A future of business may be businesses owned by charities; they have a history of commercial success and social good. The following is an excerpt from Atypical: Five Strategy Rules for a New World by Prateek Raj, published by Westland Business (2025).
Academics and business practitioners worldwide grapple with a grand challenge of our times—how do we integrate community and business, such that businesses can be internally motivated to contribute to their communities. Philanthrocapitalism, although charitable, has no solutions to the conflict between the visionless pursuit of profit and the harms it can have on our public goods and commons. Similarly, worker democracy, an enticing idea gaining ground through the rise of negotiated shareholding in new ventures, empowers many workers. However, it still does not offer a way to include the community. How can a Madagascar family suffering from the ill effects of famine have a seat at the tables where decisions are made?
Very few businesses like the Tatas have embodied a spirit of giving back throughout their long history. We have discussed the Tatas and their grounded approach to business at length. It is worthwhile to revisit the organisation to understand the singular organisational form that gives the company a unique character.
The Tata Group is India’s largest conglomerate, with a combined revenue of $165 billion and employing nearly a million people. It comprises multiple publicly traded multi-billion-dollar businesses across industries from steel to EV, with its parent company, Tata Sons, as its principal shareholder. Tata Sons itself is a private investment holding company that is majorly owned (66 per cent) by Tata Trusts, a group of philanthropic organisations with a history going as far back as 1892 with the foundation of the J.N. Tata Endowment. The many nation-building contributions of Tata Trusts include the setting up of national institutions like the Indian Institute of Science (IISc in 1909), Tata Institute of Social Science (TISS in 1936), Tata Memorial Hospital (in 1941), Tata Medical Centre (in 2011) and the National Cancer Grid (in 2012), contributing to education and healthcare in India.
Such a direct and controlling ownership of a large business by one or a group of philanthropic organisations (called enterprise foundations) represents a unique ownership structure pioneered by the Tatas in India. It has gained some popularity over the past century, especially in Northern Europe. Danish alcoholic beverages company Carlsberg and German optics multinational Carl Zeiss were a few other pioneering businesses like Tata that were vested in the hands of philanthropies in the nineteenth century (Carlsberg in 1876, Carl Zeiss in 1889).
Some other large businesses that have a similar enterprise foundation ownership arrangement include American chocolate multinational Hershey, Danish pharmaceutical giant Novo Nordisk, British newspaper Guardian, the legendary Swiss watchmaker Rolex, German engineering multinational Bosch, and Swedish furniture giant IKEA. Indian IT consultancy giant Wipro could also be on its way to a similar model, where Wipro’s majority owner, Azim Premji, has transferred much of his wealth to the philanthropic Azim Premji Foundation.
Enterprise foundations like Tata Trusts and the Novo Nordisk Foundation are distinct from independent philanthropies such as the Gates Foundation and the Ford Foundation, which have been significantly funded by wealthy donors (Bill and Melinda Gates and the Ford family) associated with founding major corporations like Microsoft and Ford. Enterprise foundations are also different from philanthropies like the Coca-Cola Foundation and the Reliance Foundation, which their respective corporations directly own.
Enterprise foundations are unique because they are philanthropies that own businesses, enabling them to influence the objectives and operations of these enterprises directly. Such philanthropy-owned businesses are insulated from the risks of amoral drift as they are unlikely to be susceptible to hostile takeovers. Hence, they have been found to focus on long-term strategic planning characterised by fiscal conservatism instead of short-termism. They also have been found to have better reputation and social responsibility ratings, with a strong focus on employee welfare, stable employment practices, better wages and longer tenure. Given a more holistic approach to business, these businesses are found to perform just as well financially and in the stock market, if not better, enjoying more stable earnings and higher survival rates.
If enterprise foundations have such benefits, why are they not more common? Despite a long global history of enterprise foundations, Denmark is the only country where enterprise foundations are the dominant ownership form, comprising more than half of the country’s entire market capitalisation. Family-controlled businesses (like Reliance) and individually-controlled businesses (like Wipro) may reach a point where they can turn their business into foundations by passing on the shares they hold in their business to philanthropy. However, bestowing the ownership of a company to philanthropy, which is not owned by any person or group but is rather independent and self-governed by a set of codes and a board, is a major act of charity. If the Tatas were less charitable, they and their children could have been some of the wealthiest individuals in the world. Instead, the various charities named after the Tatas are wealthy.
In many cultures, passing down wealth from one generation to another as inheritance is considered a parental or family duty, and such a sense of duty may deter many from taking the philanthropic route. Countries like Denmark and other North European nations have become culturally more open to the idea of individual responsibility—that parents do not owe a large fortune to their children. Hence, passing the ownership of a business to philanthropy instead of the family may not appear like a transgression of social expectations in North European culture. Such cultural attitudes where children do not feel entitled to the wealth of their parents and have a sense of individual autonomy are more likely to foster enterprise foundations, passing the ownership of businesses to philanthropies instead of children.
Another factor limiting enterprise foundations in countries like the US is the general legal and regulatory scepticism towards ownership structures that fuse together profit with philanthropy. In the US, profit-driven businesses are taxed while philanthropies are not, leading to the view (e.g., the 1969 US Tax Reform Act that effectively banned enterprise foundations in the US) that such foundations would neither be good philanthropies nor good businesses, but rather a way for businesses to evade taxes. Such regulatory hurdles led foundations like the Ford Foundation to become independent charities rather than the enterprise foundations they were initially envisioned to be.
Although financially sound and attractive performers in the stock market, philanthropy-owned organisations may find it challenging to raise capital quickly because the controlling stake held by philanthropic entities can limit the ability of the business to dilute ownership. This is a unique challenge not just for philanthropy-owned organisations but also for any business with controlling shareholders. There have been cases where philanthropy-owned businesses divested themselves or diluted their stake. For example, the British pharmaceutical giant Burroughs Wellcome eventually merged with Glaxo and SmithKline Beecham to form the pharma giant now known as GlaxoSmithKline. The associated enterprise foundation Wellcome Trust divested itself from the pharma business in 1995, and today, it is one of the world’s largest philanthropies focused on healthcare research, being one of the largest funders of science in the world.
Since philanthropy-owned businesses resist takeovers, investors looking to gain controlling ownership or influence its strategic direction may be discouraged, slowing the pace at which these businesses raise capital. Because the vision of the business is deeply embedded in the organisation due to its ownership structure, it is unlikely that such businesses can be quickly taken over and steered in a different strategic direction by another shareholder.
While the validity of the above concerns must be appreciated, there is another way to view the issue. Businesses with a strong vision that does not prioritise profit maximisation alone will always be less attractive to short-term investors and, hence, unlikely to get quick capital. However, is that necessarily a disadvantage for businesses if it protects them from amoral drift away from their social mission? This becomes especially relevant given that research by management scholars like Steen Thomsen and long-term investor confidence in businesses such as Tata shows that philanthropy-owned businesses are financially sound as well as socially responsible.
From the book “Atypical: Five Strategy Rules for a New World” by Prateek Raj. Copyright © 2025 by Prateek Raj. Published by Westland Business. All rights reserved.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
