Swedish foundations - The European Foundation Centre

Nordic foundationsIcelanders warm toidea of philanthropyBy Jon Warne, EFCPhilanthropy is not a new concept inIceland, and up until the recent turmoilsurrounding the country’s banks – both theeconomy and charitable giving had beenfrom 2003 until 2008, Iceland’s economy(Gross Domestic Product) grew by 70%.Information on foundations based in Iceland is madeavailable via the Rikisendurskodun (Icelandic NationalAudit Office), which has monitored all registered funds andcharities since 1964. Legislation adopted in 1989 obligeseach of these organisations to send their accounts forthe previous year to the Rikisendurskodun, along with areport on how the money has been spent, and who sits onthe Board of Directors, by the end of June of each year. TheRikisendurskodun maintains a database with informationabout all income, expenditure, assets and liabilities ofregistered funds and charities.The prevailing legislation ensures the transparency of asector which, at the end of 2007, was comprised of 694registered funds and charities with combined assets tothe tune of 28.6 billion Icelandic kronas (ISK) (which at thattime was equivalent to approximately €310 million) andannual expenditure of around 8 billion ISK (then worthsome €87 million). With figures such as these, in a countrywith just over 320 000 inhabitants, Icelandic philanthropycould be said to have reached a significant scale.Although information on specific Icelandic foundationsis difficult to find, it is notable that various bilateralfoundations do exist. One such example is the CanadaIceland Foundation, an organisation funded by Canadiansof Icelandic descent, dedicated to the preservationof Icelandic cultural heritage. Most of these bilateralorganisations work to support the Icelandic diaspora, orenhance relations between Iceland and other countries,particularly in Scandinavia and North America.One such example is the Leifur Eiríksson Foundation, whichhas offices in the US and Iceland and operates a graduateexchange programme between the two countries. Theboard of trustees is appointed by the Central Bank ofIceland, the Icelandic Government, and the University ofVirginia.Greg Bocquet, “Trading Longships for Aid Packages”,The Iceland Review (Spring 2007):http://icelandreview.comIndex Mundi online database: www.indexmundi.comSwedish foundations:Evolving roles in achanging welfaresocietyBy Hanna Surmatz, EFCEach year on 10December, the wholeworld pays attention whenindividuals from all cornersof the globe are honouredfor outstanding achievementsin physics, chemistry, medicine, literatureare managed under the responsibility of thewas established in 1900 in accordance withThe Swedish foundation sector, even though in most casesoperating with far less media attention, is of course much bigger.Recent research suggests a total of around 15 000 foundationsin the early 21st century with combined assets worth some270 billion Swedish crowns (equivalent to approximately €24billion). Foundations play a significant role in Swedish society,especially in the fields of science, research and culture. So itis surprising that they have not received much attention inpolitical debate or in academic research. The first thoroughanalysis of the scope, roles and vision of foundations in Swedenwas published by the Stockholm School of Economics in 2004(see Sources).According to the authors of this report, Filip Wijkström andStefan Einarsson, foundations in Sweden have assumed differentroles in different time periods: new situations leading to thecreation of foundations with new missions. At the same time,previously dominant roles and functions have not disappeared.They either exist in parallel or have been re-interpreted ortransformed. The Swedish foundation sector is therefore moreflexible and dynamic than one might expect.A recent development in the Swedish foundation communitywas the transformation of the public wage-earner funds duringthe 1990s into private foundations supporting research. Overall,the state and local municipalities have played an important rolein creating new foundations, particularly in the last 20 yearsof the 20th century. The 2004 report mentions that parts ofsociety still look upon foundations with a degree of irritationand suspicion. One explanation for this could be that in earlierperiods foundations were established mainly by wealthyindividuals.38 | Effect spring 2009 © European Foundation Centre | | www.efc.be

Forging a stronger identityIn general, Swedish foundations are not regarded and do notnecessarily regard themselves as a distinct sector in society.Lennart Elbe of the Gustav V 90th Anniversary Foundation,for example, explicitly considers his foundation a “part ofthe non-profit youth sector”. (The foundation gives grantsto Swedish youth organisations and trains young leaders.)Dan Brändström, a board member of the recently revivedSwedish network of foundations, notes that in the past manyfoundations did not see themselves as being part of a separatesector with a common identity, which made it more difficultfor a national association of foundations to get off the ground.Over the past 10 to 15 years, however, Swedish foundationshave received more attention from politicians as well as thepublic at large, and are increasingly seen as a distinct sector.Playing complementary and innovative rolesThe role of Swedish foundations is often discussed inconnection with the redefinition of the scope of the modernwelfare state. Today many foundations see themselves as actorsthat complement (“fill gaps”) but do not replace the welfarestate. Metaphors used for describing this complementary roleare “oil in the machinery” or “something extra to top up with”.Representatives of two EFC members, Göran Blomqvist ofRiksbankens Jubileumsfond and Lennart Elbe of the Gustav V90th Anniversary Foundation, have stressed the complementaryand innovative roles of Swedish foundations. Blomqvist seesfoundations as being free to test new ideas and act fast. In thefield of research, Riksbankens Jubileumsfond’s own analysishas, for example, shown the need to improve conditions foryounger researchers early in their academic careers, and tofund research on security policy. Blomqvist believes that,because of the welfare state, Swedish foundations may play asmaller role than their counterparts in other countries.Wijkström and Einarsson’s report identifies additional rolesplayed by Swedish foundations, and Stefan Einarsson hasidentified a number of trends during recent years:- Foundations can be used as tools for establishing “free zones”and for opening up to alternative ideologies, methods andways of operating;- Some foundations, so-called “power foundations”, areregarded as exercising control, for example, through theownership of shares in Swedish companies.Some foundations can be seen as playing a role in developingalternative visions of society, including a more liberal visionof society. The emerging liberal vision, as well as the growthof operating foundations and the growing interest in privatedonations, constitute a wave of “new philanthropy”. Thiswould suggest that some of the newer foundations might bereplacing the state in various ways. Foundations could be seenas an interesting but challenging vehicle for the redistributionof wealth in society.A liberal environment but few incentivesThe legal framework in Sweden is quite favourable and liberal,as no state approval is needed to set up a foundation. Althoughsome foundations have to register with the supervisoryauthority, registration is not a prerequisite for establishment.From a comparative perspective, the lack of fiscal incentivesfor individual and corporate donors is a disadvantage, eventhough the estimated number of foundations in Sweden ishigh (over 15 000 in a country of 9 million people). However,the tax treatment of foundations involved in business activitiesis rather liberal.Foundations are regulated primarily by the Foundation Act,which came into force in 1996 and was last modified in 2008.There are two main categories of foundations: grantmakingfoundations whose income derives from returns on investedassets (this is the largest group); and operating foundationswith some kind of project or business-related activities.Many foundations combine elements of the two categories asthey are grantmaking but also run their own projects. Swedishfoundations can pursue any legal purpose that the founderhas specified, but most of them (around 75%) pursue publicbenefit purposes. Their assets must be sufficient to pursue thestated purpose for a period of at least five years.Swedish foundations are administered either by their ownboard or the board of another legal entity. They may engagein economic activities. Foundations can also be the majorshareholder in a company as a so-called “parent foundation”.Several Swedish foundations own companies. According toEinarsson, one of the reasons for this is that a foundation cankeep a company stable for future generations and prevent itfrom being split up.Foundations that carry out business activities, are parentfoundations, were set up with state participation and/or haveassets over a certain amount must maintain proper accountingrecords. Most of these foundations are required to prepare anannual report, which is then made public. If a foundation hasa public benefit purpose and uses its income mainly to pursuethis purpose, it can receive some tax benefits. Donations fromindividuals are not tax-deductible nor generally are donationsfrom corporations. However, companies can deduct somedonations as business expenditures if they are related to thebusiness. In the future, the Swedish foundation and associationsector may consider pushing for more tax incentives fordonors.Filip Wijkström and Stefan Einarsson, “The SwedishFoundation Sector”, Stockholm School of Economics,2004Filip Wijkström and Stefan Einarsson, “Foundations inSweden. Their Scope, Roles & Visions”, 2004Nobel Foundation:http://nobelprize.org/nobelfoundation/index.htmlSwedish Network of Foundations:www.stiftelserisamverkan.se (in Swedish only)Nordic foundations39 | Effect spring 2009 © European Foundation Centre | www.efc.be