For many, corporate foundations are very confusing. A charity owned by a company? A for-profit entity working through a legally separate not-for-profit agency? Surely ‘corporate foundation’ is an oxymoron at best, not to say a complete contradiction? This confusion is exacerbated in the UK context, as such foundations operate a bit like stealth bombers – flying below the radar screen while packing quite a punch. The SMART report – Revealing the foundations: A guide to corporate foundations in England & Wales – identified 126 foundations currently operating in England and Wales; yet, with a few large exceptions, most companies present their community activity as done by the company, not its foundation.
In the rest of Europe, foundations are better recognised. In some cases, like Bertelsman and BMW, they actually own a large slice of the business. In the US, foundations are even prominent, operating like the corporation’s advance guard. Every self-respecting company has one – almost a badge of honour for those serious about their engagement. Stakeholders are very used to working with and through them.
Given the differing cultural contexts, it’s perhaps not surprising Shell got into a muddle – and have had their knuckles very publicly rapped by the Charity Commission. This serves as a warning shot across the bows for others. NGOs will now be much more focused on this aspect of corporate behaviour, not least given the ready-made scope to allege self-serving hypocrisy.
Strictly speaking, few companies need a foundation – in the UK, they confer no real tax advantages and their organisational benefits can easily be outweighed by disbenefits. It’s a judgement call. Got right, they can provide presentational benefits. Got wrong, they face court marshal by the regulators, with the company being shot at dawn in the media.
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Charity commission gives independence guidelines
The Guardian newspaper alleged on October 17 that the Shell Foundation was not sufficiently independent of its parent company, after the foundation’s director Kurt Hoffman joined Shell chairman James Smith at a meeting with Hilary Benn, the secretary of state for international development in a meeting about the controversial Sakhalin project in Russia. The Shell Foundation denied lobbying the government and stated that it attended the meeting to discuss its Investment Climate Facility for Africa project. The government’s charity regulator, the Charity Commission, rebuked the Shell Foundation, advising in a letter to Hoffman that:
Foundations should carry out risk assessments for any meetings that may involve a representative from the commercial parent company.
Foundations need to be aware of any potential criticism or damage to its reputation resulting from such meetings.
They should ensure all activities promote the charity’s interests and not the commercial interests of the profit-making entity
Foundations must have “robust procedures” in place to ensure that it maintains and demonstrates independence.
Any relationship with its commercial entity must be transparent to beneficiaries and the public. All communications, as well as statements regarding any joint work carried out by the foundation and the parent company, must reflect autonomy.
Governance is fundamental. Charities have to be managed by their trustees for their stated charitable purposes.
Philanthropy in Europe magazine ranked Europe’s 25 top corporate foundations and compared them to the top 25 US foundations, finding that the Europeans outperformed the US, giving $2.08bn versus $1.4bn. La Caixa Foundation in Spain was the biggest giver in Europe contributing $384m in 2005, while the Wal-Mart Foundation came first in the US with contributions worth $153m. European foundations also have a larger international focus than the US foundations, with the Europeans having a more structured international grants system. Americans tend to focus more on international communities in which they operate. www.philanthropyineurope.com
Foundations report
The theme of foundation independence was picked up by a recent study by The SMART Company published in October. Revealing the Foundations – a guide to corporate foundations in England & Wales, also examined the sources and levels of income and what types of projects foundations support.
The study found that the level of independence of a foundation varies widely – some foundations carry out projects that are linked to the company’s corporate social responsibility programmes, some foundations are based in the corporate offices and others have administrative costs paid for. The main conclusion was that it is essential for foundations to manage these links and that governance is integral. The report’s aim is to open discussion about corporate foundations and to provide a guide to companies planning on establishing a foundation. The Cabinet Office and the Charities Aid Foundation funded the study. www.thesmartcompany.net
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