Trends & data analysis

The foundations of company giving

18 April 2016

UK companies are giving £250 million in grants, where does the money comes from?

It has been estimated that there are over 140 corporate foundations in the UK providing a total grant contribution somewhere in the region of £250 million (equivalent to 7% of all grants made by charitable trusts and foundations in the UK, or 12% of total company contributions).

Some companies choose to create a legally separate corporate foundation to deal with their charitable commitments. The advantage of this is that money can be ring-fenced and held separate to the company’s other accounts, which cushions this pot from any blows to the business. Decisions can also be taken separately, without regard to the day-to-day business machinations, with dedicated staff who devote themselves to the foundation’s aims.

Corporate foundations derive the majority of their income from a company either in the form of an endowment or an annual or periodic transfer of income (usually a percentage of profits or a fixed sum). This gives corporate foundations a very distinct financial profile. Recent research for the Association of Charitable Foundations (2015) showed that 95% of corporate foundations’ income is categorised as voluntary, compared to an average of 46% amongst the top 300 grantmaking trusts.

Estimates show that around 0.01% of UK companies have a foundation, compared with 0.04% of all US companies.

The ‘top’ corporate foundations in the UK are:
1.    Lloyds Bank Foundation for England and Wales, giving grants of over £21.94 million
2.    Shell Foundation, giving grants of over £20.74 million
3.    Vodafone Foundation, giving grants of over £19.53 million
4.    Lloyd’s Register Foundation, giving grants of over £17.16 million
5.    Goldman Sachs Gives (UK), giving grants of over £14.55 million
6.    BHP Sustainable Communities, giving grants over £11.32 million

These top 6 foundations, each giving over £10 million per annum, give nearly half of the total grants of the top 50 corporate foundations in the UK, representing a large skew in the distribution of corporate giving. While Lloyds Bank Foundation distributes grants nationally across the UK focussing on small and medium charities dealing with disadvantage; Shell has a natural inclination towards environmental issues, which are also the focus of BHP Sustainable Communities, and much of the money for these projects goes to the developing world and other countries. Lloyd’s Register Foundation has quite a niche focus on the: ‘design, manufacture, construction, maintenance, operation and performance for the purpose of enhancing the safety of life and property at sea and on land and in the air’.

Overall, the financial sector in the UK has more corporate trusts than any other industry sector, with retail having the second highest number. Both of these sectors tend to focus their charitable efforts on the local communities in which they are based, bringing much needed extra funding into the UK charitable landscape.

The number of corporate foundations is increasing year on year, however recent research from Corporate Citizenship (2013) suggested that their average income may be falling. While this may have been due to the global financial crisis it is something to keep an eye on for the future. The same research found that many corporate foundations do not have a committed funding formula in place, meaning that the founding company is not bound to fund the foundation at any particular level or in perpetuity. The consequences of this have played out in, for example, the collapse of the Northern Rock (whose Foundation had been the mainstay of charitable grants in the North East region), and the difficulties experienced by the Lloyds TSB Foundation (Scotland) during the takeover of HBOS by Lloyds Banking Group in 2009.

This is, in part, inevitable, as companies emerge, merge, collapse or split on a relatively regular basis. This also means quite an active stream of new entrants into the marketplace. For example the new Virgin Money Foundation, which emerged after Virgin Money took over Northern Rock in 2012, which has been funded with £4 million by the government from the fines levied on banks for manipulating the London Interbank Offered Rate (LIBOR) benchmark and £1 million pledged by Virgin Money.

If there is a disadvantage to corporate foundations it may be that by removing the charitable decision-making from the heart of the company one can lose the sense of a CSR (corporate social responsibility) agenda as a core part of company practice. However there is a balancing act to be achieved between the savings and alignment of an overlap between the company and the foundation, and the potential for conflation of priorities and mission drift. This can be particularly worrying when some companies choose to exercise influence over the Foundation by appointing a number or all of the board members. This can raise questions of independence and put the foundations on a collision course with the Charity Commission which has pointed out that:
There are reputational risks for the corporate foundation (and potentially the company) if the public perceive that the corporate foundation is for the benefit of the company rather than the public.

Sources:
BITC, 2003. Corporate foundations: building a sustainable foundation for corporate giving.
Charity Commission, 2010. A guide to Corporate Foundations.
Corporate Citizenship, 2013. The Foundations of Business: The growth of corporate foundations in England and Wales.
Lloyd’s Register Foundation: http://www.lrfoundation.org.uk/about-us/mission/
Pharoah, C., Jenkins, R. & Goddard, K., 2015. Giving Trends: Top 300 foundation grant-makers. Association of Charitable Foundations, Centre for Charitable Giving and Philanthropy at Cass Business School and Pears Foundation. Accounts are from 2013 and 2014.
The SMART Company, 2006. Revealing the foundations: A guide to corporate foundations in England & Wales. Cabinet Office and Charities Aid Foundation.
Walker, 2013. The Company Giving Almanac. Directory of Social Change.

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Cat Walker

Dr Cat Walker has worked in the UK voluntary sector for the last 17 years, including Charities Aid Foundation where she was Head of Research from 1999-2006, and Directory of Social Change where she was Head of STEAM (Sector Trends Evidence Analysis Metrics) from 2010-2015.

Cat now works as a freelance consultant and is the founder of The Researchery – a policy-focussed, strategic research surgery for those who want to get more out of data for evidence-led social change we can all believe in.

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