The European Foundation Centre (EFC) and its membership have identified three different types of corporate related foundations across Europe based on the degree of involvement of the company in the foundation and vice-versa. Companies establish a foundation to avoid the fluctuations that come from financing community investment activities from current income alone and to streamline and increase the effectiveness of their operations in the communities where they work. Through the company foundation, a company may complement, expand and promote the goals of the company and leverages the leadership of senior management.
Independent Corporate Foundations
This first category covers independent corporate foundations, where the founder of donor is a company or corporation that makes a single or infrequent gifts to a separately constituted foundation, which controls the capital. Often such gifts are to honour a centenary or other milestone in the company's growth. The foundation is not dependent on annual gifts from the company for the funds that it will itself distribute. The majority of trustees of the governing board are independent individuals from the public or private sectors or the foundation/association community, though a minority of trustees may have ties to the donor company.
Corporate Foundations
In this second category, the founder and donor is a company or corporate that makes annual gifts to a separately constituted foundation, which normally has a nominal capital. However, the foundation depends on the annual gifts from the parent company and/or subsidiaries for funds that it will, in turn, distribute. In addition, the majority of trustees of the governing board are employees or board members of, or individuals retired from, the donor company. Corporate foundations usually maintain close ties with the parent company, and their giving usually reflects company interests.
Foundations with Corporate Interests
The third category cover foundations where the donor may be or may have been an individual person or a group of people, and the investment portfolio includes a controlling interest of greater than 50 percent of voting shares in a company or firm, and shares in this company represent greater than 50 percent of the foundation's total capital. Often this company was founded by the donor(s). The board of the foundation comprises either family members or leading representatives from the public or private sectors or the foundation/association community.
A survey undertaken by the EFC Research Task Force on the dimension of the foundations sector in 2003/2004 identified that corporate-foundations would form the third most important group of foundations in Europe, after governmentally-linked foundations (from 4% to 19% of foundations) and independent foundations, which represent the major part of the sector (50% to 90% of the foundation community across the EU). Details are available at www.efc.be/projects/eu/research/eumap.htm
Corporate related foundations distribute their resources either through grantmaking or through operational programmes, or a combination of the two. Corporate foundations typically have specific funding priorities and operating policies. These are often closely linked to the company's office or plant locations and business interests therein. Nonetheless, there are examples of foundations, which fund projects that have no direct relation to business activities.
There are also foundations that have a geographic scope beyond plant locations. Since corporate giving is often linked to overall image and market development, a broader geographic scope can help build the company's reputation as a good corporate citizen, and establish name recognition and goodwill.
Moreover, corporate foundations play an important role in engaging the company's employees in the design and implementation of its community programmes as a natural ally and resource, recruiting them from volunteer programmes for example.
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