Corporate Foundations in Germany Prof. Dr. Hans Fleisch CEO German Association of Foundations 14. June 2010

2 Foundations in Germany State/ governmental sector (1. Sector) Corporate Sector (2. Sector) Civil Society (3. Sector) associations foundations 4. Sector? Hybrid organisations Constant growth of Cicil Society

3 Foundations in Germany Long history Middle age: Church foundations Civic urban foundations in free towns (Hanse- towns etc.) 19.th century: Boom of civic foundations Law reform (civil code BGB): foundations as independent legal bodies 1900: existing foundations First half of 20th century: destruction of majority of foundations (2 world wars, Nazi, inflation)

4 Foundations in Germany Second half of 20th century: East Germany: Destruction of most remaining foundations (socialistic dictatorship GDR) West Germany BRD: Slow but growing recovery of foundation sector; primarily private persons as founders; foundation boom since 1990

5 Rechtsfähige Stiftungen des bürgerlichen Rechts Foundations in Germany 11%44%12%-1%19%7%13%8%12%21%22%-7%1%9%3%2%26% Grwoth rate per year Foundation law & tax reforms 2000/2002 Foundations tax Reform 2007 Number of new foundations in each year since 1990

6 Corporate Foundations in Germany Assets of German Foundations: ca. 100 Mrd*. +X Assets of 20 biggest: ca. 30 Mrd. ? Expenditures of foundations per year: ca. 15 Mrd. Of this: 5 Mrd interest 2 Mrd donations *Mrd = US-billions

7 Purposes of foundations in Germany Rechtsfähige Stiftungen des bürgerlichen Rechts

8 Foundations in Germany Various legal forms of foundations 90 % of founders: private individuals of this: 44 % private entrepreneurs 10 % of founders: legal institutions (incl. governement, associations & corporate firms)

9 Foundations in Germany Various tax benefits for charitable foundations Donations deductible from income/corporation tax: 20 % of yearly income (private/corporate; if more donated: deduct transferable to next tax years) or 4 % o of yearly turnover (corporate firms; if more donated: deduct transferable to next tax years) Plus: 1 Mio donations to the endowment (one time every 10 years) Plus: No inheritance tax for assets donated by last will Existing charitable foundation: no income/corporation tax, no turnover tax; serveral other tax benefits

10 Foundations in Germany Corporate-related foundations: founded by an entrepreneur; the corporation is the donated endowed asset (e.g. Bosch-Foundation, Bertelsmann, Krupp, …) Corporate foundations: the corporation is the founder, donates the asset (in the framework of the normal foundation law)

11 Corporate foundations in Germany approx. 450 (?) corporate foundations plus 670 (corporate) foundations of the saving banks (Sparkassen-Stiftungen) plus serveral hundred foundation-like mechanisms Nearly all major stock corporations (AGs) have at least one own corporate foundation (e.g. Allianz: 3 foundations in Germany, other in other countries)

12 Corporate foundations in Germany Assets of corporate* foundations are higher % smallmediumbig *Sparkassen-Stiftungen (saving banks foundations) not included

13 Corporate foundations in Germany 53 % of German corporate foundations* have assets between 1 Mio & 50 Mio (Other Foundations: 40 %) 10 % have assets of more than 50 Mio * Sparkassen-Stiftungen (saving banks foundations) not included

14 Corporate foundations in Germany Corporate foundations* have higher expenditures than other foundations (43 % of corporate/37 % of other spend more than per year ) % *Sparkassen-Stiftungen (saving banks foundations) not included

15 Corporate foundations in Germany Major income usually from interest etc (endowment) Often: additional yearly donations from the corporation Example Telekom-Foundation: 100 Mio endowment fund 5 Mio yeary income from interest/dividends etc 5 Mio donation from Telekom

16 Corporate foundations in Germany A corporate founation is usually one of three pillars: -Corporate giving -Corporate foundation (and its expenditure) -Social Sponsoring These three pillars are major parts of the overall CSR-activities, which include other elements as well (such as corporate volunteering programs). CSR is part of the CR of the corporation.

17 Corporate foundations in Germany Corporate foundations Other foundations Education 39% 17% science33% 13% Art & culture 27% 15% Purposes of corporate foundations*: * Sparkassen-Stiftungen (saving banks foundations) not included

18 Corporate foundations in Germany New corporate foundations per year Boom since 1980 as part of CSR-movement

19 Corporate foundations in Germany Corporate foudnationss name: name of the corporation usually included, often in combination (Telekom-Foundation; BMW-Kuenheim-Foundation; Allianz environment foundation) Corporate identiy of the foundation: 50 % related but partially different logo (compared to the corporation); 50 % same CI as the corporation; usually own but coordinated PR Usually fully transparent (finances, activities), own annual report plus inclusion in the CSR- report

20 Corporate foundations in Germany Highly professional management Higher renumeration of staff than at other charitable foundations Director: usually a foundation professionel (but sometimes in combination with responsibility for the whole CSR-program) Corp. foundation staff usually employed by the foundation (sometimes a mixture) Often administrative support from the corporation, financed by the corporation Separate form corporate volunteering program

21 Corporate foundations in Germany Activities Grant giving and / or own projects (often both); strategic & focused approach beyond traditional corporate philantrophy Often partnership with other foundations Growing: Partnership with other governemental/public institutions and/or NGOs NGOs and public institutions are more prepared to cooperate with the corporate foundation than with the corporation

22 Corporate foundations in Germany Corporate Foundations: traditional foundations have a slightly different image Corporate foundations are the becoming more and more an accepted and appreciated normality Corporate foundations do not fundraise (no competition to the NGOs) Corporate are a player in the foundation field, which is different from the other NGO-world

23 Corporate foundations in Germany Corporate Foundation: a player in the 3rd sector (foundation part), not just a bridge into it. The more a corporate foundation plays its role as a player in the 3rd sector with (limited) independence, the higher is its credibility and therefore higher is the image transfer effect for the corporation Corporate foundations bring professionalism into the 3rd sector / foundation sector and stability and sustainability (and thus credibility) into the CSR-activities of the corporation transfer know how and networks to the corporation