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. 

To the authors:
The working group is avail­able to all corpo­rate foun­da­ti­ons within Swiss­Foun­da­ti­ons. It meets several times a year to discuss topics of rele­vance to the group, and its leadership (Denise Brænd­gård, Curdin Duschletta, Kristian Tersar and Paul Castle) would be deligh­ted to be joined by further active members. Info and contact: swissfoundations.ch/themen/corporate-foundations

1 Hand­book on Corpo­rate Foun­da­ti­ons, Roza/Bethmann/Meijs/von Schnur­bein (eds.), Sprin­ger Nature 2020, ISBN 978–3‑030–25758‑3 oder eBook 978–3‑030–25759‑0. 

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