En­ter­prise Found­a­tions and Re­spons­ible Own­er­ship

Course content

Enterprise foundations—nonprofit entities that own and control major commercial firms—challenge conventional assumptions about ownership. Specifically, they unsettle standard market-based explanations, challenging dominant assumptions about markets, monitoring, incentives, and the role of the state. Standard theories of corporate governance predict that firms without residual claimants should underperform: lacking owners with direct financial stakes, such organizations are assumed to face weak monitoring and heightened risks of mission drift. Yet many foundation–owned firms consistently deliver strong and durable performance, and some of Europe’s most profitable firms are foundation-owned. For instance, firms such as Novo Nordisk, Lundbeck, Carlsberg, Rolex, and IKEA have shown enduring success financially. Their success presents a theoretical puzzle: how can foundation-controlled firms, with nonprofit owners bound by strict purpose locks and unable freely to divest core assets, outperform investor-owned companies that benefit from market discipline? And what is the role of regulation in this regard?

This course will explore the foundation model and examine whether it may potentially be used as an inspiration for purposeful ownership in other ownership models, including family business, enterprise associations (mutuals, coops) and state-owned enterprises.

Foundation control of businesses presents a unique and complex governance model with both economic advantages and regulatory challenges. Because this combination of nonprofit purposes and business objectives raises governance issues and tax questions, policy makers typically require both public external governance mechanisms and private mechanisms aimed at mitigating mission drift. As laws aim simultaneously to facilitate charitable purposes and to provide sound framework conditions for foundation control of business enterprises, the specific interplay between public and private governance mechanisms becomes particularly important. From a regulatory-governance perspective, it is crucial to understand how legal design accommodates the need for economically rational nonprofit ownership of business enterprises while also ensuring that public good purposes are sufficiently furthered by the enterprise foundation.