Foundation Ownership and Sustainability International Evidence

Paper Authors: David Schroeder, Steen Thomsen

The increasing focus on corporate social responsibility and sustainability has inspired a search for institutional arrangements that promote responsible business behavior. In this study, we focus on foundation ownership, which is observed in large companies like Bosch and Bertelsmann (Germany), Maersk and Novo Nordisk (Denmark), Hershey (US), the Wallenberg companies (Sweden) and the Tata Group (India). Foundation ownership seems to be an institution suited to foster responsible business behavior because of muted profit incentives and long-term commitment to philanthropy and promotion of the company. Based on environmental, social, and governance (ESG) data from Asset4, Bloomberg and S&P Global and a unique dataset of publicly listed firms from 28 countries over the period 2003-2020, we investigate empirically, whether foundation-owned firms (FOFs) are more socially responsible and environmentally sustainable than firms with more conventional ownership structures. We find that FOFs exhibit higher ESG performance than matched family firms, and they do no worse than matched investor-owned firms. For identification we , use the 2008 financial crisis as a cut-off point in a difference-in-difference test. We show that foundation-owned companies’ sustainability engagements is better able to withstand this negative shock.