Even if the topic “power in the foundation” is defined very differently for private foundations and federal foundations, the following points must be observed for founders in any case:

  1. Unilateral advice
    Law firm, bank, tax, wealth and philanthropy advisory services each cover only one aspect of a charitable foundation. However, for the functioning of a structure geared towards long-term existence – and that is a foundation – a holistic approach is required, which aims at an optimal interaction of the individual components.
  2. The purpose of the foundation is poorly defined
    This is where the decisive field of tension arises: On the one hand, a sufficiently clearly defined mandate must be submitted to the foundation’s board of directors, since the foundation’s purpose is the essential guideline for its actions. On the other hand, a foundation’s board of directors must be able to move to achieve the foundation’s purpose and adapt to changing conditions. Both – long-term orientation and flexibility in operationalisation – should be considered in the description of the foundation’s purpose.
  3. Insufficient foundation assets
    The classic sustainable approach to asset allocation requires a foundation capital that not only meets the minimum legal requirements (70,000 according to PSG, 50,000 according to BStFG). The income should be sufficient to pursue the purpose of the foundation and to cover the running costs (foundation board, foundation auditor, ongoing accounting or preparation of the annual financial statements).
  4. No suitable mandate holders
    Far too often, mandates are understood as a friendly service and are awarded or accepted on the basis of personal commitments in the social network, instead of formulating the requirements of the functions and determining the objective suitability of candidates. After all, competence does not necessarily exclude good personal relations with a board of directors or foundation auditor, but the appointment of committees should always follow purely professional criteria.
  5. Board of directors is appointed for an indefinite period
    In this case, on the one hand, control of the foundation is largely relinquished, because dismissal is not so easy. Especially when people come from the personal network of the founder, a dismissal is already interpersonal and much more difficult to handle than the expiration of a mandate that may not be renewed.
  6. Organs are not properly structured
    Many foundations give too little thought to the actual processes within the foundation. Who informs whom? What is the basis for decision-making? This should be thought through – with professional support – and taken into account in the structure and procedures of the foundation. Drawing up rules of procedure or a code of conduct helps to avoid conflicts.
  7. No regular evaluation
    Especially charitable foundations often pursue goals, the achievement of which becomes visible in the change of a situation. If you do not constantly check whether the foundation is getting closer to its goals, you will not be able to optimize its conduct. Only those who evaluate know to what extent the foundation operates successfully and can make adjustments based on these findings. For this purpose, the founder’s rights should be preserved for as long as possible.

The general rule is: as flexible as possible, as concrete as necessary!