Social Activity in Spanish Banking Foundations: Governance Dynamics

Abstract

Regulators in Spain transformed the savings bank by dividing each of them into a bank and a foundation. The bank continues lending activity, and the foundation focuses on social work. The aim of this paper is to explore how the governance structures and their dynamics in banking foundations relate to their social work. For this purpose, we use the relevant theoretical framework in the field of governance, focusing on agency, stewardship, and stakeholder theories. To achieve this aim, we perform semi-structured interviews with members of governance bodies, in the framework of a qualitative approach. We find that studied characteristics of governance relate to social work in different ways. Diversity in the governance bodies, through a balance between economic and social logic, and through representation of stakeholders, among other elements, relates positively to the level of social work. Additionally, it shapes the mix of social activity types. We conclude that the chosen theoretical framework helps us understand the phenomenon and interpret the results. The research question is answered but, at the same time, the empirical research reveals the complexity of the relationships and indicates future lines of research.

1. Introduction

Savings banks in Spain originated from the Montes de Piedad1 in the 18th century, with the first official savings bank, Caja de Ahorros de Madrid, established in 1838. These entities combined financial activities with social purposes. Initially more regulated than private banks, they were allowed to operate competitively only from 1960 (Aranda Ruiviejo and Sotomayor Morales 2018). Regulations established in 1985 mandated public authority representation on boards and allocation of surpluses to social projects. An additional key characteristic of these entities is that they had territorial roots, which led them to serve their local clientele at risk of social and economic exclusion (Bajo Davó and Rodríguez Carrasco 2018).

Since their creation in Spain, the savings banks’ relevance in the financial and social fields has only grown. During the financial crisis, mergers, conversions into banks, and public interventions occurred. Economic failures and bankruptcies were attributed to poor management, politicization, and risky financial practices. Certain authors argue the issue was the management performance rather than the institutional model, as some banks remained solvent (López Expósito 2016). Excessive investments in construction during the economic boom period and the issuance of complex financial products were important trends occurring under that management model (Bajo Davó and Rodríguez Carrasco 2018). In fact, there were failures in corporate governance due to a lack of educational background and professional experience among senior executives (Sacristán-Navarro et al. 2017).

Politicization was addressed by reducing public sector representation on boards in 2010 and further in 2013 to promote professionalism and independence (Aranda Ruiviejo and Sotomayor Morales 2018). Nevertheless, some authors (López Burniol 2022) indicate that the widely held belief about the widespread politicization of savings banks should be approached with caution, as, for example, La Caixa was an independent entity.

Law 26/2013, of December 27, also called LCAFB by its acronym in Spanish, split each of the savings banks into two different organizations: the bank and the foundation. The objective was to create an institutional environment that set more restrictive parameters of operability and solvency and to create entities that would concentrate on social work (Aranda Ruiviejo and Sotomayor Morales 2018) performing with the highest levels of professionalism, transparency, independence, and efficiency (Pérez Moriones 2021). Social work is defined in this study as activities that have the aim of helping people with social disadvantages or enhancing the collective well-being, including its cultural dimension.

The result of this process was that 43 savings banks turned into 14 banking foundations, 19 ordinary foundations, 12 credit institutions, and 2 savings banks (Bajo Davó and Rodríguez Carrasco 2018). The foundations are subject to the supervision and guidance of the protectorates, and supervisory bodies, either at the state or regional level, depending on the territorial scope of action. They ensure the correct establishment and governance of the foundations (FUNCAS 2015). Their mission is to advise these entities on both aspects, for example, in the drafting of statutes, the application of the economic–financial legal regime, and in conducting feasibility studies.

Since 2008, coinciding with the onset of the crisis, the amount spent on social work decreased drastically year after year (Montero et al. 2015). In 2014, the trend experienced a turning point, and there has been a progressive improvement in this aspect (Sacristán-Navarro et al. 2017). This improvement has continued during the period from 2017 to 2019. Again, the economic difficulties generated this time by COVID-19 caused total spending on social work to decrease by 8.7% in 2020 compared to 2019 (CECA 2021). The latest observed figures, those for 2023, confirm the recovery to the level of 2019 (CECA 2024). Figure 1 illustrates the trend.

The weight of each type of social work over the total spending has also evolved over time. Social action, which focuses on basic social needs, gained relevance as the crisis sharpened. Upon economic recovery, the percentages gradually approached pre-crisis levels. See Figure 2 for a graphical representation of the trends.

The historical, economic, and social context explained in the previous paragraphs induces us to consider that studying banking foundations is relevant because they perform a complementary function to that of Public Administration in terms of social activity (Embid Irujo 2015). Regulators and researchers relate the performance of foundations to, among other issues, their governance structures (Bajo Davó and Rodríguez Carrasco 2018; Calvo-Sotomayor 2017). In parallel, the literature review suggests that not enough empirical studies on the relation between governance and foundations’ output have been carried out yet. As a result, it seems reasonable to affirm that the academic adequacy of further research in this direction is supported.

Contributing to the identification of the key relationships between the components of the governance structures and the output of this group of entities will help to improve their efficacy. This paper explores how the theoretical elements of the conceptual framework regarding the governance models relate to the actual characteristics of the social activity developed by the banking foundations. Whether the composition and diversity of the board of directors of the banking foundations influence their social activity is studied. Diversity is considered in terms of the educational and professional backgrounds of the governance bodies members, their interests, their political inclinations, their level of experience, and the representation of the different stakeholders.

This research builds on the theoretical foundations of the principal–agency problem, stewardship relations, and stakeholder dynamics. The relevance of context and the cognitive element are added as transversal factors to the theoretical framework. The literature review leads us to formulate the following questions: Are the composition and diversity of the board of directors of the banking foundations associated with their social activity? How does diversity in governance structures relate to the main characteristic of social work (Page 2007)?

The rest of the paper is structured as follows: Section 2 presents the relevant literature and theoretical framework that allow us to orientate the study. This section starts with a subsection to explain the economic context of the foundations, as it helps understand the environment in which the governance bodies operate and the restrictions they are subject to. The following subsection covers relevant specificities of nonprofit organizations in terms of governance. Next, we present a subsection to offer general considerations of the theoretical framework we use for the study. The subsequent subsections deal with the agency problem, stewardship, stakeholder theory, the cognitive element, and the importance of context. Section 3 explains the methodology we use to address the research question. Section 4 provides the results of the empirical study and, finally, Section 5 presents the conclusions.

Figure 3 represents the high-level logic of the article, before entering the conclusions. Given that we approach a social subject of study employing a qualitative approach, the research design was circular rather than sequential. Yet, the manuscript intends to follow the structure shown in the illustration.

2. Literature Review

2.1. Economic Context of the Foundations Appearing After the Transformation of Savings Banks

LCAFB directs banking foundations to gradually reduce their shareholding in credit institutions (López Expósito 2016; Calvo-Sotomayor 2017). This pressure forces foundations to seek other sources of funding. Similarly, foundations must include a diversification strategy in their financial plan (Bajo Davó and Rodríguez Carrasco 2018; Calvo-Sotomayor 2017). This plan may include, as an alternative to divesting from the financial institution, the provision of a reserve fund to guarantee financial solvency as a shareholder. The expected outcome is that risks are reduced while the generation of sufficient sources of revenue is ensured.

The authors agree that a fundamental mission of the board of trustees is to guarantee effective management of resources. In the face of changes in the environment, this mission becomes a major challenge and serves as a catalyst for transformation within the governance bodies themselves. The need to generate income from commercial activities leads nonprofit organizations to focus on creating economic value, rather than just social value (Bruneel et al. 2020). This trend induces the modeling of new governance structures that balance social and economic logic. Administration bodies introduce administrators from corporations, thus increasing professionalization, make radical changes in the board, and modify statutes. In particular (Calvo-Sotomayor 2017), the BBK Foundation interprets changes in the regulatory environment and the economic context as the need to adapt its governance body and management team to new demands and to enhance excellence and transparency. Thus, there is a commitment to attract and retain talent specialized in management and project investment direction, while also promoting the creation of economic, social, and environmental value for the stakeholder groups with whom cooperation is carried out.

Although the magnitude of the spending is smaller than in the moments before the crisis, Aranda Ruiviejo and Sotomayor Morales (2018) find that social work is now more self-sufficient. The activities of the foundations themselves generate income that begins to replace dividends from credit institutions. This fact is common for other types of foundations that originally enjoyed a heritage but had to seek other sources of income due to the evolution of the environment (Orejas Casas 2018).

2.2. Governance Specificities in Nonprofit Organizations

Similarly to corporations, the concern for finding appropriate governance structures in nonprofit organizations arises following the failures detected in their governance systems (Cornforth and Edwards 1999). Increasingly, there seems to be a consensus among researchers that addressing the governance of these entities as a subject of study is necessary (Fontes-Filho and Bronstein 2016; Donnelly-Cox et al. 2020). In many countries, nonprofit organizations have gained importance in recent decades as providers of public services complementary to the administrations of different territorial areas. They attract more funding and, as a result, are subject to greater scrutiny. Therefore, parallel to what happens in other types of organizations, their governance models and effectiveness are being studied more intensively (Cornforth 2012; Ortega-Rodríguez et al. 2024). The results obtained in most empirical studies indicate that dedicating efforts to propose improvements in governance systems reduces conflicts that may exist between principals and those in charge of controlling the entity (Khan 2011).

Certain authors who have published research in this field find many similarities between for-profit and nonprofit entities. The relationships proposed in agency theory between ownership and control can be used to study the governance of third-sector entities (Romero Merino 2007; Fontes-Filho and Bronstein 2016; Du Bois et al. 2009). Steane and Christie (2001) conclude that, in various aspects, the governance of Australian nonprofit organizations mimics the governance of shareholder-owned companies.

Nonetheless, the application of classical governance theories to foundations poses various challenges. One of them is the fact that the financing structure of these entities differs from the model of a company controlled by one or more shareholders and managed by a board of directors. Authors like Romero Merino (2007) tackle this challenge and study foundation governance from this theoretical perspective. They argue that the interactions among the participants in foundations are equivalent to those that take place among participants in large companies controlled by shareholders. They distinguish between the founders and donors of resources on one hand, and the resource managers on the other. Additionally, they introduce a cognitive component into governance mechanisms as a determining factor in foundation efficiency.

Difficulty in measuring the performance of nonprofit organizations or the limited power of beneficiaries over donors or funders are some examples of their specificities (Aldashev et al. 2015). Other particular characteristics are their tax treatment, non-distribution of profits, absence of purchase transactions by another entity (Glaeser 2002), or the difficulty in assigning responsibilities in the absence of a principal owner (Nikolova 2014).

Governance structures are equally important for nonprofits and, although one cannot speak of shareholders or profit-seeking, there is the figure of the donor or founder of the organization, who has interests in it; interests that differ from the concerns motivating the actions of those whose task is to manage the entity (Siebart and Reichard 2004). In fact, an interesting effect of studying the governance of nonprofit organizations has been that some aspects have been highlighted which have subsequently served as lessons for corporate governance (Fontes-Filho and Bronstein 2016).

2.3. Theoretical Framework on Governance: General Considerations

Agency theory (Jensen and Meckling 1976) and the academic work about internal and external governance mechanisms (Denis and McConnell 2003; McColgan 2001; Denis 2001) lay the theoretical grounds of the study. Certain scholars propose that, in the same way that the role of the principal is played by the shareholder in a corporation, the donors and founders are the principals in nonprofit organizations (Siebart and Reichard 2004). In this paper, following Rouault and Albertini (2021) or Schubert and Willems (2021), we suggest that it is necessary to consider more complex relationships, such as stewardship interactions (Donaldson and Davis 1991) and stakeholder dynamics in the governance of an entity (Freeman and Reed 1983) to have a realistic view of governance dynamics in banking foundations. Governance dynamics is understood as the interaction of forces that work in the process of managing resources and developing the mission of an organization.

From a theoretical perspective, it is therefore appropriate to expose the most important knowledge that researchers in this field have published. This area of research was initially framed in private companies that have an ownership structure centered around the shareholder and operate in markets. Subsequently, the findings were applied to other types of organizations, whether public or nonprofit, through parallels between the participants of both types of entities. Thus, we explain the theoretical elements that we find substantial for understanding the studied phenomenon. We begin with the general theories developed primarily in the field of corporate governance and continue with the approaches developed for nonprofit entities.

Table 1. Theoretical elements in the literature review and their relevance regarding the subject of study.

Theory	Element	Relevance
Agency Theory	Agent/Principal	Basic hypothesis for understanding governance dynamics. Starting point for identifying other more complex governance structures in the studied cases.
	Agency conflicts	Identifying them is necessary to design governance mechanisms. Confirming their absence helps design efficient governance structures in Spanish banking foundations.
	Governance mechanisms	If conflicts exist, the literature provides a number of mechanisms to minimize agency costs.
Stewardship Theory	Alignment of interests	Describes frequently found governance relationships in nonprofit organizations. Reduces agency conflicts and therefore allows for more efficient governance structures. This is found in the studied phenomenon.
Stakeholder Theory	Representation of stakeholders	Helps understand the social forces that are present in nonprofit organizations and relate to their governance structures. Very important to understand social work, as presented in Findings.
	Interactions of stakeholders	Facilitates the understanding of how stakeholders are associated with governance structures and outcomes (social work).
Limited Rationality	Cognitive element	Helps understand why diversity in the governance structure is important for its performance (social work).
Context *	Governance environment	External pressures affect several elements of governance structures and therefore need to be taken into account when understanding or defining optimal governance structures.

* Not a theory in itself, but it is mentioned by numerous authors that study governance in nonprofit organizations.

presents the basic elements contributed by the theories that take part in the framework for this study. We add summary comments on the relevance of the application of these elements in Spanish banking foundations.

2.4. Agency Conflicts and Mechanisms to Minimize Their Impact

According to McColgan (2001), the origins of conflicts between principal and agent are moral hazard, profit retention, risk aversion, and time horizon. The conflicts generate the emergence of agency costs.

Moral hazard (McColgan 2001) arises when the manager makes business decisions that suit their profile and knowledge, thereby increasing their value to the company and the cost of their replacement. This conflict occurs because there is an asymmetry in the information obtained by the principal and that held by the agent (Caers et al. 2006). Profit retention becomes an agency problem when the agent, whose remuneration is usually tied to the company’s volume, decides to increase the company’s reserves to enlarge it, instead of generating dividends for the shareholders. Thirdly, the manager makes decisions with a low level of risk because their employment is at stake, while the shareholders, assumed to have diversified their investments, are willing to assume more risk in that particular company. Lastly, the time horizon will be different for both parties in terms of cash flow generation, as the shareholder is interested in all future cash flows, while the manager limits their horizon to the period in which they contemplate being part of the company’s management (McColgan 2001; Caers et al. 2006).

To minimize conflicts and, therefore, the costs derived from them, there are internal and external control mechanisms (Ganga Contreras and Vera Garnica 2008). These mechanisms should aim, on the one hand, to reduce the differential between the principal’s interests and the agent’s interests, and on the other hand, to provide a significant impact on the company’s value and performance (Denis 2001).

The literature refers to corporate governance to denote the mechanisms mentioned in the previous paragraph. This notion was already suggested by Adam Smith (1776), stating that the different interests of those managing other people’s money compared to those of the owners necessitated oversight work. Corporate governance has gradually become more sophisticated since then, as companies, their external relations, and their internal relations have evolved rapidly. Thus, we distinguish between internal and external mechanisms of corporate governance (Denis and McConnell 2003).

In

Table 2. Governance mechanisms (Denis and McConnell 2003; McColgan 2001; Denis 2001).

Internal Mechanisms	Board of Directors
	Ownership Structure
	Corporate Financial Policy
	Executive Compensation
External Mechanisms	Mergers and Acquisitions Market
	Legal System
	Executive Labor Market
	Corporate Control Market

, we present a synthesis of the mechanisms found. Internal mechanisms are those generated within the company, although they may emanate from different layers at the ownership or control level. External mechanisms are given to the company and come from both markets and institutions or public administrations.

Generally, we find that external mechanisms end up influencing internal mechanisms, so that none of them operates in isolation without receiving influence from any other. Thus, for example, the executive labor market constitutes a framework of possibilities for the internal mechanism of executive remuneration. Similarly, the legal system influences financial policy or ownership structure.

All mechanisms have an equivalent in the theories of corporate governance for nonprofit organizations, but given their importance and scope of application, we will focus on the board of directors as an internal mechanism to address conflicts in this type of organization.

2.5. Stewardship Theory for Nonprofit Organizations

A person is not only driven by their own economic benefit, but their actions are also motivated by other forces such as satisfaction from achievements, the exercise of responsibility, or the attainment of recognition (Donaldson and Davis 1991). More specifically, individuals involved in managing nonprofit organizations have a higher proportion of altruistic motivations, aligning their interests more closely with those of the founder (Tosi et al. 2003). Yu (2023) addresses public service motivation as a stimulus that reduces the goal conflicts between a principal and an agent or steward.

Indeed, Caers et al. (2006) find that governance bodies in this type of organization exercise weaker control than in traditional corporations. This may be due to the difficulty in obtaining control instruments due to the challenge of monitoring the nature of the services they typically provide. Thus, executives might have more options to act in a discretionary manner, yet this is not generally observed. Both the altruistic behavior of agents and competitive elements act to ensure that the agents’ work is efficient and aligned with the organization. Along the same lines, Van Puyvelde et al. (2012) state that executives do not seek high levels of compensation, but rather are driven by the opportunity to use their professional skills to achieve their ideals. Therefore, traditional governance bodies do not seem to be the key to avoiding chaotic management.

Regarding the separation of interests between shareholder and manager, such a difference may not exist if we consider that the manager expects a better professional future if the shareholder’s corporation succeeds, which is also in the shareholder’s interest (Donaldson and Davis 1991). However, stewardship theory explains some scenarios better than others. For example, it seems reasonable that, as long as the executives’ jobs are not at risk, interest alignment is easier, and stewardship theory may be valid. On the contrary, if their continuity in the company is at risk, such as due to a potential sale of the company, executives will act to protect their own interests, which will differ from those of the shareholders. In this case, agency theory proves more useful.

Several authors (Caers et al. 2006; Van Puyvelde et al. 2012) consider stewardship theory to be a boundary of agency theory, where conflicts between principal and agent are eliminated. According to these authors, it cannot be clearly stated that there are no conflicts of interest in nonprofit organizations, but they do assert that studying the level of conflicts that actually exist may not be trivial. Therefore, they suggest that it may be useful to use the mentioned theory to explain the governance of this type of entity. In fact, Van Thiel (2024) proposes to use a mixture of principal–agent and stewardship theories to model the governance of public agencies.

Thus, one argument in favor of applying agency theory is the fact that there is no specific shareholder, so there is no efficient board representing the specific interests of the principal. This leads to greater manager discretion and the emergence of agency conflicts, which entails agency costs. Another argument is the difficulty in measuring results and the existence of complex or ambiguous objectives. This poses problems when measuring managers’ performance, facilitating moral hazard and adverse selection.

In contrast, proponents of stewardship theory argue that the existence of discretion does not mean that managers will use it. Both ethical aspects and the utility they gain from pursuing their clients’ interests act in this regard. Additionally, there is a self-selection process for occupying positions in nonprofit organizations, where the employee has goals aligned with those of the organization and its principals. Public good is, in this case, an objective for both principal and agent.

A second aspect addressed by the stewardship perspective in nonprofit entities, based again on agency theory, is considering who the principal is and who the agent is. The publications of relevant researchers (Caers et al. 2006; Van Puyvelde et al. 2012; Albrecht et al. 2023) make explicit the need to consider different principal–agent relationships within the organization. The most important ones are those observed between the board of directors and executives or managers, and those that exist between executives and the rest of the employees.

The first case is the most studied, from the origin of agency theory, and predominates in the present research. Each of the groups seems to have independent objectives and actions, although both groups interact with each other in strategy development and relevant financial decision-making (Cornforth 2012). However, there may be interrelations between them resulting in an ambiguity in the boundary line between them, given certain conditions in the organizational structure. For example, when board members need executives’ support to be elected or renewed on the board, they end up behaving similarly to executives (Caers et al. 2006). Thus, executive compensation systems are more of an agency problem than a mechanism to reduce agency conflicts.

Regarding the second case, which studies the relationship between executives as principals and employees as agents, we can affirm that it is increasingly being considered, especially in certain third-sector organizations, where social spirit and democratic principles seem to be more important (Cornforth and Edwards 1999).

In fact, Van Puyvelde et al. (2012) assert that employees can clearly influence executives, and it is equally important to consider how control and incentive mechanisms work from the principal to the agent. For example, we find that employees in nonprofit organizations tend to accept lower salaries than in traditional companies due to the social externalities embodied by the social activity they engage in. Likewise, when employees are volunteers, the weight of the social benefit generated is so significant as to compensate for the lack of private benefit. However, this does not mean that managers should not exercise control or incentive over them. They must be aware of their personal goals, such as reputation or others, and provide them with the means to achieve them.

Although Caers et al. (2006) acknowledge that there is an open debate about the suitability of agency theory or stewardship theory in the executive–employee relationship as principals and agents, they argue that managers should select employees who enable the organization to pursue the mission set by the top management. This may mean that employees work to pursue goals that align with theirs, or that they are misaligned with them. Like Van Puyvelde et al. (2012), Caers et al. (2006) believe that employees influence executives. They further explain that the degree to which they can do so depends on factors such as belonging to the same department, the executives’ professional background, or the employee’s ability to benefit or harm the executive. It seems, therefore, that no clear conclusion is reached supporting the abandonment of agency theory, and that conflicts of interest exist in one way or another and must be resolved.

2.6. Stakeholder Theory for Nonprofit Organizations

Stakeholders are defined as interest groups that claim certain characteristics or actions by a concrete organization. The diversity of stakeholders (Barney and Harrison 2020) and the absence of a single shareholder prompt researchers to consider multiple principals (Steinberg 2010). During the 1980s, revolutionary changes occurred in organizations, where external stakeholders demanded, among other things, greater social responsibility from corporations. Since then, this requirement has not left the corporate stage and has led to an increased importance of nonprofit organizations with social purposes (Savage et al. 1991).

In this regard, drawing on the ideas conveyed by Abzug and Webb (1999), Steane and Christie (2001), or Valentinov et al. (2019), it is useful to adopt the perspective of stakeholder theory to map the characteristics of foundation governance with the elements identified by researchers in the governance of nonprofit organizations. The concept of stakeholders was widely introduced in the literature following the work of Freeman and Reed (1983), aiming to better understand the tasks and functioning of a board of directors when addressing corporate governance. Freeman and Reed (1983) explained that the organization has a responsibility not only towards shareholders but also towards other stakeholders.

Thus, this theory posits that anyone capable of claiming the attention of an organization, its resources, or the outcome of its activities, or who is affected by it, is a stakeholder (Van Puyvelde et al. 2012). In fact, there exist important stakeholders who have the possibility to influence the decisions that managers make (Bruni-Bossio and Kaczur 2022). An important implication (Abzug and Webb 1999) is that the organization must be managed taking into account all interested groups. Therefore, an effort should be made to understand each stakeholder individually. This is a challenging task, as satisfying some may mean disregarding the interests of others. Indeed, a perspective of multiple principals and multiple agents can help capture with greater certainty the reality of the relationships between nonprofit organizations and other entities, such as traditional private companies.

The focus of this research stream lies not only on internal participants but also on the relationships with external actors in the organization, considering the board as the interface between external and internal stakeholders (Van Puyvelde et al. 2012; Bruneel et al. 2020). Thus, we continue to observe that the board maintains a crucial role, but new stakeholders appear on the scene who are part of the organization’s governance system.

Table 3. Internal and external stakeholders (Abzug and Webb 1999; Van Puyvelde et al. 2012).

Internal Stakeholders	Managers
	Employees/Volunteers
	Board of Directors
External Stakeholders	Shareholders/Founders/Donors
	Competitors
	Suppliers
	Clients/Beneficiaries
	Partners of the organization
	Community
	Public Administration

illustrates those identified in the literature as internal and external stakeholders.

Conceptually, most stakeholders are valid for both for-profit companies and nonprofit organizations, even though their attributes may differ case by case. However, there are certain cases that are specific to nonprofit organizations. Alongside the usual group of employees, who receive compensation for their work, there are volunteer workers who obtain a different type of utility in exchange for their labor. Similarly, in the equivalent position to that of a shareholder in a private company, founders and donors appear as relevant stakeholder groups, considered external since they generally do not participate directly in the operational management of the entity. Lastly, the beneficiaries group emerges as those who ultimately receive the services or products provided by the nonprofit organization. They are part of the typical demand in the third sector, influencing the organization’s activities but not participating in revenue generation.

Abzug and Webb (1999) offer a stakeholder theory perspective in which there is a variety of principal–agent relationships between nonprofit organizations and external stakeholders. To begin their research, they inquire about the type of relationship these organizations have with private companies operating in the same sector. Thus, in economic theory, it has long been considered that they do not compete in the same segment, partly because the reality of third-sector entities has been much less relevant for much of modern history. It is true that, as observed since the late last century, in some sectors such as hospitals or other healthcare services, they compete directly. However, generally, there are subtle differences between the markets of these two types of organizations. Thus, they tend to complement each other within the value chain.

Another interesting stakeholder relationship between a nonprofit organization and a private company occurs when the former, usually a foundation, is a shareholder of the latter (Abzug and Webb 1999). In this case, the authors propose studying the hypothesis that the foundation influences the structure of the company in which it invests capital. Jassaud (2014), when studying the governance of Italian banks, discovers that those owned by a foundation are structured differently. The fact that foundations have no shareholders and are subject to political influences has consequences for decision-making in banks in which they have stakes. In their study, they find that the quality of asset measurement in these specific banks is lower than the sector average in Italy. In the same vein, Achleitner et al. (2020) indicate that there is at least a non-positive perception of the presence of a foundation in a corporation’s shareholding. They observe that when the foundation announces a decrease in its percentage of ownership, financial markets react positively.

The use of stakeholder theory as one of the conceptual foundations in this study is supported by works such as that of Calvo-Sotomayor (2017), who uses this theory specifically to analyze the corporate governance of the BBK Foundation, based on the principle that the entity should seek to maximize the added value for all its stakeholders. Similarly, Bajo Davó and Rodríguez Carrasco (2018), Pérez Fernández et al. (2007), International Monetary Fund (2012), Boesso et al. (2017), Carrillo and Silva (2016), among other studies, examine the governance of banking foundations, ordinary foundations, and savings banks from the perspective of stakeholder theory.

2.7. Cognitive Element

The cognitive element acquires special relevance in the recent literature. According to Argote and Greve (2007), the concept of limited rationality, from the behavioral theory of the firm, is important for understanding the decision-making process in the board of directors. This concept indicates that decision-makers have limited capacity to gather relevant information and solve complex problems. Thus, Bruneel et al. (2020) explain that decision-makers make resolutions that are good enough, given their limitations of knowledge and experience, rather than seeking optimal decisions, for which they would need different resources.

Applying this concept to the present study, we might say that a management body with limited cognition of social logic will make social-oriented decisions even if there is an economic problem in the situation at hand. Cognitive diversity is limited, but this is mitigated by the entry of members with experience in economic logic into the board. Additionally, it is necessary for the board processes to change accordingly. In fact, Cuñat and Garicano (2010) explain what happened with savings banks precisely in terms of limited rationality, arguing that the professionals who were part of the governing bodies did not have the information, experience, or sufficient capacity to make optimal decisions.

2.8. Importance of Context

Through a case study, Cornforth and Edwards (1999) reinforced the idea that the context of nonprofit organizations influences, both positively and negatively, the role adopted by board members, as well as the degree of separation the board has from the organization’s managers. These two factors, in turn, influence the board members’ ability to add value to the organization and contribute positively to its strategy.

Caers et al. (2006) illustrate the influence of context on the role played by the board by stating that the lack of a sense of responsibility towards the organization’s community makes the boards weaker. Rossi et al. (2015) confirm this conclusion by explaining that, although there are often formal requirements, the actual participation of communities in the governance of the organization is limited. Thus, board members feel responsibility for themselves and their specific areas of action, rather than for the organization as a whole and its environment, which means they do not pursue the mission adequately.

Due to changes in the environment (Bruneel et al. 2020), such as legal reforms and financial crises, social enterprises and other nonprofit organizations can no longer sustain themselves through donations and grants but must seek alternative sources of income. Thus, they have had to embrace market practices and include among their managers and workers experts from, in many cases, profit-making sectors. Specifically, their boards of directors have had to evolve in the same direction.

3. Materials and Methods

We perform ten semi-structured interviews with trustees or managing directors of banking foundations to obtain empirical evidence, following Jacob and Furgerson (2012). The outcomes of the interviews are coded and categorized according to the main themes and sub-themes that emerge from the data. The themes are then related to the research question and the hypothesis, as well as any new insights that arose in the interviews.

Foundations are chosen to represent the categories in terms of size, shareholding relationship with the bank, and profiles of the governing bodies.

Table 4. Characteristics of the sample. Elaborated by the Authors.

Dimension	Characteristic	Sample Covered
Foundation	Banking/Ordinary	4 Banking Foundations/6 Ordinary Foundations
Foundation	Geographic Area	8 Autonomous Communities: Castilla y León, Madrid, Cataluña, Andalucía, Extremadura, País Vasco, Navarra, Asturias
Foundation	Social Spend	From <1 M Euros to 540 M Euros
Governance Body (Patronato)	Size	From 8 to 15 Members
Interviewed Subject	Board Member/Managing Director	5 Board Members/5 Managing Directors
Interviewed Subject	Professional Background	Savings Banks Management, Political background, Private Banking, Social Work Management, Private Companies Management, Notary
Interviewed Subject	Career Path Stage	Senior professionals with considerable accumulated experience

shows the characteristics being covered in the study, and

Table 5. Regulatory elements for the dimensions of the population. Created by the Authors.

Dimension	Characteristic	Key Regulatory Element
Foundation	Banking	∗ Has 10% or more participation in the segregated financial entity or has the faculty to appoint members in the participating financial entity; ∗ Subject to stipulations of Ley 50/2002, de 26 de diciembre, de Fundaciones (general law for all foundations in Spain) and Ley 26/2013, de 27 de diciembre, de Cajas de Ahorros y Fundaciones Bancarias (specific and more restrictive regulation for banking foundations).
Foundation	Ordinary	∗ Has less than 10% participation in the segregated financial entity and has no faculty to appoint members in the participating financial entity; ∗ Subject to stipulations of Ley 50/2002, de 26 de diciembre, de Fundaciones (general law for all foundations in Spain).
Foundation	Geographic Area	Four different levels of scope: ∗ Province; ∗ Autonomous community; ∗ Spain; ∗ Spain/International.
Foundation	Social Spend	No regulatory limits. Actual spend ranges from <1 M Euros to 540 M Euros.
Governance Body (Patronato)	Size	Minimum of 3 members.
Board Members	Professional Background	Independent, highly qualified; requirement of financial background for certain members of each board.
Board Members	Career Path Stage	Senior professionals with considerable accumulated experience.

explains the regulatory framework of these characteristics for the population. We classify foundations and trustees based on these characteristics, so that we can cover all categories and, at the same time, apply the saturation criterion to define the number of interviews conducted (Hennink et al. 2017; Mason 2010).

Code saturation is considered in this empirical research for defining the sample size that provides the researchers with the relevant information. For this purpose, the codes that are saturated are the ones that are explained in each subsection of the results section in this paper. As an example, the code is regarded as saturated by the stakeholders when the implications of stakeholders in the governance of foundations are covered and no new concepts or associations appear—a similar process for politicization or motivations. For practical purposes, new codes that appeared in the interviews and are mentioned in this article, like transparency or superstructures, are not saturated. The reason is that the research needs to be delimited at some point in order to analyze results and discuss them. They may, though, be the subject of further studies in the future.

Morales Contreras et al. (2016) explain why it is suitable to apply a qualitative approach methodology in the field of business administration. Drawing parallels with the findings of that study, the objective of this qualitative research is to gain an understanding of the different elements involved in the governance of foundations arising from the transformation of savings banks. As we verify through a synthesis of existing knowledge on the governance of entities, and even more so by focusing on nonprofit organizations, the main governing body interacts with other levels of the organization, both internal and external, which are considered part of the same system aimed at pursuing the entity’s mission. We have also observed that researchers point towards a deeper exploration of these aspects to gain increasing clarity on how relationships are established in these complex systems and what impact they have on the activities carried out.

Obtaining information directly from the individuals who are part of these systems offers insights that cannot likely be observed in annual reports or management reports of foundations. The interview design aims to ascertain which of the elements found in the literature play relevant roles in the governance of foundations and how they influence the performance of the board of trustees. However, open-ended questions are posed to allow the interviewees to disclose interesting information from the research perspective, even if that information has not been considered initially. In this way, we seek to enrich the study through a circular approach that allows us to delve deeper into the phenomenon. Furthermore, the knowledge obtained through this technique can be of great help in defining variables for a possible quantitative study.

It is important to explain what information is sought through the research, and who should be the source of that information, as well as provide rigorous justification. We consider that the trustees of the foundations can be relevant sources of information, as they are at the center of the phenomenon under study. In the process, the decision was made that the source of the expected information would be the trustees of the foundations, since, on the one hand, they are part of the governance structures, and, on the other hand, they have direct access and knowledge of both the organizational governance context and its performance, and activities carried out.

We create a protocol based on the recommendations provided by experts in this method (Jacob and Furgerson 2012) and formulate questions according to the research gaps identified and the points identified as relevant in the work. Appendix A shows the interview protocol for this research.

The choice of semi-structured interview as a research technique for this study is based, firstly, on the need for a qualitative technique, since there are not enough quantitative observations on what we want to study to draw relevant conclusions.

4. Results

In this section, we explain the concepts and relationships found in the empirical study in correspondence with the findings that the literature review presents regarding governance models of non-profit entities. The ideas conveyed in this section are the direct observations obtained in the empirical research. In Figure 4, we attempt to graphically represent which elements are important, based on the results obtained in this study, in the governance structures of foundations in terms of their subsequent impact on social work, both in terms of spending levels and their allocation.

We find a set of elements closely related to the deployed governance model. Additionally, we use information obtained about the context of the phenomenon, such as the transformation process of savings banks, or the evolution in governance, as well as information about the interviewee, such as their motivations, to better contextualize the specific information obtained from the specific questions. Finally, we analyze the information obtained about the social work carried out by the foundations, in its two dimensions, and find the relationships between the first and the last set of elements.

In the remaining part of the section, we elaborate on the obtained results.

4.1. Governance Model

4.1.1. Composition

The composition of the board of trustees is the most important element of the governance model of foundations in terms of its influence on the board’s performance. This is true both for the type of activities carried out and their intensity, although there are factors that limit both aspects.

We observe this relevance through facts such as the existence of nomination committees, which aim to safeguard the governance structure of the entity by selecting appropriate profiles.

Different dimensions operate within the composition, which, as we will explain later, are associated with the social work developed by the organization. Below, we explain which dimensions have appeared in the empirical study and which elements are relevant within them.

Balance Between Social Logic and Economic Logic

The board of trustees must include experts in economic matters to maximize the performance of available resources and generate income. Additionally, there should be individuals with recognized experience in the areas of social work to be developed. The following is stated by some interview subjects in these examples:

In the board, we must find those who know the social world, and therefore who produce coherent projects, but also those who can foster the economic growth of the entity and maximize the available economic resources, because the more resources are available, the more social activities we will be able to develop.

(I1)

We need to keep a financial reserve, as we hold a relevant participation of the bank. This implies that we need to have a high level of knowledge in this field. Then in our case it is mandatory to have a representation of the social world.

(I2)

This finding is in line with Argote and Greve (2007). Additionally, there should be persons appointed by the public administration, provided they comply with the incompatibility regime. These administrations can be municipalities, provincial councils, or autonomous communities.

To understand the current balance between economic logic and social logic, it is important to note that the profiles inherited from the savings banks are more oriented towards social work and expenditure. Therefore, some of the entities studied start from an imbalance, which has been addressed to varying degrees depending on the case. In line with Cuñat and Garicano (2010):

Many foundations originated by the former savings banks present boards which are dominated by social spending profiles.

(I1)

The fundamental need for trustees with experience and skills in the economic field is clear, so that the foundation’s activities can be developed sustainably over time. Thus, asset management and maximizing returns are fundamental aspects of the availability of resources that allow maintaining or increasing the level of spending on social work. Equally important is the ability to attract resources from the foundation’s own activities, for example, by charging admission to cultural events that are social work in themselves, thereby recovering part of the cost and generating more resources for other projects. Moreover, prudence in management necessitated the cessation of inefficient practices in the expenditure area, measuring the granting of aid more rigorously based on justification, or directly reducing expenditure levels in certain years to meet future needs.

Financial autonomy is, therefore, a fundamental element recognized by the trustees of the foundations, given the difficult environment, explained in previous sections, in which they find themselves. This finding agrees with López Expósito (2016) and Calvo-Sotomayor (2017). However, achieving a certain level of autonomy varies in difficulty depending on the patrimonial endowment of each foundation. In this regard, representatives of banking foundations, which have a percentage of participation in at least one bank, do not always receive income from this investment. In fact, the European Central Bank temporarily prohibited banks from distributing dividends. Similarly, representatives of ordinary foundations express that their entities must find creative ways to achieve financial autonomy, arguing that they do not have the patrimonial volume that banking foundations possess. Thus, in the case of ordinary foundations, it has been even more necessary to have trustees with financial or business profiles on their governing bodies. This need has also promoted the search for profiles related to cost management and innovation in revenue generation.

In the foundations studied, there are different ways of perceiving and describing the presence of financial management knowledge among the trustees. While the predominant understanding of this quality is the ability to obtain returns from available resources, there are significant deviations in what trustees of certain cases expressed. For some of them, economic logic is present in the fact that, at the very least, resources are not lost, as there is adequate control over expenditure, allowing the planned social activity to be developed. On the other hand, there are trustees who consider complex investment plans to achieve returns far superior to what participation in the bank from the savings bank can offer or, in the case of ordinary foundations, what their patrimonial heritage can offer, whether it be a historic building, cultural halls, investment portfolios, or others—profiles capable of anticipating trends and making appropriate financial decisions.

In most cases, maintaining or creating economic logic in the governing body has been achieved through important decision-making. The results included correcting previous defects or improving financial management skills, often by incorporating trustees with financial or managerial profiles.

Before we were part of the board, there was a board that was rather pitiful, to be honest, as they made some totally wrong decisions. No investment was made. Then we elaborated a strategic plan, and we created an investments committee.

(I4)

Social logic, on the other hand, is present to varying degrees and in different ways. There are foundations whose foundational purpose is very narrowly defined, focusing the trustees and executives on a very specific part of the social work, so they do not need extensive knowledge of other social areas. Conversely, there are boards of trustees of foundations with a very broad scope that involves the development of diverse types of social work. Therefore, they include trustees who are experts in different types of social work.

Moreover, the economic difficulties experienced by some of the foundations caused survival-oriented economic management to prevail over social awareness. Temporarily, there was an imbalance favoring economic criteria, and once the difficulties were overcome, social logic regained importance and rebalanced the scales.

In any case, regardless of the level of resources and the volume of activity, the possibility of achieving a balance between economic logic and social logic is conditioned by the historical context of the foundation and the mechanism used for appointing trustees. The former represents inertia that can favor one of the two areas, and the latter can either facilitate or hinder correcting the imbalance.

We inherited significant liabilities together with assets, and this has meant a big problem and a huge burden.

(I5)

Politicization

The interviewees state that they currently do not have any issues with politicization in their boards of trustees. However, they attribute this fact to the regulator, as the requirements for being appointed as a trustee of a banking foundation seem to tacitly acknowledge that political influence in the former boards of directors of savings banks may not have been positive for their development, in accordance with Bajo Davó and Rodríguez Carrasco (2018). It is acknowledged that there are trustees with different political ideologies, but they are not individuals with personal political interests.

At this moment we do not have any active politician in our board. Some might be supporters of concrete political parties, but they do not represent them.

(I3)

In banking foundations, the incompatibility regime eliminates the breeding ground for politicization. According to the empirical study, ordinary foundations have received mimetic pressure and typically do not incorporate elected officials into their boards of trustees either.

When we were transformed into an ordinary foundation, we were not obliged by law not to have politicians in our board, but we kept the obligation in our statutes.

(I4)

People are sought who are connected to public life and are familiar with the characteristics of the territorial area of operation, but not actively holding political positions.

There is a widespread perception that the politicization of the boards of directors of savings banks had negative consequences for their management, but the perception of how this occurred in different savings banks varies according to the interviewee. In any case, in foundations, the political aspect is less important compared to the era of savings banks, though not in all cases. Both in what certain trustees describe about their foundations and in what some of them comment about other foundations, it is observed that in some entities, the political sphere still has influence. In general, the negative perception of management has significantly decreased, and there are checks and balances to correct any exclusively political interests that one of the trustees might pursue. However, one of the interview subjects has a different opinion:

Some people have accessed boards of foundations for political reasons. They are not qualified at all to perform a public function, and they do not really comply with regulations.

(I7)

Motivations of the Trustees

People willing to be part of boards of trustees are driven by a mix of motivations, including altruism, recognition, prestige, and professional advancement. The significant difference compared to the members of a company’s board of directors is that trustees cannot be remunerated. Therefore, financial compensation is not one of the incentives that help them perform their role as members of the governing team. This motivation is replaced by other extrinsic elements such as reputation or recognition.

Reputation probably gains more weight (in the motivations of board members) than in a for profit entity, to the extent that they cannot be remunerated.

(I1)

This finding relates directly to stewardship behavior as studied by Donaldson and Davis (1991).

One of the interview subjects, however, expresses that reputation is not a key motivation:

Most board members have long professional careers already, and holding a chair in the foundation does not add more visibility for them.

(I5)

The predominant motivation in the interviewees’ responses is altruism. Trustees usually have a profile oriented towards social vocation and public contribution. It is this intrinsic motivation that often leads them to sacrifice their leisure time or give up other professional commitments to contribute to the foundation’s mission. In turn, the high weight of this component within the governing body facilitates maintaining a high degree of harmony among the board members, as tensions generated by egos are less significant.

The first characteristic (related to motivations of the board) is generosity, as we are all working for the interest of the community.

(I3)

It is much easier to find someone to do a job if you pay them. In a governance body, it is the same. But in a foundation, you substitute this by the willingness to contribute.

(I8)

In the case of foundations linked to a more specific territorial area, such as an autonomous community or a province, the connection to that area emerges as an important motivation. The ability to contribute to the prosperity of the society in the territory where one has roots, has formed a family, or developed a professional career, for example, is a source of pride and intrinsic satisfaction that motivates one to dedicate time and effort to the foundation’s work.

Some interviewees agree that trustees assume a level of risks and responsibilities that are not truly compensated, due to the lack of remuneration. There is even a suggestion for a regulatory change in this regard, to facilitate these entities in finding suitable trustees to ensure the sustainability and growth of the foundation’s work over time. However, in this study, we have not been able to capture alternative proposals for measures that could be implemented. Compensation and reducing the size of the governing body are discussed, which seems to imply allocating economic resources to compensate for governance responsibilities.

The regulator should think about compensating the obligations of the board members with their rights.

(I2)

Others maintain that the level of satisfaction from the success of the projects and the achievement of the foundation’s social objectives compensates for the risks and responsibilities assumed.

Board members in these foundations assume high responsibility, but I tend to think that the social results they achieve keep them satisfied.

(I5)

Diversity

Diversity within the board of trustees is perceived by the interviewed subjects as a positive aspect of the governance model, in line with Page (2007). Most of them claim to enjoy this quality in the boards of trustees, although in many cases, this situation has been reached after a transformation process. Those who do not affirm it express their desire for improvement in this aspect by including trustees who bring new perspectives and different knowledge. This view is aligned with the theoretical framework regarding cognitive limitation and its effect on governance bodies. Making decisions focused on making necessary transformations is possible if there is a sufficient level of diversity in experience and knowledge that allows for choosing optimal paths.

We are very diverse, and this is enormously positive.

(I7)

There have been qualitative changes in the board, for example in the aspect of diversity of the board members. If we reduce diversity in the future, it will be a mistake.

(I8)

This attribute of the board of trustees implies debate, knowledge exchange, and exposure to different perspectives, but there is usually consensus on decisions made once this process has taken place. The perception is that the agreements reached, and the options chosen are more likely to succeed because of this. There is no sense of competition among trustees, even if their beliefs or backgrounds are very different from each other.

Similarly, the idea predominates that it is difficult to have the right trustees to ensure diversity. We find that governance bodies must overcome numerous difficulties in areas studied in this research, such as motivations, the balance between economic logic and social logic, regulatory framework, or blocking negative aspects of politicization, to have the most suitable professionals. It is true that foundations with greater volume and scope in their activities have access to more suitable profiles than those with fewer resources or less attractive projects. However, it is also true that the former have a very high degree of complexity and require profiles with more experience and notoriety than other smaller foundations.

It is important to highlight in this section that, in the case of banking foundations, the law to which they are subject promotes diversity through qualitative requirements about the members of the board of trustees.

4.1.2. Stakeholders

Interest groups are found to be part of the governance model of foundations, as already stated by Calvo-Sotomayor (2017). This is similar also to other studied cases of nonprofit organizations, as Valentinov et al. (2019). Some of them even form part of the highest governing body. In

Table 6. Internal and external stakeholders found in the empirical study, classified according to the literature (Abzug and Webb 1999; Van Puyvelde et al. 2012).

Theoretical Framework		Found in Empirical Study	Represented in the Board
Internal stakeholders	Managers	Managers	Yes
	Employees/Volunteers	Employees/Volunteers	No
	Board of directors	Board/Patronato	Yes
External stakeholders	Shareholders/Founders/Donors	Founders	No
	Competitors	-	No
	Suppliers	Suppliers	No
	Clients/Beneficiaries	Beneficiaries	Yes
	Partners of the Organization	Foundations/associations	No
	Community	Geographical Scope	No
	Public Administration	Townhall/Province/Region Protectorate	Yes
	-	Segregated Bank	No

, we summarize the results regarding relevant stakeholders in the studied foundations. Firstly, we observe that all interest groups mentioned in the literature related to non-profit entities appear in the study, except for donors. On the other hand, we find that not all of them are formally represented on the board of trustees. Those that are represented are those that enhance aspects of governance to which greater importance is given. Therefore, resource managers, benefiting social areas, and relevant public administrations have a place in the governing body.

Furthermore, the financial entity associated with the foundation appears as one of the interest groups with which the foundation interacts. Whether it is due to financial participation or association based on a common image, foundations maintain a certain connection with the entities that carry out banking activities after the transformation of the former savings bank. In some cases, the foundation’s board of trustees feels the need to separate its image from that of the bank, aiming to establish its own identity that is recognized by society and to dissociate itself from any possible negative reputation of the banking entity due to specific events such as branch closures. In others, their strategy is to maintain that image link, convinced that it benefits both parties.

The figure of the competitor as a stakeholder does not exist due to the nature of the scope in which foundations operate. On the contrary, what is mentioned is that boards of trustees often seek alliances with other institutions, whether public or private, business-oriented, or non-profit, to pool efforts and achieve larger social objectives. In fact, certain foundations mention the Spanish Association of Foundations as a facilitator of these types of alliances.

Additionally, the foundations under study regularly meet at CECA, which is mentioned by some of the interviewees as an opportunity to enrich knowledge about the social work carried out, inspire the setting of new objectives, and establish links between different foundations.

The perception of the board of trustees as an interface between the foundation itself and the different interest groups is widely accepted and confirmed by the interviewed subjects. This occurs both through direct stakeholder representation on the governing body and through the role played by the trustees in the field of institutional relations with representatives of interest groups. We have only found one case where this connection function with interest groups is performed almost entirely by the general director.

We have a plan to contribute to education, to the pastoral scope, to culture… but this has never materialized because (the main stakeholder) does not have that plan.

(I4)

However, there is heterogeneity regarding the weight that each type of stakeholder acquires in the governance of the foundation. There are foundations that focus on the needs of society, understood as beneficiaries, and try to adapt to them as much as possible. Thus, the most direct approach that certain foundations find is to include trustees in their governing bodies who represent the different areas to which social work is intended. Trustees linked to the educational sector, culture, social action, or academic research are appointed.

To achieve this, on many occasions, they have had to overcome inertia and explain to former founders that new beneficiaries needed the support of the foundation. In these cases, the performance of institutional relations was key. At the same time, in other foundations, tradition weighs heavily and requires focusing on support for certain institutions, thus establishing limits on the framework of action of the governing body. Even if there have been attempts within the board of trustees to promote a change in the object of social and cultural assistance, it has not materialized. For example, if there is a strong link with a religious institution, this interest group has such weight in the governing body that it directs the allocation of resources to its area, hindering diversification towards other social areas that also need support.

In the case of an ordinary foundation subject to the study, importance is given to the fact that, beyond the formal relationships with the stakeholders established on the board of trustees, an active communication process was established with almost all of them. In this case, the main objective was not to adapt the foundation to the requirements of the stakeholders, or at least not at any cost. What was intended was for stakeholders to understand the new reality facing the foundation, as opposed to the era of savings banks, and to find new effective, but also efficient, forms of collaboration. Currently, the foundation is reaping the benefits and maintains a productive relationship with its interest groups. Additionally, the execution of this plan has led the organization into the field of partnerships with other institutions or organizations.

4.1.3. Regulation

Normative changes have been significant in defining the governance model of foundations. They were especially important for foundations established as banking foundations and remain as such, although they have also significantly influenced those that had that status temporarily.

The criteria for incompatibility imposed require a certain typology of trustees. On the one hand, this requirement aims to avoid the potentially harmful effects of profiles associated with public administrations or specific political parties, whose interests, while legitimate, may diverge from the purposes of the foundation. On the other hand, it aims, as mentioned earlier, to enhance the search for independent profiles, specialized in resource management or social work development.

Regulation has been key in laying down foundations and creating structures. Subsequently, it is the trustees who carry out strategic planning and oversee its execution, complying with the formalities imposed by regulations but making decisions without constraints from the regulator.

From the data collected, another important objective intended by the regulatory framework and the European Central Bank is understood, which is the separation between the bank and the foundation. There must be total autonomy, and one should not intervene in the management of the other. However, one of the interviewed subjects questions the real effectiveness of this measure for some cases, as they express that, while complying with the law and without it implying mismanagement, key individuals in the foundation and the bank make the intended independence not real.

One of the interviewed subjects mentions the negative impact of the current regulation on the formation of the boards of trustees. They acknowledge that, in an initial phase, it was necessary to impose a series of obligations on the trustees to restrict their compensations, to achieve the objectives explained in the previous paragraphs. However, as argued, currently, after sufficient time has elapsed since the application of the LCAFB and once the governance structures have been consolidated, restrictions on the rights of the boards of trustees should be relaxed. The objective of this measure would be to increase the chances of attracting talent to the governing bodies, which would positively influence the achievement of goals by the foundation.

4.1.4. Statutes

The statutes of foundations are perceived by trustees as elements that do not condition the governance model but rather reflect what has been established as the management model, and they also adapt to the law. However, we observe that the drafting and compliance with the statutes become a tool that fosters stability in the governance function and helps trustees not to deviate from the internal operating norms set by the institution itself, by establishing deadlines and requirements for renewals and appointments of their own positions. Likewise, they reinforce compliance with the law, since they at least replicate the requirements imposed by the regulatory framework.

4.1.5. Governance Superstructures

The data collected indicates that the governance of a foundation is carried out by the board of trustees, and there cannot be said to be a governance superstructure in this group of organizations. Trustees acknowledge that there are contextual constraints that may exert pressures as referred to in the theoretical framework review, but they consider these are not elements that are part of the governance model itself.

The most frequently mentioned external body is the supervisory authority, known as the “protectorate”, to which foundations are subject. Different types of foundations depend on different protectorates, as they can be either regional or state-level. As expected, all interviewees have a clear perception of the supervisory mission undertaken by the protectorate, but there is no unanimity regarding the relationship foundations have with it. Some foundations merely comply with the obligations imposed by the protectorate, without fostering a more active relationship with it. Even in the case of some banking foundations, for which the need for transparency is significantly greater, interaction is limited to supplying information. However, other foundations actively engage with the protectorate. They talk about the need to earn the trust of the supervisory body through clear, proactive, and transparent communication, gradually eliminating the negative perception that existed about some of the former savings banks.

At this point, it might be asked whether the perception of non-participation in the governance of foundations by the protectorates actually means non-interference in management. The control tasks carried out by these external bodies could be considered elements of good governance. Thus, it could be argued that this superstructure does indeed form part of the governance of foundations.

As mentioned earlier, there are also collaborations with other entities, which have their own governing bodies, to carry out joint projects. Interview subjects state that collaborations do not influence the governance strategy but integrate these activities into management if they are aligned with the foundational purpose. In certain cases, committees are formed whose purpose is the governance of specific projects, not the governance of the foundation as a whole.

4.2. Social Work and Found Relations

Figure 5 shows a summary of the relationships between the concepts appearing as relevant in governance structures of banking and ordinary foundations, and the two studied dimensions of social work: volume and type.

4.2.1. Level of Spending on Social Work

It seems evident, both from the explanations obtained in the literature review and from the information gathered in the study, that there are elements of the governance structure that condition the possibilities of spending on social work and do not depend on the qualitative aspects of the board of trustees. Primarily, we refer to the initial endowment of the foundation and the specific economic context, which will enable a greater or lesser financial exploitation of resources. However, there are other characteristics inherent to the board of trustees that can be associated with the volume of resources available to develop social work.

In this regard, the experience and knowledge of the board of trustees, or a relevant part of it, in financial and business activities come into play. Thus, the financial profiles described in the section on the composition of the board of trustees must demonstrate their ability to manage resources in the long term to obtain sustained returns over time.

If you have 100 million Euros and you have them in a regular bank account, your revenue is zero. If you invest the funds in financial assets that generate 4%, at the end of the year you have 4 million euros that will be available to do more social work.

(I1)

We pride ourselves on being a long-term shareholder, but if we manage to invest in a diversified way, our social work will be more protected.

(I2)

With the available resources we planned the strategic lines for the following three years that would allow us to perform social work with financial feasibility.

(I3)

As commented in a previous section, some foundations have a less sophisticated concept of financial management of resources. This fact has a direct relation with the level of spending on social work:

From the budget we have, we need to pay the employees and maintain the buildings. The remaining part is dedicated to social work.

(I4)

Also, innovation in management capacity is important in obtaining resources. For example, cultural promotions do not have to be free, as charging an entry fee will generate income available for another social activity.

If we do cultural activities, we can charge an entrance fee. This fee is not going to cover the cost of the activity, but it is going to be revenue. Imagine that we spend 4 million on cultural activities (as social work). If we recover 50% through the tickets, then we have 2 additional million available for social work.

(I1)

Altruism is pointed out by several interviewees as one of the characteristics of the governance model that positively influences the level of social spending. Trustees guided by altruistic motivations feel satisfaction when they see that the foundation’s projects are successfully implemented and contribute to society. In this way, they perform their work with effort and selflessness to obtain the highest level of resources possible and to be able to launch projects with the greatest possible impact.

I do think that a board formed by members with other motivations than altruism would have a different result in the level of social work developed by the foundation. The syntony between social work and a board whose motivations are not altruistic would have collapsed.

(I5)

One must believe that altruistic social work is necessary in order to develop it.

(I9)

We find a very significant case that has maintained levels of spending on social work during the pandemic crisis years despite the absence of bank dividend income. This was possible thanks to prior investment diversification and the allocation of reserves, as part of a financial strategy that avoids drastic reductions in resources available for social work.

In fact, during the pandemics, there was the brilliant idea to freeze the payments of dividends in the banking sector, and we continued to do social work without reducing the spending by a single euro.

(I2)

This is conditioned by the governance model we have adopted.

(I2)

Trustees value stability in levels of social spending, or its sustainable growth, as opposed to periods of high spending followed by periods of drastic decreases. Stability allows for the design of social strategies and their fulfillment, minimizing the risk of having to halt projects due to resource unavailability.

4.2.2. Type of Social Work Developed

It has been previously stated that an important part of the board of trustees must be occupied by professionals with recognized experience in the areas of social work to which resources are allocated. In this sense, we can affirm that if one social or cultural area is more represented than another, the percentage of social spending dedicated to that area will be higher.

If you have profiles in your board that are more linked to, say, entities that work with people at risk of exclusion, the approach will be focused on this line of action.

(I1)

However, it is also necessary to consider that certain foundations were born with a significant legacy in the proportion of social work dedicated to certain areas, so the conclusion is more complex and requires an analysis of the evolution in the governance model of the specific entity. Likewise, the needs and diversity of the society served by the foundation according to its territorial scope condition both the need for certain profiles and the way in which spending is distributed among the different social areas.

In this regard, in foundations that perceive their community as diverse and balanced, we find boards of trustees with a certain balance in terms of social profiles. Similarly, foundations operating in communities with very marked needs make the effort to adapt to them by including specialists in their boards of trustees and dedicating more resources to activities that address those needs.

In one case, it was decided to reduce the number of activities in which social spending would occur.

We decided to choose a limited set of activities that would maximize the social impact on the relevant territory as per our geographical scope. This impact needed to be sustainable in the medium and long term.

(I3)

Another interview subject is more explicit in this sense:

We built a department that studies the social needs in our territory and this department also investigates what needs are already well addressed by the public administration. Based in this, we decide the social activities to develop.

(I2)

This suggests that, in certain foundations, resources are dedicated to studying what concrete types of social work are more necessary according to society in the scope of the entity.

The perceived intentions in these examples are not to pursue particular interests but to optimize management and select those purposes that would have the greatest impact on the territorial scope of action in the long term. For a decision like this to be made, the board of trustees must have attributes described when addressing the composition of the board of trustees: balance between social and economic logic, diversity to understand the different aspects of the society in question, rejection of political interest, and generosity to renounce personal prominence linked to a specific social area.

In cases where diversity on the board of trustees is lower, and where the historical context of the foundation is heavily skewed towards certain beneficiaries, management transformation is more difficult, and attention to other purposes that may need more support is slower.

It is expressed in the statutes of the foundation that social work is open to all types. However, most of the investment goes to one destination.

(I4)

5. Discussion

The research concludes that the nature and extent of social work undertaken by foundations are significantly associated with governance composition, stakeholder and stewardship dynamics, together with regulatory frameworks and financial contexts.

The relations are complex, in the sense that it is not always straightforward to find direct cause–effect associations. On the one hand, elements like context or regulations influence, or condition in certain cases, other more concrete concepts like the balance between economic and social logic or representation of different collectives (linked to stakeholder theory). In turn, stakeholder principles can be associated with the level and category of social work. On the other hand, stewardship theory foundations are directly present when analyzing the association of motivations with the same dimensions of social work.

It is appropriate to start reviewing general governance theories that address the principal/agent problem, as we have observed that control mechanisms are in place in the studied foundations to mitigate agency costs. At the same time, the use of an extended theoretical framework has proven necessary to address the research question. Different stakeholders shape the boards of the studied foundations, which affects social work. Similarly, the stewardship component in the relations between multiple principals and agents generally supports the achievement of social missions.

In this sense, the theoretical review proves to be academically convenient to study the phenomenon of the governance of the banking foundations created by former savings banks in relation to their output. Still, as explained in the results section, there are generally observed relationships along with exceptions or deviations from the overall patterns. This fact leads us to present the first limitation of the study, which should be addressed by further research. More in-depth analysis of the circumstances under which we find different results will help complete the understanding of the research problem.

This study has focused on a concrete type of foundation. Even if not only banking foundations have been examined, but also ordinary foundations, all of them have their origin in the transformation of Spanish savings banks. A logical future research line would be to extend the subject of research to foundations of other categories or with different origins. Additionally, a quantitative study designed to measure governance structure variables and find correlations with social activity would add robustness to the results found in this paper.

Finally, the concept of collaboration among the governance bodies of different foundations emerges in the study. Not a few interview subjects evoke the potential benefits of intensifying alliances between different entities to the benefit of social work. A new research line is therefore discovered for future studies.