62 PERSPECTIVES ON BUSINESS AND ECONOMICS | VOL 41 | 2023 business organizational model towards short-term profits for shareholders and an inability to sustain the long-term investments increasingly required by the capital-intensive container shipping industry.” This observation is representative of the key strength that lies in foundation-owned firms—long-termism, a mindset that is focused on the long-term performance of the company rather than short-term profits. The long-term orientation of industrial foundations can be seen in their performance during times of financial crisis. Industrial foundations often emerge from economic emergencies unscathed and are less likely to cut their employees. Because foundation-owned firms must follow their charter, longterm growth is prioritized over quick profits; as such they are well consolidated, with money in reserve for times of economic loss or stagnation, a necessity given that they cannot be rescued by outside capital like their corporate competitors. Concentrated holdings also prevent them from relying on the law of large numbers to protect against variations in firm- specific risks (Thomsen, 2017). The foundation’s mission has a strong effect on the business decisions of foundation-owned firms, in addition to a desire for profit. When foundation-owned firms first arose, Denmark had a weak public stock market, which meant the structure of the foundation-owned firm could alleviate the pressure of satisfying shareholders (Thomsen, 2017). The trade-off is that foundation-owned firms are expected to hold themselves accountable to the same mission they have had since their inception, which, in the case of the three companies under consideration here, was over 100 years ago. Nonetheless, it is this feature of foundation-owned firms that results in an emphasis on long-term growth and stability that cannot be overstated. There are, however, disadvantages to the foundation structure. The first disadvantage is that the limit to diversification of ownership results in foundations bearing the bulk of the risk. Another disadvantage is that there is no incentive to economically maximize their financial earnings in the short term. A third disadvantage is that foundation-owned firms have slower growth. The same factors that keep them stable— heavy consolidation, lack of debt, and their tendency to be older companies—constrain the rate of their growth (Thomsen, 2017). Whether these drawbacks affect the performance of foundation-owned firms compared to conventional corporations depends primarily on size and to a lesser extent on age. Large foundation-owned firms tend to perform better than or equal to large corporations, whereas small foundation-owned firms perform worse than conventional corporations of a similar size. In fact, the financial outcome of foundation-owned firms is highly dependent on the size of the firm, with small foundation-owned firms (firms with assets less than 1.4Bkr) barely making a profit. Their return on assets is 0.6%—in contrast to large foundation-owned companies, which “make more money (return on assets of 5.4%) than average, and more than nonfoundation-owned companies” (Thomsen, 2017, p. 134). The age of a firm can also be a factor. The largest foundation-owned firms are older, meaning they are well consolidated and have a stockpile of resources from which to draw. Foundation-owned firms are highly dependent on their high level of consolidation, which is difficult for more recently formed foundation-owned firms to obtain due to having less resources at their disposal. Consolidation, when combined with smaller foundation-owned firms possessing less borrowing capability and fewer business connections overall, could result in a lower return on assets than their larger counterparts. The financial advantages of foundation ownership, then, are most potent in the largest firms that are also generally the oldest firms. That economic success is also manifested in these firms’ abilities to contribute more to carbon reduction sustainability goals, to promote technological innovation through research and development, and to support philanthropic endeavors. Foundation-owned corporate examples Novo Nordisk, Maersk, and the Carlsberg Group are three of the largest foundation-owned firms in Denmark and can be used to illustrate the above generalizations. What differentiates the operations of these firms from those of firms with a traditional corporate structure is their attitude of long-termism, which enables them to better adjust to changing market conditions. Their focus on the bigger picture, coupled with an emphasis on environmental sustainability, research and development, and corporate philanthropy that is rare for traditional corporations of their size, will better secure their future as well as provide societal benefit. Novo Nordisk is the largest company in Denmark and one of the largest health-care companies in the world, similar in size to Pfizer and Merck. The firm is operated by Novo Nordisk A/S, which is completely owned by the Novo Nordisk Foundation, holding the majority of votes at general meetings. Novo Nordisk derives 50% of its profits from the production of insulin, with 31.9% of the diabetes market share (Novo Nordisk, 2022). Due to its overwhelming reliance on insulin as a source of its profit, Novo Nordisk has
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