the potential to drive more local economic development. Equally important to Ms. Reddy, the Hahne project is a good financial investment for the company, and the vibrant city life it will spur should help Prudential recruit and retain talented employees.
For a long time, companies have tried to align their giving with their business objectives, emphasizing marketing and public relations. Ms. Reddy wants to take Prudential’s social mission of building a more inclusive economy and make it part of the company’s business strategy.
“When we talk about corporate responsibility, it’s no longer something that’s done off to the side,” she says. “It’s about how you make your money.”
A Company-Wide Commitment
Ms. Reddy, 51, never expected to work in corporate America, but this is her second stint at Prudential. A former civil-rights lawyer, she spent 11 years at the company’s foundation, starting in 1997 as an education-program officer and working her way up to vice president. The insurance giant lured her back from consulting in 2012 with a striking mandate: Rethink what corporate responsibility means.
Prudential and its foundation award more than $60 million annually. The company has committed roughly $850 million to investments intended to bring both social and financial returns toward a goal of making $1 billion in impact investments by 2020.
In June, Prudential signaled its commitment to taking social good companywide by elevating the office of corporate social responsibility into the C-suite. The office used to be part of human resources, but now Ms. Reddy reports directly to the vice chairman. Another sign of Ms. Reddy’s clout: She helps vet Prudential’s prospective board members.
The idea of incorporating social responsibility into a company’s business operations has gained momentum quickly, says Mark Shamley, chief executive of the Association of Corporate Contributions Professionals. Companies are being much more strategic about how they support the causes they care about.
“They’re looking at their assets across the board, whether it’s financial, people, and their competencies,” he says. “It isn’t just about check writing anymore.”
Using all the tools at their disposal helps companies make a bigger impact, he says, but there are potential downsides. A company’s social mission and its business operations aren’t always going to line up, Mr. Shamley warns. He points to CVS’s $2 billion decision to stop selling tobacco products. Companies that take public stands on social issues but have business activities that conflict with those ideals risk charges of hypocrisy.
“Companies are really being forced to reconcile their business strategies and what they stand for socially,” he says. “There are times when these ideas bump up against each other and where you have to make some tough choices.”
Once a year, Melissa Berman asks Ms. Reddy to be a guest speaker in the global philanthropy class she teaches at Columbia Business School. At the end of the lectures, Ms. Reddy is surrounded by students who all want to work for her at Prudential, says Ms. Berman, chief executive of Rockefeller Philanthropy Advisors.
The students’ enthusiastic response is one of many reasons Ms. Berman thinks the integrated approach to corporate social responsibility is here to stay: “The people who are in business school now don’t think that they need to — or want to — separate making money and making the world a better place.”
Still, as Ms. Reddy puts the new strategy in place, she knows the idea that corporate do-good-ing as a way to make money could be jarring — and controversial.
Prudential first road-tested the idea with close partners — nonprofits it works with and colleagues in corporate philanthropy — before taking the message public. Ms. Reddy says the reaction was pretty consistent: “Oh, that makes sense.” She thinks that people appreciate the company’s candor and are more skeptical about companies that say they have a moral obligation to do good.
“People inherently believe business is about the bottom line,” she says. “When we talk about the bottom line and being able to use that to drive social good, something clicks and people get that.”
One of the first changes Ms. Reddy made when she returned to Prudential was to increase cooperation among the company’s foundation, its impact-investing unit, and employee-volunteering programs. In the past, the three groups operated independently; now they routinely work together. For example, Prudential often makes grants in concert with investments as a way to amplify the social impact.
A case in point: When Prudential’s impact-investing unit put more than $5 million into AeroFarms, a Newark company that grows leafy greens without pesticides and with much less water than conventional farming, the foundation made a grant to the Ironbound Community Corporation for a program to recruit and train residents for AeroFarms jobs.
Ms. Reddy has built relationships throughout the company, and she and her staff have been integral to how Prudential has expanded its operations. For example, her team was involved in the planning for a business and technology center the company opened in El Paso in 2014. They talked to stakeholders throughout the city, looking for areas of need that fit into the company’s business objectives. The result so far has been more than $1.6 million in grants.
Ms. Reddy points to a $450,000 grant to the University of Texas at El Paso to help start an actuarial-sciences program as a prime example of the mutually-beneficial efforts the company seeks out.
“It is obviously great for us as a company that hires pretty much every actuary on the Eastern Seaboard and other places around the world,” she says, chuckling. “And then these are great jobs for people who come through the program, whether or not they work for Prudential.”
Ms. Reddy saw education’s power to change economic trajectories firsthand in her own family, something she hopes keeps her grounded — and helps her understand and empathize with the people she’s trying to serve.
Ms. Reddy’s father grew up in a small village in India where the local school went only to the fourth grade. Her uncles’ education stopped after that, but Ms. Reddy’s father asked his parents’ permission to move to a neighboring town to continue his schooling.
Then, when his marriage was being arranged by his and his bride’s parents, he persuaded his future father-in-law to give the couple one-way tickets to the United States.
Ms. Reddy’s father worked and went to university, earning first an undergraduate degree and then a Ph.D., eventually becoming an economics professor.
“One person’s education and his sheer determination took my family from a very small, very remote village in India to a solidly middle-class to upper-middle-class existence in America,” Ms. Reddy says.
During law school at Emory University, Ms. Reddy decided she wanted to devote her career to making sure other people got the same opportunity. She later took a job as an attorney in the Office for Civil Rights in the New York office of the U.S. Department of Education, which resolves complaints about discrimination in public schools.
The work was fulfilling. But over time, Ms. Reddy started to feel like her cases were putting Band-Aids on systemic problems. She wanted to dig into the root causes of educational inequity, so she applied for the job as a program officer at the Prudential Foundation.
Ms. Reddy has a warm manner and a sonorous speaking voice, but she measures her words carefully, perhaps the lingering effect of her work as a lawyer. She projects a sense of calm. During a two-hour interview, the only time she betrays strong emotion while speaking is when she talks about how often nonprofits and researchers come to struggling cities like Newark and make promises they fail to keep.
“We’ve had to discourage programs that want to come in and do work basically to build a body of research and then take it somewhere,” she says. “It’s like, ‘Sorry, this is not the place.’”
No More ‘Bogeyman’
Prudential has kept its headquarters in Newark since the company was founded in 1875. One of the few large companies that stayed after deadly civil unrest rocked the city in 1967, Prudential has long played an outsized role in Newark’s civic life. Over the years, that influence has evoked strong— and sometimes contradictory— responses.
Go back 30 years ago, and Prudential was a “bogeyman,” says the longtime activist Joseph Della Fave, executive director of the Ironbound Community Corporation: “There was a concern that Prudential and downtown, corporate industry was running Newark — and not for its betterment necessarily.”
Now, Mr. Della Fave is impressed by Prudential’s investments in projects that have boosted Newark’s revitalization and by the willingness of the company’s impact-investing team to meet with him about zoning issues and his group’s concerns that the city’s revival might displace longtime residents. He says the company’s grants — both to his organization and to many others — are critical to the city’s charities.
“The nonprofit infrastructure here in Newark has in many ways sustained the stability in neighborhoods over the difficult years,” he says.
While some in Newark have questioned whether Prudential is too powerful, others have looked eagerly to the insurance stalwart as a savior.
“Everybody expected Prudential to solve every social problem in Newark. That’s not a realistic expectation for a corporate partner,” says Ben Hecht, chief executive of Living Cities, a collaborative of foundations and corporate grant makers that includes Prudential and has worked with the company on efforts to reduce opportunity gaps.
Ms. Reddy’s answer is collaboration. Rather than taking a go-it-alone approach in Newark, she emphasizes the importance of Newark’s major institutions, including government, universities, businesses, and others, working together.
Prudential brought together government officials and community groups to discuss public safety, which led to the creation of street teams that deal with problems before they mushroom into violence. The company is also working with anchor institutions to support the city’s “Hire. Buy. Live. Newark” campaign to encourage local entities to create job opportunities for city residents, buy goods and services from local firms, and encourage their employees to live and shop in Newark.
“We all have our own individual strategies to try to do better and help the city grow and thrive,” Ms. Reddy says. “But we know that our collective power and collective actions can be a multiplier.”
WRITER’S NOTEBOOK: BEHIND THE STORY
When I first walked into the Hahne & Co. building in Newark, NJ., I was struck by how airy it is. Natural light streams in from the restored atrium of what was once a grand department store.
I visited Newark to meet with Lata Reddy, head of corporate philanthropy at Prudential Financial, and to see for myself what the insurance giant is doing in its hometown.
Ommeed Sathe, the member of Ms. Reddy’s team who leads the company’s impact-investments group, told me that during World War II, the atrium was tarred over, because of fears that the skylight could act as a beacon for German bombers. After the department store closed in 1987, the downtown building sat boarded up for almost three decades.
“No one had actually seen this atrium for the better part of 80 years,” he says.
The restoration of the Hahne Building is a keystone in Prudential’s new approach to corporate social responsibility. Under Ms. Reddy’s leadership, the company is weaving social good into its business strategy. It’s an influential approach, and one that might offer a preview of the future of corporate giving.
The company invested nearly $50 million in the Hahne rehabilitation. But it doesn’t feel like a typical downtown development project. The building’s layout is designed to foster community. Dramatic open staircases encourage foot traffic, while elevators are tucked away. Local nonprofits hold meetings in the arts incubator run by Rutgers University-Newark and throw parties in the building’s public spaces.
“The fact that the Hahne Building has been restored to its former glory has become a very visible and emotional reminder that Newark is, in fact, on the rise,” Ms. Reddy says. “It showcases the hope and the promise and all that is good about this city.” — NICOLE WALLACE
Used with permission of The Chronicle of Philanthropy Copyright© 2018. All rights reserved.