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To celebrate the 100th anniversary of the Bavarian machinery company his grandfather set up in 1901, Richard Scheubeck and the firm's other family owners decided to create a charitable foundation. They put in €900,000, and Scheubeck encouraged the company's suppliers and business partners to make donations. With more than €1.1 million now in its coffers, the Scheubeck-Jansen Foundation has enough to fund its initial project: the first professorship in sensor technology at nearby Regensburg University of Applied Sciences. "We wanted to do something for the region, to set a cornerstone for a new industry cluster," says Scheubeck, 54, who chairs the foundation and serves as managing director of the family holding company.
Until recently, such generosity would have been unusual — unwanted even — in Germany. By tradition it was taxpayers, not foundations, who funded university chairs. But Germany is cutting back its spending on higher education, creating a need for more charitable giving. So far the technology position is the only privately funded professorship at the school. But at a rival university across town, charitable foundations are funding five professorships, and four more are on the way.
A new wave of business philanthropy is breaking across Europe. Corporate giving is commonplace in the U.S., where a century ago the Carnegie Corporation and the Rockefeller family pioneered a new type of corporate altruism. Their foundations remain models for companies and wealthy businesspeople, including Microsoft's Bill Gates, whose family foundation is one of the world's biggest. In Europe, however, with the exception of Britain, corporate-giving traditions were wiped out by war, inflation and the growth of the welfare state, which left firms with little incentive to dole out funds. Fueled by high taxes, governments have carried the burden of social justice. If firms gave at all, they sponsored causes that might further their business or extend their marketing. That's changing, as governments squeeze their budgets and a new, less self-interested type of charity takes hold.
There has been a sharp rise in the number of not-for-profit foundations throughout Europe. And a network of foundations is beginning to lobby for pan-European legislation. According to the Brussels-based European Foundation Centre, about a quarter of the 61,000 foundations in the European Union were established in the past decade. In Belgium, one-third of the country's 323 foundations were created after 1990. Growth is particularly strong in Germany, where more than 3,000 of the nation's 12,000 foundations have been created since 2000.
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Some of Europe's biggest foundations are also the newest. They include a €820 million foundation set up by Klaus Tschira, a co-founder of the German software firm SAP, which funds science competitions and antismoking campaigns, and a $250 million foundation set up in 2000 by Shell, the Anglo-Dutch oil giant. In Germany some newer foundations are following the example of Reinhard Mohn, who built Germany's Bertelsmann into a media powerhouse after World War II and in 1993 transferred the company's ownership to a foundation that now has about €735 million in assets. In Belgium Luc Tayart de Borms oversees the €227 million King Baudouin Foundation, which was set up by the former Belgian King, and serves as an umbrella organization for corporate and other donors. The number of private funds under its aegis has doubled in five years. Britain, which has a long history of philanthropy, is home to, among other big foundations, the $27 billion Wellcome Trust, which funds biomedical research like the genome project.
The rise in philanthropy helps fill growing funding gaps across Europe. Budget deficits have been on the rise since the 1990s owing to economic downturns and rising health and retirement costs. As a result, France, Spain, Belgium, Britain and Germany have introduced new laws — including bigger tax breaks — that encourage philanthropy. Scheubeck, for one, says the tax changes made the idea of creating his foundation "more interesting."
The new giving spirit isn't based only on pragmatism. A generational change in Europe's wealthy families has contributed to new charitable attitudes. As the entrepreneurs who rebuilt postwar Europe retire, many want to give back some of the bounty they have enjoyed. In a survey of 1,600 of the newest German foundations, the Bertelsmann Foundation found that more than 60% of them were set up by people over 60 years old — 42% of whom don't have children.
Bertelsmann's Reinhard Mohn, 83, does have children, including a daughter who is active in the foundation and a son who works at the company. And the way he set up his foundation as the firm's major shareholder means the family will continue to have an influence in the business even after his death. That's controversial. Some managers at the company have criticized the role played by his wife Liz, 63, in the recent ousters of two top executives. But Mohn is committed to his vision of improving society, and he wanted the Bertelsmann Foundation — unlike many U.S. foundations that limit their activities to providing grants — to have a hands-on role. The foundation, set up in 1977, funds only projects that it runs; its stated ambition is to influence the future shape of Germany.
Bertelsmann's latest project aims to shake up the school system. Mohn argues that German children leave school without life skills because of a stifling bureaucracy that eschews contact with the outside world. The foundation has been running two pilot projects in the company's home state of North Rhine-Westphalia in cooperation with the Education Ministry. The first project looked at education in 52 schools. The second, which started in 2002 in 278 schools, includes a scheme to retrain 5,000 teachers and give school heads greater autonomy. At the Otto Hahn secondary school in Herford, near Hanover, the changes have given Director Achim Körbitz the chance to be creative in working with local companies. A kitchen-appliance firm sent apprentices to the school to practice making service calls in English with the students as a way of showing them that "there's more to language instruction than mtv English," says a teacher there. That helps train both the students and the apprentices. "We're making use of our room to maneuver," Körbitz says.
Bertelsmann's insistence on running its projects sometimes attracts controversy too. Some educators question how independent Bertelsmann the foundation is of Bertelsmann the media company — and are worried that commercialism might arise in schools as a result. One school initially refused to participate in the program unless Bertelsmann sold its TV operations.
In Italy publicly held UniCredit is modeling its year-old foundation, Unidea, on those of U.S. philanthropists such as the Fords and Charles Stewart Mott, a General Motors pioneer. UniCredit ceo Alessandro Profumo says that the work these foundations have been doing to foster civil society in Eastern Europe is "a source of inspiration." Unlike more parochial Italian donors, Unidea is spending 60% of its grants on projects in Africa, including schemes to combat aids in Mozambique and improve public health in Burkina Faso. Also, the bank set up one of the first gift-matching programs in Italy, meeting employee donations euro for euro. "We wanted to raise the awareness of employees that they are part of a company that believes in a value system that is far bigger than a simple creation of value for shareholders," Profumo says.
UniCredit's approach is a stark contrast to the more traditional, political kind of philanthropy that some Italian savings banks have practiced. Owned by communities, they were expected to serve as patrons for local causes. In the mid-1990s new laws required them to split off their philanthropic divisions, creating 89 foundations, with endowments totaling €35 billion. They included the €5 billion Monte dei Paschi di Siena Foundation, which has financed art exhibits, restored churches and renovated a Siena hospital, buying a new MRI machine. Just €4 million of the €145 million Monte dei Paschi disbursed last year went outside Italy. "We pay a lot of attention to the territory where we operate," says Giuseppe Mussari, the foundation's president.
For all the creeping altruism, the notion of giving back is still not as ingrained as it is in the U.S., largely because Europeans are used to paying so much in taxes. John Logan, who runs a foundation that Britain's Vodafone set up in 2002 and is urging its subsidiaries to do the same, has a hard time explaining the need for corporate philanthropy in some parts of Europe. For example, in Sweden, where taxes are among the highest in Europe, Logan says, "persuading our friends that they should be encouraged to give is quite a difficult job."
In France raising money also continues to be a struggle. Marie-France Blanco, a former teacher and social worker, has battled since the mid-1980s to find funding for a program for children of prison inmates. Blanco, who was appalled to discover that the children of French prison inmates are often forgotten by the authorities who lock up their parents, could get the help only of her husband, an executive at the French subsidiary of farm-equipment manufacturer Massey-Ferguson, before she decided to create an association. "When I said prison, everyone turned their head," she recalls.
Then a contact referred Blanco to the Van Leer foundation, which agreed to fund her group. She has since expanded to a national federation with 17 regional associations. Thanks to her, several French prisons have facilities for visiting children. In June, after three years of arm twisting, the Fleury-Merogis prison outside Paris let her stage the first Father's Day party for kids and their jailed dads. Blanco still has to struggle to raise money. She recently wrote to all 63 companies in her local chamber of commerce. Not one gave a euro.
There are other kinks in Europe's fledgling philanthropy as well. There are strict limits in some countries on the amount of donations that companies can deduct from their taxes. In the U.S., foundations must disburse 5% of their assets annually to qualify for not-for-profit status. In Europe there's no such stipulation. For example, the Robert Bosch Foundation, Germany's largest, gave just over 1% of its €5.1 billion in assets last year.
But the philanthropy bug continues to spread. In Regensburg, Johann Vielberth, a real-estate developer, set up a foundation earlier this year to finance a new institute of real-estate studies with four professorships at the university. Next year he will put up a new building to house it. Vielberth, 72, says that although his family has backed local causes for 150 years, he is formalizing that tradition and taking the generosity to a new level: the donation to the university exceeds €9.2 million. "It's time for a culture of philanthropy to begin again," he says. Given Europe's growing funding needs, it's happening not a moment too soon.
- PETER GUMBEL | Paris
- As Europe's governments face a budget squeeze, a new breed of corporate philanthropist is taking up the slack