Motivations for Establishing a Corporate Foundation in Australia

ABSTRACT

Similar to other countries, Australian firms are increasingly using corporate foundations (CFs) to manage their philanthropic giving. While research has explored the global expansion of CFs, there has been limited understanding on why they are established. This study involving 16 Australian CF managers used qualitative thematic analysis to identify the following four motivational factors that most influence organizational establishment of CFs: 1) centralizing corporate giving; 2) stakeholder influences; 3) financial advantages of foundation structure; and 4) strategic benefits to the establishing firm. The results suggest most Australian firms establish CFs to undertake strategic philanthropy, assisting those in need while capitalizing on the legitimizing social benefits. Many also use it to market activities to their staff, thereby enhancing internal engagement and retention. Yet despite such positive benefits, there is rarely a reduction in principal-agency costs when using a structured CF controlled by corporate executives rather than ad-hoc corporate giving. Furthermore, the decision to establish a CF is often based on normative isomorphism (copying competitors). Additionally, no CFs were established for direct taxation benefits, rather most were focused on the tax benefits associated with employee giving and donations from the general public. The uniqueness of these results, compared with other research, suggests there could be differing motivations to establish CFs based on the organization and the environment of the country where it is located.

KEYWORDS:

• Corporate foundations (CFs)
• corporate philanthropy
• motivations
• ancillary trust structures

Introduction

In terms of business history, corporations are relatively new, emerging in the 17^th century. They are now a leading global non-state power (Cassidy, 2008), and their activities have extended into economic areas traditionally serviced by governments and nonprofit actors, including charities (Von Schnurbein et al., 2021). These nonprofit related actions are often structured through corporate foundations (CFs) to advance firms’ social responsibility agenda (Rey-Garcia et al., 2018). With a CF defined as “not profit oriented; not part of the public sector; use their own financial resources; led by an independent board of trustees; aim to face issues for the common good” (Srivastava & Oh, 2010, p. 460). Yet in some western countries there are no specific legal definitions in terms of what constitutes a CF (McGregor-Lowndes & Williamson, 2018), except when they seek chartable or tax-exempt status (IRS, 2023).

Globally most CFs are structured as perpetual trusts to facilitate philanthropy, grant-making and other public-benefit purposes (Ward, 2012). In many cases CFs provide a liaison function between the establishing firm and the communities which those firms serve (Pedersen & Herlin, 2012) and are usually managed by a board of trustees, in compliance with national legal and regulatory trust requirements (Bryan & Vann, 2012; Renz et al., 2020).

Irrespective of the organizational structure, there has been an escalation in the establishment of CFs on a global scale. In 2020, there were 2,893 US-based CFs reporting grant activities (Candid, 2021), an increase from 2,468 in 2015 (and in 2019 delivered estimated grants of $6.88 billion) (Giving USA, 2020); in 2023 there were 160 CFs in the UK (Pembridge & Threlfall, 2023), with grants of £239 million in financial year 2019/20 (C. Walker, 2022).

Yet despite such a high volume of CFs being established by corporations, there has been minimal research focused on the reasons why (Minciullo & Pedrini, 2015), with the papers that exist focusing on the role of a given motivation, rather than understanding the broader dynamics involved when the CF was established. Former CF researchers have highlighted the need to understand why firms establish CFs (Bethmann & von Schnurbein, 2020; Herlin & Pedersen, 2013; Minefee et al., 2015) and others suggested there was limited peer reviewed works on CF’s (Srivastava & Oh, 2010) although such works have increased over time (e.g., Gehringer, 2021; Swift et al., 2022). The literature on CFs has taken different perspectives. Some works have focused on the reputational benefits of CFs to the establishing firm, whether it is in terms of consumer perceptions (Swift et al., 2022) or employees preferring to work for responsible firms (Breeze & Wiepking, 2020). Other works have explored the tax benefits associated with corporations setting up CFs (Webb, 1994). With such actions, falling within the broad domain of strategic philanthropy (Cha & Rajadhyaksha, 2021). Were as other works have explored how corporations set up CFs to make a real philanthropic difference (Boodoo et al., 2022) and/or remove principal agency issues, where managers give to their favorite causes, rather than to causes that have a substantial impact¹ (Abebe et al., 2020) by establishing independent ongoing charitable activities (Lungeanu & Weber, 2021; Masulis & Reza, 2015). The past work generally focuses on understanding whether given benefits arise, rather than examining the broader set of underlying motivation for the establishment of the foundation. Understanding the role of alternative motivations thus allows for a more contextual understanding of the decision dynamics at the time of the CF’s establishment. As such, the research questions addressed in this research are: a) Why have Australian firms established CF’s; and b) To what extent to the purported motivations in the literature apply.

To address this question, we approached 37 CFs in Australia, found through a review of the Australian Charities and Not-for-profits Commission (ACNC) register of charities (see methodology section for further detail). We interviewed 16 CF managers, including 10 that had directly contributed to the establishment of the CF. This reflected 44% of the corporate foundations that existed at the time.²

The next section is an overview of the academic literature examining why firms may undertake philanthropy via CFs, with the six motivational themes identified as potentially influencing the establishment of CFs then examined: 1) centralizing corporate giving; 2) public goodwill and stakeholder reputation; 3) isomorphic influences; 4) lawyer influence; 5) taxation benefits; and 6) increasing employee engagement. Section 3 then explains the research design and methodology used in this study, which followed an interpretive (Creswell & Poth, 2016) thematic analysis process (Yin, 2011), followed by a sentiment analysis of respondents’ views toward the themes (Liu, 2012). Section 4 next discusses the data analysis conducted in this study, with a particular focus on the motivational themes. The final Section 5 covers the key findings and insights of this research, as well as this study’s limitations and propositions for further research.

Review of literature

This section covers the CF literature review that was undertaken in this study. It discusses the main reasons provided in the literature for corporate philanthropy. The most common CF descriptions are then discussed, followed by the six main motivational factors for establishing them.

Corporate philanthropy

Corporate philanthropy has been described as the use of a firm’s profits to benefit society (Olson-Buchanan et al., 2013). Most firms operationalize their corporate philanthropy through two channels (Liket & Simaens, 2015). First, directly giving covers any type of pro-social giving made by the firm directly to a nonprofit organization, individual or community group (Brown et al., 2006). Second, indirectly giving via a CF to structurally coordinated the firms’ charitable activities through a single philanthropic mechanism of the corporate foundation, rather than by multiple managers or departments (Werbel & Carter, 2002).

Some firms practice corporate philanthropy to promote how external stakeholders also benefit from their corporate objectives (Cha & Rajadhyaksha, 2021). This has been defined as “strategic philanthropy,” which is the use of organizational funds and activities to achieve societal and corporate benefit (Thorne et al., 2003). Yet some researchers have highlighted how strategic philanthropy is inconsistent with the true definition of philanthropy, which is altruistic in intent rather than a firm-based motivation (Kubíčková, 2018). Despite such contention, the notion of strategically implementing philanthropic activity has some support within the academic literature (e.g. Bernholz, 2000; Carroll, 2008). In line with this, Porter and Kramer (2002), suggest that giving is a strategy whereby organizations leverage charitable actions for competitive advantage, thus the goal is not to be philanthropic unless it directly benefits the firm. They later contended that the commercialization of charitable services via a capitalistic, for-profit business model is essential for resolving entrenched social ills, which they referred to as “shared value,” with businesses being “the most powerful force” for resolving societal issues (Porter & Kramer, 2011, p. 4). However, there are others who recognize that organizations have an obligation to be good corporate citizens (Gehringer, 2021) and, in doing so they make themselves and their stakeholders better off (Monfort et al., 2021). Thus, giving is more about helping and less about self-interest (Von Schnurbein et al., 2021).

CF descriptions

Most CFs are non-profit entities that provide philanthropic services, established by for-profit corporations they operate separately from (Bernholz, 2000; Gehringer, 2021). Petrovits (2006, p. 337) described a CF as a “company-sponsored private foundation” bound by legal frameworks that define its governance and funding mechanisms, disbursements, asset management, conflicts of interest to the establishing firm, as well as operational reach. There are various rules for organizations to achieve charitable or nonprofit status (IRS, 2023), however, in Australian there are no legal requirements for using the term “foundation,” it can be applied by any firm for any relevant corporate philanthropy structure (Freehills, 2012), whereas in the UK an organization needs to be a charitable organization (The Charity Commission, 2009).

CFs in the Australian context

In Australia, most CFs are formed as trusts, which are bound to strict legal conditions of behavior prohibiting self-servicing actions (Petrovits, 2006; Ward, 2012). Such a trust has been defined as “an obligation enforceable in equity which rests on a person (the trustee) as owner of some specific property (the trust property) to deal with that property for the benefit of another person (the beneficiary) or for advancement of certain purposes” (Ford & Lee, 1990, p. 101).

In Australia, two main types of charitable trust structures are used by CFs: the private ancillary fund (PAF), and the public ancillary fund (PuAF). The type of trust structure dictates how a foundation operates, the services they provide, how funds are raised and how they disperse them (Hemphill, 1990). These trusts are similar to US private foundations, Canadian public foundations (McGregor-Lowndes & Williamson, 2018), as well as corporate foundations in the UK (The Charity Commission, 2009).

In 2017–2018 Private and public ancillary funds in Australia contributed $400 million each or 33.3% of all structured giving, highlighting the importance of this type of structured giving (Philanthropy Australia, 2021). Additionally, based on comparative results across countries, Australia has the lowest total giving as a percent of gross domestic product (GDP) (0.81%) as well as one of the lowest reported philanthropic assets as a percentage of GDP (0.7%) (Philanthropy Australia, 2021). Whereas in the UK total giving as a percentage was 0.81% and in the USA was 2.1%, with Philanthropic assets as a percentage of GDP in the UK and US, 3.2% and 4.8%, respectively (Philanthropy Australia, 2021), suggesting Australian corporate foundation giving lags other developed countries.

Australian CFs that have charitable status are typically registered for charitable status by the Australian Charities and Not-for-profits Commission, which is an independent government body to regulate charities receiving tax exemption status by the (Australian Tax Office (ATO) 2021, Murray, 2020). These foundations are then able to receive deductible gift recipients (DGR), which are tax-deductible fundraising donations, as well as funding grants to other charities classified as DGRs (Philanthropy Australia, 2021).

The two types of trust structure in Australia differ in two main ways (Ward, 2012): 1) PAFs cannot solicit fundraising from the public, while PuAFs must invite public donations; and 2) PAFs need at least one board member to be considered a “responsible person,” while PuAFs need most of the board to be considered responsible. In this context, a responsible person is defined in the legal guidelines as an “individual with a degree of responsibility to the Australian community as a whole” (Taxation Administrative act, 1953). In earlier iterations of these guidelines assumed the responsible person was independent of the establishing firm, meaning that they were not an employee or beneficiary.

Motivations for CF establishment

Among corporations, there are many motivational factors that can drive decision-making around establishing a CF. A thematic literature review in line with M. J. Grant and Booth (2009) and Snyder (2019) was undertaken and identified the following six primary motivational factors for establishing a CF: 1) centralizing corporate giving; 2) public goodwill and stakeholder reputation; 3) isomorphic influences; 4) lawyer influence; 5) taxation benefits; and 6) increasing employee engagement.

Centralizing corporate giving

This motivation is focused on shifting or consolidating corporate philanthropic activity into a single corporate giving channel, rather than it being conducted in an ad-hoc manner involving multiple parties. In many firms, there is fragmented giving and centralizing corporate giving seeks to have a unified objective approach. It is also designed to overcome principal agency issues (Benshalom, 2009; Masulis & Reza, 2015). In the context of corporate giving, this principal agency issue arises as managers may be donating corporate funds to causes they personally prioritize over the broader firm’s interests. Thus, managers may obtain personal benefits associated from this giving by directing funds to causes they personally support, rather than those that are most aligned with the firms or its CFs goals. For example, in Australia there are various nonprofit organizations that run clubs that operate gambling vending machines. A portion of the money raised from these activities is to go to support local community activities (Australian Gaming Council, 2023). In some cases, these clubs have claimed that improving their club infrastructure achieves this goal (Alexander & Gladstone, 2023), whereas it has been deemed by regulators not to be the case. While these are not CFs this demonstrates how those in charge (agents) may not be looking after the responsibilities of the organization (the principal) and similar issues arise in the CF context.

Public goodwill and stakeholder reputation

Public goodwill has been recognized as an intangible value assigned to the firm, which is often enhanced by a positive reputation (Abzug & Webb, 1996). In line with this, Fombrun and Shanley’s (1990) study of 292 large US firms highlighted how corporate philanthropy was used by many to demonstrate social benevolence that generated public goodwill with consumers and the wider community; thereby aligning with their corporate strategy focused on a competitive reputational status.

There are many firms globally that strategically exploit the “positive halo effect” to create positive associations with visibly prosocial actions, such as those conducted by a foundation (Bethmann & von Schnurbein, 2020; Faucette, 2001). Some researchers have found that simply using the term “foundation” can trigger positive public associations with a corporation (Silberer, 2007). With Swift et al. (2022), finding that firms funding their own CFs were viewed more positively than firms funding a secondary foundation. Yet despite such potential reputational benefits, Monfort et al. (2021) recently found that establishing a CF does not necessarily increase corporate share value.

Isomorphic influences

In the context of corporations, isomorphism is a phenomenon where organizations begin to resemble one another in process and structure over time (DiMaggio & Powell, 1983). Both normative and mimetic forms of isomorphic influence have been recognized as key drivers of corporate philanthropy (Sharfman, 1994), which may also motivate firms to establish a CF (DiMaggio & Powell, 1983).

It has been suggested that positive relationships exist between both normative and mimetic isomorphic influences. For example, in a quantitative study of 620 US-based CFs, E. Walker (2013) found that CF managers were significantly influenced in their giving amounts by the actions of competitor CFs. That is, they were more likely to increase their giving when others within their “peer group” were already doing so; thereby normalizing the behavior of increased giving (mimetic isomorphism leading to normative isomorphism).

Furthermore, it has been suggested that imitating a successful firms’ pro-social behaviors, such as establishing a CF, can improve a firm’s stakeholder legitimacy (Renz et al., 2020). In an empirical study of US banks between 1985 and 1992, Deephouse (1996) concluded that when firms copy strategies used by others, they are seen to be more legitimate by the public and regulators.

Lawyer influence

Whether they are internal staff members or external consultants, lawyers are often influential within large commercial firms, including as an advisor on corporate social responsibility (CSR) (Wilkins, 2012. As there are often complexities when implementing CSR within large firms (Blackwelder et al., 2016), lawyers are used to minimize risks via more conservative choices (Pitts, 2008). This includes guiding the establishment of a CF, which have been recognized as rarely having any negative impacts on the founding firm, thereby minimizing any risks that might arise from direct corporate action (Leat, 2004).

Taxation benefits

The tax benefits from corporations establishing a structured foundation are commonly recognized as a primary motivator (McGregor-Lowndes & Williamson, 2018). Across the literature, there were four main potential tax benefits identified. First, a CF that allows a firm to promote philanthropic activities and brand strength, which may lead to a form of subsidized advertising (Abzug & Webb, 1996; Monfort et al., 2021). Second, firms are able to shift profits into the foundation corpus in the good years, enabling them to continue giving in the years where there are little or no profits (Wymer & Samu, 2003). Petrovits (2006) validated this via a longitudinal study of US firms with CFs, where it was shown that firms can use CFs to manage reserves not reported on balance sheet. In line with this, the same type of firm in Australia can shift profits into its foundation under the Australian Income Tax Assessment Act 1997 and register the transaction as a general business deduction (Freehills, 2012). Third, the firm takes an immediate tax deduction from funds shifted into the CF, and then keeps the money invested there indefinitely (Petrovits, 2006), which means it can maintain tax-free capital in the CF, as long as there are regular distributions according to tax policies (Freehills, 2012). Fourth, firms are more incentivized to perform the role of wealth redistributor to benefit society, by moving shareholder profits directly to charities (Prewitt, 2004; Zhulina, 2018).

Increasing employee engagement

Some CFs are established from more of a strategic philanthropy perspective, such as increasing staff morale to drive higher productivity via reduced absenteeism and turnover (Haski-Leventhal, 2020). In line with this, in their survey of 200 corporate philanthropy professionals in the UK, Brammer et al. (2006) found that corporate philanthropy was often used for improving the relationship of firms with their employees. It has also been suggested that such strategic establishment of CFs is to deliver a “quasi-fringe benefit to firm employees” (Navarro, 1988, p. 90), and that visible charitable support could be enabling firms to attract employees that find such activities appealing (Bruch & Walter, 2005).

Another relevant motivation is to better engage employees through CF volunteer programs, where staff spend time working for nonprofits while being paid their normal salary (Bartkus & Morris, 2015). In addition to reducing staff turnover and absenteeism, such programs may increase commitment to company and broader community engagement (A. M. Grant, 2012; Haski-Leventhal, 2020).

Methodology and research design

An interpretivist paradigm was used in this study to explain a range of experiences and perceptions (Yin, 2011), in the context of corporations establishing CFs. Among the research participants, 10 of the 16 were actively involved in the establishment of the CF (see Table 2). Collectively, 10 of the participants had not previously worked in the philanthropy space, and 4 were not at the firm at the time it established the CF, which enabled a broader, diversified perspective on the rationale for establishing a CF.

Approach

The qualitative research method that was used in this study has been deemed as most appropriate for drawing on in-depth experiential information (Corbin & Strauss, 2014). Qualitative research is often used to understanding business decision making in both the for- profit (Ince & Hahn, 2020) and nonprofit setting (e.g., Bolduc et al., 2004). Interviewing individuals involved in decision making or who have an intimate knowledge of the decision-making process allows for a better understanding of the decisions being made (Boffelli et al., 2020; Ma et al., 2021).

There are many examples of where a qualitative method has advanced CF studies (e.g., Bolduc et al., 2004; McElroy, 2012; Monfort & Villagra, 2016; Scaife et al., 2012), particularly when exploring neglected and/or underdeveloped CF research themes (Westhues & Einwiller, 2006; A. Williamson et al., 2019). For example, Bolduc et al. (2004) used in-depth interviewing of CF grantees to more comprehensively explore their individual feelings of doing business with CFs. McElroy (2012) similarly used in-depth interviews when researching CFs within the mining industry, to better understand the feelings of establishing firms’ employees. Scaife et al. (2012) also used in-depth interviews, but to instead explore CF motivations for giving with 40 philanthropy professionals, with direct quotes holding a richness of detail, not achievable in other data collection methods.

This study’s qualitative method was also deemed most relevant due to the small population, with only 37 CFs identified in the ACNC’s registry, which is insufficient for statistical analysis (Burmeister & Aitken, 2012). Bartlett et al. (2001) also suggest that quantitative methods are especially applicable to make inferences about a population. However, at the same time, it has also been recognized that quantitative analysis of smaller sample sizes can suffer from a lack of validity due to statistical differentiation (Holton & Burnett, 1997).

Research of organizational decisions frequently involves interviewing people retrospectively about past actions, discussions, and situations (Decker et al., 2021; Solarino & Aguinis, 2021). With researchers suggesting that interviews about less distant events allow respondents to have time to recall and reflect the situation that arose (Ma et al., 2021), minimizing recall and recency bias (Berrett & Sudweeks, 2023). While the data was collected several years ago, the interviews occurred when recollections of discussions associated with the establishment of the targeted firm’s corporate foundation, were more recent for managers, representing the events as the decisions occurred. As will be discussed later in the paper, the composition of foundations in Australia has changed little over time and thus these recollections still reflect events surrounding decisions. The delay in publishing, thus, does not impede on the validity of the work and if anything in fact ensures that people have accurate reflections, with limited recollection bias.

Recruitment and sampling

To recruit relevant study participants, an assessment was undertaken of the ACNC’s register of approximately 53,000 Australian nonprofit organizations (NPOs), with 37 identified as CFs in March 2016.³ This involved downloading a copy of the register into a spreadsheet format and cross-referencing it against the top 500 ASX-listed companies (All Ordinaries Index). We examined only ASX listed funds because we sought to understand the motivations for CF establishment in firms where there is a separation between the equity owners and their managers (principals vs agents) and thus provided a sound starting point for our own research.

To account for instances where the CF name may not have contained all or part of the founding firm’s name, the following two search filters were applied: 1) entries that included “the trustee for,” as commonly used in the legal naming of CFs; and 2) main activities that was categorized as “grant-making activities,” as often selected by CFs. These search filters confirmed that none of the CFs had been missed. This process was redone in December 2023, with 39 CFs identified and four of those initially interviewed no longer registered; thereby verifying that the overall number of Australian CFs had remained both small and relatively static.

The chosen sampling technique was purposive, in that a known sample of CF managers were asked by the researchers to participate via an e-mail invitation. Purposive sampling has been determined as well-suited for capturing a broad representation of a known population (Williamson et al., 2018). After receiving ethics approval, the e-mail was sent to 37 CF managers (with a range of titles that included foundation manager, senior manager of foundation, head of foundation, general manager foundation and foundation lead), inviting them to participate in one-on-one, in-depth interviews. Their e-mail addresses were sourced from the ACNC register and via a LinkedIn search that identified the relevant CF manager, and follow-up e-mails were sent one week after the first. Overall, 17 CF managers expressed interest in participating, although one was later excluded because of a lack of data quality (leading to a 43% usable response rate or 16 usable responses). These interviews were conducted over a five-month period between June and September 2016.

Within the semi-structured interviews, follow-up questions were asked as required. Emergent lines of questioning are often a feature of semi-structured interviews, where inductive probing of responses is used to yield new insights not originally considered by the researcher (Bailey & Burch, 2002). Such inductive research methods are typical of interpretivist paradigms, where there is a reliance on in-depth and spontaneous exploration to achieve the research objectives (Williamson et al., 2018).

Based on this study’s initial pilot interview, it was anticipated that the interviews would run for approximately 50 minutes, which has been identified as ideal for time-poor participants working within corporate environments (Evans et al., 2014). One researcher conducted all of the 16 interviews, and the average duration was approximately 49 minutes.

The study participants were restricted to CF managers that were involved in or had knowledge of their firm’s decision to establish a CF. Ten of these participants worked in roles at the firm, which were unrelated to corporate giving at the time of CF establishment (see Table 1), while four of the remaining six had initially worked in other areas within the firm. This helped to ensure a broader understanding of the complexity of issues within the CF establishment decision-making process. This was in addition to asking all participants to objectively discuss such organizational decisions without interjecting their own personal views, which was also applied to minimize perceptual bias (Kumar et al., 1993). While it would not have been possible to interview all those involved in the decision-making, the study sample was chosen to reflect a wide range of potential organizational perspectives with regard to the motivations for establishing the firm’s CF. Table 1 provides further details on each of the study participants and their relevant CF.

Table 1. Details on participants and their CFs.

Participant number	CF size	CF staff (excluding manager)	CF name same as establishing firm	CF legal structure	Establishing firm industry	Focus of CF giving	CF manager helped establish foundation	CF manager allocation to role	CF manager other role/s within firm if part-time	Role specialization before joining foundation	Years of philanthropic experience (incl. foundation)
P1	Large	.5 FTE	Yes	Discretionary investment trust – PAF	Financial Services	Social issues, community safety and resilience	Yes	.5 FTE – CF role .5 FTE – marketing role	Marketing manager	Marketing	2
P2	Large	1 FTE	Yes	Discretionary investment trust – PAF	Information media and telecommunications	Technology advancement	Yes	1 FTE	N/A	CSR	10
P3	Large	5 FTE	Yes	Discretionary investment trust – PAF	Financial Services	Education	Yes	1 FTE	N/A	Finance	5
P4	N/A	N/A	N/A	Australian proprietary company – no CF	Information media and telecommunications	Disability support	N/A	N/A	N/A	Marketing	5
P5	Medium	0	Yes	Trust – PuAF	Financial Services	Health	Yes	0.2 FTE CF role 0.8 FTE Stockbroking role	Stockbroker	Stockbroking	15
P6	Large	0	Yes	Discretionary investment trust – PAF	Professional, scientific and technical services	Legal and justice	Yes	1 FTE	N/A	Legal	12
P7	Large	.6 FTE	Yes	Trust – PuAF	Financial Services	Addressing social isolation and community enrichment	No	1 FTE	N/A	Executive management	15
P8	Large	.6 FTE	Yes	Trust – PuAF	General	Education	Yes	.6 FTE part-time in CF role only		CSR	7
P9	Large	.5 FTE	Yes	Discretionary investment trust – PAF	Healthcare and social assistance	Healthcare	No	1 FTE	N/A	Project management	6
P10	Medium	0	Yes	Discretionary investment trust – PAF	Financial Services	Open focus	Yes	1 FTE	N/A	Executive management/nonprofit sector	15
P11	Medium	0	Yes	Fixed trust – PuAF	Financial Services	Community wellbeing and education	No	.1 FTE CF role .9 FTE Assistant to the CEO	Assistant to the CEO	Accounting	3
P12	Large	2.4 FTE	Yes	Public company – non- profit	Electricity, gas, water and waste services	Education	Yes	1 FTE	N/A	Non-profit sector	7
P13	Large	.5 FTE	Yes	Trust – PuAF	Healthcare and social assistance	Healthcare	No	1 FTE	N/A	Executive management	3
P14	Medium	2 FTE	Yes	Trust – PuAF	Information media and telecommunications	Education	Yes	1 FTE	N/A	Marketing	6
P15	Large	1 FTE	Yes	Fixed trust – PAF	Financial Services	Community health and engagement	Yes	1 FTE	N/A	Marketing in nonprofit sector	9
P16	Medium	0	Yes	Discretionary investment trust– PuAF	Electricity, gas, water and waste services	Community engagement	No	1 FTE	N/A	Information technology	2

Analytic approach

With participant permission, interviews were recorded and transcribed. These transcripts were then assessed by two researchers using the thematic analysis approach, to identify the motivational themes that influenced the CF establishment. An open-coding approach was applied to establish general themes, followed by axial coding to further develop and consolidate sub-themes and their relationship to other themes (Boyatzis, 1998).

Participant sentiments were evaluated via a classification process, where they were allocated as positively or negatively expressed, or if the issue was not mentioned during the interview (Liu, 2012). Such categorical variables are a common feature of qualitative analysis, where they are regularly used to order interview data into response type clusters (Yin, 2011). This study’s participants rarely indicated that differing views had been expressed across the organization with respect to the significance of one motivational factor over another leading to the CF’s establishment. These inter-firm counter views were therefore not coded in the sentiment classification.

The ability to assign a positive or negative sentiment required a thorough understanding of the words used by the participants, including the context in which they were given. For example, in the following response the researcher was able to determine that the participant felt negatively about lawyer influence being a motivating factor on firms establishing CFs:

P14: Not particularly influential. I think it didn’t change anything, it just confirmed that we were on the right track I guess.

In particular, the phrases “not particularly,” “it didn’t change anything,” and “it just confirmed” indicated a negative sentiment with respect to lawyer influence.

In contrast, the following response was classified as indicating positive sentiment with respect to lawyer influence, particularly based on the phrases “quite influential” and “would definitely have taken their advice:”

P9: They’re pro bono lawyers, which is probably quite influential. So that would have been, [establishing firm] would definitely have taken their advice on that.

After completing sentiment analysis the data were aggregated or what is sometimes referred to as Quantitizing, which is the numeric tabulation of qualitative data (Sandelowski et al., 2009). This allows us to assess the strength of support for each of the motivational themes and sub-themes, which adhered to a quantitizing process (i.e., numerical translation of qualitative data) (Sandelowski et al., 2009) and compliments the richness of detail provided through participant dialogue.

Results and discussion

Across the 16 participant interviews, 10 sub-themes were identified, based on four higher-order motivational themes that had varying degrees of support (see Table 2). The number of sub-themes in this study expanded on the six identified in the literature review, with emergent codes required to adequately capture the CF establishment issues expressed by the participants. As will be discussed, we did not arrive at the same themes in the literature, which we suggest reflects an integration of some topics, which achieve broader objectives. Whereas in the past literature, studies focused on individual factors not the overall set of themes. See Appendix 1 for a list of participant sentiments related to each sub-theme they identified.

Table 2. Summary of participant agreement with motivational themes and sub-themes.

Higher- order themes	Centralizing corporate giving		Stakeholder influences			Strategic benefits to the establishing firm			Financial advantages of foundation structure
Sub-theme	Focus and formalize giving practices	Separation from business activities	Board and executives of establishing firm	Lawyer influence	Other commercial Firms (isomorphism)	Reputational benefits	Staff engagement and participation	Shared value strategy	CF corpus	Taxation benefits
Supportive	14	15	15	11	12	14	14	6	11	7
Oppose	1	1	1	2	2	2	-	4	3	2
Not identified	1	-	-	3	2	-	2	6	2	7

Higher order theme 1: centralizing corporate giving

Most participants viewed the first higher order theme of centralized corporate giving positively, with two sub-themes identified. The first sub-theme relates to how a CF can convey a giving focus via formalized corporate giving practices. The second is the separation of philanthropy from the CF rather than within the business, which aligns with the agency issue.

Focus via formalized corporate giving practices

Focused on whether participants believed the establishment of a CF was motivated by the firm wanting to refocus its corporate giving onto a more formalized practice, this motivational sub-theme is also within the literature (e.g., Bruch & Walter, 2005). It was identified as a positive driver of CF establishment by 14 of the participants, while it was seen as a negative consideration by one and was not raised by the other.

P11: I definitely think it’s good to have a separate organisation, a separate foundation or group that wholly look at that [corporate philanthropy] … it’s just good to have focus.

This perception aligns with the literature, where it was highlighted, that unfocused giving is typically associated with a firm’s direct giving program, occurs less often when corporate philanthropy is practiced via a CF (McElroy, 2012; Westhues & Einwiller, 2006). In line with this, participants confirmed how the CF had reduced the firm’s “scattergun” or ad-hoc giving, particularly with respect to some managers making giving choices without considering broader business objectives (i.e., the principal agency issue).

P15: So, I think in all honesty it [direct giving] was probably being driven by individuals and their particular passions and interests … requests would have just been coming in, as I said scattergun, ad-hoc, here and there, and they would have just been assessed one-off on their merits.

The literature supports such opinions about a lack of formalized giving when there is not a CF. For example, Bruch and Walter (2005) suggested that corporate giving before the establishment of the CF was of a more casual nature. Some of this study’s participants also mentioned that their firm’s giving was conducted by staff in their spare time prior to the establishment of their CF, without any formal managerial oversight. A range of charitable giving foci were identified by the participants (e.g., education, healthcare), as listed in Table 1.

Separation of CF from business activities

The second sub-theme within higher order centralizing corporate theme giving relates to the intentional separation between philanthropic spending and the firms’ managers in positions of influence. This sub-theme was identified by 15 of the participants as a positive influence on their firm’s decision to establish a CF, which had the equal highest number of positive sentiments across all themes.

Many of the participants felt that the CF operating independently provided more clarity on the firm’s charitable mission, and that having a CF would be seen more favorably by the community:

P2: I think they [CF board] felt having it as a separate entity gave it, in the eyes of those that are stakeholders out there in the community, it might give them greater confidence that the foundation was going to be operating in the best interests of the community, and not in the best interests of the establishing company.

This perspective was also supported in the literature, such as by Bartkus and Morris (2015) who suggested that CFs have inherent legitimizing qualities, and in Pedersen and Herlin (2012), where CFs were considered to provide a facilitation role to connect the CF’s establishing firm with their communities. This means the public is more likely to accept and contribute to the CF’s causes, without cynical perceptions of the motives for establishing it. With Swift et al. (2022), finding that consumers were more likely to support firms that had their own foundations as compared to those firms that made donations to other foundations.

In line with this, eight of this study’s participants positively commented on how the CF restricted involvement of the firm’s executives in ad-hoc granting choices:

P7: … if someone knocks on their [firm executives] door and sees them, can you give a thousand dollars to the ballet, they can say, “Yeah, we’ve got a process, we’ve got an application, if you want to apply you go through this door, rather than come to me direct.” So it gives an opt-out.

While this ability for CFs to separate philanthropic activities from the broader firm objectives is supported in the academic literature (Gautier & Pache, 2013; Gehringer, 2021), other participants within this study indicated that the CFs were strategically used to deliver the firm’s CSR agenda. This aligns with the recent study of Bethmann and von Schnurbein (2020), who found among 35 European CFs an overlap between the establishing firm’s CSR and their CF activities.

It has been suggested in other research that a clear separation between the CF and the establishing firm’s broader business objectives can reduce principal agency costs (Werbel & Carter, 2002). The removal of senior executives’ influence over the firm’s philanthropic activities enables the CF managers to undertake giving within a separate structure (Gautier & Pache, 2013). However, in this study most CF boards were primarily comprised of the establishing firm’s executives (as shown in Table 1), indicating that the agency costs simply shift from the firm to the CF, especially when the executives are actively involved in its giving decision-making. Moreover, separation between the CF and establishing firm did not occur in our study as most of the CFs which participated in this study were based from within the offices of the establishing firms at no cost to them, in addition to having the entirety of their expenses covered (e.g., stationary, IT, finance, legal services), and CF staff salaries (whom in this research were in all cases employees of the establishing firm). These interconnections suggest that a lack of independence within CFs could negate their opportunity to reduce agency costs.

Higher order theme 2: stakeholder influences

The second higher order theme relates to a disparate range of influences that stakeholders have on the firm’s establishment of a CF. In the context of relevant stakeholders that can influence this decision, the following three sub-themes were identified: 1) establishing firm’s board and executives; 2) lawyers and other advisors; and 3) other commercial firms (isomorphic influences).

Board and executives of establishing firm

Most participants (15) highlighted the importance of the establishing firm’s board and executives (including the CEO) in determining the creation of a CF. Along with separation from business activities, this sub-theme had the highest positive participant support. The role of the board and executives is closely linked to the CF separation sub-theme, particularly as it has been known to impact on how much CEOs use their firm’s philanthropic activities for their own personal or professional interests (Masulis & Reza, 2015):

P8: I would say the board of, in terms of the actual decision to establish it, it’s the board, the directors of. [establishing firm]

These perceptions were supported in the literature, with boards of commercial firms recognized as having a high degree of influence over how the firm practices philanthropy, including via the establishment of a CF (Renz et al., 2020).

Lawyers and other advisors

In the context of legal and other advisors influencing the establishment of a CF, the literature suggests lawyers, especially, are highly influential, particularly with respect to the legal structuring of philanthropic activities (Pitts, 2008). Eleven of this study’s participants noted the positive influence of these advisory stakeholders when their CF was established, with another two believing they had impeded the formation of a CF, while the remaining three did not make reference to this type of stakeholder influence.

P12: They [CF managers] might access legal support either internally, or sometimes externally. There are legal firms that specialize in this work, or they have parts of their business that do this work. So they would then contact them and ask, “how might I legally set up this entity?.”

Such positive comments are consistent with the academic literature highlighting how many firms seek guidance from lawyers and other advisors on CSR initiatives, such as how to structure a CF (Wilkins, 2012). Some of this study’s participants also made reference to the influence of these advisors on the final CF structure:

P8: Pretty influential [on the CF structure], because we’re a small corporation … because what we were really focused on was that DGR status, and [law firm], the solicitors we were working with, had very good experience in that area [non-profit tax law], so we were going to take their advice.

Only two participants in this study openly disagreed that legal feedback was important to the establishment of a CF:

P14: I think it [legal advice] didn’t change anything, it just confirmed that we were on the right track … there was quite a lot of material out there that made it really easy to figure out the right structure I guess.

One of the participants cautioned on the use of lawyers determining the legal structure of the foundation without the establishing firm already understanding the consequences of alternative structures:

P7: I know of organizations who have gone to lawyers, set up a public ancillary fund, and they didn’t want any public fundraising, and they wanted to give the grants out to individuals, and you can’t do either of those. So I think it comes down to, there’s not a lot of firms with deep experience in the [philanthropy] space and not quite sure what they want to do or what they can or can’t do to start with.

This comment supports the influence of lawyers in directing rather than simply providing an advisory or support service after the firms’ having determined the appropriate legal structure (Carter, 2011). Lawyers are relied upon to provide advice to the establishing firm to whom decisions of trust structures or unstructured foundations are uncertain or ambiguous (Simon, 2003), and such as in this research where five of the CF managers had no prior philanthropic experience (see Table 1).

In addition to lawyers, some participants highlighted the importance of other advisory stakeholders such as accountants or nonprofit consulting firms, with respect to the establishment of their CFs. This is consistent with Bernholz (2000) who found that when their case study US firms started setting up CFs, they often contacted a range of experts. Thus, this is not a separate classification but part of the border stakeholder influence, suggesting these advisors are a critical stakeholder, who may be either internal or external to the formal management of the organization.

Other commercial firms (isomorphic influences)

The third sub-theme with respect to the influence of other commercial firms on the establishment of CFs primarily relates to institutional isomorphism; that is, where similar firms come to resemble one another over time (DiMaggio & Powell, 1983). Thus, we have included these as part of the stakeholders’ influence (external), rather than identifying these as a separate category of influences. This sub-theme had a positive influence on the establishment of the firm’s CF among most participants (12 of the 16); there were negative sentiments among another two, and it was not mentioned by the other two.

Among the positive participants, some explained how their firm’s decision was influenced by perceptions of best-practice for CF structures among other firms, as a vehicle for undertaking corporate philanthropy:

P15: … the other big [firm] that exists in [the same location], they had had a foundation in place by that stage. Their foundation had been in place for about four years already, and so I think the [establishing firm] felt “well, if we’re to match them in a business sense, we probably also should be matching our competitors in this regard as well.”

Such perspectives aligned with the academic literature in the context of isomorphism, with it recognized that best-practice behaviors of leading and/or the majority of firms within a specific industry are then often adopted by other relevant firms (DiMaggio & Powell, 1983).

In line with this, one of this study’s participants who had also managed another firm’s CF, revealed that the same structure was used to establish the current firms CF based on that earlier experience. While this is not technically an isomorphic influence, it demonstrates a common perception of “the right way of doing things,” in alignment with normative isomorphism:

P3: The other probably key influence, probably me, because I had experience in the philanthropic sector and particularly running a corporate foundation, and being aware of a number of different governance models.

Despite the potential benefits of normative isomorphism, some participants were critical of how some CF board members were part of a closed group or an “old boys club,” often based on shared professional interests. This aligns with the normative isomorphism perspective of group identity being reinforced and normalized via hierarchies and status attributions, irrespective of resulting actions flowing positively to the firm (Sanzo-Pérez et al., 2017).

P4: In fact, where challenges are existing because a lot of the board members of foundations sit on many foundations, it’s like an old boy’s club, so everyone thinks the same and they’re perpetuating the model.

Many of the participants provided examples of both mimetic (imitating an envied competitor) and normative (following industry standards) isomorphism.

Interestingly, there was limited explicit suggestion that firms were undertaking a foundation to better address consumers desires to see firms as being responsible, with any customer reputation issue seen as more of a strategic focus, discussed later.

Higher order theme 3: financial advantages of foundation structure

While financial advantages from firms establishing and using a CF, particularly taxation benefits, has been identified as a primary motivator (Navarro, 1988; Webb, 1994), some recent works have highlighted that these benefits do not always eventuate (Monfort et al., 2021). The following two sub-themes were identified within the financial advantage higher order theme from a CF: 1) corpus of invested funds provided to establish the CF; and 2) potential taxation benefits from establishing a CF.

Corpus investment funds

Despite CF corpus not being identified as a motivation within the literature, it was a predominantly positive theme within this study. There were 11 participants that had positive sentiments toward this motivator, while three others perceived it negatively and the remaining two did not mention it. In the context of CFs, the corpus has been defined as a vested funding source for its exclusive use (Leat, 2004). It is usually held within a low-risk investment structure drawn on by the CF to fund granting programs and may also be used for staff’s salaries (Ward, 2012).

In particular, the relevant participants positively identified that establishing a CF with a corpus allocation would protect the funding source from being repurposed.

P3: … a CF would ensure the legacies of the endowment and insure it against future changes in corporate structure within [the establishing firm] that may lead you to have a different type of board, a different type of CEO who might not want to support the foundation in the way it’s currently structured.

Despite no explicit support in the literature, such views are indirectly supported. In a qualitative study of both US and Dutch-based CFs (Renz et al., 2020), it was found that CFs were closed because the CEO did not like the causes the foundation was supporting. The Body Shop Foundation ceased operations in 2017 after the establishing firm, since purchased by L’Oréal in 2006 refused to provide funding, following irreconcilables differences in how closely foundation giving should be aligned to the corporate interests of The Body Shop. Whereas the GM foundation also closed in 2017 following the establishing firm’s decision to shift philanthropy spending into direct giving within its existing CSR function, having considered its CF to be too limiting in the causes and amounts of funding it was able to provide. These examples suggest that the use of a corpus would appear to protect the CF from repurposing by the establishing firm and its executives.

Five participants that had positive sentiments about the corpus felt that its establishment was the primary purpose for the firm establishing a CF, as it provided an independent perpetual fund rather than relying on ongoing corporate funding:

P3: Yes, would be the fact we wanted to have something that was perpetual in nature, enduring. So that said to us, “no,” setting up an endowment as opposed to having a cost centre where we funded programs from was really critical.

This aligns with the argument that a corpus is a distinguishing feature of a structured CF over other forms of corporate philanthropy (Leat, 2004). Even though this has not been suggested to be a motivating feature for CFs establishment.

Two of the participants identified how a demutualization event (i.e., converting a cooperatively owned private firm to a public company) of their firms led to the establishment of a foundation where the corpus represented a large body of enduring investment funds. Although such opportunity would not be relevant to most commercial corporations, given that the mutual society structure (and opportunities for de-mutualization) are less common:

P9: Well, I think [establishing firm] really did want, it was a once-in-a lifetime opportunity of moving from a mutual to a listed company and being able to raise a big amount of money like that, $25 million, through the issue of new shares. That opportunity doesn’t come around very often. So they seized it and they really wanted it to have a real and lasting impact in the community, and for it to be very authentic. For the community to really see that it was a real foundation.

In line with the above, Faucette (2001) previously identified benefits for those firms that are fortunate to establish a corporate foundation at the time of demutualization, and through one-off time-based events such as anniversaries, as found in Gehringer (2021).

Taxation benefits

The second sub-theme within the financial advantages higher order was the tax benefits of a CF. There is a large body of literature highlighting the influence of taxation benefits on the decision to establish a CF (e.g., Brown et al., 2006; Morris & Biederman, 1985; Webb, 1994). This sub-theme was only positively identified by seven of this study’s participants. It was instead perceived as a negative motivator by another two of the participants, while it was not mentioned by the remaining seven. Among the positive participants, the tax benefits were noted as a key consideration of the CF structure:

P1: … right at the start, the intention was that the company and others within the immediate circle of the foundation would be able to make tax deductible donations. So that was one of the founding requirements.

Some specifically referred to the Australian Tax trust structure which was necessary to achieve tax deductibility of donations:

P9: … the driving factor for us around that was we were then a PPF, a prescribed private fund, which was the precursor to the private ancillary fund. And there were tax advantages around that approach.

Some participants also noted that they could achieve DGR status via a CF, meaning they could receive tax deductible donations, enabling donors (e.g., the firm, employees, customers, or community members) to claim a tax deduction. This DGR status facilitates the voluntary salary deductions of employees as pretax contributions, to be integrated into a firm’s payroll system (Ward, 2012). As will be discussed in higher order theme 4, firms who wanted to better engage with their employees and other key parties are more driven to establish their CF as a body with DGR status (i.e., a legal trust).

P16: … the DGR status means that I can take donations from members of the public, I can take pre-packed donations from our staff. So you know, a lot of our employees will give $10 a pay, but it only costs them $7 because it comes out as a pre-tax deduction.

While Scaife et al. (2012) similarly suggested DGR status gives CFs the same tax advantages as other nonprofits, particularly when targeting donors, our study highlighted that firms were considering their employees as their primary external donor, which has not normally been identified as a financial driver. This suggests a stronger link to firms perceived internal strategic benefits from establishing a CF, rather than the potential benefits for customers or the broader public. As such, the tax benefits to customers could be considered as a stakeholder influence, whereas employees could be linked to strategic activities. However, we felt that given the core focus on taxes, placed it more within the financial advantages.

Higher order theme 4: strategic benefits to the establishing firm

The final higher order theme is strategic benefits from establishing a CF, which incorporates three sub-themes: 1) reputational benefits; 2) staff engagement and participation; and 3) shared value strategy. This replaces the public goodwill domain, making this more about more traditional organizational value and profit.

Reputational benefits

Within this study, 14 participants positively identified reputational benefits as an influence on the firm’s establishment of a CF, while the other two viewed it negatively. Most of the positive participants referred to the active reputational marketing of CF activities by both the CF and the establishing firm, particularly to firm stakeholders:

P14: … it’s about what story can we tell your shareholders about what you’re giving back to the community, so your shareholders think you’re better at keeping their investment.

Such perceptions are consistent with the literature, which highlights that firms often participate in philanthropy to promote their adherence to their shareholders’ values (Bartkus & Morris, 2015). Although the use of shareholder funds to promote philanthropic causes can also be a contentious issue, particularly as it can remove the freedom for shareholders to spend their own equity (reinvest or as cash dividends) in the manner they choose (Navarro, 1988).

In this study, four of the participants were explicit about the CF being used to promote the reputation of the establishing firm:

P9: Yes, I guess that’s one of the reasons that we exist, is to help [establishing firm] in that vision that it has of being a good corporate citizen. So when it established a foundation, and our name is [firm name] Foundation, so we are custodians of the corporate brand simply because it’s part of our name. Inevitably, that means that the good reputation, the good work that we do in the community that’s fairly well regarded, widely appreciated by people, particularly people who benefit from it, that has a flow-on effect to the corporate brand.

Such intentional reputational benefits from the establishment of a CF is well-recognized, particularly the naming of the CF after the establishing firm, to boost the latter’s public image. From a strategic philanthropy perspective, such actions increase name recognition and positive image transfer (Bethmann & von Schnurbein, 2020; Swift et al., 2022), where any positive halo effect is maximized from the CF to the establishing firm (Abzug & Webb, 1996).

Furthermore, while CFs are supposedly independent of the establishing firm, some participants indicated that the firms actively monitor the reputational benefits:

P12: The [establishing firm] does reputation research, and that seems to indicate where people know about the existence of the foundation and its work, they think more highly of the business.

Sjovall and Talk (2004) even suggest that CFs are established to leverage issues if relevance to the firm and its stakeholders. In line with this, the above participant highlighted that their firm explicitly measured the positive impact of the CM on their reputation via research; thereby improving the firm’s brand perceptions via its social legitimacy (Peterson, 2018).

Staff engagement and participation

Fourteen participants suggested that CFs were designed partly to target staff engagement and participation, it was not mentioned by the remaining two. There was a great deal of positive participant sentiment in this regard, such as:

P1: And I think that was one of [the CEO’s] other objectives, in my mind, the people part was. A lot of that was about staff becoming more engaged with the company, taking more pride in the company, giving the company more heart and so on. To me that was, it was, about morale and engagement …

Such suggestions that the firm’s CEO and other executives leveraged the CF to improve staff engagement and morale aligns with the literature (Bartkus & Morris, 2015). Such strategic philanthropy has been recognized as primary focused on strengthening organizational performance rather than supporting the community through altruism (Haski-Leventhal, 2020).

One of the most common forms of staff engagement and participation is corporate volunteering, where they are given paid leave to volunteer in community activities coordinated by the CF (Bruch & Walter, 2005; Haski-Leventhal, 2020). Several participants identified links between CFs and employee volunteering programs:

P14: So we’re almost like a volunteer facilitator, I guess in that sense … we actually have a big focus on the skilled volunteering piece and how to free up some of the expertise that fits within the industry for the charity.

P16: … volunteering makes people happy, making a difference makes us happy and, you know, it’s something that we want to be proud of and be engaged with. So it’s not just about the money. [that is given to charities]

While such participant perceptions align with CSR-specific literature, where staff volunteering has often been linked to improved staff engagement and participation (Campbell & Slack, 2008), such as via corporate volunteering programs (e.g., Rodell et al., 2016), it has not been extensively explored how firms operationalize such programs via CFs (Gautier & Pache, 2013). In this study, there were many comments about how the firm targets its staff with information about CFs’ philanthropic activities:

P16: Starting with the basis of it is communication, so getting our message out there [to establishing firm staff], the goal is to improve the effectiveness of the communications and our employee engagement. I’m [performance] measured against how many [establishing firm staff] groups I get to visit personally in a year.

Another participant highlighted that the CF gave presentations to new staff about CF activities as part of the induction process:

P11: Oh, I think it’s very beneficial. It’s beneficial for the company, but staff love it … from feedback I’m getting, on the last few that I’ve done, is people like to know that the company they’re working for are giving back to society.

In addition to encouraging staff engagement, some participants conveyed how their establishing firms had implemented traditional workplace giving schemes, allowing employees to directly donate part of their salary to support the CF. One participant (P16) highlighted that the CF’s main source of income was through the workplace giving program, rather than direct funding from the establishing firm. Although such reliance on employee funding was not identified in the literature.

Shared value strategy

The shared value strategy sub-theme was identified as a positive influence on CF establishment by six participants and was perceived as a negative influence by four, while not mentioned by the remaining six. It was the least positively identified sub-theme. A relatively new phenomenon within the literature, where it has been defined as “creating economic value in a way that also creates value for society by addressing its needs and challenges” (Porter & Kramer, 2011, p. 4), it is recognized as an extension of strategic philanthropy (Liket & Simaens, 2015).

Among those study participants that perceived shared value strategy as a positive motivator on the establishment of the CF, most related this to how CF activities are managed. For example:

P7: It’s nice to do good things, but people [staff of establishing firm] are now asking that there should be some sort of alignment. That’s what shared value is all about. There’s a shared reason why things are being done by that organisation. Why are they putting their time and resources into it? Why are they supporting it?

Such feedback indicates perceptions that shared value strategy aligns the interests of CF giving with the “returns” to the establishing firm. This connects with the theme of strategic philanthropy, which is the practice of only meeting external stakeholder needs and expectations if such actions benefit the establishing firm (Bethmann & von Schnurbein, 2020).

Despite such common perceptions, one of this study’s participants suggested that the CF structure and a shared value strategy are mutually exclusive:

P9: I think it would depend on how altruistic their [the establishing firm’s] motives are. If their motives are very altruistic in what they’re wanting to do, then the true foundation structure probably works. But if they are taking much more of a shared value approach, where they’re wanting to be driving benefits to the business as well as benefits to the community out of every dollar they spend, then it’s probably not the best structure.

Such comments align with the traditional philanthropy definition: “the voluntary giving and receiving of time and money aimed (however imperfectly) toward the needs of charity and the interests of all in a better quality of life” (VanTil, 1990, p. 34). Such a purist perspective aligns with CFs established as charitable trust structures, where there are strict rules about firms not seeking direct benefits from CF giving (Monfort et al., 2021). This view suggests CFs should operate in a way that is not strategic, as legal obligations imply philanthropic motives at its core.

Table 2 summarizes the results of this study’s higher order themes and the associated sub-themes of motivations for firms establishing a CF. All the higher order themes are supported, with than two-thirds of the participants agreed that all sub-themes positively motivated the decision to establish a CF, other than tax benefits and shared value. The higher order centralizing corporate giving theme had the highest level of agreement across its sub-themes, followed by the higher order themes of strategic benefits to the establishing firm, stakeholder influences, and financial advantages of foundation structure.

This suggests there are specific factors that have more primacy with respect to firms establishing CFs. The focus on centralized giving is seen as potentially removing the principal agency problem, but within the data there is close alignment of the firm and the CF, thus questioning whether this is achieved. It does however ensure that there is some centralization of giving actions, which potentially allows for more focused actions. However, such focused actions aligned with achieving strategic benefits, further suggests that these CFs are being as strategic philanthropy rather than purely philanthropic actions. The focus on the strategic benefits also is highly aligned with targeting internal employees, in terms of them being volunteers, perceived reputational linkages and funding the CF. The fact that firms were more focused on employees is something that while discussed in the literature, has not been seen to have primacy as discussed in this research. A unique finding of this research is that protecting the corporate corpus used to establish the foundation is a significant issue. This is linked back to the independence issues as well, as it means the firms recognize the idea of trying to establish some level of external control. Unfortunately, the overlap of trustees of foundations and firm connections (i.e., managers, past managers, or associates of the firm) may impede this.

Contributions and propositions for further research

This research has advanced our understanding of the motivations for establishing corporate foundations.

The results have highlighted four higher order themes, which are slightly different to what have been proposed in the literature, but this is because we have defined stakeholder influences as including managers, lawyers and other firms (i.e., isomorphic influences). While the themes are broadly supported in the extent literature, the importance of these appears to differ across past studies, with at least one sub-theme (tax deductibility for employees and customers) arising within the financial objectives. The results suggested a strong emphasis of strategic philanthropy across the four themes. Whether it be giving a more structured focus within the Centralizing giving theme (Theme 1), ensuring that the benefits to the firm from consumers, or employees (Theme 3), or trying to achieve financial benefits from the firm (Theme 4). This raises opportunities to test and develop theory in the future, and we have proposed four propositions that arise from this research.

Firstly, is an examination of the more focused giving strategy controlled by CFs and whether this in fact removes potential principal agency cost problems (Gautier & Pache, 2013). Shifting control of the giving to an independent body should ensure more objective systematic giving, aligned with the CF’s rather than the establishing firm’s goals. As this research also identified that CF management often substantially overlaps with broader establishing firm management, it has been proposed that:

P1: The lower the degree of overlap in management of the CF and the management of the establishing firm: a) the higher the degree of reductions in principal agency costs; and b) the more objective the organizational giving.

The second proposition relates to this study’s finding that firms often achieve a range of corporate advantages via CFs, equating to CFs being a form of strategic philanthropy. In line with the common view of CFs being purely philanthropic, it raises the question of whether such corporate motivations negatively affect the operation of the CF and its philanthropic objectives. Yet it would appear in this study’s results that such objectives can help firms to enhance their CFs activities, which may achieve greater social benefits. For example, if the CF is seen to be highly impactful within its social domain, it will likely have higher credibility and thus a greater halo effect on the establishing firm (Monfort et al., 2021). In addition, employees will probably view such employer firms more positively, and thereby have more positive engagement with them (e.g., workplace volunteering and commitment to the organization, and supporting the CF through payroll donations) (Haski-Leventhal, 2020). It is therefore put forward in this study that:

P2: In comparison with those firms that establish CFs for more philanthropic motivations, those that establish CFs for strategic philanthropic motivations will have: a) more impactful social outcomes; b) greater employee engagement; and c) higher credibility.

The third proposition relates to the funding of CFs. While it has often been argued that establishing a CF is mostly done for tax benefits (McGregor-Lowndes & Williamson, 2018; Webb, 1994), this was not as clear a motivation in this research. Instead, the issues that arose related more to employee tax donations and the establishment of CFs with a corpus external to the firm, which allow it to be truly independent. In the context of employees, volunteering programs where employees were committed to the CF’s targeted activities or supported these tax-deductible donations were apparent. Also highlighting a link to strategic philanthropy, it was determined in this research that establishing firms often seek to enhance employee engagement and participation through their CFs. Further empirical assessment of the impacts of CFs on employees is warranted, as there have been works that have shown corporate giving and philanthropy impact on employees (Breeze & Wiepking, 2020; Cha & Rajadhyaksha, 2021; Fombrun & Shanley, 1990).

P3: CFs will be more aligned with a firm’s mission and objectives when: a) they coordinate employee volunteering; and b) when a greater portion of the CF funding comes from employee donations.

The issue of establishing a corpus to fund the CF on an ongoing basis was identified as the fourth proposition from this study. Two organizations established their CFs with such funding mechanisms when they transitioned from a cooperative (member-owned) to a traditional shareholder-based organization, which was primarily done to highlight their ongoing commitment to the community. As such, it is put forward in this study that:

P4: CFs that are established or are endowed with a large corpus: a) are more independent than those that are funded in other forms; b) have weaker links to strategic philanthropic goals; and c) are likely to undertake a wider range of philanthropic activities in line with the broader philanthropic nature of trusts.

Managers and organizations establishing corporate foundations need to have a clear understanding of the motivations and expected outcomes of such entities. They need to understand the regulations around CFs within their legal jurisdiction. If CFs are established to truly be philanthropic entities, the founding firms should ensure that there is clear independence. This involves funding, where providing a corpus will ensure that the CF is not dependent on yearly donations and support from the firm. True independence of directors to ensure that the giving is designed to achieve whatever the establishing goals are designed to achieve.

The lines between true Philanthropy and strategic actions do get blurred with regard to other higher order aspects of CFs and the founding firm. In establishing the CFs giving strategy and goals, it would be realistic to have some alignment with the firms and its impact on society, unless these CFs are truly board-based granting bodies potentially assisting in any social issues (e.g., the Bill and Melinda Gates Foundation). While this alignment may seem to suggest that the CF is implicitly strategic in nature, there does need to be some initial position undertaken as in line with literature, firms do have some responsibility to their specific stakeholders (Renz et al., 2020). Any communication with stakeholders, external (Swift et al., 2022) or internal (Breeze & Wiepking, 2020), would implicitly have some organizational benefit, the question is to what extent is this an organizational focus for the CF? It may also make sense for appropriately supported CFs to support the firms other CSR actions such as coordinating employee volunteering if volunteering actions are part of the CFs purview. But again, the question needs to be balanced to ensure where the priority of CF actions lay, philanthropic or strategic for the firm?

Finally, it is unclear if firms and their managers want to use CFs as strategic philanthropy, that this is truly an issue? If the firms are leveraging truly socially valuable CSR actions, then is this necessarily a problem (Porter & Kramer, 2011)? It is a problem when the corporate strategic issues overshadow any social benefit, with there being increasing skepticism of firms’ broader actions, which have limited true social value (Hamilton, 2019).

Limitations

As with most research, there were limitations in this study. For example, a small sample size was used, based on only 37 CFs being identified as relevant in Australia at the time of the study. While it may have been beneficial to try and integrate more participants, the locating of other relevant individuals within organizations (i.e., those involved in the CF establishment decision) was not logistically feasible, as has been experienced in similar studies (Chatterjee & Rai, 2018). To address this limitation, participants that were presently managing the CF but had also had other roles within the firm were used to represent a wider range of perspectives.

We did not ask respondents if they felt whether there were any negative outcomes of foundations, given the focus was on why the firms establish these, nor did we examine instances where firms have chosen to disestablish their CF to focus their philanthropy within alternative channels such as direct giving, and so would suggest these topics for future research. Future research also needs to examine if there are any significant activities that can be undertaken using a foundation structure that cannot be undertaken under the banner of internal corporate philanthropy actions.

Conclusion

This research has identified four main motivational themes that drive CF establishment in Australia: 1) centralizing corporate giving; 2) stakeholder influences (integrating, managers, advisors and isomorphic factors in past works); 3) financial advantages of foundation structure now including the tax benefits for employees and customers); and 4) strategic benefits to the establishing firm. Identifying that strategic philanthropy was a key motivation for establishing CFs, where firms directly benefited from their giving activities and that the integrated nature of CFs and the firms would appear to limit the reductions in agency costs. While strategic philanthropy was a key motivation, this research has shown that firms establish CFs based on multiple motivational factors rather than a single motivational driver. The results also importantly show that there are global similarities in these drivers, i.e., some generalizability exists globally. However, a one size fits all model does not appear to hold. In most cases the motivations appear to be more about the benefits to the firms, in terms of strategic activities, rather than suggesting that this will improve societal impact of firms’ philanthropic activities.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. For example, giving to support a local flower club in which they are the president, rather than having a systemic objective process to identify where to give.

2. The number of CFs in Australia has remained relatively stable and in 2023 there were only 39 CFs listed in Australian Charities and Not-for-profits Commission (ACNC) register of charities.

3. We identified several foundations that were established by the families owning the firms listed in the ASX. These were also contacted, did but not responded to our request to participate in this study.

Appendicse Appendix 1.

Summary of responses across motivational themes

Table

Top-level themes	Centralizing corporate giving		Stakeholder influences			Strategic benefits to the establishing firm			Financial advantages of foundation structure
Participant number	Focus and formalization of corporate giving practices	Separation from business activities	Reputational benefits	Staff engagement and participation	Shared value strategy	Board and executives of establishing firm	Lawyer influence and other advisors	Isomorphic influences from other firms	Foundation corpus	Taxation benefits
P1	Positive	Positive	Positive	Positive	Positive	Positive	Positive	Positive	Positive	Positive
P2	Positive	Positive	Positive	Positive	Positive	Positive	Positive	Positive	Positive	Positive
P3	Positive	Positive	Positive	Positive	Not raised	Positive	Positive	Positive	Positive	Positive
P4	Negative	Negative	Negative	Positive	Positive	Negative	Negative	Negative	Negative	Negative
P5	Positive	Positive	Positive	Not raised	Not raised	Positive	Positive	Not raised	Negative	Not raised
P6	Positive	Positive	Positive	Positive	Not raised	Positive	Positive	Not raised	Positive	Not raised
P7	Positive	Positive	Positive	Positive	Positive	Positive	Positive	Positive	Positive	Positive
P8	Positive	Positive	Positive	Positive	Not raised	Positive	Positive	Positive	Positive	Positive
P9	Positive	Positive	Positive	Positive	Positive	Positive	Positive	Positive	Positive	Positive
P10	Positive	Positive	Negative	Positive	Positive	Positive	Positive	Positive	Positive	Negative
P11	Positive	Positive	Positive	Positive	Not raised	Positive	Not raised	Positive	Not raised	Not raised
P12	Not raised	Positive	Positive	Positive	Negative	Positive	Not raised	Positive	Positive	Not raised
P13	Positive	Positive	Positive	Not raised	Not raised	Positive	Positive	Negative	Positive	Not raised
P14	Positive	Positive	Positive	Positive	Negative	Positive	Negative	Positive	Negative	Not raised
P15	Positive	Positive	Positive	Positive	Negative	Positive	Not raised	Positive	Not raised	Not raised
P16	Positive	Positive	Positive	Positive	Negative	Positive	Positive	Positive	Positive	Positive

Appendix 2.

List of semi-structured interview questions

Table

Interview Questions
1. Can you please describe your role in the foundation. Did you have any involvement with the establishment of the foundation? If so can you describe your involvement?
2. What are the foundation’s objectives? Do the foundation objectives have anything in common with the firm’s objectives? If so what are these? How do you measure if the objectives have been successful?
3. Can you please describe how your foundation operates, such as: its board structure, number of foundation staff the areas that it involves itself in, such as charitable giving, volunteering, ETC. process to determine how much money to allocate to charities each year
4. At the time your foundation was established, was specific advice sought to determine the type of structure it should operate within? For example, a public foundation operating through a trust. If so, where did this advice come from and how influential was the advice for the final decision?
5. Are there any coordinated activities between the foundation and the firm?
6. Do believe there are any advantages or disadvantages with the use of a corporate foundation over other forms of direct corporate philanthropy?
7. Which internal or external groups do you believe had the most influence in making that decision to establish your foundation?
8. Were there any objections raised about the decision to create a corporate foundation?
9. Which factors do you believe were the most important in determining whether to create a corporate foundation?
10. Which of these factors are the most important to you? And which factors are the least important to you?
11. What are your thoughts on the role of the foundation in centralizing corporate giving? Have you seen this occur due to the work of your foundation?
12. Have you found the foundation more or less able to maintain a consistent level of charitable giving year on year, as opposed to as in a direct giving model, where more could be given from the firm in good years, and possibly none in poor years?
13. Do you believe there have been any reputational changes that stakeholders may have of the founding firm due to the foundation? If so, has one stakeholder group shown this more than others? If so, do you believe the same changes to stakeholders could have resulted by other forms of corporate giving?
14. Has the foundation had any noticeable impact on staff commitment to the founding firm? If so are you able to describe these and how is this measured?