The role of the foundation’s board of directors is changing increasingly: from a greeting from God-August to an owner representative who is to work independently and within the defined framework conditions to fulfil the foundation’s purpose. In doing so, he is personally and unlimitedly liable for wrong decisions.
Independent decisions have three levels: Firstly, the decision itself; secondly, monitoring of implementation; thirdly – as set out in our comments on the Business Judgement Rule – documentation of the decisions taken. For all three levels of action, the foundation’s board of directors needs suitable instruments.
Above all, these include a reporting system tailored to the foundation’s needs. Reporting on pure financial assets differs significantly from investment controlling. And the reporting of a subsidiary will have a different focus than that of the foundation, which is a shareholder. The decisive factor is therefore the individual design, in which all asset classes are taken into account according to their characteristics. Correct operative and entrepreneurial decisions can only be made on the basis of reliable information.
A foundation board must have knowledge of all assets and their development at all times. As in the management of a company, the foundation’s board of directors has the task of defining the relevant key figures, information and reports and their frequency of collection, which enable it to obtain a comprehensive picture of the current status, but also an outlook on the potential development of the foundation’s assets and relevant risks.
However, reporting not only serves the purpose of decision-making in accordance with the Business Judgement Rule, it also makes a significant contribution to smooth cooperation between the various bodies. For example, reports with varying degrees of detail can be sent to the board of directors and foundation auditor, the advisory board and the beneficiaries. Here it is particularly important to provide the advisory board and the beneficiaries with an appropriate insight into the current financial situation, major projects, decisions made, risks and distributions.
Many foundations, for example, have as their purpose the preservation and increase of the foundation assets. In order to adequately assess whether this purpose is fulfilled, a suitable valuation procedure must be defined for all existing assets, appropriate forecasting models must be selected, and interdependencies between the various assets and risk focuses must be identified and taken into account. Once the concept is in place, the appropriate technical environment must be created and workflows set up to collect the required information at the desired intervals, enter it into the system and create the corresponding reports.
For the implementation and, if necessary, also for the operation of these processes, it is advisable to consult a consultant who can cover all interrelated topics, from financial assets to real estate and equity investments.
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