Families, Firms, and Philanthropy: Shareholder Foundation Responses to Competing Goals

Abstract

In this chapter, we examine an alternate model of corporate foundation that inverts the control and equity relationship between firm and foundation. While other scholars have called them “industrial foundations” or “foundation-owned companies,” we label this model the “shareholder foundation” because the founder of the company typically donates all his shares to a newly formed philanthropic foundation, making it full or majority owner of the company. The peculiar features of shareholder foundations give rise to a different set of governance challenges compared with conventional corporate foundations. While there are no a priori trade-offs between the pursuit of profit and public good with this model, it faces institutional complexity as its leaders deal with competing expectations and claims from firm representatives, family members, and philanthropy recipients. Using an inductive case comparison approach of nine shareholder foundations across three countries (Denmark, Germany, and France), we bring to the foreground the impact of the national institutional environment on foundation governance, linking it to the types of decisions that managers will make when facing situations with competing objectives.