The advance of corporate social
responsibility is causing some companies to review whether their
corporate foundations need to change to reflect new priorities
In the public mind, there is little difference between a corporate
foundation and the company that set it up – a confusion caused in part
by the common company practice of naming their foundations after
themselves. Yet a corporate foundation, though the creation of a
company, has its own governance and financial structure – foundations
are statutorily independent and many receive funding from sources other
than the founder company. As with pension funds, trustees must act in
the interests of the foundation, not the founding company.
With CSR now an accepted part of business practice and thinking, where
does this leave foundations? That, broadly speaking, is the question
posed by a thought-provoking pamphlet written by the Smart Company
consultancy for the Charities Aid Foundation* and published earlier
this summer. It continues a line of enquiry begun in an earlier
report** from the two UK-based organizations that identified 126 corporate
foundations, most of which have been set up since the 1960s. The income
of these foundations typically ranged between £100,000 and £5million
($200,000–$10m), but the largest had an annual income in excess of
£26m. Compared with overall charitable giving in the UK, the total
income of corporate foundations – just over £208m – is small beer,
amounting to less than one per cent of all charity receipts.
The 72-page pamphlet, based on interviews with 12 companies and their
foundations, specialists in the field, and charities at the receiving
end, uncovers diverse connections between CSR and the role and function
of foundations. Some foundations have remained tightly focused on their
original grant-giving role as a tax-efficient means of channelling
funds to deserving causes. The foundation model is made for this,
providing a distinct form and structure, making budget management more
transparent and relieving the company of an administrative burden.
In other cases, the original reason for the foundation has largely
disappeared. Building society foundations, set up in the 1990s to deter
investors hoping to profit from demutualization, are an example. These
foundations received the windfall shares that would otherwise have been
collected by ‘carpetbaggers’. But demutualization is now on the wane,
while the community credentials of building societies are being
challenged by the social programmes of competing high street banks.
This means developing a more sustainable approach. Hence, the Chelsea
Charitable Foundation, established seven years ago by the eponymous
building society, is engaging the society’s members and staff, matching
funds raised for charity by the staff and making a donation on behalf
of every member who votes at the AGM.
Still other companies are integrating their foundations into their CSR
programmes. This takes the foundation beyond grant-making into areas
such as civil society partnerships and projects that further the
companies’ social and environmental objectives. Done effectively, it
plays to a foundation’s strengths. An arms-length charitable foundation
may be a more acceptable partner for a non-governmental organization
than the company itself, particularly in a sensitive area, and
foundations are a tax-efficient means of giving. Thus, the foundation
of the catering and facilities management company Sodexho works with
several national charities on food-related campaigns. The supermarket
chain Waitrose invests, through its foundation, a percentage of the
sale price of farm produce from South Africa in social welfare
programmes for that country’s farm workers and their families. And
Dyson, the vacuum cleaner manufacturer, promotes design engineering
skills through the James Dyson Foundation.
The study is cautious about identifying a trend, partly because
foundations are so diverse that it is hard to generalize, partly
because the sample is small. The general impression is that some
companies are happy to let their foundations get on with it, while
others want them to dance more to a company tune. This latter group, at
least, is likely to start asking for the sort of detailed information
on social and environmental impacts that the companies themselves are
now expected to produce. Charitable foundations are not legally
required to report to their corporate sponsors and it seems that few
do. Ironically, foundations are much tougher than companies at asking
how their money is spent, according to the recipients of their largesse.
What seems clear is that some foundations now co-ordinate employee
involvement, fund new projects and link with voluntary groups, in
addition to making grants. New functions are also emerging, such as the
role foundations can play in helping companies to engage with
stakeholders. But what stands out is that, for the most part, the
relationship between a company and its foundation has changed little,
despite CSR’s rapid rise.
*The changing nature of corporate responsibility – what role for corporate foundations?, 2007
** Revealing the foundations, 2006
