A study on corporate foundation and philanthropy: Does governance matter for organizational performance?

Abstract

Given the increased social and strategic value of corporate philanthropy (CP) in businesses, a growing number of corporations have established associated corporate foundations to institutionalize and formalize their CP. Notably, CP has been channeled through team charitable foundations in professional sport, which are corporate foundations closely tied to their parent teams while having own (quasi) independent governance structure. However, these corporate foundations have received less scholarly attention. The study explores the relationship between corporate foundation governance and organizational performance in the context of professional sport. Specifically, this study focuses on how board structural characteristics, such as board size and board diversity, and board leadership, such as board chair affiliation with the parent team and the presence of a paid executive director, influence the team foundation's total received contributions. To empirically test our hypotheses, the study used longitudinal data of financial and personnel information of team foundations in the United States from 2011 to 2017. The results show that the team foundations with a larger board and paid executive director generate more significant revenues (received from contributions, grants, and gifts). The study illuminates how the internal governing environment shapes and steers a corporate foundation's philanthropic practices and performance.

How Managerial Practices Impact Perceived Organizational Effectiveness: A Study of Corporate Foundations

“…Previous studies confirmed a positive relationship between the presence of distinct practices and higher levels of organizational effectiveness (Forbes 1998;Herman andRenz 2000, 2004;Renz and Herman 2016). However, earlier studies have mostly focused on the individual drivers of organizational effectiveness, such as governance issues, including the effect of board structural characteristics and board leadership (Yang and Babiak 2023), board involvement (Minciullo and Pedrini 2020), and knowledge-transfer methods (Minciullo andPedrini 2014, 2015). Other drivers concern general organizational characteristics and practices, such as "organizational climate, organizational structure, and the presence of unionism" (Forbes 1998, p. 190) or successful stakeholder management, through which organizations are perceived to be more effective (Balser and McClusky 2005).…”

“…Additionally, to prove their effectiveness, they must focus primarily on monitoring and evaluating activities. One way to interpret this result is to remember the increasing pressure on foundations for professional impact measurements to show what the foundation has achieved, for which pure output calculations or storytelling reports are no longer sufficient (Balser and McClusky 2005;Lecy et al 2012;Minciullo and Pedrini 2014;Yang and Babiak 2023). Instead, comprehensive assessments of the intended positive and unintended negative effects on immediate stakeholders and the organizational environment are required.…”

“…Scholars have investigated organizational effectiveness across different NPOs, such as community foundations (Ostrower 2006a(Ostrower , 2007, social enterprises (Grieco et al 2015), international non-governmental organizations (Tran 2020), and national Olympic sporting organizations (Shilbury and Moore 2006). Very few studies have examined organizational effectiveness in other charitable organizations, such as charitable foundations set up by corporations (Minciullo and Pedrini 2014;Rey-Garcia et al 2018;Yang and Babiak 2023). Corporate foundations present an interesting object of study, as they are a manifestation of institutionalized corporate philanthropy that is "increasingly applied in practice" and is "increasingly visible in the philanthropic sector" around the globe (Roza et al 2020b, p. 2).…”

“…Different patterns of these result in hybridity on a strategic, organizational, or contextual level (see Gehringer 2021 for a more detailed definition). In particular, corporate foundations are under pressure from their corporate founders and stakeholders to increase transparency and accountability regarding the effective use of shareholder money for public goods (Balser and McClusky 2005;Lecy et al 2012;Minciullo and Pedrini 2014;Yang and Babiak 2023). This article aims to contribute to the study of corporate foundations by examining the relationship between certain management practices and organizational effectiveness as perceived by their leaders.…”