Even ‘curious crea­ti­ons’ can be optimised

You need to have a good think before setting up a corpo­rate foun­da­tion. There are lots of ways to struc­ture one, all of which have bene­fits and draw­backs. But what are they? The corpo­rate foun­da­ti­ons working group* at the Swiss­Foun­da­ti­ons asso­cia­tion offers prac­ti­cal tips.

If a company is keen to get invol­ved in phil­an­thropy, there are lots of ways for them to do this. They can make dona­ti­ons, say, or support their staff in giving their time to social projects. This kind of inter­nal solu­tion can be the best option, depen­ding on the company’s size and how invol­ved they’d like to be. Often, though, these acti­vi­ties are depen­dent on a parti­cu­lar indi­vi­dual: if the mana­ger who’s been driving them forward leaves the company, the project dies, too. In years where money is tight, the budget for dona­ti­ons shrinks as well. In these instances, the sustainable phil­an­thropy we should be stri­ving for fizz­les out. 

Foun­da­ti­ons can help here. ‘But don’t just think about your own foun­da­tion,’ advi­ses Curdin Dusch­letta, Execu­tive Mana­ger at the UBS Foun­da­tion for Social Issues and Educa­tion. ‘For SMEs, in parti­cu­lar, getting invol­ved in an umbrella foun­da­tion can be a better bet. You can also outsource the imple­men­ta­tion of a phil­an­thro­pic project to a part­ner.’ Profes­sio­nal advice is crucial, with many teams of lawy­ers and bankers now specia­li­sed in foun­da­ti­ons and philanthropy. 

‘If you do opt to set up your own foun­da­tion, there are some decis­i­ons you’ll have to make,’ comm­ents Denise Brænd­gård, Gene­ral Mana­ger of the Novo Nordisk Haemo­phi­lia Foun­da­tion in Zurich. ‘The main ones are the type of finan­cing, your proxi­mity to the company and the compo­si­tion of the board of trustees.’ 

Poten­tial finan­cing models include inves­t­ing the foundation’s assets, which does help some­what with plan­ning. ‘Some­ti­mes, we’re a bit jealous of foun­da­ti­ons that have a cushion like that,’ admits Paul Castle from the Syngenta Foun­da­tion for Sustainable Agri­cul­ture. ‘We need to apply for a budget every year, which is a tricky busi­ness, as all our commit­ments run for seve­ral years. But it does keep you disciplined!’ 

The Basel-based Syngenta Foun­da­tion also accepts exter­nal funding for its program­mes. Third-party funds of all kinds are among the other finan­cing sources for corpo­rate foun­da­ti­ons. ‘Many also rely on dona­ti­ons from group employees,’ says Kris­tian Tersar. He’s Execu­tive Direc­tor at the Lucerne-based Osteo­logy Foun­da­tion, Geist­lich Pharma’s corpo­rate foun­da­tion. ‘As with volun­tee­ring, making finan­cial dona­ti­ons can also help employees iden­tify more with the foun­da­tion,’ adds Tersar. ‘But it requi­res a huge amount of organisation.’ 

Dona­ti­ons of time and money like this are an aspect of the second key ques­tion: the foundation’s proxi­mity to the company. ‘Decis­i­ons on employee enga­ge­ment can wait while you’re in the process of setting up the foun­da­tion,’ says Denise Brænd­gård. ‘But you can’t put off the funda­men­tal ques­ti­ons.’ This includes the foundation’s purpose, above all. Should it work in a simi­lar area and, say, be active in health­care if it’s a foun­da­tion set up by a pharma company? Or should it do some­thing comple­tely diffe­rent? ‘There are good examp­les of both approa­ches,’ explains Kris­tian Tersar. ‘That said, my foun­da­tion is happy to be working on a simi­lar topic: it means we can share our exper­tise and discuss the content of our projects on an equal footing.’ Having a purpose simi­lar to the company’s field of acti­vity is prima­rily bene­fi­cial when a foun­da­tion runs its own projects; if it simply makes grants to others, having a shared topic plays a some­what lesser role. 

Gover­nance and taxation

‘When we’re talking about a foundation’s proxi­mity to a company, the compo­si­tion of its board of trus­tees is a central topic,’ empha­si­ses Curdin Dusch­letta. Often, seve­ral of a company’s mana­gers serve on its board of trus­tees – some­ti­mes without any exter­nal members along­side them. If this is the case, it does have the perk of getting the sensi­tive topic of compen­sa­tion off the table, but, in turn, it limits the breadth of exper­tise available and prevents the board from having an outside perspec­tive. ‘Our foun­der merely appoints the chair, with all the other trus­tees inde­pen­dent,’ notes Paul Castle. ‘I think this is pretty much the perfect combination.’ 

Many corpo­rate foun­da­ti­ons are curr­ently busy­ing them­sel­ves with one parti­cu­lar topic: the new VAT law. In simple terms, this impacts them because of its provi­si­ons for the taxa­tion of non-finan­cial support. Many corpo­rate foun­da­ti­ons use infra­struc­ture and services provi­ded by ‘their’ company. Along­side offices, for exam­ple, they might call on the services of HR and IT depart­ments. The new law threa­tens to charge VAT on this, which might lead to sizeable bills for them. It remains unclear how exactly the law will be applied. ‘But it is very important that the company and foun­da­tion put a clear, writ­ten agree­ment in place,’ empha­si­ses Denise Brænd­gård, ‘A service level agree­ment can be used to docu­ment the support to be provided.’

‘Corpo­rate foun­da­ti­ons are curious crea­ti­ons,’ stated a recent acade­mic publi­ca­tion.¹ That may well be the case; in any event, they are a unique type of foun­da­tion. If you want to estab­lish one, you need to take into account even more aspects than if you were setting up a family foun­da­tion or public foun­da­tion.  The Swiss­Foun­da­ti­ons working group would be happy to provide further reading on request.