Unraveling the legitimacy of corporate foundations

• In Event: Country studies on the impact of New Public Management on the third sector

Abstract

Organizations strive to achieve organizational legitimacy (Dowling and Pfeffer, 1975). Legitimate organizations are not questioned and can act freely. More importantly, legitimacy improves the chances for organizational survival (Deephouse and Suchman, 2008). In order to gain legitimacy, organizations need to align the social values associated with their activities with the extant norms and values in the larger social system. Misalignment threatens an organizations legitimacy and can lead to social, economic or legal sanctions (Dowling and Pfeffer, 1975).

For corporate foundations this quest for alignment is complex because of their roots in ¬– and links to ¬– ¬both business and civil society. Corporate foundations in Europe are independent legal entities (e.g. Webb, 1994; Gehringer, 2020; Bethmann and von Schnurbein, 2020). Like other charitable foundations, they are generally expected to exclusively pursue societal purposes (Bethmann and von Schnurbein, 2020). However, in practice they are often dependent on the associated firm, which has its own aims and interests (e.g. Webb, 1994; Gehringer, 2020; Renz et al., 2020). As a result, corporate foundations have a ‘split personality’.

Among organizational scholars in business and nonprofit fields, there is a trend to conceptualize organizations with a split personality as hybrid entities in which different institutional logics co-exist (Pache and Thornton, 2020). Each logic prescribes different organizational goals, organizational forms, and governance mechanisms (Pache and Santos, 2013) Corporate foundations combine the social welfare/community and business/market institutional logics (Roza et al., 2020). As an example, the social welfare logic prescribes a focus on addressing societal challenges while the market logic steers corporate foundations towards addressing the company’s interests (Pache and Santos, 2013).

Because institutional logics prescribe the expected behavior for organizations – which goals they should pursue, and which means are appropriate to achieve their goals – adhering to the competing demands is key for an organization’s legitimacy (Pache and Santos 2010; 2013). On the one hand, organizations that successfully combine logics increase legitimacy among different stakeholders and enhance their chances for survival. On the other hand, organizations that fail to address the different demands, threaten their survival (Pache and Santos, 2013).

So far, no research has been done on the elements by which different stakeholders judge the legitimacy of corporate foundations. As an initial step to fill this gap, we aim to identify which elements of the social welfare and market logics contribute to the organizational legitimacy of corporate foundations among different stakeholder groups? We aim to study the prevalent norms and values – and thus the perceived legitimacy of corporate foundations – among different stakeholders (e.g. partner organizations), through surveys. To take the differences in various institutional contexts into account, the study will be conducted in four countries.

Corporate foundations managers can use the insights to decide which factors to take into consideration to meet their key stakeholders’ expectations. The corporate foundation sector can apply these factors to develop best practices to improve corporate foundation legitimacy among external stakeholders. The results might also prove useful for hybrid organizations with a similar template, such as social enterprises.

References

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Pache, A., & Santos, F. (2013). Inside the hybrid organization: Selective coupling as a response to competing institutional logics. Academy of Management Journal, 56(4), 972-1001. doi:10.5465/amj.2011.0405
Renz, D., Roza, L., & Simons, F. (2020). Challenges in corporate foundation governance. In L. Roza et al. (Ed.), Handbook on corporate foundations (). 17-37: Springer.
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Webb, N. (1994). Tax and government policy implications for corporate foundation giving, webb. Nonprofit and Voluntary Sector Quarterly, (Vol 23, Issue 1), 41-67. Retrieved from https://doi-org.eur.idm.oclc.org/10.1177/0899764094231004

Authors

• Puck van Ipenburg-Hendriks, Rotterdam School of Management, Erasmus University Rotterdam

• Georg von Schnurbein, University of Basel

• Lucas Meijs, Erasmus University Rotterdam