In recent years many of the nation's largest corporate foundations have given substantial sums of money to nonprofits affiliated with their parent companies' board members, a practice that can compromise director independence, governance experts say.

A Chicago Tribune study of the most recent annual reports issued by the twenty largest US corporate foundations found that, as a group, the foundations had given nearly $25 million to nonprofit entities for whom a corporate director served as a trustee or held another leadership position. In some cases, 10 percent or more of all foundation grants went to such organizations.

Companies, board members, and nonprofits routinely stress the importance of philanthropy and say that large donations to favorite nonprofits do not affect the independence of corporate board members. But critics of the practice argue that it can create a clubby atmosphere among directors that makes them less likely to challenge management. And although corporate foundations detail their donations in annual tax filings with the IRS, companies aren't required to disclose the nonprofit affiliations of their directors, making it problematic for investors to know the full extent of such connections.

At SBC Communications, the foundation made a three-year, $1.16 million grant in 2002 to Girls Inc., where SBC director Joyce Roche is CEO. Because the grant came out to less than $460,000 a year, it fell below SBC guidelines that would have precluded Roche from being considered an independent director. Similarly, the Alcoa Foundation has made grants of more than $583,000 to the World Wildlife Fund since 2002, the year that the organization's U.S. president, Kathryn Fuller, joined the board of Alcoa Inc.. Because the grants fall below Alcoa's threshold of 2 percent of the recipient's annual gross revenue, Fuller is considered an independent director.

Meanwhile, roughly half of the $7.3 million in non-matching grants awarded by Motorola Inc. in 2003 went to the Massachusetts Institute of Technology, where Motorola director Nicholas Negroponte is a professor and founding chairman of the Media Lab. Over the last three years Motorola and its foundation have given nearly $14 million to MIT. A Motorola spokeswoman told the Tribune that the grants did not surpass its independence threshold, which applies to contributions exceeding the greater of $300,000 or 5 percent of an organization's gross revenue.

Governance experts argue that such grants can, at a minimum, cause concern about potential conflicts of interest. "You're not saying somebody's buying the vote, but it raises the question in the minds of others as to how independent this man or woman is under the circumstances," said Gavin Anderson, chief executive of GovernanceMetrics International, which evaluates companies' corporate governance. "Companies today can't afford to have that kind of question asked."