Philanthropy by Decree

• Author: Giacomo Boesso,Fabrizio Cerbioni,Andrea Menini,Antonio Parbonetti
• DOI: http://doi.org/10.1002/nml.21122
• Date: 01 March 2015
• Published date: 01 March 2015

197

N M  L, vol. 25, no. 3, Spring 2015 © 2015 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/nml.21122

Journal sponsored by the Jack, Joseph and Morton Mandel School of Applied Social Sciences, Case Western Reserve University.

Correspondence to: Giacomo Boesso, University of Padova, Economics and Management, Via del Santo, 33–35123,

Padova, Italy. E-mail: giacomo.boesso@unipd.it.

Research Articles

Philanthropy by Decree

EXPLORING THE GOVERNANCE AND PHILANTHROPIC

STRATEGIES OF FOUNDATIONS OF BANKING ORIGINS

Giacomo Boesso, Fabrizio Cerbioni, Andrea Menini, Antonio Parbonetti

University of Padova

This article investigates the relationship among nonprofit foundations’ choice of philan-

thropic strategy (expressive, receptive, proactive, and collaborative) and sound governance,

as measured by board capital (competencies and networks), board processes (planning,

control, evaluation, and so on), and chairman power (entrenchment and tenure). Using

a sample of fifty-one Italian foundations of banking origins, this article shows that high

levels of board capital, complete board processes, and chairman long tenure are positively

associated with proactive and collaborative philanthropic strategies.

Keywords: governance, philanthropy, board capital, board processes, chairman power

SCHOLARS, POLITICIANS, AND PRACTITIONERS expect foundations to play the unique

role of social merchant banks to facilitate the positive impact of nonprofi t organizations. Pre-

vious literature (Center for Eff ective Philanthropy [CEP] 2004; Ostrower and Stone 2007)

and regulators (European Commission 2005; US Senate Finance Committee 2004) have

argued for the need for nonprofi t organizational effi ciency (governance) in order to achieve

this objective.  is article extends this view by analyzing the role eff ective governance plays in

shaping foundations’ philanthropic strategies.

Although the nonprofi t literature has extensively investigated the composition, role, respon-

sibilities, and characteristics of nonprofi t boards, the reviews of this literature (Du Bois et al.

2007; Ostrower and Stone 2006) demonstrate a lack of research on the causal link between

governance and organizational performance. As a pivotal point for approaching the issue,

Brown (2007) suggested analyzing boards’ strategic contributions, while practitioner-oriented

publications, such as those of the Center for Eff ective Philanthropy, developed frameworks

with which to analyze governance’s key contributions to strategic planning (CEP 2004).

Many of these reports extend the seminal work of Green and Griesinger (1996), who isolated

fi ve activities of nonprofi t board that were related to good governance: strategic planning,

policy formation processes, program control, fi nancial planning, and resource development.

Nonprofi t Management & Leadership DOI: 10.1002/nml

198 BOESSO, CERBIONI, MENINI, PARBONETTI

More recent studies have acknowledged board motivation and board capital as drivers of good

governance. Inglis and Cleave (2006) proposed a framework composed of six “ intangible”

attributes for good governance: self-esteem, learning through community, helping the com-

munity, individual relationships, unique contributions to the board, and self-healing.

We argue here that diff erent combinations of these governance activities and attributes lead

to diff erent strategic approaches. No study to date has sought to determine how governance is

associated with nonprofi ts’ strategic decisions.  erefore, this article investigates the association

between the choice of the philanthropic strategy (expressive, receptive, proactive, or collabora-

tive) and governance, as measured by board capital (directors’ competencies and networks),

board processes (planning and control mechanisms and systems, information collection and

use, members’ evaluation and timing), and chairman power (entrenchment and tenure). To test

our hypotheses, we surveyed eighty-eight Italian “foundations of banking origin” (FOB).

Italian FOBs are legal entities created twenty years ago when the Italian legislature privatized

the public banking sector and separated banking activity from philanthropic action, thus cre-

ating by decree the most important philanthropic players in the country. In 2009 the eighty-

eight FOBs managed more than 60 percent of Italian foundations’ assets, and their fi nancial

portfolios were valued at more than €49.6 billion. Because of their peculiar genesis, FOBs

provide an ideal setting in which to study the association between governance and philan-

thropic strategy.  e absence of a strong founding body (for example, a family, a company, or

other individuals) may lead to a lack of strategic goals, thus making the governance process

pivotal in shaping eff ective philanthropic strategies. Moreover, by studying foundations in a

single country, we avoid country-level institutional diff erences among foundations.

 e article is organized as follows: the fi rst section builds on existing literature to generate

our hypotheses; the second section presents the sample and the method; the third section

highlights the results; and the fourth and fi nal section concludes.

Theoretical Background

and Testable Predictions

Although foundations are important players in the nonprofi t sector, and their number and

signifi cance are growing internationally (Lecy and Van Slyke 2013), few studies have investi-

gated their boards’ role in their strategic planning. Several studies have examined how non-

profi t boards’ performance can aff ect organizational performance (Brown 2007; Cornforth

2003; Green and Griesinger 1996), how the institutional and social context aff ects boards

(Fredette and Bradshaw 2012), the behavior, decision-making processes, and relationships

within and outside the board (Frumkin 2010), and changes in board composition and action

(Gabielsson and Huse 2004), but only a few studies mention the relationship between foun-

dations’ governance and strategy formulation (Brown and Iverson 2004; De Andrés-Alonso,

Azofra-Palenzuela, and Romero-Merino 2010; Porter and Kramer 1999).

One possible reason for this omission is the specifi c governance environment in which foun-

dations move.  e mainstream literature on governance is based on profi t maximization and

agency theory, but foundations’ directors (trustees) face diff erent governance problems than do

for-profi t companies. Although managerial remuneration, takeover markets, and the owners’

active monitoring are less important in foundations’ environments than in for-profi ts’ environ-

ments, stakeholder management, social value creation, and community management are more