Brewing Philanthropy: an interview with D.Sc. Flemming Besenbacher, Chairman of the Carlsberg Foundation
Good governance should be a priority for every philanthropic organization. But in the case of the Carlsberg Foundation it represents a precondition and the essence of a unique model created to ensure stability and long-term view to the business while providing substantial philanthropic support for scientific research, talent and knowledge-sharing
15 February 2018
One of the oldest commercial foundation in the world, the Carlsberg Foundation was established in 1876 by brewer J.C. Jacobsen to secure the future of his brewery. When he died in 1887, the Foundation assumed ownership and management of Old Carlsberg: the Carlsberg Group is currently the only global brewer owned by a foundation.
Today the Foundation pursues two main goals. In primis, to ensure a decisive influence on the Carlsberg Group’s strategy; for this reason the Foundation owns 30% of Carlsberg A/S’ share capital and 70% of the votes (with the obligation from its trust deed of always possessing at least 51% of the votes). The other goal is to support basic scientific research within the natural sciences, social sciences and humanities through the awarding of grants for socially beneficial projects. This goal is pursued mainly through a grant-making activity accounting for about 64,5 million euros in 2016, with a strong focus on knowledge sharing – whose origin can be retrieved in the vision of the Foundation’s founder himself – and on the concept of Scientific Social Responsibility (SSR).
We had the chance to deepen this quite unique philanthropic model and explore the opportunities and challenges stemming from its governance with D.Sc. Flemming Besenbacher, Chairman of the Carlsberg Foundation.
The Carlsberg Foundation is one of the world’s oldest commercial foundations. It would be interesting to start this interview by highlighting if there are other peculiar characteristics that in your opinion make the Carlsberg Foundation unique.
I think I could list three main drivers. The first is the link between science and business: the simple fact that the founder of Carlsberg, J.C. Jacobsen chose to establish a foundation with the purpose to support basic scientific research is quite unique in my eyes. And even more so because he decided that the Foundation’s main purpose should not simply be to support research related to the art of brewing, but rather to science more broadly, namely the humanities, social sciences, and natural sciences. This has continued to be the main scientific purpose of the Foundation since 1876. A large number of research-supporting foundations support research that somehow relates to their business, but our founder looked beyond the sphere of his own business, which I find admirable.
The second distinctive point can be found in Carlsberg Laboratory and open data: J.C. Jacobsen decided to set up a laboratory as a sub department of the Foundation, which was to undertake basic scientific research related to the art of brewing. This means that Carlsberg had an R&D department almost since the brewery was founded, which was not normal back in the 19th century. J.C. Jacobsen had a great love to science and understood that it was critical in order to develop this craftsmanship and pursue perfection. And he was right! The Carlsberg Laboratory, which was founded in 1875, has brought us great inventions such as the pH-scale and the purification of yeast. One related and important note to this is that the old brewer publicly shared all the knowledge created at the Laboratory – you can thus say that he embraced “open data” before the term was even invented. The best story to underline this point is that Heineken upon request received some of the pure yeast; I’m not sure that such an amazing invention would have been shared today with a main competitor, but Jacobsen did! That is also why we today proudly say that Carlsberg is the father of lager beer.
Through his model of knowledge sharing, our founder J.C. Jacobsen embraced “open data” long before the term was even invented.
Finally, I would underline the link to the Royal Danish Academy of Sciences and Letters. I do not think any other foundation in the world has the kind of governance structure that we have. For different reasons J.C. Jacobsen decided not to pass on the brewery to his son Carl, but instead asked the Royal Danish Academy of Sciences and Letters to oversee the Carlsberg Foundation and hence select its board. The Academy accepted this “gift” and the arrangement was then written into the charter of the Foundation. This means that the board of the Foundation must always be selected among the members of the Academy. These five scientists make up the board of the Foundation, and in turn also sit in the board of Carlsberg A/S (together with 5 external professionals and 5 employee selected members), as the Foundation continues to be the majority shareholder.
Good governance should be a priority for every philanthropic organization in order to be accountable and perform effectively. But in your case, this topic is even more fundamental in light of the architecture that connects the Carlsberg Foundation to the Group. Could you highlight the main pillars in relation to the Foundation’s governance and decision-making?
Overall, there are very strict regulations about how an industrial foundation can interact with its company based on an “arm’s length principle”. We can never give money or in any other way directly support undertakings at Carlsberg. As any other owner, we can increase or decrease our number of shares to certain percentage points should the brewery need liquidity e.g. in the case of an acquisition, but that is about it.
Furthermore, the Danish Business Authority is supervising us and we have to comply to both the Danish Foundation Law and a soft law on good governance where you have to follow the recommendations or explain why you do not. The Carlsberg Foundation meets all the recommendations except for the ones that relate to the board structure, which is due to the unique governance model with the Royal Danish Academy of Sciences and Letters, as explained in the above. On a broader perspective, as a Chairman I believe that transparency and openness are extremely important to demonstrate good governance and I have thus worked hard on opening up the Foundation since I became Chairman in 2012.
Which are the in your opinion the challenges and benefits of the Carlsberg Group being owned by a Foundation?
Among the benefits, I think that this model allows us to be long-term oriented and to be able to afford to take more risk. Also, it provides stable ownership, works to achieve a greater purpose and protects the Carlsberg Group against hostile takeovers. Studies also show that employees in foundation owned companies stay on for longer, and there are even signs of better financial performance.
There are of course related challenges: due to the long-term view, there is a risk that you are not aggressive enough or too patient in important business decisions e.g. when it comes to management or rationalizations. This means that you may not act as fast as a capital fund owner or others would.
What is your annual grant-making amount and which are the main drivers that guide your philanthropic choices?
In 2016 grants accounted for 479,8 million DKK (about 64,5 million euros) but the amount depends on years, as shown in the table.
Concerning our philanthropic choices, the Carlsberg Foundation has two main objectives: 1) to be an active investor with a controlling interest in Carlsberg A/S, thus ensuring a decisive influence on the Carlsberg Group’s strategy; and 2) to support basic scientific research within the natural sciences, social sciences and humanities through the awarding of grants for socially beneficial projects. We support the best researchers with the most promising projects and aim to promote internationalization and strengthen the growth layer in Danish basic research by supporting the most talented young researchers. The Foundation therefore sends researchers to the most highly acclaimed universities in the world to give them an international experience and network. This nurtures the growth layer and creates favourable conditions for implementing smooth generational change in the Danish universities. The Foundation also prioritizes research across scientific disciplines. It is often in cross-over areas that the real ground-breaking results are achieved. Bringing together researchers who do not normally share results can lead to exciting innovation. In keeping with the Charter, research supported by the Carlsberg Foundation is conducted by Danish and international researchers connected to the Danish research environment.
Furthermore, the Carlsberg Foundation also provides funding for its four departments:
- The Carlsberg Research Laboratory.
- The Museum of National History at Frederiksborg Castle.
- The Tuborg Foundation, which supports socially beneficial causes through projects related to Danish industry.
- The New Carlsberg Foundation, which supports art and art history and is responsible for running Ny Carlsberg Glyptotek.
Corporate social responsibility is a term we have become used to. But how and why did you come to define and apply the concept of Scientific Social Responsibility (SSR)?
We want researchers funded by the Foundation to be aware of the value of their research for society. With SSR, we hope to be able to counter the prevailing scepticism about research and to ease the pressure that is sometimes brought to bear by society and politicians in demanding that research should make a greater contribution to the achievement of political goals, thereby resulting in short-term solutions and growth. However, top-down management of research rarely produces new discoveries and breakthroughs, on the contrary – with excessive top-down management we risk not exploiting the potential of free research to come up with solutions to global challenges.
Experience tells us that the scientific and technological advances made in the last hundred years are not the result of a top-down political process, but often the result of the right combinations, i.e. the right person with the right ideas in the right place, the right laboratory with the right infrastructure, etc. It is often then other people with insight into business developments that turn the research into practice as technology and actually create value for society.
By demonstrating SSR, researchers can also bring about greater understanding of the importance of research both now and in the future. This will allow researchers to maintain the freedom to decide the content of their own research – and there is no doubt that they are the best people to make that decision. Even if the Foundation supports excellent basic research, it does not necessarily lead to direct societal value and progress. By focusing on SSR, however, researchers are motivated to assume shared responsibility for societal development and to consider how their basic research can help address the global Grand Challenges.
With SSR we want researchers funded by the Foundation to be aware of the value of their research for society to help address the global Grand Challenges.
To close, a look at the past and at the future. Which are the results the Foundation achieved that you are most proud of and the challenges that lay ahead?
I think it is hard to point out specific results. But one thing that I am proud of on behalf of the Foundation is that it is much due to our stabile and dedicated support to academic disciplines like archaeology and astronomy that they have not slowly faded away, but on the contrary developed to become world class research environments. In general, the support of the Foundation has in fact been critical to uphold a high academic level of the humanities here in Denmark. Personally, it also really brings me great joy to support young talents and see how our grants help them boost their career while bringing new scientific results into the world.
On the other side, probably the greatest challenge is how we can tackle the global challenges. I am convinced that science is the solution to overcome challenges like water scarcity and health related issues, but how can we best help as a foundation while still being loyal to our charter, uphold all our other commitments and main purposes? At the moment we have established a certain type of grant to address the global challenges, but maybe we need to do even more in the future. Everyone has a major responsibility in addressing the UN SDGs and in particular foundations, as they possess many of the necessary resources such as money, knowledge, network and more.
Everyone has a major responsibility in addressing the UN SDGs and in particular foundations, as they possess many of the necessary resources such as money, knowledge, network and more.
For further information http://www.carlsbergfondet.dk/en