Q&A What is a corporate foundation?

How does a corporate foundation differ from other trusts and foundations?

It derives the majority of its income from a profit-making company.

How does it receive its income?

There are several models:

· as investment income on assets originally given by a company

· regular donations from a company

· an endowment linked to a company's profits

· in lieu of shares

· or money raised by a company's customers or employees.

Some examples?

· Northern Rock Foundation receives 5% of Northern Rock's annual pre-tax profits

· Lloyds TSB Foundations receive 1% of Lloyds TSB Group's pre-tax profits, averaged over three years in lieu of a dividend on their shareholding in the Group.

· The Vodafone UK Foundation receives an annual donation from Vodafone UK and from the Vodafone Group Foundation.

· The Shell Foundation was set up with a $250m endowment from Shell.

How else does a company support its foundation?

Some pay staff salaries and provide office space.

Why do companies set up foundations?

For a variety of reasons:

· as a vehicle for corporate giving that is at arm's length from core business activity

· ensures focused and structured giving

· ensures continuity of giving

· the personal motivations of the owner or founder

· reputational benefits

· a significant structural change

· provides a company with a more credible way of engaging with the voluntary sector

· to support unpopular social issues.

Shell says it set up its foundation in 2000 to provide a "transparent mechanism" for using corporate money to do good things. "[The Foundation] has been absolutely critical in allowing us to engage robustly with the outside world and has enabled us to engage as a fellow member of civil society with non-profits rather than coming in with corporate baggage," says Shell Foundation director Kurt Hoffman.

Isn't it just for tax purposes?

Not anymore. Now there are no additional tax benefits by giving through a foundation as all charitable donations attract tax relief.

How many corporate foundations are there?

126 in England and Wales, according to research conducted last year by the Smart Company. This is a 25% rise on 2003 when Business in the Community identified 101 corporate foundations.

How much income do corporate foundations receive each year?

Their total income was just over £208m in 2004/05 - about 0.6% of overall charitable income. This ranged from under £10,000 to more than £30m.

How much do they give away?

They donated some £148m to charitable causes in 2005/06.

What contribution do they make to wider corporate giving?

Their giving accounts for just 18% of total corporate giving.

What do they support?

29% have a regional focus. 78% said their funding had no link with the company's business focus. 29% support employee involvement in the community.

How independent are they?

Some claim total independence but more than half of corporate foundations source trustees from the founder company. Shell Foundation has a board of six trustees - three members from Shell, including its two most senior figures - and three external members. Around 30% run volunteering or matching giving programmes for the company's employees. Around a fifth of the Vodafone UK Foundation's budget supports the company's staff fundraising and volunteering for their chosen charities.

Are there groupings of corporate foundations?

Yes. Many building societies which floated on the stock exchange in the late 1990s set up charitable foundations to safeguard future charitable giving. Again in the 90s, utility companies created foundations to support customers unable to pay their utility bills and to fund general debt relief and counselling.

Source: Revealing the Foundations: A Guide to Corporate Foundations in England & Wales by the Smart Company. www.thesmartcompany.net/publications