Abstract
Philanthropic foundations have become increasingly important in present-day societies. In relation to governance, they represent some specific features. Like corporations, they are subject to regulation, but they differ by having neither owners nor customers. This makes the governance of foundations an important issue for study. At the same time, governance by foundations is likewise of importance. It includes the role of foundations in corporate governance based on their ownership in corporations and their role in resource allocation based on the returns of their assets. Against this background, this article addresses three research questions: (1) What are the characteristics of the governance of foundations? (2) What role do foundations play for corporate governance? (3) What role do foundations play for resource allocation? In order to contribute to answering these questions this article provides an analysis of the first centenary (1917−2017) of a major Swedish philanthropic foundation, the Knut and Alice Wallenberg Foundation. It is concluded that successful foundation governance is characterized by (1) rule compliance, (2) loyalty to the founders, and (3) legitimacy among prospective grantees. Additional conclusions are that the larger, the more concentrated, and the more long-term the asset portfolio, the more significant will be the role a foundation may play in corporate governance, and the more successful asset management and the more careful project selection, the more significant will be the role a foundation may play in resource allocation. In addition, the article demonstrates the reciprocal relationships between foundations, corporations, and grantees.
Highlights
Corporate governance has attracted considerable interest in the post-war period
If statutes do not limit asset allocation to government bonds, foundations are likely to invest in the stock market, thereby providing opportunities to be involved in corporate governance
In view of the above, this article will address three research questions: (1) What are the characteristics of the governance of foundations? (2) What role do foundations play for corporate governance? (3) What role do foundations play for resource allocation?
Summary
Corporate governance has attracted considerable interest in the post-war period (see for example Gordon and Ringe 2017; Engwall 2018). Neither of the two above-mentioned approaches works well for organizations that lack owners and customers One such group of organizations is philanthropic foundations, which have become increasingly important in economies where individuals have been able to build up considerable fortunes. The fact that foundations lack owners and customers makes it appropriate to analyse their characteristics of governance, which is the aim of this article. To this end, the section will present a framework for such an analysis. The section will present a framework for such an analysis It will be used in a study of the first centenary of a major Swedish philanthropic foundation, the Knut and Alice Wallenberg Foundation. This analysis will lead up to some general conclusions that will be presented at the end of the paper
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