Abstract
The goal of this article is threefold. First, it aims at understanding the dynamic positions of foundations (institutional proximities and purposes, approaches and roles) relative to church, state, market, and civil society. The institutional factors behind the transformation of the small and heterogeneous set of foundations existing in the country in the late 1980s, under scattered and restrictive regimes, into a relatively sizeable and influential sector of formally homogeneous nonprofits are explored. Second, it approaches the conceptualization of foundations in Spain and describes the recent evolution and current configuration of the sector with 2009 (year of the first foundation census) and 2014 (latest estimate available) as reference dates—illustrating them in comparative perspective. Third, its goal is to shed light on their advantages and disadvantages for relevant stakeholders in the context of evolving institutional proximities, foundation models, and prevailing typologies. In order to structure the discussion, the purposes, approaches, roles, benefits, and drawbacks of Spanish foundations will be compared with the German and U.S. anchors as depicted by Anheier and Hammack in this issue.
Introduction
Spain has a centuries-old tradition of voluntary, beneficent, or philanthropic organizations, including foundations understood according to civil law tradition—as endowments voluntarily donated in perpetuity for charitable purposes with their own legal personality. This tradition is mostly rooted in religious values of charitable giving and in the strong presence of the Roman Catholic Church in the public sphere, social welfare, and education. To a lesser extent, it is based on the secular initiatives of wealthy, enlightened elites, who endowed foundations under a build-out role and for specific relief purposes such as building hospices, hospitals, or schools, or meeting the needs for social care in their respective communities.
However, the Spanish foundation sector—understood as a set of formally homogeneous organizations that share the self-understanding of belonging to the same field and involve in collective action to represent and advance their own interests—only dates back to the late 1970s. The first visible milestones of its emergence were the creation of the “Centro de Fundaciones” or Spanish Foundation Centre in 1977 to channel collective efforts of foundations to influence their institutional environment, and the recognition of the right to found for general interest purposes in the 1978 democratic Constitution (Rey-Garcia & Puig-Raposo, 2013).
Today, Spain is home of a relatively sizeable and predominantly young foundation sector, encompassing one of the largest populations of both registered and active public benefit foundations in Europe. Growth of these organizations stands out also in the context of the overall scale of the nonprofit sector. From being almost insignificant in numbers in 1977—year of the first democratic elections—foundations amounted in 2005 for approximately half of all organizations with nonprofit tax status in the country—the other alternative being public utility associations (García Delgado, 2009).
The main goal of this research consists of understanding the distinct positions, roles, and performance of contemporary Spanish foundations in the broader context of the nonprofit sector or civil society, and relative to Germany and the United States, our comparative anchors. In order to achieve that goal, we first explore the path-dependencies that have shaped the evolving institutional proximities and roles of these organizations until the recent emergence of a foundation sector. Second, foundations are conceptualized and the forces whereby they have transitioned from marginal to numerous, mainstream, and influential nonprofit organizations (NPOs) in the course of four decades explored. Its latest growth and current scale are assessed under a comparative light. Finally, foundation types are discussed against the background of the transformation of the foundation model of the country, in order to understand which difference being a foundation makes in terms of benefits and drawbacks.
The Evolving Institutional Proximities, Purposes, Approaches, and Roles of Spanish Foundations
Historical embeddedness goes a long way in explaining not only the late institutionalization of Spanish foundations relative to the United States, but also their distinct position and purpose–approach–role triangulation in contrast with both our two comparative foci. In order to depict their dynamics across these dimensions, we will adopt the conceptual framework proposed by Anheier in his introduction to this issue, and specifically the institutional proximities mapping (Figure 1) and the foundation triangle (Figure 2; Anheier, 2018).
The civil law concept of foundation emerged in Spain in the late 19th century from the alluvium of Roman and German law and the practices of Christian philanthropy (Alli Turrillas, 2010), in a context of continued hostility by different political regimes. In the 1820s, the liberal revolution ruled out or limited foundations, in the understanding that mortmain (assets committed to perpetuity) were unproductive tools for preserving the privileges granted to the church and the nobility by the absolutist regime. From 1849 onwards, a new regulatory framework formalized the role of the state as the one arbiter and source of public goods and sanctioned the existence of foundations only as marginal private initiatives in social welfare. Early 20th century regulations constrained their investment practices, resulting in massive decapitalization (Rey-Garcia & Puig-Raposo, 2013).
The first contemporary foundations endowed by bourgeois families were frequently in proximity to their religious practices and focused on relief purposes through a mix of grant-making and operating approaches, playing a build-out role relative to the government. The late 19th and early 20th centuries witnessed the return to the country of affluent emigrants from Latin America (“indianos”), who endowed foundations for specific purposes. They started free-of-charge schools, nursing homes or hospitals; promoted higher education institutions (the case of the Fundación Vizcaína Aguirre, founded 1916, and the Jesuit University of Deusto); or installed public utilities in the founders’ home towns. Nevertheless, the scale of this first wave of mostly secular, private, independent, family foundations cannot be overstated.
The Francoist regime (1939-1975) oversaw two long-range developments with regard to foundations and other third sector organizations. First, the creation of three relief-oriented, service providing nonprofits that would become the grounds of the third sector, and still rank among the largest and more influential today: the Spanish Red Cross, the National Organization for the Blind or ONCE (that created its own foundation in 1988), and the confederation of Catholic charities for social assistance or Cáritas. These nonprofits have historically enjoyed a corporatist relationship with the State, including distinct legal status as “special entities” and extensive access to public funding—subsidies, contracts, and fundraising channels—most notably a share of the State monopoly of national lotteries. All in exchange for the political support of the constituent populations they represent and deliver services to (Rey-Garcia, Alvarez González, & Valls-Riera, 2013).
The second development consisted of the creation of a small group of fully and substantially endowed family foundations, in consonance with the U.S. model of grant-making, independent, general-purpose foundation. The Juan March (1955), María Francisca de Roviralta (1959), Marcelino Botín (1964), Pedro Barrié de la Maza (1966), or Ramón Areces (1976) foundations still rank among the most visible family foundations nowadays. They were endowed by their founders with shares of the firms they owned, for example, Santander and Pastor Banks or El Corte Inglés, the largest retailer in the country. Their special legal status and substantial endowment safeguarded founders’ intent and granted them independence from State interference in terms of asset investment policies (Rey-Garcia & Puig-Raposo, 2013). However, their boards included public authorities. Many activities were developed in close coordination with the state government, particularly in the areas of education (in a complementarity role), culture, and research (in a substitution role). In terms of purposes, protection displaced relief, and grant-making became a powerful tool for implementing new solutions (innovation) and creating and controlling regional elites. The most comparable and closer foreign coeval for this second wave of family foundations would be the Portuguese Gulbenkian Foundation.
The emergence of a foundation sector in Spain since the late 1970s was predated by what Pérez-Díaz (1993) called the “return of civil society” to the country. During the last four decades of the 20th century civil society revived, understood not only as social institutions such as market and the third sector but also as social capital, a public sphere, and a culture of civic engagement. On the one hand, developing civil society was one key explanatory factor of the successful process of democratic transition and market economy consolidation in Spain. On the other hand, civil society became established in the course of such process. Once a preindustrial economy, with a tradition of authoritarian governments, and a Catholic-dominated culture, Spain became a modern state based on the dynamic interaction of economic and class interests, on a market society, and on a growing voluntary sector (Pérez-Díaz, 1993).
Thus, after the restoration of democracy in 1976, a new third sector regime emerged in the context of consolidation of parliamentary democracy, integration in the European Common Market, a welfare state deployed through a new federal-like government structure (with 17 autonomous communities and 2 autonomous cities, each with their own parliament and government, and a few with a distinct tax regime), and speedy economic growth until 2007. Specifically, the new position of foundations was characterized by progressive secularization, and a new favorable legal and tax framework (with two milestones in 1994 and 2002).
Estrangement from church and a growing understanding with the state and regional governments—foundations entering new areas of activity connected to policy such as international cooperation, regional development, environment, or research and innovation; on a mainly complementary or innovative role—were combined with increasing proximity to the market. A new generation of philanthropic entrepreneurial families, a growing population of ordinary citizens, and a broad variety of organizations, both public and private—from firms to public agencies, and also other nonprofits and social economy entities such as savings banks or cooperatives)—entered the field as founders or donors (Rey-Garcia et al., 2013). The operating or mixed approaches became the most prevalent.
A new wave of foundations oriented toward change superposed over prior layers focusing on relief and protection purposes. The turn of the 21st century witnessed the enrichment of the traditional complementarity and substitution roles with a growing portion of foundations that aims at innovating at the borders between different areas of activity, sectors, or models of operations (e.g., through social entrepreneurship, cross-sector partnerships, technology-intensive programs, program related investing, or creation of spin-offs). However, other innovative formulas such as social impact bonds or venture philanthropy have not yet consolidated in the country (Rey-Garcia & Alvarez-González, 2015).
Conceptualization of Foundations in Spain and Institutional Forces Shaping the Current Configuration of the Sector
The complex historical interdependency of the Spanish foundation sector with both the state and religion requires ex ante, careful clarification of our unit of analysis across the lines of the civil, ecclesiastical, and governmental spheres. Similar to Germany and other civil law countries, foundations are recognized in Spain as a distinct legal form, by contrast with the United States and other common law systems, where no such legal definition exists (Rey-Garcia & Puig-Raposo, 2013). The sector as hereby understood includes only foundations constituted under private law, which are required to pursue public benefit purposes (different from Germany, in Spain a “foundation” cannot pursue private benefit goals). Since 1994, foundations are consistently defined by the Spanish law as organizations with an endowment and no members that have their own legal personality, are subject to a nondistribution constraint, aim at broadly defined public benefit purposes of their choosing, have been constituted and inscribed as foundations in an ad hoc public registry, are of a private nature to the extent that they are basically subject to state-wide civil law fundamentals, and are subject to public supervision (Rey-Garcia & Alvarez-González, 2011).
Therefore, foundations that are subject to either canon law or public law are excluded from the scope of this research. Similar to Germany and different from the United States (see Anheier, Förster, Mangold, & Striebing, 2018; and Hammack & Smith, 2018, respectively), ecclesiastical foundations constitute a distinct legal category in Spain. The Catholic Church hosts an unknown number of pious endowments in perpetuity devoted to strictly religious purposes (worship, preaching, etc.). These nonautonomous pious foundations are excluded from our analysis as they are incorporated and ruled according to ecclesiastical law and to the agreements between the Spanish state and the Holy See in place since 1979. Regarding autonomous pious foundations, they acquire civil legal personality and can access the same tax breaks as private law ones, provided their inscription in the registry of religious entities of the Ministry of Justice (currently listing a total of 423 religious foundations). Furthermore, churches and religious entities control private law foundations devoted to education, health, or social services–related purposes that will be included in our estimates (Beneyto Berenguer, 2007; Ministry of Justice, n.d.).
Along the same lines, a small number of public foundations constituted under administrative law, mainly in the field of public health provision, are excluded from our object of study. However, “public sector foundations”; that is foundations constituted and operating under private law that are directly or indirectly controlled by public entities (as public sector actors contribute the majority of their endowments), fall within the scope of this research. Different from the United States, where foundations created by governments and public agencies do not constitute an important category (Hammack & Smith, 2018), in Spain foundations controlled by regional/provincial/local governments, the state, or public entities such as universities, hospitals, or research institutes, have amounted to 9% to 10% of all active private foundations between 2009 and 2014 (Rey-Garcia & Alvarez-González, 2011, Rubio Guerrero & Sosvilla Rivero, 2016).
Once the unit of analysis has been clarified, the country-specific economic and regulatory institutional factors, state and regional policies, and cultural factors (DiMaggio & Anheier, 1990) that shape the recent development and current configuration of the Spanish foundation sector must be acknowledged. Coercive isomorphism originating from governmental authorities has been a key factor, starting in 1994. First and foremost, by setting and enforcing a statewide, consistent conceptualization and legal framework for all foundations under private civil law and an advantageous tax regime for them and their donors. It should be noted that fundamental regulations do not establish subtypes of foundations under private law, with the exception of public sector foundations, which are defined in the 2002 law, and banking foundations born from the restructuring of traditional savings banks, subject to their own specific regulatory framework and protectorate. Therefore, U.S. differences between “private foundations” and community foundations that are “public charities,” or between “independent grant-giving foundations” and “endowed charitable services providers,” do not apply (Hammack & Smith, 2018). In particular, the U.S. “community foundation” typology is of limited application, as Spanish foundations raising funds from the public are neither engaged in grant-making, nor tend to operate within a defined geographic area.
Second, and in contrast with the minimalist conceptualization prevailing in Germany (Anheier et al., 2018), the Spanish law clearly delineates foundations from other organizational forms and specifies their governance in great detail, positioning public authorities as custodians who oversee the functioning of the board over the whole life cycle of the foundation, from creation to extinction (Alli Turrillas, 2010). By law, public foundation protectorates are ultimately responsible for guaranteeing compliance with founder’s intent and with the public benefit mission of the foundation (duty of loyalty), and for controlling overall economic performance and specifically preservation of assets over time (duty of care).
The basic civil status for all foundations established under private law is currently regulated in the statewide “Ley 50/2002, de 26 de diciembre, de Fundaciones.” This law assumes 30,000 Euros as the minimum endowment “sufficient” to start a foundation. Similar to the United States and in opposition to Germany, there is a minimum payout requirement. Foundations must spend at least 70% of their net income—after deducting the proportional share of administrative and personnel expenditures—in charitable purposes. Board members must perform their duties for free, although they can be reimbursed for expenses incurred, and also take salaried positions in the foundation for duties other than care and loyalty. The law allows foundations to develop mission-related or mission-complementary economic activities, and to hold unlimited shares of limited liability companies. Finally, foundations must benefit only “generic collectives.” This excludes benefitting one organization in particular, unless pursuant of public benefit purposes, and also the founder, the board members, and their kin. The employees of a firm and their relatives, however, may be the main beneficiaries of foundation activities (Foundation Civil Law, 2002).
The basic tax status of NPOs, foundations included, is contained in the recently reformed “Ley 49/2002, de 23 de diciembre, de Régimen Fiscal de las Entidades sin Fines Lucrativos y de los Incentivos Fiscales al Mecenazgo,” together with the benefits for patronage. All foundations can opt for the special tax regime foreseen for NPOs and public entities, combining their own full exemption with partial deductions for their donors (30% for individuals and 35% for legal persons). Regardless of the option for the general or the nonprofit-specific tax regime, the aforementioned payout requirement holds. However, whereas foundations and their donors can access tax breaks as soon as they opt for this regime, associations—the other alternative to incorporate a nonprofit in Spain—need a declaration of public utility from the government in order to take advantage of such tax benefits, which may take some years to be achieved (Foundation Fiscal Law, 2002).
However, this homogeneous national framework currently overlaps with additional regulations that are set and enforced by regional authorities. This results in a second layer of geographically fragmented and intricate regulations, and sometimes—from the perspective of foundations—arbitrary compliance system, due to differences in supervision and enforcement criteria. Fifteen out of the 17 regional governments have issued their own complementary foundation regulations. Complexity escalates in the case of public sector foundations due to their hybrid status. Regarding supervision of foundations, it corresponds to over 2 state and 21 regional public protectorates and registries, which foundations are ascribed to depending on their geographical scope and area of activity. These administrative units are mostly understaffed and sometimes lack information and communication technologies and specific training. This prevents public access to the annual reports and documents deposited by foundations in public registries, and produces variability in the enforcement of regulations by protectorates.
Foundations have not only become a distinct subsector under homogeneous rules but have been also driven to increased similarity by normative pressures derived from ad hoc training, gradual professionalization, creation of professional networks, and self-regulation. Whereas collective action in the third sector has been traditionally structured along areas of activity—with social services nonprofits and international cooperation nongovernmental organizations leading in the advancement of their respective interests—foundations are the only NPOs that have self-organized according to their legal form. They have undertaken successful collective action toward further legal and fiscal advantages, particularly relative to tax exemptions, liberalization of asset investment policies, reporting requirements, and tax deductions for private patronage. The Spanish Association of Foundations, with around 900 members, and, to a lesser extent, also regional associations (most notably the Catalan one, with around 500 members), have been instrumental in that process. The fact that the national association is the second largest in Europe, after the German Bundesverband Deutscher Stiftungen, illustrates the degree of institutionalization achieved by the sector (Rey-Garcia & Alvarez-González, 2015).
Furthermore, emulation of organizations that are perceived as successful is likely one of the main drivers behind the entrance of new profiles of founders, other than wealthy families, to this increasingly consistent field. This mimetic isomorphism is particularly relevant when it comes to explaining the recent proliferation of public sector and corporate foundations. Parallel to the rise of corporate social responsibility in the business world, most corporate foundations were created in the 2000s and, to a lesser extent, in the 1990s, sometimes as substitutes but more frequently as supplements to the corporate social responsibility function of firms. Seventy-five percent of the 35 largest publicly held companies in Spain (those listed in the IBEX35) have created foundations, the probability increasing with firm size (PWC, 2016).
Demographics of Spanish Foundations in Comparative Perspective: Growth and Size
Foundations thus defined experienced sustained growth between 1994 and 2008. Two legal milestones fueled that process, starting in 1994 with the passage of the first foundation law, and accelerating it from 2002 onwards with the passage of the second one, currently in force. The annual average of new foundations rose from 80 in the 1980s, to 255 in the 1990s, and 458 between 2003 and 2008. The evolution of founding rates suggests that both the 1994 and the 2002 laws stimulated the creation of new foundations through the provision of clear legal rules and tax incentives nationwide.
Growth stopped in 2009, as the full effects of financial crisis started to show, including decline of founding rates, dissolutions and mergers, transformation of active into lethargic foundations, and cutbacks in funding of active ones. As a consequence, both the total number of active foundations and the portion of those with employees decreased at −7.6% and −16.6%, respectively, between 2008 and 2014. Whereas in 2009, 70% of registered foundations showed recent signs of mission-related activity (i.e., had deposited annual accounts or activity plans in the registry, had appointed board members or modified their statutes, had an active web site, answered to surveys, etc.), the activity rate had dropped to 63% in 2014 (Rey-Garcia & Alvarez-González, 2011, Rubio Guerrero & Sosvilla Rivero, 2016).
Despite this slowdown, most recent estimates (2014) account for 14,120 registered public benefit foundations—Spain being one of the eight European countries with more than 10,000 registered foundations—and judge 8,866 as active. Overall, 70.6% of foundations active in 2014 were created after 1994 (Rubio Guerrero & Sosvilla Rivero, 2016)—another similarity to Germany, where 71% were established since reunification. Total population and expenditure data available for Spain, Germany, the Netherlands (the only three European countries for which data on active foundations are available according to Donors and Foundations Network in Europe [DAFNE], 2016), and Italy and Portugal (the other two countries classified under the “Mediterranean corporate” foundation model) are summarized in Table 1.
The Spanish Foundation Sector in European Comparative Perspective: Number of Organizations and Total Annual Expenditures.
Source. Author’s elaboration from DAFNE (2016); for Germany, Anheier et al. (2018); for Spain, Rubio Guerrero and Sosvilla Rivero (2016); for Portugal, Carvalho (2016).
Regarding economic size and according to DAFNE (2016), Spanish foundations rank third in Europe in terms of total charitable expenditures, only after Germany and Italy. Year 2014 estimates for Spain amounted to endowments of 7,466 million Euros, assets of 21,469 million Euros, total income of 7,398 million Euros, and total expenditures of 8,066 million Euros (Rubio Guerrero & Sosvilla Rivero, 2016). Aggregate financial estimates, however, fall short of providing valuable insights into the sector from a comparative perspective. First, some countries lack an updated census of foundations and reliable data on their endowments and expenditures are rarely available. Second, the distribution of available data on endowments and expenditures within countries is highly skewed, and Spain is no exception. Third and last, differences in how the unit of analysis is defined and categorized (private benefit vs. public benefit foundations, private vs. public law, endowed vs. fundraising, etc.) hamper comparison. Even within continental Europe, where foundations are commonly understood as nonmembership NPOs (private, self-governing, nonprofit distributing, and serving a public purpose) with an endowment, the minimum size of the latter varies broadly, as do payout requirements (Hopt et al., 2009).
The most updated comparative financials for Spain in European context come from the EUFORI study (Gouwenberg et al., 2015; Rey-Garcia & Alvarez-González, 2015). Though accompanied by relevant methodological limitations (quantitative data come from a survey with notably low response rates in most countries, in particular relative to economic data), on the positive side the study focuses on a homogeneous subset of foundation activity—research and innovation (R&I)—and shares the same conceptualization of the unit of analysis and questionnaire. The average expenditures and average assets’ volume of Spanish R&I foundations, though ranking among top 10 countries, fall right behind Nordic and Central European countries and the United Kingdom. Average assets of German R&I foundations are about 10 times those of Spanish R&I foundations, and the percentage of German R&I foundations receiving income from endowment more than doubles that of Spain. However, average expenditures of German R&I foundations only double those of Spanish ones, and the expenditures to assets ratio of Germany is around one fourth of Spain’s. Less than one fifth of total R&I foundations in Spain have a predominantly grant-making approach, versus almost three quarters in Germany.
Regarding the philanthropic expenditures/assets ratio, Spain ranks among the highest values if R&I expenditures are considered. This ratio is influenced by the existence of a legal or tax requirement for a minimum endowment (existing in Spain, though symbolic) and/or a minimum payout rate that may be calculated relative to assets (the U.S. case) or to revenues (the case of Spain). However, it is also a proxy for foundation productivity and higher values suggest that, ceteris paribus, the organization’s capability to generate charitable expenses is greater. The ratio is particularly meaningful in a Spanish context because the presumption of unproductivity of foundation assets was the main criticism that led to the de facto dismantling of this type of organization in the early 19th century. Data for the top 12 countries in terms of average assets of their R&I foundations are summarized in Table 2.
Spanish R&I foundations in European Context.
Note. R&I = research and Innovation.
Source. Author’s elaboration from Gouwenberg et al. (2015).
Similar to the United States and Germany, endowment sizes and volume of annual income/expenditures are highly concentrated. Spain hosts a few large foundations that distort the picture of a sector dominated in numbers by micro- and small-sized foundations, a significant portion of which lacks paid staff. Even larger ones tend to rely on external services, rather than on in-house staff. Whereas the largest Spanish foundations tend to be corporate or endowed family ones, the majority lacks a relevant endowment (the portion of foundations with endowments more than 2,400,000 Euros raised from 6.6% in 2008 to 8.6% in 2014) and has a diversified income structure. A total of 54.11% of income comes from private and public contributions, 36.15% from fees from services, and 9.74% from returns on investments. Overall, 15.53% of income comes from public sources. In 2014, 20.5% of active Spanish foundations had less than 30,000 Euros of annual income, 41.2% had between 30,000 and 500,000 Euros, and only 5% had income more than 10 million Euros. Human resources amounted to 410,689 people with varied levels of time commitment: 213,683 paid staff, 75,563 board members, and 121,443 volunteers (Rey-Garcia & Alvarez-González, 2011; Rubio Guerrero & Sosvilla Rivero, 2016).
Regime Types, Foundation Typologies, and Advantages and Disadvantages of Spanish Foundations
In terms of the regime types reviewed in the “Introduction” to this issue, Spain would be closer to Germany than to the United States in terms of varieties of capitalism, and welfare and nonprofit regimes. Similar to Germany, the contemporary Spanish foundation sector is in closer institutional proximity to the State than foundations in the United States, with marked cooperation with public agencies in fields characterized by significant public spending. More specifically, Spain has been traditionally classified within the corporatist third sector regime type as the “Mediterranean corporate” foundation model, together with Italy and Portugal. Under this regime, the overall importance of the third sector is medium, foundations experienced a rapid recent development after autocratic experiences, and their relationship with both the State and religion is one of complex interdependency. While there is a long history of operating foundations linked to the dominant religion and running parallel to contemporary public welfare provisions in the areas of education and social services, the development of grant-making foundations has been delayed (Anheier, 2018; Anheier & Daly, 2007).
While U.S. foundations are essentially understood as charities that make grants to other nonprofits, in continental Europe a not inconsiderable portion of foundations operates their own programs and provides services. In both Spain and Germany, a majority of foundations combines the operating and grant-making approaches. While 24% of German foundations are purely operating and 25% are mixed operating-grant-making (Anheier, 2016), 74.6% of Spanish foundations consider their main approach to be operating, while only 31.9% choose grant-making. Regarding their preferred areas of activity, and according to the International Classification of Nonprofit Organizations, the most prevalent are related to culture, education, and research; followed in the distance by social services, environment, development and housing, and health (Rey-Garcia & Alvarez-González, 2011; Rubio Guerrero & Sosvilla Rivero, 2016). In terms of the foundation typology proposed in the “Introduction” to this issue, engagement foundations and professional philanthropists would be the less populated categories, with a majority portion of the sector consisting of niche or services providers (Anheier, 2018).
With regard to the comparative (dis)advantages of foundations, they are rooted by the literature on their relative (in)dependence from market and political considerations. This independence is hampered in Spain from a twofold perspective: not only almost all foundations are very weakly endowed, but the portion of foundations instrumental of business and public organizations has grown rapidly.
Evidence suggests that family foundations—those founded by individuals of the same family—though going further back in history, are not the dominant players anymore. This situation contrasts with the United States where they represent 91% of a population of 86.192 foundations (Foundation Center, 2014). One of the main reasons may be cultural, as the philanthropic propensity of entrepreneurial families in Spain—defined as the percentage that control, directly or indirectly, foundations—is much lower than the United States’ and also lower than Germany’s. Whereas 85% of entrepreneurial families owning the 100 largest family firms in the United States control foundations (a total of 164), philanthropic propensity falls to 50,5% for families owning the 200 largest family firms in Germany, and to only 21.6% for the 245 largest multigenerational family firms in Spain (with only 69 foundations under their control; Rey-Garcia & Puig-Raposo, 2013).
Not only entrepreneurial families tend to found in Spain to a lesser extent, but also younger family foundations are not fully endowed anymore. Two models of relationship between the entrepreneurial family, the family firm, and the foundations related to them have been identified worldwide, that “provide a very promising framework for exploring the international prevalence of different types of foundations” (Feliu & Botero, 2016, p. 133). Under the noncontrolling model, the main goal of the family foundation is to channel the philanthropic activity of the entrepreneurial family in a tax-efficient way. Under the controlling model, the “industrial” or “shareholder” foundation -fully endowed with shareholdings that grant control or a dominant influence over one or several family firms- is used mainly as a vehicle for maintaining control of the family firm/group within the family and into the future. Whereas in the United States the 1969 Tax Reform ruled out foundations as the primary vehicle used by U.S. entrepreneurial families to transfer control of the family firm from generation to generation in a tax-efficient way, the controlling model is extendedly used in Germany to protect its Mittlestand, as it serves as an antitakeover device (Rey-Garcia & Puig-Raposo, 2013). 1 In Spain, the law allows for controlling foundations, and in fact this was the dominant model among the second wave of family foundations. Nevertheless, the third wave of family foundations created in the 1990s and early 2000s (Esther Koplowitz 1995, Rafael del Pino 1999, Alicia Koplowitz 2003, Cellex 2003, etc.) has followed a noncontrolling model instead. Recent improvements in the tax treatment of the intergenerational transfer of family firms have compounded with the increased usage of family offices and family counsels to channel the philanthropy of entrepreneurial families. Not by chance, family foundations, which created the Spanish Association of Foundations, are losing influence within its ruling board in favor of corporate foundations.
Along these lines, Spain stands out for the relatively high prevalence of foundations that are instrumental of organizations—firms, other nonprofits, or public entities—for operating programs, delivering services, or fundraising. Legal persons founded 29% of foundations active in 2014. Thirty-four percent were public sector foundations, whereas 66% were founded by private entities (including businesses, associations, savings banks, professional associations, educational entities, foundations, religious entities, political parties, or trade unions). Among public sector foundations, 42% were founded by regional administrations, 32% by local governments, 15% by the state administration, and 8% by public entities in the areas of education, research, or health. Among private legal persons, associations (38%), firms (22%), and foundations (16%) were the most active founders. Overall, these percentages have remained relatively stable between 2008 and 2014 with one exception: the percentage of corporate foundations has doubled during that period (Rubio Guerrero & Sosvilla Rivero, 2016).
Regarding active public sector foundations, they rose from 833 (2009) to 872 (2014; Rey-Garcia & Alvarez-González, 2011; Rubio Guerrero & Sosvilla Rivero, 2016). Fiscal adjustment of the public sector derived from economic crisis caused, on the one hand, a slight decline in the number of regional foundations and, on the other hand, increased governmental control over all public sector foundations. Their popularity is explained by a set of advantages that creating a private foundation entails for public founders. First, they are used to scape from the restrictive framework of public law, thus allowing for private flexibility in hiring, paying and dismissing personnel, contracting external services, or managing assets for public benefit activities. Second, whereas public entities must focus on the public good in general, their private foundations can pursue more particular interests as far as they somehow relate to public benefit areas of activity. Third, public sector foundations bridge the public sector with business donors and civil society partners, attracting their contributions. Fourth and not least, they facilitate earmarked donations to projects developed by public entities.
Regarding corporate foundations, a recent study estimates there exist approximately 1,000 in Spain, equivalent to around 11% of total active foundations (PWC, 2016). The recent boom of corporate foundations again contrasts with the U.S. case, where they hardly represent 3% of the foundation population (Foundation Center, 2014). Twenty-seven percent of Spanish corporate foundations are related to service providers. Almost one fourth are connected to firms belonging to intensely regulated sectors such as financial services, telecommunications, and energy. Sixty-eight percent of board members occupy management positions in the related firm. The sample is again considerably skewed, as the top 5 corporate foundations in terms of budget absorb 77% of total income of a sample of 133 organizations (PWC, 2016). Corporate foundations also tend to position themselves as operating, which avoids pressures from grant-seekers, and allows for more flexible allocation of resources and reduced payouts. Furthermore, it helps justify the number of employees and manager positions within the foundation.
Most corporate foundations receive their income through annual contributions from their related firms. Notable exceptions are Fundación Mapfre, a large controlling foundation with shares of a multinational insurance company (with a budget of 47 million Euros in 2016), or the banking foundations that emerged from the recent restructuring of savings banks. It should be noted that, from the late 19th century until their restructuring in 2012, Spanish savings banks were formally incorporated as private, nonprofit foundations that combined financial (commercial banking) and social objectives, were controlled by regional politicians, and amounted to approximately 50% of the country’s banking system (Pina, Torres, & Bachiller, 2016). In 2007, the 45 savings banks existing in Spain peaked an investment of 1,824.29 million Euros in public benefit purposes (so-called “obra benéfico social”). An important portion of this investment was in its turn channeled through the savings banks’ own corporate foundations (CECA, 2008). Despite overall decrease of their resources due to financial crisis and restructuring, “la Caixa” Banking Foundation remains the largest budget of the overall Spanish foundation sector, consistently managing an average of 500 million Euros per year.
A third and very relevant subcategory of foundations created by legal persons refers to those promoted by third sector organizations, such as the “special entities” (the case of ONCE Foundation), associations (e.g., the Spanish Association against Cancer, scientific societies, or professional associations), or foundations themselves. The advantages of these foundations lie in their facilitation of fundraising, collaboration with external stakeholders, or reaching beyond associations’ membership base.
Therefore, the contemporary Spanish foundation, though formalized under a highly homogeneous legal formula, covers radically different organizational animals in terms of purposes, roles, and (dis)advantages entailed for founders, beneficiaries, and society. The common thread is that the foundation has become an extraordinarily versatile institution in Spain when it comes to pursuing any type of public benefit purpose from the private realm (for versatility of foundations as institutions, see Hammack & Anheier, 2013).
One of the main advantages of foundations for private founders consists of being largely undemocratic institutions that apply tax-protected resources to promote their private vision of the public good in the public arena (Prewitt, 2006). With regard to public founders, they are allured by the flexibility that private law regimes provide for their endeavors. While the Spanish foundation sector has distanced itself from the church, proximity to the state remains intense. Public actors are intertwined with private foundations as regulators, supervisors, founders, board members, and funders. Nevertheless, public supervision and accountability requirements to foundations are sometimes as formally intricate as ineffective in practice. The relatively high prevalence of foundations that are instrumental of legal persons—other nonprofits, businesses, or public entities—is further explained by the versatility of foundations as organizations that, on the one hand, formalize “cheap” control of other organizations, or of causes, brands, programs or initiatives; and, on the other hand, allow private donors to enjoy tax deductions.
Discussion and Conclusions
This article acknowledges the limitations of available economic data, particularly aggregate financials, to convey an accurate picture of the pluralistic motivations, material diversity, and varied outputs encompassed by the Spanish foundation sector. Instead, it qualitatively explores the historical and institutional factors that explain the relevant differences in regulatory framework, assets and mission-related expenditures, and approaches–activities–roles combinations of Spanish foundations, relative to their U.S. and German counterparts.
Using the traditional characterization of Spanish foundations under the Mediterranean corporate model as a stepping stone, and Germany and the United States as comparative foci, the main contribution of this research consists of identifying and discussing the latest traits shaping the position, purpose, approach, roles, and performance of Spanish foundations: (a) the increase in importance (numbers and influence) of foundations within the Spanish third sector during the last four decades; (b) the shift of their attributed roles from build-out to innovation, parallel to a continuous interplay between complementarity and, to a lesser extent, substitution; (c) the replacement of the historical proximity of foundations to the church by a strong closeness to the state, coupled with an increased presence of the corporate world; (d) the consolidation of the foundation across both expressive—embodying the return of civil society to the country—and instrumental dimensions as a versatile organizational form to privately pursue public benefit goals; and (e) the structural weaknesses originating from the growing importance of weakly endowed, small foundations with particular purposes that are instrumental of market or public organizations.
The Spanish foundation sector is a latecomer if compared with the United States, but stands out in European context for being sizeable and highly institutionalized. It emerged in the aftermath of a dictatorship, backed by constitutional support and adorned with the presumption of pluralism typical of civil society organizations. The sector is currently a grown-up creature of capitalist democracy, instrumental not only to structure civil society in the country but also to formalize its interface with the public and business sectors. Foundations currently occupy a central position in the third sector, not because they make grants to other nonprofits (the U.S. model) but rather because they have become themselves the fastest-growing type of nonprofit. Their relative contribution—not only in terms of number of organizations but also of volume of resources, expenditures, and influence—is probably the largest in Europe (Anheier & Toepler, 2010).
Spanish foundations are mostly operating, are part of the welfare system, tend to self-attribute complementary, subsidiary, or innovative roles, and maintain complex borderlines with the State and the business sectors. On the one hand, foundations serve to formalize individual citizens’ initiatives, embodying the value of pluralism that is inherent to vibrant civil societies. On the other hand, they are frequently instruments of corporate citizenship (“corporate” referring here to public, business, and nonprofit corporations) for reaching out to relevant stakeholders—from politicians to donors—by “serving the public benefit in enlightened but ultimately self-interested ways” (Anheier & Daly, 2007, p. 20). Beyond the values of pluralism and citizenship, available evidence further confirms the great relevance of the resources that Spanish foundations mobilize and harness (asset, cash and in-kind donations, and paid and volunteer human resources) for public good purposes within the third sector.
The dense and detailed legal framework typifying internal governance of Spanish foundations contrasts not only with the United States, where there is no legally binding definition for foundations, but rather a mention in the Tax Code, but also with the minimalist legal approach prevailing in Germany. High homogeneity in basic legal and tax features coexists with some heterogeneity as complementary regulations and their interpretation by public supervisors vary regionally. Normative and imitative pressures, reinforced by the sector’s successful collective action and increased social visibility, have driven foundations to further similarity. Foundations are currently positioned as a relatively affordable license to operate under a nondistribution constraint and to raise funds for public benefit purposes; and are frequently preferred to other alternative nonprofit forms. They are used to formalize initiatives related to public benefit areas of activity without the hassles of ownership or membership, and with the advantages of co-optative governance, immediate NPO tax benefits, largely commoditized bylaws, symbolic endowment requirements, and the social legitimacy linked to voluntary organizations.
Whereas statutory purposes of Spanish foundations are very broadly drawn up, allowing for flexible strategies and ambiguous roles, their actual goals tend to be specific. If churches, higher education institutions, and hospitals are priority beneficiaries of U.S. foundations, the areas of activity of Spanish foundations are largely diversified, with a focus on the culture–education–research triad. The preference for social relief, historically at the very core of foundation purposes in connection with Catholic-oriented philanthropy, has declined in favor of specific protection and change purposes. Also different from the United States, an operating or mixed model prevails, where an increasing number of foundations are instrumental for other organizations, raise funds from multiple sources, and manage their own programs as niche or services providers.
Though in clear proximity to Germany in terms of youth, prevalence of the operating or mixed approach, and degree of collective action, Spanish foundations are far less well endowed—thus more dependent on both contributed and earned income—and even less prone to grant-giving than German ones. The symbolic endowment required to create a foundation in Spain, coupled with the payout requirement rule, suggest that the legislator tossed aside the civil law tradition of perpetual endowments. Contrary to the German model of a sacred charter aimed at preserving the endowment and founder’s deed, Spain opted instead for a model based on small (ways to grow are limited), human resource intensive (in terms of staff, board members, and volunteers), operating nonprofits, that fundraise from all types of sources. In fact, and due to the relatively large size that characterizes boards, a majority of Spanish foundations resembles charitable purpose associations with small and coopted membership bases, rather than grant-giving, legally independent endowments typical of the liberal model. Under a U.S. lens, they would probably be considered pass-through public charities or operating NPOs, rather than private foundations.
Regarding sector structure, a few large controlling foundations, a myriad foundations founded by corporate, nonprofit, and public sector organizations, and a select group of fully endowed family foundations coexist with a majority of SME-like foundations operating in highly diverse and very specific public benefit areas of activity. Similar to U.S. foundations, Spanish ones are constrained by the relatively small size of their assets and grants (Hammack & Smith, 2018). Furthermore, most foundations have boards that are large in numbers, rarely include independent members, and tend to meet only twice per year (the minimum legally required). The potential advantages of institution and bridge building are not as evident as the risks of insufficiency and particularism. If many small U.S. foundations are mere pass-through for individual or family checkbook philanthropy, small and medium Spanish foundations may provide niche self-employment or visibility opportunities for founders. An unknown but apparently substantial number of foundations are mere fundraising vehicles for their founding organizations, be they other NPOs or public entities. Foundations are also used to equip centers operating for public benefit purposes (research and technology centers, schools, hospitals, etc.) with their own legal personality and tax benefits. The legitimacy of the “foundation” brand and its tax regime entice private patrons, as they signal that their contributions will be deployed in a tax-beneficially and socially appealing way. Many other times, foundations are utilized to formalize cross-sector partnerships (particularly public–private collaborations) or to “occupy” an emerging social cause or issue in order to become the valid interlocutor for other stakeholders, particularly public administrations and the media.
Similar to Germany, the Spanish foundation sector includes today aspects of what Anheier and Daly (2007) labeled the business model. In the United States, limitations on the voting stock of companies that foundations may hold, prohibitions on self-dealing, and reduction in amounts deductible from donations to private foundations suggest the will of legislators to draw a line between the foundation and the business sector. In Spain, by contrast, controlling foundations are legal, corporate foundations may benefit company employees, and foundations in general can undertake business activities within the limits of their mission and under a nondistribution constraint; all with the same exemptions and tax deductions as the rest of NPOs. The increased proximity of the Spanish foundation sector to the corporate world hinders its characterization under the “Mediterranean corporate” model and suggests instead that Spanish foundations have transitioned toward a mixture of the civil-society-centered corporatist model, and the business model.
Unfortunately, the organizational performance of Spanish foundations largely remains a black box, both in terms of their efficiency as subsidized entities and their effectiveness relative to their public benefit goals. The effects of these organizations on their direct and indirect beneficiaries, and on society at large, are terra incognita. Output and outcome measurement and social impact evaluation practices of Spanish foundations are in their very infancy (Rey-Garcia, Liket, Alvarez Gonzalez, & Maas, 2017). This situation, when compounded with the prevailing vagueness of missions, insufficiency of means, the lack of transparency about the allocation of resources to administrative and program-related expenses, and weak de facto public supervision can result in largely unaccountable behaviors to society (Martín Cavanna & Rodríguez, 2017).
In the context of the positive perceptions about third sector organizations that prevail in the country—in comparison with other institutions—perceptions about foundations are relatively less favorable. The few recent scandals involving foundations are connected to the funding of political parties, to public sector foundations, to foundations connected to royal family members or descendants of the dictator Francisco Franco, and to corporate efforts to influence public decision making through foundation giving. These controversies echo the call by Skocpol (2016) to understand the implications of foundations for politics. Thus, the effects of the behavior of foundations are not only an underresearched topic but also a socially relevant one. Measuring the value foundations create in terms of economic, social, and political capital and assessing who captures that value—founders, donors, managers, beneficiaries, or the broader community—emerges as the main priority in the policy and research agenda.
Footnotes
Declaration of Conflicting Interests
The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author received no financial support for the research, authorship, and/or publication of this article.