Blogpost September 2017

by Anne-Sophie Oehrlein

 

Transparency – a missed opportunity for (corporate) foundations

At the beginning of the year, I worked on a project which aimed to analyse and compare the financial and organisational structures of various corporate foundations. My initial reaction, “What an interesting assignment!” Immediately, I started my research with a lot of ambition and curiosity – not realising that this attitude would be challenged early and often. Over the course of examining databases, foundation websites, and annual reports, I have become frustrated and somewhat disillusioned. Unfortunately, most of the corporate foundations turned out to be more of a black box than a beacon of transparency.

This realisation is probably not surprising for anyone working in the non-profit sector, where the demand for more transparency has been omnipresent for a long time. However, non-profit organisations in Germany are still not legally obliged to report on their activities. Due to this circumstance, Transparency International launched the initiative Transparente Zivilgesellschaft (Transparent Civil Society) in 2010. Members voluntarily commit to disclose relevant information such as the source and use of their funds. As of today, 892 organisations have signed this agreement, but only 134 out of more than 20,000 German foundations are among them[1].

Foundations especially should have a major interest in a more transparent non-profit sector. More than 50% of foundations operate as grant-making organisations[2] and everyone who has ever submitted an application knows that there is one aspect foundations demand more than anything else from their applicants: transparency. This requirement is, of course, important and legitimate. But shouldn’t grantees be equally entitled to request the same transparency from their funders? Many non-profit organisations rely on their reputation. Being aware of how and with whom their funders work is, therefore, critical means to avoid conflicts of interest and external defamation. But foundations themselves should also be interested in maintaining their reputation and developing their public legitimacy. An open portrayal of their organisation and finances should be the starting point for all foundations to gain recognition and trust.

The lack of transparency is a missed opportunity for foundations. Given their role as intermediaries between companies and the non-profit sector, corporate foundations are particularly qualified be more transparent. The non-profit sector is often accused of being less professional than the private sector. This implies too little use of well-tested management methods, operational inefficiencies, and the like. Many corporate foundations are closely linked to large and established companies, which allows them to champion the application of business professionalism in the non-profit world. According to the German economist Prof. Dr. Ludwig Theuvsen, increasing transparency helps to guarantee quality, increase efficiency, and control the use of resources.[3] Therefore be an important step forward.

As of 2017, Germany’s largest companies are required to report on their non-financial activities, including their societal engagement and sustainability strategies. Hopefully, this mandatory reporting will spark the debate on transparency and reporting standards of foundations as well.


 


[1] Transparente Zivilgesellschaft – Die Unterzeichner: https://www.transparency.de/Die-Unterzeichner.2050.0.html

[2] Stiftungen in Deutschland. Zusammenfassende Ergebnisse und Handlungsempfehlungen. Hertie School of Governance & Universität Heidelberg (Centrum für soziale Investitionen): Briefing Paper 2, 2016.

[3] Ludwig Theuvsen. Professionalisierung des Nonprofit-Managements durch Governance-Kodizes: Eine Analyse der Transparenzwirkungen: Wiesbaden, 2011.