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There has been increasing recognition in recent years that the benefits a trust or foundation can bring go beyond just the monetary value of their grant-making, and of the original philanthropic gesture which enabled that, to encompass their independence. It is this that gives them the freedom to speak and act in ways not always possible for most other organisations in society. And as the reports from the SMART Company have demonstrated, the growth of corporate foundations has been a welcome and hugely beneficial contribution to this philanthropic scene. However, the position in which two corporately supported foundations have recently found themselves suggests that without an endowment, or another secure source of income other than regular payments from the parent company, independence may be more in question for such foundations.
Very much in the public eye has been the Northern Rock Foundation, where the activities of the Northern Rock bank, completely outside the control of the Foundation, certainly threaten the income flow to the Foundation and thence the charities it supports, and even perhaps the existence of the Foundation as a substantial entity. In a situation which has been changing almost daily since September, things will certainly have shifted again by the time these words are read. But at the core, the Foundation is supported through an annual donation of 5% of Northern Rock plc's pre-tax profits, so if there is no bank or no profits, clearly there can be no income flow to the Foundation. However good the Foundation’s financial planning and management, it does not have any other funding or income to rely upon to maintain any of its work in the future.
In a similar way, while it had always been expected that the board of National Lottery operator Camelot Group would wind up the Camelot Foundation by 2009, it was not anticipated that the Foundation would be told this September – just a month after the lottery licence renewal – that its funding would actually end immediately, leaving the foundation's budget £2m short. Again, this is completely outside the Foundation’s control, and it too is dependent on income flows from the corporate body. And it too will have to cease funding many good causes, in some cases abruptly so. The Foundation is now set to close in March 2008, and all staff will be made redundant.
So is this risk – the lack of control over their existence – a price worth paying for the benefits that corporate foundations can bring?
Or is there a better model we can find at the point of establishment of such foundations? This would be a model that, alongside providing immediate social returns to the company, would also build a secure endowment or other long-term fund to secure some greater independence for the foundation, as well as greater security for the charities being funded.
Without that, the greater risk I see ahead is that of the corporate sector as a whole being tainted with a cavalier reputation about the way it regards charities, and even philanthropy.
David Emerson is chief executive of the Association of Charitable Foundations.
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