{"id":1361924,"date":"2025-01-08T11:07:46","date_gmt":"2025-01-08T10:07:46","guid":{"rendered":"https:\/\/www.ie.edu\/insights\/?post_type=articles&p=1361924"},"modified":"2025-01-08T11:07:46","modified_gmt":"2025-01-08T10:07:46","slug":"how-foundation-ownership-drives-sustainable-success","status":"publish","type":"articles","link":"https:\/\/www.ie.edu\/insights\/articles\/how-foundation-ownership-drives-sustainable-success\/","title":{"rendered":"How Foundation Ownership Drives Sustainable Success"},"featured_media":1361925,"template":"","meta":{"_has_post_settings":[]},"schools":[],"areas":[481],"subjects":[416,425],"class_list":["post-1361924","articles","type-articles","status-publish","has-post-thumbnail","hentry","areas-leadership","subjects-business-and-finance","subjects-sustainability"],"custom-fields":{"wpcf-article-leadin":["Foundation ownership can deliver superior sustainability performance and long-term societal impact, but requires exceptional leadership and robust governance writes Steen Thomsen."],"wpcf-article-body":["Foundation ownership \u2013 where companies are controlled by nonprofit foundations \u2013 offers an alternative to conventional corporate structures. This model is common in Europe and underpins the success of companies like Novo Nordisk, Bosch, and Carlsberg, enabling them to pursue ambitious environmental and social objectives while maintaining leadership in the market.\r\n\r\nModern capitalism faces growing scrutiny over its ability to address environmental and social challenges. Stakeholders increasingly demand that businesses prioritize sustainability and long-term value creation over short-term profit maximization. What sets foundation ownership apart is not the absence of shareholders, but rather their nature: these nonprofit foundation shareholders are guided by long-term societal and environmental objectives rather than financial gains.\r\n\r\nTogether with my coauthor, David Schr\u00f6der of CBS, I have found evidence of foundation ownership\u2019s ability to outperform conventional firms in sustainability<\/a>. Our study of foundation-owned, family-owned, and investor-owned firms across 28 countries reveals that foundation-owned firms achieve environmental, social, and governance (ESG) scores that are 7.7\u20138.3 percentage points higher than their conventional counterparts while maintaining financial competitiveness.\r\n\r\nTo understand how foundation-owned companies achieve these superior results, consider their distinctive operating model: they are governed by charters that explicitly embed social or environmental purposes into their core objectives. Unlike conventional investors who must respond to quarterly earnings pressure and market volatility, foundations can prioritize stability, long-term investments, and broader societal impact. This fundamental difference in purpose and governance allows foundation-owned firms to excel in three key areas:\r\n
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  1. Long-Term Ownership<\/strong>\r\nFoundation ownership liberates companies from short-term market pressures, enabling sustained investment in renewable energy, employee welfare, and innovation. For example, Novo Nordisk, owned by the Novo Nordisk Foundation, invests heavily in diabetes research and emissions reduction strategies, creating a direct link between corporate success and global health and environmental goals.<\/li>\r\n \t
  2. Purpose-Driven Governance<\/strong>\r\nFoundation charters often mandate societal objectives, ensuring alignment between ownership, governance, and sustainable practices. The Carlsberg Foundation exemplifies this approach, channeling profits from the Carlsberg Group into scientific research and innovation in sustainable brewing.<\/li>\r\n \t
  3. Resilience During Economic Shocks<\/strong>\r\nDuring periods of economic uncertainty, foundation-owned firms demonstrate remarkable staying power. While many conventional firms scaled back their ESG commitments during the 2008 financial crisis, our research shows that foundation-owned companies maintained their sustainability activities, demonstrating the model\u2019s resilience under pressure.<\/li>\r\n<\/ol>\r\nSpain offers several notable examples of successful foundation-controlled companies that balance economic performance with social impact. Unicaja Banco, controlled by the Fundaci\u00f3n Bancaria Unicaja, combines strong financial performance with community initiatives in education and social development. CaixaBank, part of Fundaci\u00f3n \u201cla Caixa,\u201d channels a significant share of its profits into charitable programs across Spain, supporting healthcare, poverty alleviation, and cultural initiatives. Similarly, ACS, one of Spain\u2019s leading infrastructure firms, demonstrates how mission-aligned ownership structures sustain long-term competitiveness while advancing environmental and social performance.\r\n\r\nFoundation ownership provides a powerful model for businesses to integrate sustainability and societal impact into their DNA. By embedding purpose into governance, this model aligns corporate success with the well-being of stakeholders, communities, and the environment. The success of foundation-owned companies offers a compelling blueprint for rethinking capitalism: one that prioritizes resilience, long-term value creation, and trust. Policymakers and business leaders can foster this model by supporting legal frameworks and tax policies that facilitate foundation ownership, ensuring its continued growth and impact.\r\n
    Enterprise foundations are no panacea.<\/blockquote>\r\nWhile foundation ownership offers a compelling alternative to conventional shareholder models, it is not without its weaknesses. Like any governance structure, its success hinges on the quality and integrity of those who manage it \u2013 particularly the foundation board members, who hold ultimate authority over both the foundation and its corporate subsidiaries.\r\n\r\nUnlike shareholder-owned companies, where boards are held accountable to profit-driven investors, foundation boards operate with greater autonomy. This independence, while valuable for long-term stability, can lead to a lack of transparency or insufficient oversight if board members are not effectively monitored. External supervision by courts or regulatory bodies helps address this concern in many jurisdictions, but enforcement can vary.\r\n\r\nAnother weakness relates to incentive alignment. In conventional firms, shareholder and executive incentives are typically tied to financial performance, encouraging efficiency and profitability. In foundation-owned companies, however, the absence of direct profit-sharing mechanisms for board members can reduce motivation to maximize performance. While foundation boards are legally bound to fulfill their charitable or mission-driven purposes, their commitment to efficiency and competitiveness ultimately depends on the individuals involved.\r\n\r\nThese challenges underscore a broader truth: enterprise foundations are no panacea. Like other ownership structures, their performance depends on the quality of governance and leadership. Foundation board members must balance the foundation\u2019s purpose with business needs, exercise sound judgment, and uphold principles of integrity and stewardship. The governance model provides a robust framework, but it must be supported by capable, committed leaders who prioritize long-term value creation for stakeholders and society. The human factor remains central \u2013 strong governance, ethical leadership, and accountability are as essential in foundation-owned firms as in any other business model.\r\n\r\nFoundation-owned companies demonstrate that businesses can thrive by aligning profit with purpose. Their success in delivering superior ESG performance while maintaining financial competitiveness offers more than just examples of good corporate citizenship. It provides a proven governance model that addresses today\u2019s urgent environmental and social challenges.\r\n\r\nThe model's strength lies in embedding sustainability into corporate governance rather than treating it as an add-on. By shielding companies from market volatility, foundation ownership enables the stable, long-term focus needed for innovation and resilience.\r\n\r\nTo reiterate, the foundation ownership model is no panacea. It requires exceptional leadership and robust governance \u2013 but it does offer a path towards a responsible form of capitalism. As businesses worldwide face increasing sustainability imperatives, the foundation model does demonstrate in a practical manner how purposeful governance can create lasting value, for both shareholders and society.\r\n\r\n \r\n\r\n\u00a9 IE Insights."],"wpcf-audio-article":["https:\/\/www.ie.edu\/insights\/wp-content\/uploads\/2025\/01\/How-Foundation-Ownership-Drives-Sustainable-Success.mp3"],"wpcf-article-extract":["Foundation ownership can deliver superior sustainability performance and long-term societal impact, but requires exceptional leadership and robust governance writes Steen Thomsen."],"wpcf-article-extract-enable":["1"]},"_links":{"self":[{"href":"https:\/\/www.ie.edu\/insights\/wp-json\/wp\/v2\/articles\/1361924","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.ie.edu\/insights\/wp-json\/wp\/v2\/articles"}],"about":[{"href":"https:\/\/www.ie.edu\/insights\/wp-json\/wp\/v2\/types\/articles"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.ie.edu\/insights\/wp-json\/wp\/v2\/media\/1361925"}],"wp:attachment":[{"href":"https:\/\/www.ie.edu\/insights\/wp-json\/wp\/v2\/media?parent=1361924"}],"wp:term":[{"taxonomy":"schools","embeddable":true,"href":"https:\/\/www.ie.edu\/insights\/wp-json\/wp\/v2\/schools?post=1361924"},{"taxonomy":"areas","embeddable":true,"href":"https:\/\/www.ie.edu\/insights\/wp-json\/wp\/v2\/areas?post=1361924"},{"taxonomy":"subjects","embeddable":true,"href":"https:\/\/www.ie.edu\/insights\/wp-json\/wp\/v2\/subjects?post=1361924"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}