Corporate Charitable Foundations, Executive Entrenchment, and Shareholder Distributions

Why do for-profit corporations have charitable foundations? Charitable foundations are burdensome to create, costly to administer, may be constrained by payout requirements and excise taxes, and are not necessary for corporations to make charitable donations. Yet as of 2013, 203 of the S&P 500 publicly traded companies had such foundations. That corporate foundations are so common despite their costs suggests that foundations create substantial benefits for corporations or corporate managers. Our new research demonstrates that corporate foundations are a sign of, and vehicle for, self-dealing by entrenched corporate executives.

We demonstrate that foundations play a role in self-dealing in two … Read more