Enterprise Foundations and Faithful Agency as Drivers of Sustainable Long-Termism in Philanthropy

Abstract

The literature on enterprise foundations – foundations that own companies – is booming. As something new, this article compares the (civil law) public good enterprise foundation with the (common law) perpetual purpose trust. While the article is focused on Danish and US law, the analysis and discussions are designed to be useful for anyone interested in enterprise foundation law. The article offers insights on enterprise foundations as ownerless special-purpose institutions with legal personhood becoming majority owners of an otherwise traditional enterprise. The article bridges existing comparative law scholarship on civil law foundations and common law trusts in the light of recent developments within enterprise foundations and similar hybrids in Europe and the US. The US Patagonia perpetual purpose trust and the Danish Novo Nordisk enterprise foundation are used as examples of the different approaches in common law and civil law. Although trusts and foundations may functionally appear remarkably similar, significant differences exist. The article discusses a broad range of policy arguments regarding public good variants of the Danish enterprise foundation model. It argues that enterprise foundations may function as drivers of sustainable long-termism in US business and philanthropy, and explains how and why. Particularly, the article highlights that the ‘purpose lock’ and ‘asset lock’ combined with strong supervision powers may deliver a non-profit entity which includes public good distributions as well as responsible and active ownership, taking the hard edges off capitalism. Arguably, the public good enterprise foundation is one of the ‘queens’ of non-profit succession planning.