Foundations in Austria - Roles and visions

Contents

1 Preface

2 Introduction
2.1 Description of the Europe-Wide Project
2.2 Structure of Thesis

3 Research Method
3.1 Description of the Research Method
3.1.1 Methodological Approach Chosen by the CCS
3.1.2 Changes Made for Austria
3.1.3 Theoretical Background
3.1.4 Sampling
3.1.5 Procedure
3.1.6 Analysis
3.2 Reasons and Discussion

4 Background
4.1 Historical Development
4.1.1 Ancient World
4.1.2 The Middle Ages
4.1.3 Modern Ages
4.1.4 19th and 20th Century
4.1.5 The Period Between the Two World Wars
4.1.6 National Socialist Period
4.1.7 Postwar Era
4.1.8 The 1970’s Until Today
4.1.9 Present Situation
4.1.10 Corporatism in Austria
4.2 Legal Issues
4.2.1 General Aspects
4.2.2 Purpose
4.2.3 Establishment
4.2.4 Governance
4.2.5 Transparency Requirements
4.2.6 Aspects of Taxation
4.2.7 Funds
4.3 Justification of Foundations in a Modern Society
4.3.1 Theoretical Background
4.3.1.1 Heterogenity
4.3.1.2 Contract Failure
4.3.1.3 Neocorporatism
4.3.1.4 Economic Background
4.3.2 Empirical Evidence
4.3.3 Foundations and Society in Austria
4.4 Quantitative Profile
4.4.1 Relevance of Foundations within the NPO Sector
4.4.2 Population Structure
4.4.3 Private Foundations
4.4.4 Charitable Foundations

5 Roles
5.1 Theoretical Introduction
5.2 Roles of Foundations in Austria
5.2.1 Complementarity
5.2.2 Substitution
5.2.3 Innovation
5.2.4 Redistribution
5.2.5 Social and Policy Change
5.2.6 Preservation
5.2.7 Pluralism
5.2.8 Others
5.3 Summary of the Roles

6 Relevance and Visions
6.1 Civil Society and the Position of NPOs within Society
6.1.1 General Aspects
6.1.2 Civil Society in Austria
6.1.3 Categorisation of NPOs
6.1.4 Problems with Measuring Efficiency and Success
6.2 Structure of the NPO Sector
6.2.1 Social Relevance and Forms of Influence
6.2.2 Institutional Networking
6.2.3 Business Administration Based on the Theory of Need for Organisations within Social Economy
6.3 Visions and Perspectives
6.3.1 The Cluster Model
6.3.1.1 The Socio-Democratic Model
6.3.1.2 The State-Controlled Model
6.3.1.3 The Corporatist Model
6.3.1.4 The Liberal Model
6.3.1.5 The Peripheral Model
6.3.1.6 The Business Model
6.3.1.7 New Public Management

7 Welfare State
7.1 Introduction and Present Situation
7.1.1 Sociological Aspects
7.1.1.1 Emergence and Functions of the Welfare State
7.1.1.1.1 Approaches
7.1.1.1.2 Growth
7.1.1.1.3 Effects and Contradictions
7.1.1.1.4 Crisis
7.1.1.2 Forces of Welfare Production and Core Values
7.1.1.2.1 Fairness and Equality
7.1.1.2.2 Freedom
7.1.1.2.3 Security
7.1.1.2.4 Solidarity
7.1.1.2.5 Subsidiarity and Responsibility
7.1.1.3 Winners and Losers within the Welfare State
7.1.1.4 Wealth
7.2 The Influence of International Issues on Foundations
7.2.1 The European Union and Globalization
7.2.2 The International Dimension

8 NPOs in a Changing Environment
8.1 Political Changes
8.2 Social Changes
8.3 NPOs in Change
8.4 Perspectives of the Welfare State
8.4.1 Current Development
8.4.1.1 Economy of the 21st Century – Space for Social Needs?
8.4.1.2 Needs for Reformation and General Conditions
8.4.1.3 Changes within the Tertiary Sector

9 Case Studies
9.1 Bank Austria Stiftung zur Förderung der wissenschaftlichen Arbeit an der WU Wien
9.1.1 Origin
9.1.2 Purpose
9.1.3 Structure
9.1.4 Activities
9.1.5 Role
9.1.6 Cooperations
9.1.7 Future and Visions
9.2 Dr. Maria Schaumayer Stiftung
9.2.1 Origin
9.2.2 Purpose
9.2.3 Structure
9.2.4 Activities
9.2.5 Role
9.2.6 Legal Entity: Federal Foundation (BStFG)
9.2.7 Future and Visions
9.3 Anton Proksch Institut Genesungsheim Kalksburg
9.3.1 Origin
9.3.2 Purpose
9.3.3 Structure and Finances
9.3.4 Activities
9.3.5 Role
9.3.6 PR, Marketing and Cooperations
9.3.7 Future and Visions
9.4 4 Pfoten Privatstiftung
9.4.1 Origin and Development
9.4.2 Purpose
9.4.3 Structure
9.4.4 Activities
9.4.5 Role
9.4.6 PR, Marketing and Cooperations
9.4.7 Legal Entity: Pivate Foundation
9.4.8 Future and Visions
9.5 Stiftung Kindertraum Privtastiftung
9.5.1 Origin
9.5.2 Purpose and Vision
9.5.3 Structure
9.5.4 Activities
9.5.5 Role
9.5.6 PR, Marketing and Cooperations
9.5.7 Legal Entity: Private Foundation
9.5.8 Future and Visions
9.6 Arnold Schönberg Center Privatstiftung
9.6.1 Origin and Historical Background
9.6.2 Purpose
9.6.3 Structure and Finances
9.6.4 Activities
9.6.5 Role
9.6.6 PR, Marketing and Cooperations
9.6.7 Legal Entity: Private Foundation
9.6.8 Future and Visions

10 Summary and Conclusions
10.1 Central Results
10.2 Consequences and Expectations

11 Literature and Other Data Sources

12 Annexe
12.1 Interview Guideline for Experts, Representatives and Policy Makers
12.2 List of Interviews
12.2.1 Experts and Policy Makers
12.2.2 Case Studies

Tables

Table 1: Austrian Research Sample

Table 2: ICNPO-groups (source: Salamon & Anheier, 1992, p. 18)

Table 3: Contrasting of BStFG and PSG (own visaulization)

Table 4: NPOs (source: Heitzmann, 2001)

Table 5: Public-welfare foundations (source: Grafl, 2000, pp. 70 and own research, August 2002)

Table 6: Charitable Foundations based on Provincial Acts according to ICNPO (source: Grafl, 2000, p. 70 and own research, August 2002)

Table 7: Foundations based on the BStFG according to the ICNPO-Groups (source: Grafl, 2000, p. 70 and own research, August 2002)

Table 8: Austrian Role Model (own visualization)

Table 9: Types of Activities of NPOs (adapted from Simsa, 2001, p. 130)

Table 10: The Organisation of the Nonprofit-sector (adapted from Wex, 1998, in Arbeitskreis Nonprofit-Organisationen, 1998, p. 255)

Table 11: Evaluation of organisational effectiveness in profit and nonprofit organisations (adapted from Murray & Tassie, 1994, p. 310, quoted in Simsa, 2001, p. 145)

Table 12: Contrasting features of profit organisations and socio-economic institutions (adapted from Schober-Schmutz, 2000, in Schauer et al., 2000, p. 184)

Table 13: Comparison of the public and the private sector model (Stewart & Ranson, 1988, p. 15, quoted in Naschold, 1995, p. 55)

Table 14: Effects and contradictions of welfare-state policy (adapted from Lessenich, 2000, in Allmendinger et al., 2000, p. 61)

Table 15: Forms of Subsidiary and Responsibility in the Welfare State (adapted from Möhle, 2001, p. 181)

Table 16 Communication pattern between NPOs and the EU (adapted from Rondo-Bovetto, 2002, in Badelt, 2002, p. 643)

Table 17: Models of State-NPO Relations (adapted from Gidron et al., 1992 quoted in Toepler, 1996, p. 188)

Charts

Chart 1: Connection between goals, instructions and methods

Chart 2: Institutional Triangle (adapted from Badelt, 1998, p. 23)

Chart 3: Austria’s population, total: 8,121,300 (source: Statistik Austria (www.statistik.at/statistische_uebersichten/deutsch/pdf/k14t_1.pdf)

Chart 4: Private foundations, total: 2,306 (source: own research in company register, August 28, 2002)

Chart 5: Private foundations per 100,000 inhabitants (source: own research in company register, August 28, 2002)

Chart 6: Distribution of charitable foundations over the ICNPO-groups, total 475 (source: own research, August 2002)

Chart 7: Distribution of charitable foundations over the provinces, total: 475 (source: own research, August 2002)

Chart 8: Austrian regions according to their geographical size (source: Compact Verlag, 1985, p.689

Chart 9: Charitable federal foundations per 100,000 inhabitants according to provinces, total (Austrian) average: 5.85 (source: own research, August 2002)

Chart 10: Charitable foundations established through Provincial Foundations Acts, total 261 (source: Grafl, 2000, p. 70 and own research, August 2002)

Chart 11: Charitable foundations established through BStFG (source: Grafl, 2000, p. 71 and own research, August 2002)

Chart 12: Influencing strategies of NPOs (adapted from Simsa, 2000, quoted in Schauer et al., 2000, p. 200)

Chart 13: Target system of socio-economic organisations (adapted from Schober-Schmutz, 2000 in Schauer et al., 2000, p. 183)

Chart 14: Elements of the broad security term (taken from Meyers, 1993, p. 101)

Chart 15: Stakeholder profile of the ‚Bank-Austria-Stiftung zur Förderung der wissenschaftlichen Arbeit an der WU Wien’ (own visualization)

Chart 16: Stakeholder profile of the ‘Dr. Maria Schaumayer Stiftung’ (own visualization)

Chart 17:Stakeholder profile of the ‘Anton Proksch Institut Genesungsheim Kalksburg’ (own visualization)

Chart 18: Stakeholder profile of the ‘4 Pfoten Privatstiftung’ (own visualization)

Chart 19: Stakeholder profile of the ‘Stiftung Kindertraum Privatstiftung’ (own visualization)

Chart 20: Stakeholder profile of the ‘Arnold Schönberg Center Privatstiftung’ (own visualization)

1 Preface

As a methodological introduction and explanation it is important to note that the empirical section of this doctoral thesis emerged as part of an international research project dealing with the roles and future of foundations in various countries. It was planned and coordinated by the Centre for Civil society (CCS) of the London School of Economics (LSE).

With the participation of 26 European countries as well as the USA background data on this topic were collected, case studies completed and expert interviews carried out with the goal of examining the current position of foundations in each country and the future prospects held within this sector. The result of this project was a separate report for each country which will be referred to in this paper.

In each country, this research and analysis process took place within a team, that is why particular findings and facts described in this doctoral thesis are also to be found in the final Austrian country report of the project and, additionally, in the master’s thesis of Reinhard Haslinger, the author's team member. As a result, there may be some selective overlappings in certain cases. In such cases, references to the report will be provided as mentioned.

All empirical steps necessary for the project have been taken in tight coordination and mutual assistance. In order to clearly define each team member's areas of main research at the beginning, the issues were distributed as follows: Data on the historical development of the Austrian foundation sector were collected by the author while Reinhard Haslinger dealt with the legal background. The quantitative part was written in cooperation and is therefore a joint effort.

The division of tasks is more evident for the case studies. Those of the ‘Dr. Maria Schaumayer Foundation’, the ‘Bank Austria Foundation for the Promotion of Science at the Vienna University of Economics and Business Administration’, the ‘Anton-Proksch-Institut Genesungsheim Kalksburg’, the ‘Arnold Schönberg Center Private Foundation’, the ‘4 Pfoten Private Foundation’ as well as the ‘Stiftung Kindertraum Private Foundation’ have been carried out by the author while Reinhard Haslinger has been responsible for the ‘Leopold Museum’, the ‘Erwin Ringel Foundation’, the ‘Caritas Socialis Private Foundation’ and, finally, the ‘Köck Private Foundation’.Statements and theories on those institutions are based on the corresponding results.

In this thesis special emphasis was put on the historical aspect and the welfare state, the economic and political surroundings of the NPO sector as well as the position of NPOs in Austria whereas Reinhard Haslinger went into greater details with the relevant legal issues and the quantitative profile of the Austrian foundation sector. Indeed, those aspects will also be briefly discussed in this paper. The same is true for the splitting of the case studies as mentioned above.

The basic purpose of this doctoral thesis is generally congruent with the question of the international research project: The aim is to find out about the roles of foundations in Austria as well as the examination of their quantitative profile, the legal background and the historical development of the foundation sector. This is to be completed by a discussion of the environment this sector exists in and the aspect of the welfare-state system which is very distinct in Austria and often induces the question whether it makes foundations redundant or not. In this connection, it is important to keep in mind that there are not only charitable foundations in Austria but also those serving private purposes only as there might be differences regarding the relevance associated with them.

Social and political changes are present everywhere. Both striving for independence of many European countries on one hand as well as the expansion of the European Union (EU) on the other hand result in dynamic circumstances and in insecurity about the future. Thus, it is not surprising that the question for a materially secured living and for a social net guaranteeing survival for everybody is more pertinent than ever.

In Austria, the presence of a strong welfare-state system covers most of the issues connected with it, which is why the NPO sector, and especially foundations, have been rather neglected by politics and the media so far. Consequently, scientific research projects have not yet focused on the issue of foundations in such great depth.

So the reason for the choice of this topic is twofold: Firstly, to update and integrate the data about the structure and activities of Austrian foundations and, secondly, to obtain comparability with other countries in the course of participating at the multinational research project. As it has turned out, only limited information is available on the present situation of foundations in Austria. Most of the figures given had to be raised empirically, and some information about non-charity private foundations are not accessible at all.

Still, the public-welfare institutions have been subject to detailed examination and the present thesis offers an overview of the foundation scene in Austria as well as its perspectives. Both theoretical information and the findings of selective case studies and expert interviews have been included in order to have extensive insight into this field.

This exploration of the Austrian foundation scene will include a theoretical description of backgrounds and surroundings as well as an empirical examination which will firstly describe the present situation including number, activities and legal issues regarding foundations and, secondly, present six detailed case studies of institutions with different purposes and legal entities. This section will bridge the theoretical and the empirical parts by showing what implications the situation has on particular foundations thereby allowing an insight into the Austrian foundation practice, and highlighting their successes and problems as well as their own future expectations.

The thesis includes more theoretical information than required for the international project and goes into greater detail concerning the situation in Austria. Still, the research was guided by the aim of finding out more general rather than individual or specific aspects so as to cast light on the foundation sector on a broad basis. This ensures conclusions valid for virtually all foundations in every field of activity irrespective of the particular law they happen to be based on.

Starting from the project, the main areas of this thesis are the social welfare state in connection with foundations and their significance as well as the roles foundations play in Austria. The empirical material was utilized and interpreted with regard to this specification. In other words, although data have been used by the team, the hypothesis and arguments presented in this doctoral thesis were elaborated for this purpose only. The common research represents the basis for both the project and the background for the two theses, but the questions raised additionally and individually constitute the main part of this thesis.

Due to the close association between the researchers, the same argumentation applies the other way round: Quotations and references made in the master’s thesis of Reinhard Haslinger will lead on to the report and therefore be the link to this doctoral thesis as a data source.

2 Introduction

2.1 Description of the Europe-Wide Project

The starting point of this doctoral thesis was a Europe-wide research project aiming at a comparison of the roles foundations play and the visions connected with them in the participating countries. Under the central coordination of the Centre for Civil society (CCS) at the London School of Economics headed by Mr. Helmut Anheier, 23 European nations as well as the USA joined in. Because of this, results are not limited to the EU member countries.

The CCS elabourated five research memoranda which were distributed to the researchers serving as the guideline of the whole project. Thus, its basic structure and information to be seeked were predetermined and not subject to discussion for the author of this thesis. Still, as will be explained later in this section, specific changes of the general demands had to be made for Austria.

As a first step, a team of researchers was formed for each country. Along with the given time schedule and general guidelines, those groups were supposed to work autonomously and follow their own individual project structure. In Austria the team consisted of three members, one in the supervising and coordinating position whilst the other two (the author and a colleague) have been responsible for the operative parts.

The study is based on both theoretical and empirical data. While the historical background, quantitative profile, and legal issues had to be raised by literature research and several telephone and Internet requests, the empirical part involved direct contact with several foundations. The sampling strategy had previously been determined, but the actual selection and contact procedure were up to the discretion of each country.

At this point, it is necessary to describe which guidelines had been laid out by the CCS and where completions had to be made for the thesis. First of all, the CCS proposed the definitions of core terms such as foundations, roles as well as visions and gave a classification of foundations by type of operation and field of activity plus a categorisation of founders (CCS, Research Memo 1, 2002).

The theoretical roles and visions were specified by models. These underlying models are described in section 5.1 explaining which theoretical roles foundations might play and section 6.3, dealing with the issue of visions. In the course of the research, accordances, mismatches and possible further roles were analysed.

Then the demanded sampling procedure and case study selection were introduced (CCS, Research Memo 2, 2002). After stating clearly why quantitative research and randomization would be neglected in favour of a qualitative approach, the peer review process was explained expecting each country’s sample to be supervised and checked by two other participating teams. Following this, the structure of the sample was presented and some instructions given for the selection process concerning number and types of foundations and experts.

The next point was the checklists for data collection including all research requests and already offering some proposals for structuring the material (CCS, Research Memo 3, 2002). The CCS also specified the expert and policy interview schedule. The Research Memo 4 (CCS, 2003) contains the interview guideline in terms of questions to ask, which were not surprisingly rather general in scope and had to be individually adapted in the course of the research.

The final instructions concerned the Country Reports and the time schedule (CCS, Research Memo 5, 2002). They outlined the chapters of the final papers and their lengths by exactly describing the expected contents and structure. The project schedule gave an orientation regarding the research progress and the steps to be completed in sequence starting with March 2002 notifying the final conference for October 2003.

The Austrian Country Report is the basis for this thesis and will be referred to frequently (cf. preface) while this thesis will exceed the frame proposed for the projects by the aspects mentioned in section 1.

2.2 Structure of Thesis

This section provides an overview of the present thesis by giving a short summary of the chapters and their basic contents. First of all, the research method will be described and discussed in greater detail in section 3 which will encompass the arguments for the choice of the method as well as the sample, followed by the research procedure and analysis. Of course, the pros and cons of the methods applied will also be covered.

Next, the institutional and economic background of the wide field of foundations will be the focal point in chapter 4. After a description of the historical development of this sector, a compact explanation of the legal framework for foundations will be shown, putting emphasis on the comparison of two laws governing this area. The background of foundations also encompasses the discussion of their justification in present days regarding society and economy. Empirical data to describe the current situation in Austria will complete this chapter.

An important aspect of foundations are their roles within society. This issue will be the subject of section 5 where theoretical information on role models will be included, followed by a description of the roles as well as the respective relevance foundations have in Austria. This part is based on the information gained in the course of the interviews together with a close examination of the material submitted by the institutions contacted.

The points raised are based on empirical research and analysis, that is, this chapter has to be interpreted specifically and especially for Austria. It provides an overview of the Austrian foundation scene and how it can be structured. As a conclusion, a new role model of foundations applicable to practice in Austria will be developed.

Section 6 completes the picture of Austrian foundations by dealing with their relevance and visions. In this connection it is essential to pay attention to the definition of ‘visions’ proposed by the CCS for the research project which clearly deviates from what one would spontaneously expect of the term. In contrast to this common understanding, here ‘visions’ comprise the present situation and the self-image of foundations rather that a future-oriented perspective.

The aim of this section is to show how foundations are embodied in society and which conditions promote their exsistence and which are obstructive to it. Moreover, the theoretical basis of the foundation sector gives an insight into connected socio-economic theories. The proposed cluster model of visions finally offers possible sets of visions regarding the foundation sector in Austria to round off the roles discussed in chapter 5.

After the description of Austria’s NPO sector and its position within society as well as the issue of civil society which is particularly important for foundations, the structure of this sector will be described on a more general level encompassing all NPOs thereby referring to foundations as one subtype. Subsequently, the different models underlying the visions and perspectives will be introduced.

To provide an extensive picture of the foundation sector in Austria as a whole, section 7 takes a step away from foundations themselves by discussing the general topic of the welfare state as it is found in Austria. The welfare-state system is a decisive factor concerning the relevance of charity institutions. After the system is presented, the social structure will be dealt with, followed by the discussion of the effects the European Union and its extension may well have on domestic foundations followed by a more general description of the international perspective.

Chapter 8 deals with the transformations of foundations’ environment and in how far these affect them. The interconnection of foundations within society will also be described. Special emphasis will be placed on social and political changes as well as on the foundations themselves. Thus, internal and external factors will also be given some attention. Apart from that, starting with current developments emerging trends and respective forecasts will be mentioned.

As the main part of empirical research deals with concrete foundations, several case studies have been elaborated which will finally constitute chapter 9. It comprises detailed presentations of the following six Austrian institutions: The ‘Bank-Austria Foundation for the Promotion of Science and Research at the Vienna University of Economics and Business Administration’, the ‘Dr.-Maria-Schaumayer-Foundation’, the ‘Anton-Proksch-Institut Genesungsheim Kalksburg’, the ‘4 Pfoten Private Foundation’, the ‘Stiftung Kindertraum Private Foundation’ and the ‘Arnold Schönberg Center Private Foundation’.

Lastly, section 10 closes the circle and offers conclusions and implications regarding the situation of the Austrian foundation sector by briefly suming up and highlighting the main facts under discussion.

3 Research Method

Generally, the guidelines from the CCS specified the research method, process, schedule and the extension of the samples as well as the contents of the interviews (cf. annexe). In this section, an explanation of the research design applied in the course of the international project will be offered to ensure the reader fully unterstands this basis for further steps in the project. To make the process clear, the following graph will illustrate the connection between research goals, CCS instructions and methods applied.

Research goals

The aim was to closely examine the situation, the roles and the visions of foundations in the participating countries as extensively and accurately as possible.

illustration not visible in this excerpt

Instructions

As a first step, the CCS in London provided the individual research teams with the guidelines and the schedule of the project. These contained the required sample, contents of the interviews and the structure of the expected outcome, the country reports.

illustration not visible in this excerpt

Methods

The research methods were also specified by the CCS. Due to the fact that the foundation sectors are very different between the countries, a combination of descriptive and qualitative approaches was chosen. On the one hand, primary and secondary data on development, number and the legal background of foundations was to be raised, on the other hand qualitative interviews with external experts as well as foundation representatives completed by case studies and content analysis were demanded.

Chart 1: Connection between goals, instructions and methods

3.1 Description of the Research Method

3.1.1 Methodological Approach Chosen by the CCS

This section addresses the research design proposed for the international project, and then gives an overview of the sample and a description of the procedure applied. Finally the additional information provided within this thesis will be summarised.

For this study, the guiding questions that should lead to corresponding theories, were the following:

- What are the roles foundations perform in Austria? Are they important or can the responsibilities be covered by others?
- Have the activities of foundations changed? Are they conservative and traditional or progressive and innovative?
- Have the purposes of foundations changed in the course of time?
- Are they linked with the state’s political and/or economic conditions such as the need for social policy and jobs in the 1960’s or the general access to education in the 1970’s?
- What visions do representatives and experts have? Are changes expected for the future? Does the common European market play a role?
- What relevance if any do non-charitable private foundations have?

In order to gain a comparable overview of the situation concerning foundations in various countries, a centralized standard definition for foundations had to be applied as a guiding concept for the international research project (cf. section 5.1).

Furthermore, a classification scheme was introduced as an orientation for the structuring procedure. Regarding the types of foundations, grant-making, mixed and operating organisations were distinguished, while the type of founder can be identified stating whether it is an individual, corporate, community or government-created/-sponsored foundation.

Due to the complexity and the heterogenous structure of the foundation landscape, a random sample was not aimed at right from the beginning because, as already discussed, quantitative methods were not suitable (CCS, Research Memo 2, p. 1). The goal of the project was rather to gain an overview of the foundation scapes of the participating countries as well as an insight into the common foundation practices which should be raised by numerous case studies of organisations operating in various fields and in different ways. Thus, the sample was not supposed to be representative in terms of statistics, but to allow for inductive conclusions that contribute to a general understanding of this sector.

The project plan of the CCS also included the audition of the samples by one to two other countries for each participant. In our case the Czech and the German teams were responsible. After these cross-examinations of the suggestions for selection among the participants. The chosen samples were approved by the CCS thereby giving the project groups the go-ahead.

As explorative qualitative interviews, case studies and content analysis were chosen by the CCS for the international project, a short methodological explanation will be given at this point. In such interviews, the knowledge, experience and attitudes of the interview partner are of interest while the narrative moment constitutes the focus (Kepper, 1994, pp. 36). During a conversation, several techniques are possible, and three principles are adhered to:

Openness reflects the search process implying that there are no predetermined limits at the beginning of the research process. The researcher is open for new inputs and flexible to adjust the direction of the process if some relevant info off the envisaged research line is discovered. Communicativity, the second principle, represents the understanding aimed at. That is, it ought to be possible to communicate in an understandable manner and to keep the conversation going. Finally, the target of typologisation is a systematic characterisation. A categorisation of the information gained is important in order to keep an overview of what has been said and what to associate the findings with.

A special kind of explorative interview that was applied in this research process is the expert interview. ‘Experts’ are defined as those people who have a certain authority on account of their knowledge (Kepper, 1994, pp. 40). The open conversation allows for touching rather complex issues here.

And, case studies were proposed that included interviews with representatives of foundations as well as external stakeholders and were completed with an analysis of the content of written material on the foundations selected. This selection was also defined by the CCS which structured the sample according to the foundations’ purposes and years of existence and so determined the number of institutions for each country.

This specific form of research, the individual case study, is not a special method, but rather a research approach consisting in“ […] the extensive and individual examination of social units.”(Kepper, 1994, p. 120). In other words, the approach describes the perspective from which an empirical phenomenon is examined and explained while the method means the specific way it is implemented.

The third important aspect of the research method applied was the content analysis of both the interviews as well as the written material provided by the foundations. It represents an empirical method for a systematic, intersubjetively understandable description of content-related and formal features of statements and information (Alemann, 1995, pp. 120). The same holds true for document analysis. It can be applied for various reasons. Clearly, it is very important that the research object is not altered by this method, moreover, it can be reproduced or repeated for the same object with a modified instrument.

In addition to these empirical research methods, secondary analysis had to be done so as to get a picture of the theoretical background of the foundation sector and the state of the art regarding previous research in this area. Consequently, previous studies, statistics, handbooks and other relevant material were consulted.

3.1.2 Changes Made for Austria

At this point it is important to highlight again that both the qualitative and the quantitative methods as well as the structure of the interviews and the sample were predetermined by the CCS (Research Memoranda 1 to 5, 2002). Thus, the individual leeway for the participants was already limited at the beginning of the research process. Some adaptations, however, were made as the domestic situation did not always fit into the international scheme. Those changes will be referred to at the corresponding points.

In Austria, it was impossible to precisely associate the present, predominant institutions with the types of foundations given, but it has been tried to be as accurate as possible with the categorisation by the detailed identification of the organisations’ activities and the appropriate association with the respective groups. What has been taken into account furthermore is the classification by the major field of activity according to the corresponding ICNPO-group (CCS, Research Memo 1, pp. 5), as already explained in the chapter dealing with quantitative issues (cf. section 4.4). In other words, the proposed categorisation has not been applied exactly but following a slightly modified scheme.

Another aspect is the twofold legal basis of the foundation scene that is unique in Austria as there are the two parallel laws governing foundations, the ‘Bundesstiftungs- und Fondsgesetz’ (abbrev. BStFG, literally Federal Foundations and Funds Act) and the ‘Privatstiftungsgesetz’ (abbrev. PSG, literally Private Foundations Act) (cf. section 4.2). Taking this into account, a new sample structure was introduced on the current situation in Austria. The distinction between ‘old’ and ‘new’ was made according to the differentiation between the BStFG of 1974 and the PSG of 1993 as this criterion of the legal basis seemed to be more sound in this connection. It is worth mentioning that only PSG foundations with a public-welfare purpose were considered for case studies. Although there are still some new establishments based on the BStFG, most new founders choose the PSG as the legal background for their institutions since it allows for more flexibility (cf. section 4.2).

As research has shown, the main period regarding the establishment of foundations in Austria took place between 1970 and 2000 (cf. section 4.1). Regarding the fields of activites (the classification scheme is described in section 3.1.4 in great detail, cf. table 2) have developed as follows: ICNPO 1 (culture, sports and leisure time) emerged during this time, ICNPO 2 (education and research) had its peak then and ICNPO 4 (social services) has remained relatively constant since earlier decades (cf. section 4.1). That is why the decision regarding ‘old’ or ‘new’ between age and new (1993) or old law has been made in favour of the latter one as the outcome will be of much more relevance that way.

The most important change was due to the fact that in the course of the interviews it was not appropriate to ask all interviewees the same questions. The external stakeholders usually did not have enough knowledge concerning the structure of the foundation sector which would have been necessary to answer the questions. Hence, the guidelines were adapted to the individual situations of each partner.

3.1.3 Theoretical Background

While the descriptive data’s purpose is to give a picture of the current situation, it is the purpose of the qualitative research to generate theories on the areas examined. Thus, quantitative research aims at measuring and obtaining comparable figures about the topic under examination. It is based on statistical methods as well as hypotheses to be examined and satisfies the usual criteria applied to such calculations.

In contrast to this, the starting point of qualitative research is the assumption that the construction of reality is based on a subjective and active process (Lueger, 2000, p. 18). Theoretically, qualitative research is person-related (Kepper, 1994, pp. 16). Thus, the methods comprise the collection and analysis of human statements and behaviour which means they depend on written, oral or observable expressions.

The object of qualitative research is the sociological content including opinions, attitudes or motives with the aim of realization, description and understanding of psychological and sociological connections, but not their measurement. Its utilization is targeted at a complete coverage as far as possible as well as an interpretation of those aspects relevant for the topic in order to gain an insight in the problem dimensions as seen by the interviewees.

The qualitative perspective aims at a compressed description of the social reality and its constitutive subjects (Alemann, 1995, pp. 58). Qualitative researchers should first of all be good listeners and observers with the intention not to have any undue influence on the empirical phenomenon being examined. Given this, the approach is open and considers the information provided by the research objects or persons. The outcome of qualitative research is the explanation and interpretation of behaviour by constructing meanings.

In contrast to quantitative methods, there are no standardized stimuli to provoke precise reactions, qualitative research encounters the phenomena without prior assumptions or the aim of reconstructing them. It is not guided by a hypothesis but rather by questions to be answered. The advantage of this approach is that information can be generated that would not have been considered before, therefore the scope of available knowledge is wider. Conversely, it is more difficult to achieve methodological control.

To compare quantitative and qualitative research, a brief comparison will now follow on this point. Regarding validity, there are crucial differences to be distinguished. Quantitative methods strive to discover general patterns of causal nature as far as possible which ought to cross the borders of laboratories (which is called external vaidity). Moreover, hypotheses are tested whereby rejections of the false ones leads to the results (internal validity). The constructs mentioned in the hypothesis are operationalized and measured by the utilization of variables.

Here, the appropriate terms are construct- and criterion validity. They aim at the evaluation of these variables regarding to what extent they are suitable to measure the underlying constructs. Qualitative researchers, however, talk about communicative and ecological validity as there are no such variables. The first term refers to the results gained which are, in another communicative process, presented to the interviewee. The researcher examines the reactions thereby putting his/her own explainations and interpretations to the test. Thus, the degree of validity depends on the mutual agreement of researcher and interview partner.

Ecological validity, however, deals with the behaviour of the interviewee during the conversation which is regarded as situation-specific element of an extensive behavioural system. It is high if the test surroundings trigger a clear set of behaviours which occur in the social environment of the interviewee. In other words, the situation must offer so many stimuli that the broadest possible cluster of individual behaviours is shown.

As far as reliability is concerned, there are theoretical tests for quantitative instruments estimating how far they actually measure what they are supposed to, which is not possible with qualitative research. Therefore, the terms validity and reliability are not traditionally included in this field of research.

As a rule, a qualitative interview seeks to systematically acquire information through targeted questions in order to examine the attitudes, opinions, facts and motivations involved (Alemann, 1995a, p. 170). For this project, semi-structured interviews were selected as the individual background of each interview partner had to be taken into account. Thus, it would not have been useful to confront everybody with exactly the same questions and possibilities of an answer. This would have dramatically reduced the amount of information uncovered.

Expert interviews are located in the middle of the continuum between a low and a high structure (Alemann, 1995, p. 117). While standardisation factually undermines experts, which they generally disapprove of, a guideline-oriented interview allows for the possibility of describing facts from the experts’ own perspective and environment. So, researchers might be obstructive to themselves by insisting on standardization as mentioned above.

The term ‘social unit’ mentioned above subsummizes persons, groups, organisations or even cultures (Reinecker, 1984, p. 277, quoted in Kepper, 1994, p. 120) and the analysis of each of these units can be seen as a complete, independent examination (Kepper, 1994, p. 120). In this respect, it is a way of rearranging the existing material and information while still maintaining the character of the research object.

The qualitative case study is characterized by the selection of one individual social element as research object and unit (Alemann, 1995, p. 60). However, the problem concerning this method is the lack of a control group, and therefore the impossibility of testing a causal hypothesis. That is why case studies are often subject to harsh criticism. Yet, for empirical scientists, case studies are not a specific method but tend toward a research approach. As the objective is to gain as much information as possible, this already implies that studies encompassing high numbers of cases are contraindicated.

Qualitative content analysis is a technique to identify and describe the linguistic features of a text to draw conclusions about non-linguistic characteristics of people and social aggregates (Alemann, 1995a, p. 173). Thus, it is an instrument to ascertain meanings and contents applied to spoken and written information. Being a way to analyse the data gained by explorative interviews, it is a method of analysis often combined with this form of obtaining data.

3.1.4 Sampling

As a general guideline for the project (cf. section 3.1), a structure was defined by the CCS that split the sample into ‘older’ and ‘younger’ institutions and what distinguished them according to the dimension leaving optional country-specific forms on the second dimension. The required types were further separated into grant-making, operating and corporate foundations, community foundations were suggested for the optional group.

In the following, the composition of the Austrian sample will be described and explained. The matrix proposed in the first run contained 17 foundations and was oriented according to an individual scheme. After having collected data about foundations in Austria which turned out to be rather difficult, as there is no central administration or any reference for information, numerous foundations were selected in the first run according to their field of activity, legal basis and their years of existence from which 17 remained. Many organisations, especially private foundations without public-welfare purposes, did not reply or were assessed as being unsuitable for elaborating a case study because the material was not sufficient, or the foundation’s purpose did not fit into the scheme, or was not really clear.

Generally, private foundations serving private purposes have only marginally been the subject of the present research project as the general topic concerns public welfare institutions. As far as there are private foundations serving a charitable purpose, they have been included, especially because they were only founded on this basis because it allows for more flexibility regarding internal structures and processes. In these cases, the legal entity of a private foundation has already been explored.

These encompass the ‘4 Pfoten Private Foundation’, the ‘Caritas Socialis Private Foundation’, the ‘Arnold Schönberg Center Private Foundation’, the ‘Stiftung Kindertraum Private Foundation’ and the ‘Leopold Foundation’. These and the foundations based on the BStFG are easier to compare with institutions of other countries than the non-charitable private foundations. Their purposes are geared towards an increase in public welfare and they can be classified according to their fields of activity (cf. section 4.3, table 3).

The selected institutions were then contacted again for material, and additional research led to new insights concerning both the actual activities of those contacted and regarding the existence of further foundations which seemed to be of relevance for the project.

Initially, the 17 foundations were contacted for cooperation and information. According to the willingness of the representatives and the material placed at our team’s disposal, a small number of ten potential case studies remained. The instructions demanded the number of ten to 17 foundations for countries with smaller foundation sectors (CCS, Research Memo 2, 2002, p. 3) to which Austria definitely belongs.

So for Austria, the final sample consisted of ten foundations again selected out of the 17 according to their suitability, their readiness to cooperate and the relevance of the information submitted. It was composed as follows:

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Table 1: Austrian Research Sample

As there are two laws governing the Austrian foundation sector (cf. section 4.2), a distinction between them was made. Moreover, the question of being operative or only making grants was also taken into consideration. The abbreviation ‘PSt’ represents the term ‘Privatstiftung’ (literally: private foundation) that has to be part of the name of each institution founded according to the PSG. As corporate foundations do not play a relevant role in Austria, this category proposed by the CCS was neglected in favour of the other two.

Still, there are also public-welfare foundations governed by the PSG whose role is completely different and similar to the ones’ established through the BStFG or a Provincial Act. That is why they have been integrated into the research and sampling procedure and have likewise been made objects of case studies. In these cases, the PSG has been chosen because it allows for more flexibility regarding the structure and the procedures as well as the administration and accountability of the foundations still following a charitable purpose.

The numbers in the brackets indicate the foundations’ association with the corresponding ICNPO-group of the International Classification of NPOs which structures the organisations along twelve content factors into the ICNPO-groups. The table below shows the groups and the fields of purposes that are associated with them.

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Table 2: ICNPO-groups (source: Salamon & Anheier, 1992, p. 18)

Although there are 13 groups to be distinguished. only the first five listed in the table (p. 43) have been included. The reason for this limitation is the fact that the demanded number of foundations to be examined in Austria did not allow for a complete cross-section of all groups. That is why the chioce was made for those where the majority of foundations are active, in other words, which are most characteristic for Austria.

3.1.5 Procedure

Subsequently, a detailed presentation of the research process will be given by a description of the single steps, the discussion of their pros and cons and their methodological and practical consequences.

So after the sample had been established, the documents of the foundations selected were analysed for relevant information about the purpose of the foundations, their establishment, development, financial structure, organigrams, etc. as a next step. During the same phase, a questionnaire was designed – again according to the demands of the CCS (cf. annexe) – that should be applied to the interviews. The questions were open-ended in order to get as much information as possible from the interviewees and to leave them the space for responding in their own way.

Afterwards, the representatives of the foundations were asked for an interview to take a closer look at their practice, aims, success, etc. In the course of the conversations, there was also an attempt to identify crucial external stakeholders who were later contacted with the intention of getting an interview, too. The objective was to gain as much knowledge as possible about all aspects of the institutions, their purposes and cooperation partners.

At the same time, experts on economy, culture and NPOs as well as policy makers were selected according to their affinity to the foundation sector and then also invited to interviews. The CCS-instructions demanded eight to ten in Austria’s case (CCS, Research Memo 2, 2002, p. 4), the final number done was twelve. For the politicians it was also necessary to have a fair distribution of respondents from the various political parties. However, in practice this was not always possible because the willingness to cooperate varied (cf. section 3.6).

Finally, the data collected and the information gained were utilized for two purposes: Firstly, detailed and individual case studies were elaborated (cf. section 9 and Haslinger, 2003) describing all aspects of the institutions selected. Secondly, the general situation of the Austrian foundation sector could now empirically be presented which was both the aim of the research project as well as of the thesis.

3.1.6 Analysis

As a last step, after all relevant data had been collected, the interviews were analysed. The answers were put into an extensive table to be made comparable, then the different questions were dealt with according to the reactions of the interviewees connected with the issues. What could be taken from the interviews were the general attitudes towards the foundations, the knowledge and the scenarios developed. Moreover, the representatives of the institutions drew quite a distinct picture of their self-images and the relevance of their foundations compared to the external interview partners.

In addition, the information was used for finding out more about the roles and visions held by the interview partners with regard to foundations (cf. sections 5 and 6). These chapters were oriented along the guidelines and the structure proposed by the CCS to ensure international comparability of the outcomes (CCS, Research Memo 1, 2002).

To compress and categorize the data available on every institution examined, case studies were elaborated for each of the ten organisations (cf. section 9). Thus, all information that had been collected was accumulated and transformed into reports of the foundations comprising development, quantitative figures, activities and self-image – that is, the picture they draw regarding the present situation of their foundations – as well as future prospects and self-reflections, dealing with the critical considerations of the strenghts and weaknesses of their institutions.

So, each country report encompasses an extensive overview of the national foundation scene and paints a picture of both the external and internal views regarding the foundation sector.

3.2 Reasons and Discussion

This section is dedicated to problems that occurred during the research process as well as general weaknesses of the method applied. Because the various situations throughout Europe are very heterogenous, the CCS decided on the methodological approach described above: Apart from secondary research on the theoretical background and the development of the foundation sectors in each country, expert interviews were to be conducted with a view to obtaining a general overview of the situation.

As only little knowledge on the topic of foundations existed at the beginning of this project, a qualitative approach seemed fitting, especially as regards the face-to-face interviews conducted with foundation representatives, experts and policy makers. Here, the explorative type was chosen within the problem-centered methods to gain additional insight into the issue. That is, the questions were not completely open-ended but oriented along some main points to be covered so as to provide international comparability of the outcomes.

Due to this lack of prior knowledge, the existing and/or accessible literature was not sufficient to serve as a solid basis for a quantitative approach. In that case, the hypothesis would have been examined, but the data and findings so far were not sufficient for elaborating a reasonable questionnaire. In addition, a main area of the research was to cast light on attitudes and opinions held towards foundations. With this aim in mind, the only possibility was to apply qualitative methods as such constructs cannot be tackled by quantitative means.

Of course, the method chosen is biased and so cannot be utilized for generalizations, which is particularly true for case studies. To be sure, this kind of combination of qualitative and descriptive research was considered the most suitable approach for the considerable number of participants and institutions involved. Moreover, the internal comparability highlighted as one of the project’s targets was to identify analogies and differences between the countries’ foundation scenes. This can be ensured by using identical methods throughout the project.

To continue with the political aspect mentioned before, some difficulties were encountered that should be highlighted as regards the appointment of interviews. While the political parties SPOE (socialists), Die Grünen (green party) and OEVP (conservatives) were willing to cooperate (cf. interviews II, III, IV, VI and VIII), the FPOE (liberalists) refused cooperation.

This might have a connection with the general attitude of this fraction and should be mentioned at this point: Within this party, a high number of officials have a foundation themselves and thus tend to be very much in favour of the instrument as a way of accumulating assets. They represent the capitalistic viewpoint. Therefore, the attempt to avoid public insight into the practice seems logical as the issue is a very controversial one in Austria because of the tax privileges these foundations enjoy without serving the public.

The same is generally true for the OEVP, and the one interview they granted (cf. interview VIII) was not done with a political purpose and focus in the first place. So, it must be remembered that policy makers’ attitudes quoted in this paper might be subject to some ideological bias to varying degrees.

What is more, it is also important to note that the majority of non-political private foundations that were additionally contacted to cast light on this aspect of the Austrian foundation landscape, also flatly refused to give any information. The representatives were either unavailable for weeks or they promised they would call back but never did.

The general unwillingness of private foundations’ representatives to talk about their organisations and their activities led to the assumption of the intention not to make internal aspects publicly accessible. Thus, something was to remain covered. This fact goes in line with the commonly held opinion of opponents to private foundations that the establishment of these institutions serves solely as an instrument of capitalism that is not really justified or at least not seen as completely ‘correct’ in terms of social aspects even by the founders themselves. Along with this, any comments regarding this offense or statements supporting the opposite were rejected by private foundations.

Concerning the research method itself, it has already been mentioned that the characteristic of being representative was not defined as a criterion for sampling and analysis keeping an eye on the feasibility of the project. In particular, this would not have been possible in Austria because no reliable data exists on the actual structure of the domestic foundation scene. In fact, information about private foundations is not generally accessible to the public.

Another problem one has to face in Austria is the impossibility of access to information on the endowment size of the foundations. It was not possible to find out the numbers actually requested by the CCS for either federal and provincial institutions or for private entities.

4 Background

4.1 Historical Development

4.1.1 Ancient World

The development of foundations can be traced back to the Ancient World. For the first time they were to be found in the Egyptian as well as Greek-Roman culture (Jandl, 1985, p. 3). At that time, they primarily served religious and ritual purposes and, therefore, enjoyed the special protection of both church and state (Mraz, 2001, pp. 37).

The first legal traditions that are still influencing our present law emerged with the Christian empire, strictly speaking, with the statutes of Justinian (530 a. d. ). Based on the development of the Christian church, foundations in today’s sense arose due to the principle of charity. In this context, Christians were supposed to leave a part of their assets for social purposes to guarantee an immortal soul.

The concern for the soul in the next life promoted the establishment of foundations. With the capital donated, ritual activities were ensured that were believed to help the founder. Thus, pure egoism and the fear of what would happen after death were the actual reasons for the existence of foundations. It took thousands of years, though, until this primitive model was finally replaced by the idea of the founder’s survival through his good deeds.

Ancient foundations were donations among the living or due to death where the contribution of assets was strictly tied up to be used for a given purpose. The investment, however, did not gain its own legal capacity (Stammer, 1983, p. 269).

The economic fall of the Ancient World was followed by a desastrous mass impoverishment without the availability of any state-based support (Mraz, 2001, p. 38). Private charity could not cope with the sheer scale of this poverty. As a result, the charity which had always been practised by the church was particularly needed. The idea of foundations has its root within this spirit of Christian charity as clerical institutions received capital for defined purposes by the donations of various charitable organisations.

Within the church, the idea of foundations was also established theologically and dogmatically. One aspect that is still valid and very important in nowaday’s regulations is the prohibition for the administrators of foundations to sell land and buildings belonging to the foundations.

4.1.2 The Middle Ages

In the medieval times, the Roman-Catholic church successfully fostered the permission of wills. Moreover, it gained the main responsibility for this practice. This was especially important for the development of foundations.

As the charitable role of the church expanded, a wide variety of foundations were created. Apart from public-welfare purposes, educational institutions and the church itself became their target groups. The institutions established for these reasons were placed under the administration of the church.

A slow change of this strictly clerical welfare service began during the 13th century when the political power of the middle classes emerged. The church-owned institutions were unable to deal with the needs of the rapidly growing poor urban population. So, the bourgeoisie raised the material resources to have influence over the property administration of the ecclesiastical foundations. Finally, they took over the leadership for all secular administration agendas. Despite all the striving for autonomy of the middle classes, secular charitable practices outside the church remained unimaginable for centuries.

The Middle Ages was the golden era for foundations. The rapidly expanding cities with their new prosperity as well as their pious spirit offered the ideal soil for the setting up of foundations. As to be seen above, the secular foundations derived from the clerical type which was the basis for charitable giving.

This development was clearly eased by the transition from a barter to a money economy. Barter economy led to the dedication of land where any building like a hospital or a church could be erected, so it was then possible to use money for foundations. Capital foundations were born. They now only represented something of value that could be used for following any purpose. As a consequence, secular foundations became dominant.

The canon law accepted the will of the founder and the foundation as a legal capacity. In the late Middle Ages, secularisation of both church and foundations took place simultaneously. The church’s prosperity within foundations represented a strong incentive for secular powers. Moreover legislation enabled the testator to impose the obligation on the heirs to use his assets for charitable purposes (Seifart, 1987 quoted in Mraz, 2001, p. 40).

4.1.3 Modern Ages

In the modern age the civil element became more important. In Austria, hospital foundations were developed in the 12th century, reached a peak 200 years later and finally declined again after another two centuries (Stammer, 1983, p. 276). The construction of new streets provided the conditions for the spread of diseases as more and new illnesses appeared, so the need for hospitals increased significantly. The founders were mainly patrons but later on cities and individual citizens were also to be seen.

Austrian foundations dating back to the 13th century are for example the Bürgerspitalfonds Krems (founded in 1212) and the Bürgerspitalstiftung Eggenburg (1299) (Stammer, 1983, p. 276). Another representative case for the development of foundations was the practice of Jakob Fugger in Augsburg, Germany, in 1511 (Mraz, 2001, p. 43). He transferred a moderate sum of money to a special account, at the beginning without any specific purpose. Assets grew as interest was added. This method was subsequently also observed in Austria.

Three years later, he constructed a housing estate for poor workmen. A written formulation followed some years later, including details of how to erect the buildings and how to run the settlement. During the following years, additional capital was raised and invested. This example was the model for the modern idea of foundations: an entrepreneur uses assets for charitable utilisation and, therefore, the improvement of social conditions. The relief of social poverty was and has been ever since the main motivation for founders.

Still, the church was dominating the field of foundations in Austria. It took the insight that actually state-run administration ought to be in charge of it for a long time to gain acceptance. The emperor Ferdinand Ist and his successor were the first ones to make efforts for putting foundations under governmental authority. It was at the same time when the first foundations for educational purposes were established in Austria, the oldest one was registered in 1404 (Pues, 1998, p. 21, quoted in Mraz, 2001, p. 44).

However, the execution of a will still remained under episcopal control (Mraz, 2001, p. 45). A problem that frequently arose was the change of purpose which never crossed the limits of the church as it was assumed that the dedication of capital for profane purposes was against the will of the genuine founder.

Yet it was possible to establish an autonomous institution such as a hospital that could be run independently by the founder or his chosen representative. Such institutions can be seen as the first self-supporting foundations as long as they were not surrendered to the church.

The empress Maria Theresia finally assigned foundations to the control and authority of the state (Jandl, 1985, p. 4). She created special commissions for the administration within government. Moreover accounting departments were established in order to keep the assets in evidence and to check both the accounts and accountants.

In 1753, the decree of the imperial court separated the foundations’ agendas from those of general national security issues (Mraz, 2001, p. 46). Then, Earl Lamberg was put in charge of the foundations. In those days, two types of foundations could be distinguished: On the one hand those that had been administrated by lower positions, and on the other hand larger Viennese institutions that were then distributed to individual representatives.

In 1759, clerical bodies were granted more influence on secular foundation practices. After Maria Theresia’s death, her son Joseph II drastically restricted the possibilities of free religious exercise. He prohibited pilgrimage and closed down several cloisters. As a consequence, the first foundations soon ceased to exist.

Under his power, control over foundations changed from the special commissions to the regional political authorities. All the assets of hospital foundations were integrated into one religious fund. Even the capital of cloisters was deemed to flow into these funds, but in fact mismanagement often occurred: Only a small part finally arrived in this account. Places of land were sold off cheaply, valuable equipment, formerly belonging to the cloisters, disappeared (Stammer, 1983, p. 279).

4.1.4 19th and 20th Century

The era of the Enlightenment and the secularisation that followed was the most hostile towards foundations, but a core survived those hard times (Mraz, 2001, p. 48). In the 19th century, the Romanticism ensued where the social values of the medieval foundations such as charity and compassion for those in need became important again. The genuine ideas of founders enjoyed high acceptance and the administrations of foundations regained their autonomy. Due to this increase in faith, many new institutions with a widespread range of purposes were established.

Apart from this social spirit, the era of natural sciences began at this time. Capital, work, technology and industry fostered more potential of work resources which, consequently, led to growing poverty because many people lost their employment. That was too much for the foundations to cope with. To solve this social problem, large associations created by both the church and the middle classes emerged. Famous examples are the charitable institutions Caritas and the Red Cross (Mraz, 2001, pp. 48).

In the first half of the 19th century there was no standardized legislation for foundations in Austria. In most of the crown countries, different instructions were developed that dealt with rules how to establish, administrate and run a foundation.

In 1841, a new decree was introduced that completely changed the practice of foundations. Now, the state-controlled right of supervision over ecclesiastical foundations was tied to the agreement of the chairs. In other words, accepting, amending or repealing of foundations as well as the administration of the assets were in the hands of the administrative authority whereas decisions regarding ecclesiastical foundations had to be made with the so-called ‘agreement of the chairs’. In short, decisions were not up to the state alone or the church.

After the administrative reform in 1853, the governmental right of control was assigned to political regional and local authorities (Stammer, 1983, p. 280). Two years later the supervisory system over ecclesiastical foundations was finally abolished. The highest leading position was held by the ministries of internal administration, only the competence for military foundations was handed over to the Ministry of Defense.

During the 20th century, the spirit of foundations developed significantly (Mraz, 2001, p. 49). Their autonomy and the respect of the founders’ wills became natural. The empirial constitution of Weimar contributed to this tendency, especially by separating the ecclesiastical foundations from state and community.

Despite inflation and the subsequent decline of foundations, large private and state-owned foundations of institutions highlighted the importance of the foundation practice again. Public trust in the state-run control and bureaucracy as well as the security of the constitutional state showed a promoting effect (Bertelsmann Foundation, 1999, p. 41).

4.1.5 The Period Between the Two World Wars

The fall of the Monarchy forced the foundation sector into tighter limits. Before this time, the area covered by foundations extended from Lemberg and Prague to Triest and Meran. On the contrary, now only the region of today’s Austria remained. Since then, the Austrian foundation sector has had a poor existence as far as new establishments, legal and literal treatment are concerned.

The federal constitutional law of 1920 regulated the separation of competences regarding legislation and execution between federation and provinces. According to this law, the federation is responsible for those foundation-relevant agendas which exceed the provincial sphere of activity while otherwise the authority remains within the provinces.

The law of 1925 additionally made it possible for foundations endowing solely mobile assets or a total capital of less than a certain sum to be associated with other institutions or to be closed down (Mraz, 2001, p. 50). In 1938, about 5,700 foundations remained in Austria after the introduction of these measures.

The regulation and distribution of competences from 1925 is still valid in an only slightly modified version, but not without being critizised. The first World War caused a deep economic crisis followed by high inflation rates that were survived mainly only by foundations which had mostly real assets. Again, foundations’ dependence on a flowering economy was proved. All state-run institutions were in need of help from any social and charitable private initiative.

4.1.6 National Socialist Period

During the Nazi period, the Austrian foundation sector experienced drastic changes. A total of 2,400 institutions were closed down without their assets being transferred to any other establishment. This practice was based on the law regulating the integration of societies, associations and organisations at the same time declaring that orders of foundations or bonds to their documents were not relevant any longer. No arguments were necessary and appeals were initially excluded.

Foundations were not systematically destroyed, but the ideological delusion gave way for any arbitrariness mainly effecting the will of founders and the purpose of foundations. Often the institutions simply adapted to the spirit of the times by changing the legal circumstances instead of the foundation law itself. One could easily find out whether the purpose of a foundation was in accordance with the Nazi policy or whether it was undermining its entity. Denominational purposes were generally considered unacceptable (Bertelsmann Foundation, 1999, p. 41).

4.1.7 Postwar Era

At the end of the second World War, many foundations were extinct (Mraz, 2001, p. 55). To hand back the assets to those who had remained, the reorganisation laws for foundations and funds started to be developed in 1945. Now, the foundations regained their legal capacity that had been erased during the Nazi period and recovered their capital. In 1946, all existing foundations were registered together with their loss of assets caused by the Nazi regime. Moreover, the administrative authorities were checked and substituted where necessary.

Coming to the legal issue (cf. section 4.2), it should be mentioned that before the BStFG of 1974 – which was the first nationwide legal basis for the establishment of foundations – , up to the formation of the Second Republic in 1945 and after World War II, corresponding regulations had been outdated and too heterogenous to cope with the situation. In other words, there was no single and extensive law governing foundations but only parallel and independent single statutes without mutual compatibility and influence. The same is true for the period between 1945 and 1974, especially since the majority of foundations had been destroyed during the war and there was only a slow growth in the numbers registered.

4.1.8 The 1970’s Until Today

In 1974, the BStFG created the basis for the foundation practice still valid in Austria today. For the first time, clear guidelines for not only administrative authorities but also the foundations themselves were given thereby bringing the situation of numerous loosely coupled regulations to an end.

A strong demand for transferring accumulated assets into foundations arose in 1980. The existing law was considered inappropriate because of the limited number of purposes open to charitable and public-welfare institutions. That is why more and more Austrian capital went to foreign foundations located in countries with more liberal regulations.

This development was accompanied by several suggestions and demands for reform during the following years. In 1992, a draft for a new law was submitted to the ministry of justice by the Ludwig-Boltzmann institution. Bearing all this in mind, the governmental parties aimed at a modernisation of the law for foundations which finally led to the introduction of the law for private foundations in 1993.

At this point, it shall briefly be presented how the historical development of the federal foundations, namely the ones based on the BStFG took place according to the classification of the ICNPO-groups (cf. section 4.3, table 3). It is of particular interest to get an idea of when exactly certain fields of activity emerged and during which periods the main areas changed. The data described below were raised in the course of the Austrian team’s own research process.

It is hard to keep track of foundations dating back to the monarchy, but the available data show a relative significance of foundations at that time. Generally speaking, there was a steady increase in the numbers until World War II, when many foundations were closed down by the Nazis. After World War II, new foundations were established because people were becoming wealthy again and dedicating assets and work to helping others. In particular, it was the initiative of the common federal foundations act that encouraged the establishment of foundations, since it can be seen that in the subsequent ten years not less then 25 new foundations were established.

The dominant fields of foundations’ activities are social services followed by education and research as well as culture and sports (cf. table 4). Foundations began to emerge at the turn of the 19th century and expanded noticeably in the 1950’s. An upsurge of new establishments was registered in the 1970’s, with a further clear increase at the turn of the 21st century, this time due to reasons of taxation.

In reference to the foundations’ fields of activities, it can be seen that the involvement in education and research (2) dates back to the 17th century and has been growing ever since. The peak was reached about one decade ago when most new institutions in this sector were established. The very important group of social services (4), however, shows a different development. It emerged at the turn of the 20th century and its increase has kept continuity for 100 years.

Culture and recreation (1) is obviously a young field of activity for foundations. With one exception in the 1930’s, it mainly emerged in the 1960’s. Foundations engaged in religious areas (group 10) can also only be traced back to the 1970’s (only one was established before the turn of the 19th century). A similar trend applies to group 7, philanthropic intermediaries and voluntarism promotion.

In contrast to this, foundations in the health sector (3) depict a rather homogenous distribution over the last century. While institutions dealing with international issues (9) appeared during the past 20 years, development and housing foundations (6) were established 20 years earlier in the 1960’s and 1970’s. There is no data available for group 5 (environment), 7 (law, advocacy and politics) as well as 11 (business and professional associations and unions).

In all, Austrian foundations have not been subject to a glorious development over the last years. They have not enjoyed the attention of the media and politicians showed no particular interest in this sector.

4.1.9 Present Situation

The heterogenity of Austria’s Third Sector becomes evident after having gained an insight into its historical development. The existence of numerous small and local institutions can be explained by the principles of federalism and autonomy which affect the nine provinces and Austrian communities (Heitzmann, 2001, p. 28). The tendency towards autonomy or self-help is quite distinct in Austria, which is also reflected by the importance of societies and associations as well as the idea of cooperatives.

The ideological orientation of NPOs and their political orientation are also due to their past. The tight link of NPOs to the state is based on corporatism (cf. section 4.1.10) and on the associations which are additionally strenghtened by mandatory pressure groups and volunteer professional associations.

If the issue of NPOs, and especially of foundations is raised medially, it is mainly for the sake of founders to receive information. In this case, the initiators are financial institutions or the chamber of commerce. Sometimes public proposals are made as to how to increase the tax privileges of founders even more.

In fact, the subject of charity foundations is hardly mentioned in political discussions. Stakeholders also seem to share in this attitude of disinterest. The number of such foundations has almost stagnated. If there are new foundations established at the federal level, they are above all the result and expression of the policy of large banks or similar institutions. The dominant purpose here is the promotion of research.

In contrast to the poor performance of the public-welfare sector, private ones are being increasingly discussed in Austria. In 2000, the question of raising the taxes for assets of private foundations was raised in the course of balancing the budget which would have achieved surplus earnings amounting to about 145,350,000 Euro for the federation.

The idea is to double the fee charged at the time of founding an institution from 2.5% to 5%, and then to tax the income even if the capital is not touched. (This tax would not be due, however, if the money was donated to beneficiaries.) Indeed, this issue has become very controversial and private founders feel severely offended. Generally, the wave of establishments seems to be stabilizing at a high level (Bauer, 2003). After a boom three years ago, the need appears to be covered for the moment.

4.1.10 Corporatism in Austria

The term ‘corporatism’ indicates that the distribution of power is to be found between unions and chambers and that policy is formulated there.

“In Austria, there is not even one foundation that could threaten the state’s role in serving the public purpose. Only if you would extend the definition of a foundation, then you find huge institutions especially in the Catholic Church and likesome associations.”(Cf. interview I) Most of the public welfare goods are provided by the state. Civil society engagement is either tightly connected to the state through organizations that depend on subsidies or to the Catholic Church.

To understand the above statement of Prof. Doralt, an expert in civil law, that gives a short and striking description of the system in Austria, a brief overview of the major institutions of society shall be given followed by linking them with the specific foundations’ visions.

“Austria is usually taken as the classic case of a political system that is characterized by a very high level of corporatist policy making. Austria is a model generator.” (guweb2.gonzaga.edu/faculty/brunell/wecorporatism.html) Chambers like the Chamber of Commerce, of Agriculture, of Labour etc. play an important role in the decision-making process in Austria.

All employees, entrepreneurs, farmers and other professional groups like doctors, lawyers, etc. are obliged by law to become members of their associated chamber. Together with the trade union organizations, the Chamber of Commerce, the Chamber of Labour and the Chamber of Agriculture form the so-called ‘social partnership’ that reflects the most important institutions in the decision-making process in Austria. The ‘social partnership’ is not an organization in power or by law, it is rather like a virtual institution that was established after World War II to guarantee social peace and stability in this country.

It was built on the experiences in the period between World War I and World War II when a civil war between the socio-democratic Schutzbund and the conservative Heimwehr had destroyed political institutions and led to the proclamation of the Corporate State. After World War II, the major political focus was on finding an appropriate democratic system that would guarantee social and political peace and establish a welfare state.

The 2nd Republic therefore is dominated by the ‘proportional representation’ system, where the two major parties, the Social Democrats and the Conservatives together with their interest groups cooperate closely. The trade unions and the Chamber of Labour are dominated by the Social Democrats whereas the Chamber of Commerce and the Chamber of Agriculture are dominated by the Conservatives and vice versa because members of chambers are often simultaneously members of Parliament and candidates for political parties.

Now, it has become evident that the negotiation and implementation of policies is characterized by a tight control through chambers and parties and by a permanent coalition in parliament and government between the two major parties. Rather than a permanent change of political majorities and competition in the political marketplace, the key groups are closely integrated into the formal political process. This is the field where most of Austrian society is being built.

4.2 Legal Issues

4.2.1 General Aspects

In contrast to other European countries, the legal situation for foundations is exceptional in Austria. The legal framework divides the foundation sector into two parts as there are two different laws regulating this area (cf. section 3.1.2). In 1974, the BStFG was introduced which defines foundations as institutions serving a public-welfare purpose. Then, in 1993, a new regulation was implemented, the PSG. According to this law, foundations are also permitted if they only focus on private interests.

To draw a complete picture of the present situation in Austria, it is also necessary to explain the Landesstiftungsrecht (literally Provincial Foundations Act) which applies to those charitable foundations whose field of activity does not cross the provincial boundaries. As long as the institutions’ target groups are regionally limited, the institutions are subject to these regulations which are basically the same as the BStFG but have some individual elements for each of the nine provinces. In short, slight differences can be made out between the regions, but they do not influence the common basic purpose of the foundations themselves.

“Im Rahmen einer Prüfung der Verfassungsmäßigkeit des Vorarlberger Landesgesetzes über Stiftungen und Fonds […] stellte der Verfassungsgerichtshof […] folgende Wesensmerkmale einer Stiftung fest: 1. Charakter als Vermögensmasse, 2. Zweckgebundenheit, 3. Gemeinnützigkeit, 4. unbeschränkte Dauer.“(Stammer 1983, pp. 43). This description of the necessary features of foundations (character as assets, earmarking, public-welfare purpose and unlimited duration) is valid for both legal frameworks, the BStFG and the Provincial Foundations Acts. For this reason, both charitable foundations based on either the BStFG or one of the different provincial acts will be summarized by the term BStFG- foundations in this thesis.

Initially, the PSG was not introduced as a substitute for the BStFG, yet a tendency in this direction is evident due to the absent obligation of supervisory authorities which is a factor simplifying the establishment and the management of a foundation (Grafl, 2000, p. 9). The actual purpose of the PSG was to provide consistency of the Austrian with other foreign legal standards developed to keep capital within the country. Additionally, the possibility of transforming a BStFG-institution into a private foundation is regulated in the PSG (§38).

In the following section, a comparison and contrast between the two laws consistent with certain crucial criteria will be made. The first will be the purpose of foundations reflecting their underlying policies. Subsequently, the establishment process, the governance, transparency requirements and finally tax issues will be subject to discussion.

According to Dr. Breinl from the ‘Stiftung Kindertraum Private Foundation’ (cf. interview 14), it was not until the introduction of the PSG that private foundations experienced an undeniable relevance in Austria, beforehand they had had a ‘bizarre touch’. The PSG has achieved the economic and fiscal aims of bringing capital back to Austria and of attracting foreign investors.

4.2.2 Purpose

“The purpose of a foundation is of fundamental importance to its establishment, since under Austrian law a foundation exists only to achieve a particular objective over a period of time not terminated by the founder’s death.”(Badelt & Bachstein, 2001, p. 87) The purpose determines the foundation’s activities and the group of its beneficiaries (Csoklich & Gröhs, 1993, p. 18) which for BStFG-institutions is limited to charitable purposes, “deren Erträgnisse der Erfüllung gemeinnütziger oder mildtätiger Zwecke dienen” (BStFG §2 Abs 1; literally: whose profits serve public-welfare or charitable purposes).

Foundations set up based on the PSG also require the statement of a purpose but unlike federal or provincial institutions the choice is not limited to the field of public-welfare. The absence of restrictions allows the founder to define the purpose as well as the beneficiaries at his/her discretion, i. e. he/she is even free to become the beneficiary of the benefits himself/herself (Knirsch, 1993, p. 729). Therefore, one objective often realized is the investment of family assets. Still, there are some private foundations which include charitable tasks in the statutes.

But also as an instrument itself, a private foundation offers some advantages compared to federal or provincial institutions. The manager of the ’4 Pfoten Private Foundation’ puts it into the following words:“Der Vorteil sind die vielen Gestaltungsspielräume bezüglich Zweck und Organe (Beiräte, Geschäftsführung, strukturelle Angelegenheiten), eine langfristige, den Zielen entsprechende Auslegung ist möglich. […] Es bietet mehr Gestaltungsspielräume, höhere Flexibilität, ist moderner und die staatliche Kontrolle ist zurückgesetzt (das BStFG ist ja uralt) [...].“(Cf. interview 8) For him, the advantage lies in the wider range of arrangements regarding purpose and bodies such as board, management and structural issues, and the goals can be interpreted in a quite flexible way. Apart from that, it encompasses more maneuverability, is more modern and state control is limited.

4.2.3 Establishment

Both regulations require a written deed, but there are remarkable differences. According to the BStFG, a private legal deed declaring the founder’s intention to devote a particular amount of capital to a certain purpose is a basic condition for establishment. The incorporation of the foundation is implemented by the approval of the corresponding public authority. In the next step, the foundation’s additional statutes also have to be approved (Csoklich & Gröhs, 1993, p. 32).

A special characteristic of foundations is that the assets have an independent legal nature, that is why the existence of the institution exceeds the founder’s life span and cannot be terminated by any other means. The only possibility of disbanding – even for the founder himself/herself – exists when the assets have been exploited for the initial charitable purpose or when the purpose is modified, respectively.

The capital investment basically serves as an independent legal entitiy only bound to the founder’s will and the declared purpose of the institution. Since it is an independent legal entity, creditors of the founder do not have access to the foundation’s assets on the one hand, and on the other hand the founder is not legally responsible for the foundation’s liabilities (Csoklich & Gröhs, 1993, p. 11, quoted in Simsa et al., 2003). A similar aspect of federal/provincial and private foundations is their definition as independent legal bodies emerging out of the devotion of assets.

In contrast to these similarities, a further difference between BStFG and PSG foundations is that no public authority is involved in the setting up of private foundations. For the latter, the process of establishment is implemented by a notarial deed of the associated first-instance court and“comes into being by entry in the companies’ register”(Badelt & Bachstein, 2001,p. 87, quoted in Simsa et al., 2003).

Concerning the initial investment, the minimum capital requirement amounts to 70,000 Euro for private foundations (PSG §4)) “in order to reduce misuse”(Knirsch, 1993, p. 730, quoted in Simsa et al., 2003). Moreover, the supplement ‘Privatstiftung’ (literally: private foundation) has to be integrated into the foundation’s name in order to distinguish it from federal/provincial institutions (PSG §2).

4.2.4 Governance

As stated previously, a foundation is an autonomous legal entity without any external owners (Csoklich & Gröhs, 1993, p. 11). Still, it is necessary to determine a representative responsible for its management. At the initial establishment process based on the BStFG, the founder is free to suggest a “trustee” who has to be announced (revocably) by the corresponding public authority (Stammer, 1983, p. 72).

This person is responsible for representing the foundation as well as running the business and setting up its statutes (BStFG §7 Abs 4) including the institution’s name, location, assets, staff, purpose, target group, etc. (BStFG §10 Abs 1-2). Subsequently, the staff proposed by the person in charge is also entitled by the public authority which determines the trustee’s responsibilities at the same time (BStFG §11 Abs 1-3).

The BStFG is rather liberal regarding regulations concerning staff and the structure of the foundations and it only requires a single managing representative. Beyond this, the internal organisation is at the discretion of the individual institution in accordance with its purpose and activity but has to be stipulated in written form. The authority has to be informed, and its approval of both this structure as well as staff and their salary is necessary (Csoklich & Gröhs, 1993, pp. 40).

According to the PSG, foundations have to be equipped with a management board, an auditor and in the case of having more than 300 employees a board of directors responsible for supervising the foundation’s activities and its financial situation. (Knirsch, 1993, p. 732). As with the BStFG, here the founder also chooses staff during the establishment period. Any other constitutions such as the auditor, the announcement and revocation of the board, salaries and new staff are incumbent upon the corresponding court (Csoklich & Gröhs, 1993, p. 52).

These regulations require that the management is responsible for the foundation’s activities and its accounting and consists of at least three discretional natural persons (with the exception of corporate bodies, beneficiaries or their relatives who cannot be members of the board in order to maintain a clear situation of legal responsibility).

4.2.5 Transparency Requirements

Due to the absence of an owner, BStFG foundations underly public supervision executed by the public authority controlling the financial status and ensuring the earmarked utilisation according to the stipulated charitable target declared in the statutes. In BStFG §14 Abs 3, a balance sheet depicting assets and liabilities needs to be submitted to the authority within the first six months after the settlement of accounts (Csoklich & Gröhs, 1993, p. 54). Besides, the authority is entitled to check the finances at any time anyway and has the authority to direct, supervise and dismiss staff. Thus, financial transparency is guaranteed for BStFG foundations.

In contrast to this, the PSG only requires a minimum capital of 70,000 Euro to be declared in the deed which is then filed in the company register. Subsequently, the information is accessible to the public. Any additional investment can be stated in a completing deed kept under lock and key. The task of the accountant announced by the court is to audit the institutions’ obligatory annual reports so as to ensure compliance with the mandate and the objectives of the foundation (PSG §21 (1)).

4.2.6 Aspects of Taxation

The founder’s transfer of assets into a foundation is governed by the Erbschaftsteuergesetz (ErbStG; literally inheritance tax law; Simsa et al., 2003). According to these regulations, charitable institutions are released from inheritance tax whereas transfers into private foundations are taxed at a rate of 5%. If the founder is a private foundation himself the rate amounts to only 2.5% (ErbStG §8 (3) b). The tax rate is the same for private foundations serving charitable or private purposes. Charitable foundations are free of income tax.

If a foundation has a company, its income and tax treatment are ruled by the Körperschaftssteuergesetz (KStG; literally corporate body law). According to this law, corporations are subject to a 34% tax rate on every form of income (KStG §1 (2)), except for legal bodies serving a charitable purpose (KStG §5 Z6). Income of private foundations constituted by capital interests and dividends is taxed at 12.5%, which can be fully deducted from the beneficiaries’ total tax burden (KStG §22 (3)+ §24 (5)).

The Einkommenssteuergesetz (EStG; literally income tax law) states that beneficiaries of foundations are subject to a 25% Kapitalertragssteuer (KeSt; literally capital income tax), while benefits received from a charitable foundation are tax-free (EStG §3 (1)). The 12.5% previously paid as tax is then subtracted from the total amount of taxes.

The subsequent table summarizes the contrasting of the two laws:

illustration not visible in this excerpt

Table 3: Contrasting of BStFG and PSG (own visaulization)

To sum up, both federal/provincial and private foundations seem to be very attractive instruments regarding the tax aspect due to the fact that the transfer of assets into a foundation as well as the (capital) income of foundations are lightly taxed. This can also be deducted from the boom of new establishments at the turn of the 21st century, as a new reguation including higher tax rates for foundations, was then introduced.

Austria’ s tax system does not allow for deducting private donations on an individual’ s or a corporate’s tax declarations whereas companies’ transfers of assets into (their) corporate foundations can be deducted as operating expenditures in their profit-and-loss account (EStG §4 (11)).

4.2.7 Funds

One section of the BStFG deals with regulations for funds serving a public-welfare purpose. For this reason, the distinction between foundations and funds will briefly be mentioned at this point so as to draw a complete picture. Firstly in contrast to foundations, there is the option to define a temporal limitation on funds. Secondly, funds are entitled to use their original investment for operation until nothing is left while foundations are restricted to the investment of interests on the assets or income (Csoklich & Gröhs 1993, p. 15, quoted in Simsa et al., 2003). The PSG does not provide regulations for funds at all.

4.3 Justification of Foundations in a Modern Society

To answer the question in how far foundations are necessary in the present social system and whether their importance is even about to increase in the future, first of all, theoretical arguments in favour of NPOs and, therefore foundations, need to be discussed. Subsequently, empirical confirmations as well as opposition are presented.

4.3.1 Theoretical Background

As an explanation of the relevance of NPOs within specific fields of activity, several hypotheses can be formulated based on different theories about the institutions (Heitzmann, 2001, p. 56). The most important ones will be mentioned briefly.

4.3.1.1 Heterogenity

The thesis of heterogenity sees the NPO sector as a producer of public goods. These are goods and services without consumation rivalry and without the possibility of exclusion (Heitzmann, 2001, p. 45). So, the temptation of moral-hazard behaviour is present. In commercially oriented systems, allocative decisions are generally made along the exclusion principle of the price. In line with classic economic theory, there will be no attraction in the market to produce such goods. In practice, this market failure has to be compensated for by the state.

But the ability as well as the willingness of the public sector to meet this task are limited. This may be due to insufficient information of the demands and to the actually non-altruistic attitude of the state, especially when within politics it is votes that really count. Thus, minorities will not be a preferred target group of any decisions. That is why in addition to market failure, state failure has to be registered. The gap left here could now be filled by NPOs.

The heterogenity thesis is now based on this qualitative undersupply and postulates it as the reason for the establishment of NPOs (James, 1986, pp. 154 and Kingma, 1997, pp. 135, quoted in Heitzmann, 2002, p. 46). The hypothesss deriving from this theory are the following (Heitzmann, 2001, p. 57): First of all, NPOs are supposed to be of particular relevance in those areas where the production of public goods or of goods with positive external effects is dominant. Secondly, the role of NPOs ought to be covering the main part of the educational sector as ethnic, religious and cultural norms are important there. Finally, the NPO sector is not assumed to be financially dependent on the state as they are in competition, but are rather financed by non-public sources. Thus, unless empirical evidence proves otherwise, an interdependent relationship appears to be plausible.

In fact, it has turned out that the first assumption is true (Heitzmann, 2001, pp. 203). One example is the protection of animals or of the environment. Still, there are also NPOs offering private goods without positive external effects such as for parts of the cultural or social field. The second hypothesis can be confirmed, but the validity of the thesis regarding qualitative undersupply and NPOs is not limited to education in Austria. As regards the third hypothesis, most NPOs are privately financed with certain differences betweed the fields of activity. In all, both this one and the theory of interdependence have a certain degree of truth in regard to Austria.

4.3.1.2 Contract Failure

The approach of contract failure does not assume state failure as a reason for the set-up of NPOs, but sees them as a direct consequence of the failure of the commercial sector asd especially because of assymmetrical information within the market process (Hansmann, 1987, pp. 27, quoted in Heitzmann, 2001, p. 47). In accordance with the theory, commercial enterprises want to make use of their information advantage at the consumers’ expense as they follow the target of profit maximization.

In contrast, NPOs are not allowed to distribute profits so the attraction of this behaviour is low in their case (Easley & O’Hara, 1986, pp. 85, quoted in Heitzmann, 2001, p. 47). Basically, NPOs exist because of the trust placed in them. According to this theory, NPOs should be considered very important within the production of health and social goods (Heitzmann, 2001, p. 58). Another aspect is the assumption that due to the prohibition of profit distribution, donors would rather trust NPOs than other enterprises. Thus, those specific fields such as social services, animal and environmental protection should be dominated by NPOs.

Practice has shown that the theory predominantly refers to the expectations consumers have rather than to the real quality of goods and services (Heitzmann, 2001, p. 47). Moreover, especially those people with distinct information disadvantages seem to have trust in NPOs.

Empirical evidence could be found for the first assumption by proving that NPOs are producers of such goods (Heitzmann, 2001, p. 207). Still, the relative market share of NPOs is larger in other fields. The second hypothesis has also been stressed and, NPOs are particularly active within fields where donations can be raised relatively easily. This fact implies that the partly overwhelming role NPOs perform in other areas such as sports or health cannot really be explained by this hypothesis.

4.3.1.3 Neocorporatism

The last approach to be discussed in this section is the principle of neocorporatism (Heitzmann, 2001, p. 53). Here, the NPO sector is viewed as a kind of buffer zone between state and society. On the one hand, it takes over the tasks left by the weakening family structure and, on the other hand, it serves to reduce or even solve political conflicts. Thus, they perform a role the state is not capable of by representing an institutional solution to problems which cannot be solved by the state with the social function of operating irrationally and inefficiently.

The hypothesis connected with this approach of NPOs as intermediaries between market and state claims that NPOs’ production is particularly relevant for those areas dealing with current political or critical socio-cultural issues or social topics such as the arts, environment or in the social field (Heitzmann, 2001, p. 59). In this case, empirical data verifies the assumption that NPOs are active where the state fails or withdraws thereby leaving unanswered why NPOs are also operating effectively within other fields (Heitzmann, 2001, p. 208).

4.3.1.4 Economic Background

Basically, there are two aspects relating to the NPO sector including the founding of the institutions, and their behaviour (Badelt, 1998, pp. 22). The first one treats the general role of NPOs within the economy, and explains the principal advantages and disadvantages of such organisations. The second one, however, is about behavioural theories applied to NPOs which proves useful for evaluation purposes.

Due to informational and monitoring problems which make it difficult to measure quality, economic approaches shift towards demand-orientation (Badelt, 1998, p. 23). Both consumers and donors prefer to be in contact with NPOs that are viewed as more trustworthy than PMOs (Ortmann & Schlesinger, 1997, pp. 97 quoted in Badelt, 1998, p. 23), while GOs may leave gaps which the NPOs then take over the task of covering these niches to ensure sufficient services.

To illustrate this situation and the relationship between the varied forms of organisations, the following figure of the Institutional Triangle is given:

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Chart 2: Institutional Triangle (adapted from Badelt, 1998, p. 23)

This diagram illustrates the ‘failure-performance approach’ of NPO theory. The starting point is PMOs’ deficiencies in supply with collective goods while GOs are not capable of meeting the needs. This results in undersupply on the quantitative or qualitative dimension and particularly concerns collective goods. In all cases, NPOs are expected to cover those fields of activities left open by the state. Setting NPOs in relation PMOs, the trust issue is the focus which is referred to as contract failure (Hansmann, 1987, pp. 835, quoted in Badelt, 1998, p. 22).

Asymmetric information applies to private goods and donations for collective goods and occurs between PMOs and NPOs (Badelt, 1998, pp. 23). The traditional forms of market failure refer to collective goods, information, distributional aspects, etc.

The approach as a whole involves several difficulties. For one, problems about a particular form of institution do not automatically allow for the conclusion that others are better, and the deliberate choice of customers between organisations cannot be taken for granted. Finally, the relevance of the informal sector beyond the scope of analysis is not dealt with in this theory which definitely distorts the image.

Seen from the supply perspective, the entrepreneurs choose to set up an NPO following their own targets which are largely different from economic goals (Badelt, 1997, pp. 162, quoted 1998, p. 23). Often the areas comprise society, environment, political power, etc.

To sum up, economic theories deal with the crucial advantages of NPOs taking in foundations which fill gaps left by other organisations and the state. People appear to rely more on them than on commercial enterprises, and NPOs are counterbalancing qualitative or quantitative public undersupply which is particularly important for socially disadvantaged marginal groups. In addition, heterogeneous needs can be fulfilled, while NPOs may be tools to attain personal aims.

4.3.2 Empirical Evidence

As mentioned above, the availability of comparative data contrasting NPOs with other organisations is rather deficient within economic theories (Badelt, 1998, p. 24). That is why empirical examination is necessary to gain an insight into the extent NPOs can and ought to be utilized in order to realise the aims of public policy such as social inclusion. Yet it has to be mentioned again that the sector is too heterogeneous to allow for generalizing tests taking in the whole field. So specifications have to be made, concentration on particular forms or regions, for example.

The theoretical role of complementarity (cf. section 5.2.1) of NPOs comprising foundations explains their establishment as the result of governmental undersupply (Badelt, 1998, pp. 24). This approach should be put into historical perspective. Seen in the long run, modern welfare states have shown the inverse development by the state taking over tasks that had previously been covered by other formal and informal organisations like the church or the family. In contrast to this, the opposite trend can also be observed. Often the government withdraws due to financial reasons giving way to the NPO sector to fill the emerging voids.

These two directions raise the question of the actual roles NPOs perform as discussed in chapter 6. The innovative potential of NPOs is thereby due to their excellent information channels as well as their incentive and motivational systems. It is no coincidence that an overwhelming majority of social policy innovations of the last decades in developed welfare states has been initiated by the NPO sector. Examples are the social activities against violence or work with peripheral or marginalized groups.

Recently, the number of quantitative studies on the behavioural aspect of NPOs has increased. NPOs also attract more volunteers that other types of organisations which implies that apart from their genuine function of supporting social inclusion they also enjoy relative cost advantages compared to competitors. In connection with this, they usually pay lower wages than public or commercial businesses within the same field of operation. An explanation may be the immaterial incentives provided by NPOs and the personal commitment of the employees.

Still, there is a clear dependence of NPOs on public financing and so the delegation of governmental tasks to NPOs has to be considered along with this argument as well. Moreover, where general statements regarding service quality or production costs are not possible, these issues have to be examined individually. So, it cannot be said that the advantages are always on the side of the NPO sector. It is therefore not advisable to see the sector as a global solution to any public-policy problems. Considering market failure, the advantages of NPOs dominate, but another approach might be the introduction of new government regulations.

4.3.3 Foundations and Society in Austria

The general vision of society in which foundations’ roles are cast is a democratic one that includes a state sector covering individual risks and providing (at least basic) services and rights within a so-called welfare state and an engaged civil society.

Dr. Schulmeister from the Austrian Institute of Economic Research does not consider civil society organizations as being a serious alternative to compensate for welfare issues in Austria. “Die Stiftung ist sicher kein Instrument, den Staat zu entlasten. [...] Stiftungen oder zivilgesellschaftliche Organisationen können nicht ernsthaft etwas gegen die Arbeitslosigkeit oder für die Altersabsicherung oder die Krankenversorgung tun. Das ist, wenn man sich die Sozialbudgets anschaut, eine nahezu groteske Vorstellung.“(Cf. interview X)

Dr. Mokre from the Austrian Academy of Sciences points out that pluralism is a key element for a functioning democracy. “Zugleich denke ich schon, dass wir in einem pluralistischen Gesellschaftsbild, [...], neben dem Staat auch noch andere Organisationen haben sollten, die sich irgendwie um öffentliche Belange kümmern. Das ist ja wohl in diesem Konzept der Civil society angesprochen, dass der einzelne Bürger oder auch Unternehmen oder diverse Institutionen sich sehr wohl um Dinge kümmern, die mit dem öffentlichen Wohl, dem Gemeinwohl, zu tun haben. In diesem Sinne meine ich, dass Stiftungen eine Berechtigung haben.“Organizations and institutions next to the governments should take care of public issues and among those foundations as a tool within civil society can have an important role (Cf. interview VII).

For foundations, there is no ideal role since they are set up for different reasons and tasks such as the promotion of research, for instance. A characteristic element is their independence. Neither the government nor individuals should have any influence on the foundation’s management or policy, just the stated purpose determines the field in which it serves with its projects.

A strong civil society is regarded as an important factor reflecting a functioning democracy based on a pluralistic and open society. NPOs are quite numerous in Austria but depend on subsidies from public funds. Foundations would be a good alternative to guarantee their independence, as Mag. Helga Wagner from the Ministry of Internal Affairs points out (cf. interview XI). Their ideal roles include the function of being a tool to finance and guarantee a permanence of projects rather than an operative one.

Unlike other non-profit organizations they rely on the interest on their assets and would not be vulnerable to changes in the economic situation. By having their own capital resources, foundations have an advantage compared to other NPOs that characterizes one of their possible main roles.

Foundations are seen as a tool to strengthen the NPO sector with additional funding, but realistically, not much hope should be attached to that assumption. In Professor Badelt’s view, funding through interest rates on assets requires large private capital stocks which is something Austria lacks (cf. interview 5). The opportunity of cooperation with other NPOs, especially on an international level, is considered to be very relevant and an advantage to public agencies.

Visions concerning innovation are mainly related to the increase of grants, especially as the need for private subsidies is expected by representatives to rise in the future. The financial basis for investments in research projects will grow. For a majority of the experts, foundations are attributed the potential of being a promoting force if private economy would increase its engagement, ideally with a general tendency towards privatisation within the faoudation sector, which Prof. Badelt, the principal of the Vienna University of Economics and Business Administration, points out (cf. interview 5).

There are certain expectations towards foundations in terms of representing alternative funding instruments for NPO activities or of serving as new organizational structures. As a rule, foundations’ current roles fit into the system of visions stated by their representatives, experts and policy makers. The new Private Foundations Act has initiated a discussion process that has definitely encouraged the expectations towards the ‘tool foundation’ and also broadened visions which apply to the roles foundations can be expected to play.

As outlined above, Austria clearly reflects the corporate model in terms of the role of NPOs within the state and cooperation between government and institutions. Large public organisations dominate the political arena whereas NPOs enhance the public benefit in areas they seem to be qualified for. Foundations, but especially other NPOs, are seen as a useful instrument for cooperation in terms of implementing and running public services. They are not seen as divisions of the public authority as each of them is an independent organisation whose approach is to contribute to society, even though in many areas the cooperation with the government is quite closely.

In effect, social services and culture are dominated by governments and public institutions that assign the provision of services to NPOs (and foundations) in many cases as far as funding and outreach of activities are concerned. In Austria, there is only one example of a large museum, the ‘Collection Essl’, that is exclusively financed by a private foundation established by an industrialist. Foundations do not normally play an important alternative role for funding public welfare goods and services.

Plenty of small and local civil society initiatives are established as membership organizations such as associations on a large scale and depend on public funding in many cases. Apart from that, there is a range of smaller foundations that represent non-majority interests as part of the civil society engagement reflecting the liberal model. These foundations have been granting money to individuals in the form of awards or scholarships or have funded public-welfare projects to a limited extent so far.

In addition, the business model is to be identified to a small extent where some corporations, especially banks or local savings banks, reach out to the public interest or fund community projects. It is definitely a minor aspect because besides sponsorships, corporations are not largely involved in contributing to public affairs.

As already stated several times, Austria reflects the peripheral model regarding the number of foundations, their financial contributions and impact on Austrian society. In terms of importance and significance, foundations play a minor role, a fact on which experts and political representatives tend to agree on.

Up to now, Austrian foundations have not operated on an international level to any great extent. As shown by the example of the ‘4 Pfoten Private Foundation’, this fact might change in both directions. Austrian foundations have identified the need to cooperate on an international level in their various fields of activity and it is also expected that international foundations will enlarge their presence in Austria. The ‘European Foundations Centre’ is not very well-known by Austrian foundations, either by policy makers or experts. Bearing in mind the tax advantages enjoyed by private foundations, experts regard the harmonization of tax systems and tax rates to be a relevant issue that needs to be put on the EU agenda and given high priority.

4.4 Quantitative Profile

This section gives an overview of the quantitative structure of foundations in Austria (Simsa et al., 2003). First of all, the relevance of foundations within the NPO sector is described. To put the information into context, the figures in the subsequent part are directly related to Austria’s population; to structure the foundations according to their field of activity, the scheme of the International Classification of NPOs, the ICNPO-Groups is applied (cf. section 3.1.4).

The second part is devoted to the Private Foundations Act of 1993 (PSG), the new law for foundations that includes foundations with non-charitable purposes. As stated in the legal issues’ section (cf. section 4.2), they can also be family foundations solely serving private purposes. The number of foundations established through the PSG will be given in absolute numbers and additionally in numbers of foundations per 100,000 inhabitants.

4.4.1 Relevance of Foundations within the NPO Sector

Basically, the heterogenous structure of this sector often causes mistaken generalisations and misunderstandings. The variety of NPOs concerns their field of activity, size, social and political background, degree of closeness to the state, amount of voluntary activity, participation of honoraries in decision making and production processes as well as their internal decision structures and self-administrative mechanisms.

This brief listing shows that a typology for NPOs is useful. The differentiation between organisations depending on their affinity towards administration or economy, etc. has proven worthwhile (Zauner, 1999, p. 123, in Frey, 2000, p. 33). Although more than half of Austrian NPOs have a purpose within social services, this kind of organisation is spread over numerous sectors such as health, culture, research and education or religion. In short, there cannot be one single NPO policy.

The subsequent table provides information on the total amount of organisations that are assigned to NPO activities and on the significance of foundations within the Austrian non-profit sector.

A total of 94,261 non-profit organisations were registered in Austria in 1997. Compared to the 214 federal foundations and the 261 foundations based on the Provincial Foundation Acts (data from 2002), it is clear that they only play a marginal role within the NPO sector that is largely dominated by associations.

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Data from 1997

Table 4: NPOs (source: Heitzmann, 2001)

In the table, foundations are subsumed in the field of ‘foundations and volunteering’, together comprising only 0.63% of non-profit organisations. Since there is no data available on private foundations with charitable purposes, they have not been included in these figures. As stated earlier, experts estimate that approximately 100 private foundations are dedicated to charitable issues, a number that would not change the current picture significantly.

Regarding the distribution of NPOs according to their areas of activity, a clear majority of about two thirds is associated with culture and sports. In this field, there is a multitude of target groups and a huge variety of activities. Social services, also the main field of activity for foundations in Austria, ranks second with just below 15% while the next positions do not even reach the 10% mark. Those are education and research, a field in which foundations are also very active compared to other ICNPO categories, business, professional associations and unions as well as religion and finally politics and lobbying. The remaining fields of international activities, foundations and volunteering, health and environment come to not more than 1%.

In the following part, information is offered about the purely charitable foundations in Austria. First, the total figures distributed according to Austria’s provinces are presented and then related to the different ICNPO- groups. Furthermore, the number of charitable foundations per 100,000 inhabitants is shown as well as the distribution according to their legal bases, either one of the different Provincial Acts or the Federal Foundation and Funds Act (BStFG).

Other data on foundations like the number of employees, assets size, expenditures due to transparency restrictions or limited research resources are not available. Estimated figures about the assets size will be presented. Data were raised by authors of previous theses presenting the situation at the end of December 31, 2000. These figures were completed by own research done in 2002.

4.4.2 Population Structure

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Chart 3: Austria’s population, total: 8,121,300 (source: Statistik Austria (www.statistik.at/statistische_uebersichten/deutsch/pdf/k14t_1.pdf)

As can be seen the pie chart above, almost one fifth of the country’s population lives in the capital Vienna, followed by Lower Austria, the largest province of Austria with a similar number of inhabitants. Upper Austria and Styria rank next with 17% and just below 15%, respectively, which is also in accordance with the geographical size. Carinthia as well as Salzburg make up for more than 6% each while Burgenland and Vorarlberg added together equal Tyrol with about 8%. The total number of national inhabitants amounts to 8.1 million.

4.4.3 Private Foundations

This section refers to the Austrian Privatstiftungsgesetz (PSG) introduced in 1993. This law made it possible to establish private foundations without any public-welfare or charitable purpose yet also enjoying remarkable tax advantages. The reasons for the introduction and the regulations themselves are discussed in greater detail in the corresponding sections.

Because of the flexibility in its structure, the PSG is becoming more and more popular as an instrument for NPO- organizations and the establishment of charitable foundations. Due to restricted transparency of private foundations’ law deeds it was not possible to separate the charitable private foundations or the ones that have charitable purposes attached from the solely private ones.

For the same reason it was not possible to apply the ICNPO- groups and classify the charitable private foundations according to their purposes. Experts estimate the portion of charitable foundations among the private ones at less than 5% in 2000 (cf. interview I). The assets of around 1500 private foundations were assessed and amounted to about € 37 billion (Harauer, 2000). Projecting them to 2,306 private foundations in 2002, assets can be estimated up to € 57 billion.

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Chart 4: Private foundations, total: 2,306 (source: own research in company register, August 28, 2002)

The chart above shows the distribution of private foundations according to Austria`s provinces. Almost half of Austria’s 2,306 private foundations are registered in Vienna. Apart from Upper Austria with 14.5%, none of the provinces exceeds the two-digit threshold as private foundations in Lower Austria, the region with the third-highest number, only comes to 8.7%. The remaining provinces show a homogenous distribution that can once again be seen as a reflection of their size. These inequalities of the distribution are probably due to the distribution of capital which is more concentrated in Vienna.

The picture is slightly different when foundations are related to the regions’ populations. In this case, Vienna clearly heads the list with 70 private foundations per 100,000 inhabitants, followed by Salzburg with over 30. Vorarlberg exceeds Upper Austria, followed by Carinthia, Styria and Lower Austria. The lowest ratios are found in Lower Austria and the Burgenland, the latter with under ten foundations per 100,000 inhabitants.

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