Foundation Owned Firms – A Comparative Study of Stakeholder Approaches

Abstract

How do policy and performance of firms change with variations in the stakeholder approach? We compare foundation owned firms (FoFs) and family firms, with and without codetermination. As foundations have no owners, the impact on corporate governance of residual claimants might be weaker and the impact of other stakeholders stronger. We find that German foundation owned firms are more labor intensive relative to matching firms. But their wages and their hiring and firing policy are about the same. Their financing policy is more conservative. Their financial performance is slightly weaker. Apart from financing policy, codetermination has similar effects. These findings indicate a stronger impact on corporate governance of employees in FoFs, combined with long-term orientation.

Keywords: Stakeholder Approach, Foundation Owned Firms, Codetermination, Privileged employee orientation, Profitability

JEL Classification: D22, D24, G32, G35, L21