Foundation Ownership and Sustainability

Concerns about the sustainability of contemporary capitalism have inspired a search for organizational forms that are more concerned with solving environmental and social problems and less focused on short-term shareholder value maximization. We examine whether one such model – foundation ownership of business companies – is associated with better sustainability outcomes. We suggest modelling foundation-owned companies as institutional hybrids that combine the characteristics of (charitable) foundations and (for-profit) business companies. We propose that foundation-owned companies are influenced by the philanthropic logic that characterizes foundations and therefore are more inclined to environmental and social considerations than business companies characterized by a for-profit mindset. Using hand-collected data on listed foundation-owned companies during 2003-2020, we find support for this hypothesis. Foundation-owned firms tend to receive higher environmental, social, and governance (ESG) ratings, specifically along both the environmental and social dimensions. The results hold across alternative ESG ratings, quantitative output measures, difference-in-differences testing and instrumental variable estimations.