Foundation governance for the purposeful ownership of enterprise

Abstract

Foundation-owned companies are regarded as real-world examples of commitment to a company purpose, and several world-class companies have this ownership structure. They have been found to perform surprisingly well, given the accountability and incentive problems anticipated by conventional economic theories when nonprofit organizations own business companies. To address this puzzle and contribute to the understanding of purposeful governance more generally, this is a study of the governance of five foundation-owned companies (Inter IKEA, Tata Sons, Novo Nordisk, Rambøll, and Kavli). Case study findings show that foundation boards act as guardians of corporate purpose by balancing structural distance to foundation-owned companies with engaged ownership. Foundation governance is manifested through purpose and value commitments and enacted through board relationships. Together, these arrangements appear to mitigate potential weaknesses while leveraging the advantages of foundation ownership. Extrapolating from these findings, we propose that foundation ownership—and purposeful governance in general—requires thinking that extends beyond ownership structure to ownership, governance, and board competences.