Steen Thomsen. The Danish Industrial Foundations

Transcription

1 Steen Thomsen The Danish Industrial Foundations Djøf Publishing Copenhagen 2017

2 Steen Thomsen The Danish Industrial Foundations 1 st edition 2017 by Djøf Publishing Jurist- og Økonomforbundets Forlag All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the Publisher. Cover: Marianne Tingkov Print: Toptryk Grafisk, Gråsten Printed in Denmark 2017 ISBN E-book ISBN Sold and distributed in Scandinavia by: DJØF Publishing Copenhagen, Denmark forlag@djoef.dk Sold and distributed in North America by: International Specialized Book Services (ISBS) Portland, USA orders@isbs.com Sold in all other countries by: The Oxford Publicity Partnership Ltd Towcester, UK djof@oppuk.co.uk Distributed in all other countries by: Marston Book Services Abingdon, Oxon, UK trade.orders@marston.co.uk

3 Contents Contents Contents Preface... 9 Chapter 1. What are Industrial Foundations? Overview Why Study Industrial Foundations? Definitions Industrial Foundations. Schematic Definition The Variety of Industrial Foundations Conclusion Chapter 2. Industrial Foundations in Theory Overview The Puzzle Agency theory Altruism Identification and values Longtermism Institutional Context Conclusion Chapter 3. Industrial Foundation Law and Supervision Overview Design issues Danish Law Supervision Best Practice Recommendations on Foundation Governance Conclusion Chapter 4. Taxation of Industrial Foundations Overview Should foundations be taxed?

4 Contents Danish Foundation taxation Tax comparisons Do Danish Industrial Foundations Pay Taxes? Conclusion Chapter 5. Industrial Foundations around the World Overview The USA The UK Germany France The Netherlands Italy Austria Switzerland Sweden Norway India Taiwan Conclusion Chapter 6. Industrial Foundations in the Danish Economy Overview Enterprise Foundations Share of the Danish Economy Market valuations The largest foundation-owned companies Employment Sales and value added (gross profits) The growth of foundation-owned companies Normal and abnormal growth Economic stability Separation rates Research and Development Foundation donations Conclusion

5 Contents Chapter 7. The Performance of Danish Foundation-Owned Companies Overview Theory Benefits of foundation-ownership Costs of foundation ownership Hypothesis Literature review The size effect Total returns Origins of the size effect Statistical Control, Matching and Differences in Differences Matching Differences in Differences Profitability of Foreign Direct Investment Performance Drivers Other performance measures Corporate Reputation Conclusion Chapter 8. The Governance of Industrial Foundations Overview Industrial Foundation Governance Foundation Governance Governance of Foundation-Owned Companies The Foundation and the Company: Managerial Distance Governance Behaviour: Longtermism Conclusion Chapter 9. The Charters of Industrial Foundations Overview Charters in Danish Foundation Law Legal structure Examples Empirical Evidence Results Analysis

6 Contents Long run changes Conclusion Chapter 10. The Philanthropy of Industrial Foundations Overview Industrial Foundation Philanthropy Donations Economies of scale Research donations Conclusion References

7 Preface Preface Preface Industrial foundations are foundations that own companies. The foundations are independent, self-governing entities, without owners. The companies need not be industrial in the sense of manufacturing, but may be active in any private business activity including construction, shipping, consultancy, real estate or banking. Other words for the same phenomenon are enterprise foundations, corporate foundations, commercial foundations or business foundations. The defining feature is that the foundations own and control the companies and not vice versa. Moreover, the foundations are private entities and not governmental or quasigovernmental institutions. Around the world, some very big companies are owned by foundations including the Indian Tata Group, the Swedish Wallenberg businesses, US Hershey, German Robert Bosch, UK Lloyds Register or Swiss Rolex. However, nowhere are they as common as in Denmark, where they account for 70% of stock market capitalization. Foundations own three of the four largest Danish companies A.P. Møller-Mærsk, Novo- Nordisk and Carlsberg. Foundation ownership presents an alternative to both investor ownership and to family business. It combines charity and business in a way that resonates with contemporary discussions of corporate responsibility. Its inherent longtermism compares favourably with the mercurial nature of contemporary stock markets, and yet it remains a rarity on a global scale, partly because of ignorance and partly because of hostile regulation. I believe that businesses around the world can benefit from foundation ownership and that governments can promote it simply by allowing it to arise and grow on its own terms without subsidies or artificial restrictions. I also believe that they can be a source of inspiration for companies in general. Nevertheless, foundation ownership is not a panacea. In the absence of vigilant governance, longtermism and responsibility may develop into inertia and complacency. The inherent weaknesses of self-ownership 9

8 Preface need to be recognized and addressed. Governing industrial foundations is therefore an important topic in its own right. This book is about foundation ownership of business companies and what we can learn about it from the Danish evidence. It is about how foundation ownership is ruled, taxed and governed, what role it plays in the Danish economy, and how foundation-owned companies perform. It is based on a large-scale research project ( but is aimed at a general readership without specialist knowledge. I wish to thank a number of people whose advice and help directly and indirectly contributed to this book: First, the project sponsors, the LEO Foundation, the Rambøll Foundation, the Novo Nordisk Foundation, the Lundbeck Foundation, the Lauritzen Foundation, the Cowi Foundation, the Augustinus Foundation, the Carlsberg Foundation and Knud Højgaard s Foundation. Second, the project participants, Christa Damgaard Børsting, Johan Kuhn, Thomas Poulsen, Rasmus Feldthusen, Martin Poulsen, Guenter Franke, Henry Hansmann, Niels Westergaard Nielsen, Hans Christian Johansen, Erik Werlauff, Susanne Nørgaard, Peter Loft, Søren Bo Nielsen, Signe Marie Degn and Anna Sofie Andersen. Third, I would like to thank my wife Annette Blegvad whose encouragement and companionship I constantly rely on, and who helped edit the manuscript. The book is sponsored by the Research Project on Industrial Foundations and any income or royalties from it will in the foundation spirit be used to maintain its website and promote further research. Copenhagen, October 2016 Steen Thomsen 10