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The institutional context of Korean philanthropy and the role of government and (quasi-) community foundations
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The institutional context of Korean philanthropy and the role of government and (quasi-) community foundations
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Content
THE INSTITUTIONAL CONTEXT OF KOREAN PHILANTHROPY
AND THE ROLE OF GOVERNMENT AND
(QUASI-) COMMUNITY FOUNDATIONS
by
Yu Jean Sohn
______________________________________________________________________________
A Dissertation Presented to the
FACULTY OF THE USC SOL PRICE SCHOOL OF PUBLIC POLICY
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(POLICY , PLANNING, AND DEVELOPMENT)
August 2014
Copyright 2014 Yu Jean Sohn
ii
DEDICATION
To my son, Noah.
iii
ACKNOWLEGEMENTS
“Caring creates resilience.”
I am truly grateful for the endless caring from my parents, husband, and brother, my
mentor Dr. Elizabeth Graddy, my committee members, Dr. David Kang, and Dr. Nicole Esparza,
all of my professors, and every academic and practitioner colleague.
I believe “creative philanthropy” makes resilience in our society, and I will work for it.
iv
TABLE OF CONTENTS
DEDICATION…………………………………………………………………………………… ii
ACKNOWLEGEMENTS………………………………………………………………………..iii
LIST OF TABLES……….……………………………………………………………………….vi
LIST OF FIGURES……………………………………………………………………………..viii
ABSTRACT………………………………………………………………………………………ix
Chapter 1: Introduction…………………………………………………………………………… 1
1.1. Statement of Purpose………………………………………………………………….. 1
1.2. Research Questions…………………………………………………………………..... 3
1.3. Overview of Methodology…………………………………………………………….. 6
1.4. Expected Results and Contributions…………………………………………………... 8
1.5. Summary of Chapters………………………………………………………………...... 9
Chapter 2: The Institutional Context of Korean Philanthropy and its Distinctiveness..…………11
2.1. Literature Review….…… …………………………… ……………………………...11
2.1.1. Foundations and Government in Comparative Perspectives…………………... 11
2.1.2. The Social Origin Theory and a Positioning of Korean Philanthropy…………. 15
2.1.3. Historical Institutionalism and the Path of Korean Foundations………………. 17
2.2. Comparisons with American Foundations……… …………………………………... 19
2.2.1. Historical Markers and Major Changes of American Foundations……………..19
2.2.2. Legitimacy Seeking of Foundations in the United States……………………… 24
2.3. Distinctiveness and Redefinition of Korean Foundations……………………….……27
2.3.1. The Evolution of Korean Foundations…………………………………………. 27
2.3.1.1. The Beginning of Korean Foundations and Modernization………………28
of Korean Society
2.3.1.2. Government-Leading Philanthropy from the 1980s……………………... 29
2.3.1.3. The End of the 1990s–Present, a Transformation………………………... 32
of Institutional Philanthropy
2.3.2. Foundation-Related Dimensions and Future Issues…………………………… 37
2.3.2.1. Supply-Side Perspectives: Familiarity by Public Foundation Model…… 39
2.3.2.2. Inter-Organizational Perspectives: The Foundation Field……………….. 41
2.3.2.3. Demand-Side Perspectives: Governments and Nonprofits……………… 42
2.3.3. Redefinition and Classification of Korean Foundations………………………. 46
2.4. Conclusion…………………………………………………………………………… 48
Chapter 3: A Traditional Model vs. A Global Norm, Role of Two (Quasi-) Community……….. 51
Foundations
3.1. Conceptual Framework…………………………………..………………………...….51
3.2. Two Cases: Community Chest of Korea and The Beautiful Foundation………..……53
v
3.2.1. Traditional Korean Philanthropy: A History of Community Chest of Korea….. 53
3.2.2. Democratization and Diffusion of a Global Norm: The Beautiful Foundation... 58
3.2.3. Institutionalization of a Global Norm: Public Foundation and Community……64
Foundation
3.2.4 The Relationship with Governments and Hypotheses………………………….. 70
3.3. Data and Comparison………………………………………………………………... 72
3.4. Conclusion…………………………………………………………………………… 89
Chapter 4: The Effects of Political-Economic Factors and Institutional Norms on…………….. 92
Korean Foundation Inception
4.1. Introduction…………………………………………………………………………...92
4.2. Theoretical Backgrounds and Major Hypotheses……………………………………. 95
4.2.1. Political-Economic Factors……………………………………………………… 96
4.2.2. Cultural Factors………………………………………………………………… 101
4.2.3. Government-Related Factors…………………………………………………... 105
4.3. Data Description and Analysis……………………………………………………… 106
4.3.1. Sample…………………………………………………………………………. 106
4.3.2. Measures……………………………………………………………………….. 108
4.3.2.1. Foundation Inception as Dependent Variable……………………………. 108
4.3.2.2. Independent Variables……………………………………………………. 110
4.3.2.3. Control Variables…………………………………………………………. 113
4.3.3. Estimation……………………………………………………………………… 117
4.4. Discussion of Findings……………………………………………………………… 118
4.5. Conclusion……………………………………………………………………….......127
Chapter 5: Conclusions………………………………………………………………………… 131
5.1. Key Findings……………………………….………………………………………..131
5.2. Implications………………………………………………………………………….132
5.3. Limitations and Future Study………………………………………………………..133
REFERENCES………………………………………………………………………………… 135
APPENDIX A: Interview Protocol and Instrument……………………………………………. 148
vi
LIST OF TABLES
Table 2.1 Cross-Comparison of Growth Patterns………………………………………………...14
Table 2.2 Government Social Expenditure and Nonprofit Sector Size…………………………..15
Table 2.3 Najam’s Four Cs Model of Government-Nonprofit Relations………………………... 17
Table 2.4 The Four Functions of Nonprofit and V oluntary Action……………………………… 24
Table 2.5 Asset Size and Established Year of Korean Nongovernmental Foundations…………. 36
Table 2.6 Foundation Corporation as Nonprofit Corporations and Public Corporations………...40
Table 2.7 Classification of Korean Foundations………………………………………………… 48
Table 3.1 Newly Established Foundations………………………………………………………. 65
Table 3.2 Classification of Public Foundations in Korea………………………………………...65
Table 3.3 Four Kinds of Quasi-Community Foundations Representative Examples in Korea…..68
Table 3.4 Hypotheses for Legitimacy and Autonomy in the Relationship with Government……72
Table 3.5 Percentages of Individual and Corporate Donation in The BF and……………………76
CCK (Only National Office), 2005–2009
Table 3.6 Percentages of Designated Fund in Community Chest of Korea (Billion Won =……..78
Million Dollars), 2005–2009
Table 3.7 Percentages of Discretionary Fund in The Beautiful Foundation…………………….. 80
(Thousand Won = 1 Dollar), 2005–2009
Table 3.8 Grant-Making Subject Categories of the BF (2000-2009) and……………………….. 82
CCK (2006–2009)
Table 4.1 Independent Variables: Description, and Predicted Effect……………………………111
Table 4.2 Summary Statistics……………………………………………………………………116
Table 4.3 Pairwise Correlation Among Continuous Variables…………………………………..116
Table 4.4 Discrete Time-Logit Estimates for Creation of Korean………………………………125
Foundations, 1975–2009
vii
Table 4.5 Competing Risks Estimates for Establishment of Government-Related……………. 126
Foundations vs. Nongovernmental Foundations, 1975–2009
viii
LIST OF FIGURES
Figure 2.1 Chapters’ Framework……………………………………………………………..…….5
Figure 2.2 Foundation Corporations’ Location in Nonprofit Corporation Law………………….38
Figure 2.3 Foundation Corporations by Different Based Laws…………………………………..38
Figure 2.4 Procedural Steps to Establish Foundation in Korea and the U.S……………………..43
Figure 3.1 Funding Intermediaries in Korea…………………………………………………….. 52
Figure 3.2 Averages of Annually Fundraised Money of Community Chest of Korea………….. 55
Figure 3.3 Comparison of Fundraised Money of CCK and BF…………………………………. 74
Figure 3.4 Percentages of Individual and Corporate Donation in the BF and CCK…………….. 77
(Only National Office), 2005–2009
Figure 3.5 Percentages of Designated Fund in Community Chest of Korea (Billion Won =… .…78
Million Dollars), 2005–2009
Figure 3.6 Percentages of Discretionary Fund in The Beautiful Foundation (Thousand Won…...80
= 1 Dollar), 2005–2009
Figure 3.7 A Purpose of Grant-Making Defined by The Beautiful Foundation …………… ...…...83
Figure 4.1 Foundation Inception in Korea, 1960–2010………………………………………….109
Figure 4.2 Foundation Inception by Funder Types, 1975–2009…………………………………109
Figure 4.3 Composition in Foundation Types……………………………………………………114
Figure 4.4 Comparison of Seoul Funder Types and Non-Seoul Funder Types…………………..115
ix
ABSTRACT
This dissertation examines the South Korean foundation field in terms of governance in
different sectors, and the processes and outcomes of institutionalization in the field. It also
elucidates the effects of political-economic factors and institutional norms on the establishment
of foundations over a 35-year span, 1975-2009. Three main chapters are organized as follows:
Chapter 2 clarifies the societal conditions of the Korean foundation field using
comparative historical analysis to foundations in the United States, based on social origin theory,
and historical institutionalism. Korean foundations and American foundations have several
differences. Whereas American foundations have built up strong partnerships with nonprofits and
have gained their legitimacy from those partnerships (Hammack, 2006), Korean foundations
have been led by the government and have mirrored the government’s objectives. Many
traditional foundations were established in collusive relationships between business elites and
government, and earned a negative image through misbehaviors and corresponding public
policies for regulations. As a result, the private passions of founders and partnerships with
nonprofits have rarely been encouraged. However, recent foundations have experienced new
public policies to boost the field and have taken some opportunities to formulate their identities
and share new norms.
Chapter 3 deals with two cases of quasi-community foundations or quasi-public
foundations, and adopts case studies and interviews. Based on the world-polity perspective and
public resource dependence theory, it examines the processes of institutionalization of the
Korean foundation field from the end of the 1990s. The processes are aligned with the
development of Korean nonprofit sector and have been affected by a community foundation
model, as a global cultural norm. Two cases from Korea, the Community Chest of Korea (a more
x
traditional fundraising organization) and The Beautiful Foundation (a more diffused model from
world-polity), show different fundraising and corporate giving, designated and donor-advised
funds, the relationship with recipients, and legitimacy seeking. A different relationship with
government is likely to lead to different levels of legitimacy and autonomy; thus, it is reasonable
to say that Community Chest of Korea can achieve quantitative growth and qualitative evolution
was initiated by The Beautiful Foundation. Their coexistence seems to affect each other, and
many kinds of sectoral norms have diffused to other foundations in the field.
Chapter 4 presents empirical evidence using the foundation population data with event
history analysis. As such, 1,376 foundation establishments and combined yearly information
during from the risk period of 1975-2009 were used to estimate the hazard rate of the creation of
foundations. The result demonstrates that not only political economic factors but also cultural
factors affect the foundation inception in Korea. “Logic of instrumentality” and “logic of
appropriateness” are likely to complement rather than compete. As examined separately, the
creation of government-related foundations tend to be influenced by political and economic
factors, and at the same time are exposed to institutional pressures, such as coercive and mimetic
isomorphism. Relatively, nongovernmental foundations tend to be more reflective of institutional
norms, especially in terms of global diffusion and mimetic pressures. In this case, internal factors
within the field seem to be more powerful influences for nongovernmental foundations.
Korean society may view the U.S. cases and policies in a dialectical and critical way, as
American foundations are going through various complicated situations due to inevitable tension
between public ends and private means (Fremont-Smith, 1965; Prewitt, 2006b; Sacks, 1961).
Regardless of many counterclaims and arguments, foundations hope to use their independent
dynamics to “stimulate democratic debate” (Anheier & Leat, 2006).
1
CHAPTER 1:
INTRODUCTION
1.1. Statement of Purpose
Philanthropic foundations are special entities seeking a “delicate balance of public ends
and private means” (Sacks, 1961, p. 217). The modern model for foundations has been regarded
as an invention of capitalism and a “unique American answer” to U.S. society’s problem of
excessive asset accumulation and poorly functioning profit distribution (Anheier, 2006;
Lindeman, 1988). There were more than 60,000 foundations with assets of $476 billion in the
U.S. (Anheier, 2006). Nowadays, foundations are not only an American phenomenon.
By 2012, the South Korean foundation population had grown to 4,582, with diverse
founders, resources, and purposes (The Beautiful Foundation, 2012). When we reflect on
traditional institutional Korean philanthropy, this evolution marks a dramatic shift—just two
decades ago, institutional Korean philanthropy had been exclusively led by the government. In
those days, most foundations in South Korea (hereafter, Korea) had been established by the
conglomerates (chaebols), and those corporate and individual foundations usually mirrored the
government’s objectives. These models and their activities were taken for granted at that time,
and many of those traditions still exist. Many Asian countries have branched out from
government-leading philanthropy. What factors explain recent changes, such as the emergence of
public foundations, grant-making, and policymaking activities in Korea?
A shift of institutional philanthropy aligned to the development of the Korean nonprofit
sector. Many Korean nonprofit scholars have argued that some critical conjunctures such as the
2
democratic breakthrough in 1987 and the economic crisis of 1997 triggered the
institutionalization of the Korean nonprofit sector (Ju & Tang, 2011). Foundations themselves are
philanthropic nonprofit organizations and put down their roots in the nonprofit sector. For
American foundations, David Hammack (2006) has pointed out:
How have American foundations made themselves legitimate in the face of such
diverse criticism? Perhaps the most fundamental answer is that in the United
States, foundations are an integral part of the nonprofit, nongovernment sector.
Nonprofit organizations have played key roles in American since the adoption of
the Constitution and the rise of corporation. We can date their prominent role to
the period between 1787 and 1833 when the Constitution, the Bill of Rights, the
Marshall Court, and other actions affirmed the rights of private property, separated
church and the state at the national and state levels, and fragmented national
power over domestic affairs . . . Fundamentally, then, American foundations
derive their legitimacy from the nonprofit sector as a whole. (p. 52)
These remarks raise an intriguing point. While American foundations “derive their
legitimacy from the nonprofit sector as a whole,” and grant-making foundations are the dominant
type of modern foundation in the United States (Hammack, 2006; Toepler, 1999), traditional
Korean foundations tend to give their money to individual beneficiaries directly, rather than
having partnerships with nonprofit organizations distribute their grants. Then, why are Korean
foundations different from American foundations? This dissertation seeks to answer this question.
As some have argued, “The historical conditions, processes, and outcomes of social economic
and political modernization in Korea are not and cannot be the same as those of Western societies”
(Park & Chang, 1999, p.153).
Paradoxically, a snapshot of the distinctiveness of Korean foundations frames another
issue in this dissertation. Given these different histories and economic and political conditions,
each society can have a distinct prototype of foundation at any given moment. Why, then, have
recent Korean foundations become similar to American modern foundations? These likenesses
are partly explained because some models of foundations in the United States have been diffused
3
and translated. But Korean nonprofit scholars who have studied the evolution of the nonprofit
sector and the foundation population in Korea have rarely addressed this global diffusion. To
address this gap, this dissertation will examine how global cultural norms have influenced
processes of institutionalization.
This dissertation will elucidate how economic-political factors as influenced by distinctive
historical conditions have intersected with cognitive factors through diffusion. Finally, it will
posit a policy design for the Korean foundation population. In American cases, the Tax Reform
Act 1969 shows the bright and dark sides but was successful “in altering some forms of behavior
by foundations and their donors without jeopardizing the continued use of the foundation form”
(Clotfelter, 1985, p. 272). This analysis is expected to suggest some government roles in
strengthening regulations to control and boosting interorganizational networking in order to share
cultural norms.
1.2. Research Questions
This dissertation consists of three separate yet related studies of Korean foundations.
Chapter 2 will focus on Korean foundations’ “distinctiveness.” What are Korean foundations’
history and distinctiveness compared to those of American foundations? What kinds of societal
conditions in Korea make for a different foundation model? Most institutionalized philanthropy
in Korea has been led by the government. Indeed, just two decades ago, Korean citizens were
encouraged to donate to the government’s fund. In addition, many Korean conglomerates
(chaebols) were associated with government through backroom dealings with politicians and
their gifts included corporate giving. These kinds of political and economical forces produced
homogeneous organizational forms of foundations in Korea—quite different from the
4
foundations in the United States—until the 1980s.
Chapter 3 will take a closer look at recent foundations that led the “structuration” of the
foundation field. As Paul DiMaggio (1991) has argued, “structuration processes are historically
and logically prior to the processes of institutional isomorphism” (p. 267). Two representative
cases in Korea, the Community Chest of Korea (a more traditional fundraising organization) and
The Beautiful Foundation (a more diffused model from world-polity) will be explored here.
Despite having a different relationship to the government, both quasi-community foundation
models go beyond asset building by aiming to effect social change. Two research questions will
guide this study: first, how has the Korean traditional fundraising model been influenced by the
global cultural norm, and what is the process of institutionalization? Second, do the different
types of relationships with the government make a difference in fundraising, grant-making, and
legitimacy-seeking? And what role does each organization take (i.e., deinstitutionalization,
restructuration, professionalization)?
Lastly, based on understandings of Korean foundations’ history and structuration of the
foundation field, chapter 4 will investigate the population data of foundations in Korea to
explicate economic and political factors—such as tax regimes, law enactment, and political
shifts—as well as cultural factors—such as social expectation, global diffusion, and institutional
isomorphism—as possible explanations to the establishment of foundations from 1975 to 2009.
Resource dependence theory argues that organizations will use their external environments as
resources, while sociological new institutionalism explains the diffusion via cultural factors. Do
political-economic factors and/or cultural factors explain the foundations’ inception?
Furthermore, do government-related foundations and nongovernmental foundations have
different identifiable factors in their establishments
5
Government’s leading tradition
What is a history of Korean Foundations? What is their distinctiveness?
How has the Korean traditional fundraising model been influenced by the global cultural norm, and what is
the process of institutionalization?
Do the different types of relationship with the government make a difference in fundraising, grant-making, and legitimacy-seeking?
Do political-economic factors explain the foundations’ inception? Do cultural factors explain the foundations’ inception?
Do government-related foundations and non-governmental foundations have different identifiable factors in
foundation creation?
Figure 2.1 Chapters’ framework.
From the 1980s Start of Korean
foundations
From 1939
Modern
American foundations
from 1905 First Tax (Major arguments)
community Reform
foundation 1914 Act 1969
From the end of 1990s
to 2009
(Two different quasi-
community foundations:
CCK and The BF)
Chapter 2
Chapter 3
Foundation population
data 1975 – 2009
(Shown in the BF lists
and registered in NTS
reporting system)
Chapter 4
6
1.3 Overview of Methodology
This study may represent the first dissertation to explore the foundation field in Korea.
By using historical analysis, case studies, interviews, and data analysis, it examines the field
and evolution of Korean foundations broadly and in depth.
Chapter 2 presents a literature review of historical analyses to examine the distinct
tradition of Korean foundations. To this end, Korean societal conditions for institutionalized
philanthropy will be compared to some of the historical markers and major changes in
American foundations. This chapter’s analysis and comparison will employ the social origin
theory and historical institutionalism. Both theories seem to adopt comparative historical
analysis, as they do not claim a universal causal model for every case or offer an interpretative
explanation through one case description; rather they make mid-range generalizations through
comparative analysis emphasizing histories and contexts (Ha, 2011). Moreover, historical
institutionalism can be regarded as “approaches, analysis frameworks, or perspectives” rather
than theory (Ha, 2011; Immergut, 1998; Jung, 1996).
Case studies and interviews will be used for chapter three, which concentrates on the
process of Korean foundations’ structuration. Community Chest of Korea and The Beautiful
Foundation are the representative cases to lead recent institutionalization process. This chapter
will compare and contrast the two cases because, if the origin of Community Chest of Korea
can be seen as a traditional fundraising model from the 1970s, The Beautiful Foundation can be
considered a newly diffused model from world-polity. Second, if it can be said that The
Beautiful Foundation has maintained its independence from the government, then it can also be
said that Community Chest of Korea has a relatively strong relationship with the government.
For example, Community Chest of Korea has been supported by a special law that guarantees
7
favorable tax status; further, the government has carried on annual campaigns to promote
donations (from government agencies, corporations, and citizens) solely for Community Chest
of Korea. Meanwhile, The Beautiful Foundation has publicized that it does not get funds from
the government, thus emphasizing its distance from the government. In this discussion, the
researcher will consult data collected from 2000 to 2009 using public resource dependence
theory and the world-polity perspective. Community Chest of Korea published this data in its
report “Social Impacts and the Future of Community Chest of Korea” in 2010. In 2011, The
Beautiful Foundation composed an internal report to summarize its activities during 10 years. I
conducted several interviews with staff members who worked from 2000 to 2009 for the two
organizations, information from which complements this data comparison.
Chapter 4 takes a closer look at the foundations’ establishments, which may depend on
the “logic of instrumentality” and the “logic of appropriateness.” Based on resource
dependence theory and sociological new institutionalism, the foundation population data were
tested to identify which theory best explains the inceptions, and how the two theories compete
with and complement each other.
Resource dependence theory and sociological new institutionalism have been cast as
rival theories to explain organizational behaviors and practices (Frumkin & Galaskiewicz, 2004;
Suárez & Hwang, 2009). Sociological new institutionalism suggests that a trend of organizing
is a main motivation for adopting models because the “efficacy” of a trend cannot be easily
proved but can provide legitimacy and increase reputation (DiMaggio & Powell, 1983; Meyer
& Rowan, 1977). On the contrary, resource dependence theory argues that organizations
behave to maximize autonomy and to decrease uncertainty in their given contexts (Pfeffer &
Salancik, 1978). In this way, the “logic of appropriateness” and the “logic of instrumentality”
8
can be compared to explain Korean Foundations’ establishments.
Whereas the “logic of instrumentality” can address that political-economic factors, such
as tax regime, and the law enactment or amendment, are determinants of the establishments,
the “logic of appropriateness” can address cultural conformity such as peer pressure and global
diffusion. I compare the two logics using a dataset of the Korean foundation population, testing
hypotheses based on resource dependence theory and sociological new institutionalism. The
data for foundations are cross-sectional and were collected by The Beautiful Foundation in
2012, and longitudinal data by year were combined additionally for this event history analysis.
The discrete-time logit model will be employed to determine which kinds of independent
variables—between political-economic factors and cultural factors—explain the hazard rate of
foundation inception during the risk period of 1975 to 2009. The competing risks model will be
used to distinguish identifiable factors between government-related foundations and
nongovernmental foundations.
1.4. Expected Results and Contributions
This dissertation examines the Korean foundation field regarding governance and
partnership with different sectors and global diffusion. Korean foundations’ fewer partnerships
with nonprofits and the close relationships with government can be captured by historical
analysis through comparison to American foundations. Whereas foundations in the United
States have been encouraged to undertake private experiments by relatively weak state
intervention, Korean foundations have tended to mirror government-led objectives and might
exploit passive charitable actions. This dissertation also explores convergence with American
foundations and how Korean processes are influenced by a global model—a subject that has
9
been rarely addressed by Korean nonprofit scholars. Community Chest of Korea is a traditional
government-sponsored foundation and The Beautiful Foundation is a civil society-initiated
foundation modeling a community foundation. Comparison of these two representative
foundations will yield information about different fundraising, grant-making, and legitimacy-
seeking behaviors, and show structuration and institutionalization at work in the foundation
field.
Next, statistical analysis of foundation population data will elucidate how political-
economic factors relate to cultural factors. Because institutional norms have attracted little
attention as influences on foundations, this dissertation will address whether they influence
more than financial rewards and policy decisions.
The main anticipated contributions of the dissertation are twofold. First, a new
theoretical argument of institutional norms and diffusion will be added to discussions of the
Korean foundation field. Second, in terms of practices, comprehensive analyses are expected to
address some advisable government roles and internal deliberation within the foundation field.
1.5. Summary of Chapters
The dissertation is organized as follows. The second chapter clarifies the societal
conditions of the Korean foundation field using social origin theory and historical
institutionalism based on comparative historical analysis to foundations in the United States.
Assuming that American foundations have gained their legitimacy from the nonprofit sector
(Hammack, 2006), and that grant-making foundations are the dominant type of foundation in
the United States (Toepler, 1999), then this chapter tries to examine why typical Korean
foundations are different and how they derive their legitimacy. In addition, the analysis
10
captures its evolutionary changes over time, providing redefinition and classification of Korean
foundations.
The third chapter addresses two representative quasi-community foundations or quasi-
public foundation models. It adopts case studies and interviews. By comparing different
organizational behaviors based on the world-polity perspective and public resource dependence
theory, it examines how different relationships to government have affected the two
foundations in terms of fundraising, grant-making, and legitimacy-seeking; how the Korean
foundation model has been influenced by the global cultural norm; and its process of
structuration. Further, studying the institutionalization of the field reveals decoupling practices
and isomorphism.
The fourth chapter presents empirical evidence in support of arguments that resource
dependence theory and the sociological new institutionalism make. Which factors between
political-economic and cultural variables can explain foundation inception? Do government-
related foundations and nongovernmental foundations have different explanatory factors in
their establishment? To answer these questions, chapter 4 employs event history analysis,
extracts foundation population data from The Beautiful Foundation research conducted in 2012,
and combines other collected data from 35 years in the foundation field. More specifically,
1,376 foundation establishments during 1975–2009 are assessed; the dependent variables are
the hazard rate of foundation inception for each year in the discrete-time logit model and the
competing risks model.
The last chapter summarizes the main findings and implications of the three chapters,
and suggests their limitations and directions for future research.
11
CHAPTER 2:
THE INSTITUTIONAL CONTEXT OF KOREAN PHILANTHROPY AND ITS
DISTINCTIVENESS
2.1. Literature Review
2.1.1. Foundations and Government in Comparative Perspectives
What is the Korean foundation’s “distinctiveness”? This study will answer two research
questions: What are Korean foundations’ history and distinctiveness compared to American
foundations? What societal conditions in Korea make a different foundation model?
We need to start with “foundation” and its relations to government. What is a
foundation? Although the definition may vary from one country to another due to law
traditions (common law or civil law), legal personalities (membership or assets), and other
dimensions (Anheier, 2001; Anheier & Daly, 2006; Anheier & Toepler, 1999), many scholarly
works draw upon the definition by Emerson Andrews (1956), which was adopted by the
Foundation Center (Anheier, 2005):
a nongovernmental, nonprofit organization with its own funds (usually from a
single source, either an individual, a family, or a corporation) and program
managed by its own trustees and directors, established to maintain or aid
educational, social, charitable, religious, or other activities serving the common
welfare, primarily by making grants to other nonprofit organizations. (Renz,
1997, p. 111)
Under civil law tradition, Korea, Japan, German, and Italy have foundations with a
legal personality. Those foundations conduct their public activities with “endowment” assets
that nonprofit organizations and member-based organization do not have (Park & Hwang,
12
2008). Meanwhile, the United Kingdom, Canada, and Australia, with common law traditions,
usually take a “trusteeship” for foundations, which means they define a relationship between
property and trustees (Anheier, 2005). The United States is the exceptional case because the
Internal Revenue Code and section 501(c)(3) defines a foundation as a tax-exempt organization
(Anheier, 2006; Park & Hwang, 2008). Here, Korea and the United States share qualities
despite their different law traditions. Their foundations have a legal status that is defined in the
tax law (Park & Hwang, 2008). Both governments admit foundations’ publicness and support
their activities when they satisfy governments’ standards that can be employed by the taxation
system. This is a starting point in the relationship between foundations and governments.
Other dimensions for foundations are also suggested by Helmut Anheier and Siobhan
Daly (2006): “founder type” (private or public), “purpose” (charitable or other), “activities”
(grant-making or operating), “revenue structure” (single or multiple funding sources), “asset
type” (own endowment or regular allocations), “degree of independence from the state,” and
“business or family interest.”
Lester Salamon and Helmut Anheier (1998) proposed a general definition for a
nonprofit organization, and Anheier (2005) articulated the following modification to the
structural-operation definition of a foundation:
• An asset-based entity, financial or otherwise: the foundation must rest on an original
deed, typically a charter that gives the entity both intent of purpose and relative
permanence as an organization.
• A private entity: foundations are institutionally separate from government, and are
“nongovernmental” in the sense of being structurally separate from public agencies.
Therefore, foundations do not exercise governmental authority and are outside direct
majoritarian control.
• A self-governing entity: foundations are equipped to control their own activities. Some
private foundations are tightly controlled either by governmental agencies or
corporations, and function as parts of these other institutions, even though they are
structurally separate.
• A nonprofit-distributing entity: foundations are not to return profits generated by either
13
use of assets or commercial activities to their owners, members, trustees, or directors as
income. In this sense, commercial goals neither principally nor primarily guide
foundations.
• An entity for a public purpose: foundations should do more than serve the needs of a
narrowly defined social group or category, such as members of a family, or a closed
circle of beneficiaries. Foundations are private assets that serve a public purpose.
(p.196)
Andrews (1956) also explained that foundations primarily make grants to other
nonprofit organizations, which means that foundations are the funding intermediaries between
donors and recipient nonprofit organizations. At the same time, Anheier and Daly (2006)
pointed out that, historically, “foundations were operating institutions primarily, for example,
hospitals, orphanages, schools, and universities, though many did distribute money (alms-
giving) and contributions in kind (for example, food)” (p. 196). Is the shift from operating
foundations to grant-making foundations a process of the evolution of foundations? Or, is it a
variation across countries? Not many scholars deal with the international variation of
foundations across countries, but Anheier (2005) has considered some growth patterns that are
not equally spread.
14
Table 2.1
Cross-Comparison of Growth Patterns
Countries Growth timing Characteristics Additional
examples
High-growth
countries
US From 1980 Sustained expansion Turkey
Italy 1990 Law 218 (or Amato law)
Spain 1994 The Foundation Act, after
democratization
Portugal After 1980 Law 460, after democratization
Medium-growth
countries
Finland 1990s Economic boom Switzerland
and the UK Germany After 1950 High incomes and stable political
systems
Greece Stabilization of Greek, increasing
immigrants, and Olympic games
Moderate-growth
countries
Czech
Republic
From 1999 High growth but many inactive
foundations, and not belong to typical
definition of foundation
Central and
Eastern
Europe Poland From 1989
Low-growth
countries
Japan Between 1980
and the early
1990s
Largely stagnated due to difficult
economic conditions, regulatory
environment
France Before post-war
period
Highly regulated and complicated in
establishment, and few incentives for
potential founders
Austria From 1960s The 1994 Private Foundations Act
attracting foundation not necessarily
with public purpose
Belgium From 1960s Highly regulated and complicated in
establishment, and few incentives for
potential founders
Source: Anheier, 2005, pp. 315–316.
The categories in Table 2.1 show facets of the relationship between foundations and
governments that are likely to be influenced by economic conditions, political situations, and
legal environments. The dynamics of the state-foundation vary and affect the development of a
foundation field. Next, we will explore the Korean foundation in relation to the nonprofit sector.
The institutionalization of foundations is embedded not only in state-foundation relations but
also in the institutionalization of the nonprofit sector. Without understanding Korea’s political
15
dynamics among foundations, the nonprofit sector, and governments, the institutionalization of
the foundation population cannot be identified.
2.1.2 The Social Origin Theory and a Positioning of Korean Philanthropy
Although a few previous scholarly works offer theories for foundations at the national
level, some scholars illuminate theories for nonprofit organizations and the nonprofit sector in
general. Salamon and Anheier (1998) developed the social origins theory for explaining
various sizes, characteristics, and compositions of NGOs in different countries. Nonprofit
sectors across countries have their own development process reflecting “path-dependence,” and
this comparative-historical theory could delve into social origins and social factors that make
every society have particular nonprofit sector (Salamon & Anheier, 1998).
Table 2.2
Government Social Expenditure and Nonprofit Sector Size
Government Social
Spending
Nonprofit Sector Economic Size
Small Large
Low Statist (Japan, most
developing countries)
Liberal (US, UK)
High Social democratic (Sweden,
Norway, Denmark, Finland)
Corporatist (France,
Germany)
Source: Anheier, 2005, p. 136.
According to Anheier and Salamon (2006), a fourfold division of nonprofit regime
types are “liberal,” “social democratic,” “statist,” and “corporatist” models, as based on
Esping-Anderson’s (1990) classification of welfare regimes and B. Moore’s (1967) analysis of
three different political regimes.
The U.S. and the U.K. exemplify liberal models characterized as a lower level of
16
government social welfare spending and a larger scale of the nonprofit sector (Anheier, 2005).
Rather than an extension of the social welfare system, the voluntary approach is preferred in
those societies because the middle class is dominant (Anheier, 2005). Meanwhile, the statist
model, for example, in Japan shows the powerful state holding policy for itself, the economic
upper class, or business elites, but it also has “a fair degree of autonomy sustained by long
traditions of deference and a much more pliant religious order” (Anheier, 2005, p.137). In
Korean society, the statist model also has lower social welfare spending, but it did not bring
about expansion of the nonprofit sector’s role until 1980. Sung-soo Joo (2012) argued that
Korea and Japan have been experiencing stable growth in voluntary giving recently, but the
recent volumes still do not reach a level complementing the lack of public social spending. In
other words, he confirmed that the Korean society belongs to a “statist” model in spite of
progress in philanthropic cultures.
According to Smith and Grønbjerg (2006), this theory requires understanding the
character of the nonprofit organization as a core of historical development by social class
interests in particular countries. Moreover, this approach is similar to social movement theory
in that it focuses on political mobilization and its influence on policy as explanatory factors for
the nature of the nonprofit sector and government-nonprofit relations in each country (Smith &
Grønbjerg, 2006). Here, if we focus on state-nonprofit relations, Najam’s four Cs model
(2000)—cooperative, complementary, co-optive, and confrontational—can be supplemented.
17
Table 2.3
Najam’ s Four Cs Model of Government-Nonprofit Relations
Goals
Similar Dissimilar
Means Similar
Dissimilar
Cooperation Co-optation
Complementarity Confrontation
Source: Anheier, 2005, p. 286.
Korea and the U.S. definitely have distinct historical origins to their nonprofit sectors,
which have been shaped by their own political and institutional environments. In terms of the
process of democratization, Korea has representative nonprofits that still have a
“confrontational” model and some characteristics of traditional union and advocacy group in
the pursuit of democratization. Compared to Korea, the U.S., based on liberal democracy and
pluralism, emphasizes professionalized service organizations and advocacy groups as a
significant partner to governments and foundations and the infrastructure of society unification.
Although the recent Korean nonprofit sector has experienced governance and
partnership through changing regimes and interaction with global contexts, major nonprofits
have kept their anti-government and anti-corporation orientation. Until two decades ago,
founders of Korean foundations were mainly corporations and the business elite. This may be
one reason that traditional Korean foundations have hesitated to form active partnerships with
nonprofit organizations and their philanthropic resources rarely went to nonprofit organizations
involved in social movements. This factor is likely to make the relationship between
foundations and nonprofits in Korea different from partnerships in the United States.
2.1.3. Historical Institutionalism and the Path of Korean Foundations
18
Social origins theory and historical institutionalism can illuminate “institutional
continuity,” in other words, “path-dependence”; social origins theory emphasizes long-lasting
effects of class relations; historical institutionalism concentrates on the “lock-in” effects of
institutional form (Ju & Tang, 2011). Path-dependence is relevant here in that “policy
structures create resources and incentives that lead to the formation of social groups, and these
policies influence the activities of these social groups and affect social learning among major
political actors” (Ju & Tang, 2011, p. 40; Pierson, 1994). In this vein, as time goes on, other
institutional options are hard to chose because the cost of altering is high enough (Ju & Tang,
2011; Pierson, 2000).
Despite its consideration of path-dependence, historical institutionalism has its strength
in embracing institutional changes (Ju & Tang, 2011). Earlier historical institutionalism tried to
explain institutional changes as more fundamental and episodic (e.g., Krasner, 1984,
“punctuated equilibrium”); but Campbell (2005), for example, argued that previous
institutional factors are handed over and reunified for new institutions, and accordingly,
institutional changes ought to be dependent on past paths and show incremental and
evolutionary processes (Ha, 2011).
Adopting historical institutionalism and institutional embeddedness, Sang Min Lee
(2012) analyzed the history of Korean foundations. He argued that foundations have been
established in response to “social criticism,” and forming foundations has functioned for the
traditional landed elites. In his study, Korean foundations’ historical markers are divided thusly:
(a) 1939–1960s, the first period of the beginning of foundation and disorder; (b) 1970s, the
second period of detecting chaebols’ foundations’ misbehaviors and government’s monitoring;
(c) 1980s–1990s, the third period of the introduction of CSR and growing social criticism; (d)
19
1997–present, the fourth period of the emergence of social welfare activity of foundations and
public foundations. His argument mainly focuses on the development of Korean foundations in
response to negative public opinion and government monitoring of foundations’ malfunctions;
it does not address the role of Community Chest of Korea and global diffusion of foundation
models. Meanwhile, institutional changes can be amplified when institutional factors from
other countries are newly adapted (Ha, 2011).
The path of Korean foundations is likely to fit into an incremental and evolutionary
process model rather than a punctuated equilibrium one, whereas institutional changes to
Korean nonprofits can match fundamental and episodic processes. It is well known that the
growth of Korean civil society is closely related to the June democratic movement in 1987,
which changed Korean social structure dramatically. Over 90% of Korean NGOs—the total
number of which is around 20,000—were established after 1987, an expansion that reflects that
Korea’s democratization and the rise of nonprofits are highly correlated (Park, 2006).
Traditionally, most activists of nonprofit organizations in the social movement tradition
pursued fundamental changes to political and economic conditions, but founders of
foundations, such as the business elite, corporations, and the social elite, were reluctant to
support those changes and be central members of the nonprofit sector. Rather, global models
from Western society and moderate logics for the evolution have exercised more power to
persuade them in pursuit of legitimacy.
2.2. Comparisons with American Foundations
2.2.1. Historical Markers and Major Changes of American Foundations
20
It is well known that the United States provides considerable tax exemption and tax
benefits to the nonprofit sector, including foundations. The U.S. government chose to offer
policy support for foundations rather than to gather tax income from them. According to
Prewitt (2006b), foundations are expected to demonstrate flexibility and imagination for
effective public activities, and to enhance pluralism in innovative and adventurous ways.
Nevertheless, foundations under the accountability system exist in pursuit of the public good,
which is a virtue of this institutional model (Prewitt, 2006b).
James Allen Smith (1991) suggested chronological markers that divide foundation
history into five periods: (a) 1890–1911, the first period for a proto-foundation era; (b) the
early 1910s–the early 1930s, the second period of increasing size and forms; (c) the early
1930s–the mid-1940s, the third period of economic crisis and World War II; (d) the late 1940s–
1970, the fourth period for renewed confidence; (e) from the early 1970s, the last period of the
post-era of the Tax Reform Act 1969.
The first period represents when the Carnegie Foundation was established, in 1905, and
the Rockefeller Foundation, in 1913. The Carnegie Foundation believed that a private entity is
more appropriate to solving social problems than ineffective governments, and that foundations
can find solutions through a scientific approach (Prewitt, 2006b). Similarly, the Rockefeller
foundation aimed for strategic “philanthropy” beyond “charity,” which:
rested on the distinction between outright support of the poor and the search for the
cause of their property, in order to build institutions that would obviate the need for
either charity or welfare by correcting the condition that brought such needs into focus
(Karl & Karl, 1999, pp. 56–57)
Andrew Carnegie and John D. Rockefeller as businessmen are controversial figures in
that their firms accrued tremendous assets in the problematic process of industrialization, and
many issues are raised in the evaluation of their business and philanthropic achievements.
21
However, as Prewitt (2006b) argued, they made substantial social changes under a
comparatively small government, and their foundations were not an invention for targeting tax
benefits—compared to foundations established after the emergence of high excise and property
taxes.
The second period saw the beginning of community foundation in 1914 (Smith, 1991).
In Cleveland, some bankers and trust companies put their pocket money in the community
center, and this money was used to solve social problems at the community level. To date, the
community foundation model has had great successes; we can cite two reasons for this growth.
Firstly, community foundations have introduced and promoted donor-advised funds
(Frumkin, 2006). Many donors buy their competitive advantages because they can keep some
degree of control but do not have to endure the administrative cost of establishing and
maintaining their own organizations. In other words, donors want to establish donor-advised
funds rather than unrestricted funds. Once they put their funds in those institutions, they can
get tax exemption immediately and maintain control as long as they want (Steuerle, 1999).
However, it reduces the institutions’ role as community leaders to define community issues and
set up agendas. Rather, they take intermediary roles to match donor interests to nonprofit needs
by increasing donor-advised funds (Ferris, 2001). When institutions’ own resource allocation is
limited and their agenda-setting for the community is diminished, they are likely to prioritize
the roles of donor services and matchmakers (Graddy & Morgan, 2006). Such is the case when
we observe the United Way’s recent diminishing position in many regions (Ferris, 2001).
Community foundations as well are struggling to integrate donors’ option into broader
community needs.
Secondly, community foundations are successful because they are “public charity,”
22
unlike private foundations. This point relates to the fourth period, ending with the Tax Reform
Act 1969 (hereafter, TRA 1969), a new regulatory regime (Smith, 1999). Nowadays, the
highest benefits for American nonprofit organizations can be employed only when a nonprofit
organization passes a “public support test,” which proves that its resources come from the
public, not from one source. In other words, until 1969, the distinction between a private
foundation and a community foundation was just conceptual and tried to identify the founders,
but TRA 1969 assigned different tax treatment and regulations to the two kinds of foundations.
TRA 1969 classifies a private foundation as 501(c)(3) but clarifies its status with more duties
and less tax benefit. If resources come from one corporation and individual, the foundation
should endure more monitoring and reduced tax benefits compared to a community foundation
registered as a “public charity.” From the donor’s side, the community foundation became a
more convenient institutional vehicle in terms of administrative costs and prompt and generous
tax exemptions.
TRA 1969 was inevitable because many private foundations had accumulated bad
public images as “tax shelters,” “enriching donors and their families,” functioning for
“controlling businesses,” and so on (Hammack, 2006). It was designed and suggested by
government officials, and foundations finally met a duty of significant reporting (Form 990PF),
more taxes and fewer benefits, and a penalty when violations occurred. Based on time series
data until 1985, Clotfelter (1985) reported that the birth rate had decreased and the death rate
had risen to some extent after the enactment of the TRA 1969, foundations’ experimental or
controversial grant-making had reduced, payout rates had increased slightly, and an
“announcement effect” worked adversely for new foundations; but he was cautious to confirm
these findings without longer-term data. According to Frumkin (2006), TRA 1969 brought
23
about changes to foundations’ management structures and hiring practices in the 1970s and
1980s, and their outcomes were “balance sheet,” “new staff to manage their increasingly
complex external relations,” “day-to-day involvement of legal counsel,” and a “high
administrative expense” (p. 114). He added:
The implementation costs of the new regulations are evident when one considers
changes in foundation administrative expenses between 1966 and 1972.
Administrative expenses include all costs related to the operation of a foundation,
excluding grant outlays. During this six-year period, administrative expenses as a
percent of grant outlays increased from 6.5 percent to 14.9 percent. This increase
was a significant change from the trend during the previous decade, when
administrative costs were dropping. . . It will no longer be possible to operate a
foundation out of a banker’s pocket. The new legislation regarding private
foundations – the possible stiff penalties, the danger of personal liability for each
and every officer and trustee, the more extensive reporting and auditing
requirement, expenditure responsibility for particular grants – all lead inevitability
to the conclusion that someone had best be on duty full-time, minding the store.
(2006, pp.114–115)
Similarly, Hall (1987) elucidated that the nonprofit sector faced demands of
professionalized nonprofit management in the early 1970s, and “the movement was both a
specific response to the regulations contained in the 1969 Tax Reform Act and a general
response to broad public criticism of the performance of private nonprofit organizations” (p.
13).
In this sense, the professionalization and bureaucratization of foundations were paths to
correcting their misbehaviors in the past, but can be interpreted as a double-edged sword
because the original strength of foundations, such as innovative attempts and venturous grant-
making, might be weakened. While Smith (1991) focused on recent historical markers with
economic fluctuations and political situations, Anheier and Leat (2006) identified three broad
paradigm shifts in American philanthropy. According to them, “the charity/service approach”
24
evolved into “the philanthropic/scientific approach” through the emergence of large private
foundations that regarded philanthropy as social engineering. “New scientific philanthropy”
was followed by the traditional scientific approach, which is referred to, variously, as “new
philanthropy,” “strategic philanthropy,” “venture philanthropy,” and “entrepreneurial
philanthropy.” These approaches show an evolution of perspectives and emphasize effective
investment for social impact, business models, and managerial modes. These hands-on
approaches are complemented by “bottom-line thinking,” but Anheier and Leat (2006) believe
that foundations can go beyond business-like functions, and move to “innovator, change-agent,
and contributor to pluralism” (p. 38).
2.2.2. Legitimacy Seeking of Foundations in the United States
One of the issues in the American foundation tradition is the extent to which private
wealth needs to be used for public ends. Korean society has not experienced those issues yet.
Frumkin (2002) demonstrated four functions of nonprofit and voluntary actions (see Table 2.4).
Table 2.4
The Four Functions of Nonprofit and Voluntary Action
Demand-Side
Orientation
Supply-Side
Orientation
Instrumental
rationale
Service delivery
Provides needed services and responds to
government and market failure
Social entrepreneurship
Provides a vehicle for entrepreneurship and
creates social enterprises that combine
commercial and charitable goals
Expressive
rationale
Civic and political engagement
Mobilize citizens for politics, advocates
for causes, and builds social capital within
communities
Values and faith
Allows volunteers, staff, and donors to express
values, commitments, and faith trough work
Source: Frumkin, 2002, p. 25.
Frumkin further argued that two instrumental and expressive rationales ought to coexist
25
while balancing each other in the nonprofit sector. For example, foundations need to distribute
their money for the public good such as social welfare; at the same time, they are able to take
experimental approaches and pursue their own passions (Frumkin, 2002).
Both points have merits and demerits. In terms of public purpose, although foundations
can enjoy their autonomy, there should be public accountability (Hwang & Powell, 2009). For
example, the National Committee for Responsive Philanthropy, a watchdog organization,
recommended the guideline “Criteria for Responsive Philanthropy” in 2009. It suggests that
foundations have to respond to the community and make grants for marginalized populations.
However, the argument to overcome fragmented philanthropy has a pitfall in justifying
the logic that governments can transfer their burden to private and the nonprofit organizations
(Kettl, 2000). This is an issue repeatedly mentioned by many nonprofit scholars to criticize the
weak state tradition in U.S. society: the “hollow state” (Milward & Provan, 2000) or the
“shadow state” (Wolch, 1990), “run by third-party government” (Salamon, 1987), or
“government by proxy” (Kettl, 1988). Decentralization provokes “governmentalization” of the
nonprofit sector rather than “privatization of the public sector” (Kettl, 2000). However, the
argument also reflects a liberal democracy and pluralism, two virtues of American society
(Hwang & Powell, 2009). However, many people believe that the right to property should be
limited, which was a rationale for TRA 1969. This is because foundations enjoy their tax-
exemption status and public subsidies. Although they objected to state regulation on principle,
foundation leaders agreed to new policies under the Tax Reform Act of 1969, which is one way
foundations have defended their legitimacy (Hammack, 2006).
Meanwhile, an active way for foundations to win legitimacy is to work “within the
context” of the nonprofit sector (Hammack, 2006). They usually search for their partners
26
among nonprofit organizations. For example, Porter and Kramer (1999) argued that
foundations need to “select a high performing grantee” and develop cases as an example of
high impact practice in the field to disseminate knowledge and create more value. Fleishman
(2007) agreed with their strategy and argued that funders need to focus on “organizations that
are already strong or that could be made strong with short- or medium-term foundation support”
(p. 254). While strategies keeping a strategic fit ensure higher-impact practice for funders, their
strong signaling might cause some spin-off, including a widening gap in the nonprofit sector.
A further step for partnership is suggested by the “capacity-building grant” for
substantive goal achieving and social impact. Brest and Harvey (2008) have observed the
power of “general operating supports” that enable nonprofit partners to develop capability and
satisfy funders in the long run. Also, Fleishman (2007) pointed out that “general operating
funds” could cultivate nonprofit partners and create more persuasive role models to the field.
However, they observed, too, that in most examples, philanthropists are usually interested in
project-specific funds. Previously, Letts, Ryan, and Grossman (1997) criticized that there was
no investment for “nonprofit organizational capacity” such as “time for nonprofit staff to plan
new programs and processes,” “training and development for managers,” and “sound operating
systems in the areas of finance, quality, and human resource development” (p. 3). They saw a
limited impact from a lack of funds for capacity-building.
Meanwhile, Anheier and Leat (2006) showed concern that partnership with nonprofits
not be based on “romantic notions of [a] nonprofit organization,” which means that nonprofits
do not exist in perfect relation to social need and as innovate centers in reality, set aside the tax
law preventing direct giving to “not tax-exempt” beneficiaries. Nevertheless:
Foundation donors have preferred to operate behind closed doors, but in response to the
suspicions of their critics foundations have provided more and more information to the
27
public. Relatively small groups of very large foundations have always held the great
majority of foundation wealth, but the foundation form has also served numbers of
people of modest means, and this has also helped foundations maintain their status as
legitimate institutions. Overall, defenders of American foundations have successfully
appealed to widely accepted notions of property, citizenship, and nongovernment action.
(Hammack, 2006, p. 53)
In sum, to seek their legitimacy, foundations have not worked alone; instead they have
worked with nonprofit organizations; they have made grants to institutions that do not relate to
their own controlling; and, lastly, they have followed the rules and regulations and have tried to
make their information more transparent by creating a directory and further constructing
umbrella organizations and research institutes (Hammack, 2006).
2.3. Distinctiveness and Redefinition of Korean Foundations
2.3.1. The Evolution of Korean Foundations
Korea has not seen much scholarly research on foundations. According to Lee (2012),
relatively little attention has been paid to foundations despite the rise of nonprofit research. For
example, most research has addressed definition and categorization (Hwang, 1998; Lee, 2007),
tax incentive systems (Kim, 1997, 2007; Park, Yook, & Yoon, 2004; Son, 2009; Son & Park,
2008) and legal regulations (Je, 2008; Kim, 2008; Park, 2007), and introductions to other
countries’ foundation models (Jung, 1995; Park & Hwang, 2008). A few researchers have
discussed foundations’ relationship to government, and governmental foundations (Cho, 2002;
Hwang, 1998). Furthermore, empirical studies have come from corporate-sponsored
foundations (Hwang, 1998; Jung, 1995; Kim, 1997; Park & Hwang, 2008, Son, 2009; Son &
Park, 2008). Then, based on the analyses of Korean foundations’ history (The Beautiful
Foundation, 2012; Lee, 2012), Korean foundations will be examined by three distinctive
28
historical markers.
2.3.1.1. The Beginning of Korean Foundations and Modernization of Korean Society
The first foundation in Korean history is Yangyounghoe, which was established in 1939
by a businessman named Kim Yeon-Soo. The foundation was renamed the Soodang
Foundation, and has been maintained as a corporate-sponsored foundation (Samyang
Corporation, 2012). The foundation created scholarships for students who suffered from
poverty during the period of Japanese colonial rule (Park & Hwang, 2008). Other scholarship
associations like Yangyounghoe created direct scholarships to individuals’ education during the
colonial era (which ended in 1945) and the Korean War in the 1950s. Despite their small scale,
these associations continued to be founded until the 1960s. However, after the Korean War,
some foundations participated in shady conduct, as the wealthy used their foundations as a tool
to evade taxes and escape from the duty of fair distribution (The Beautiful Foundation, 2012).
While society went through confusion and reconstruction, foundations were established to
redress the unjust accumulation of profits (Lee, 2012). The effects on Korean society are
significant even nowadays, as they instigated negative images of the accumulation of wealth.
Korean citizens observed how the newly emerged elites took advantage of a national crisis and
built up their wealth in the colonial era of Japan, the Korean War, and military’s coup d’état
(Sohn, 2003). For example, Koreans who stood for the Japanese government and the U.S.
government successfully gained assets and social status. Unfortunately, fairness was not a
consideration of the elites and the logic of profit maximization for its own good was regarded
as virtue by society at large.
According to The Beautiful Foundation (2012), 56 foundations were established in the
29
1970s, but their true objectives were dubious because of their inoperativeness and undeserved
tax-exemptions. In the 1970s, the responsibility of “giving back profits to society” was
introduced, so Korean conglomerates (chaebols) rooted in state-driven economic development
began to establish their own foundations (Lee, 2004). However, foundations could not gain
social respect from the public. The media intensively watched their misbehavior, such as using
foundations as tax shelters and family banks, which provoked the enactment of Public
Corporation Law in 1975 (The Beautiful Foundation, 2012; Lee, 2012). Lee (2012) posited that
the Korean conglomerate system explains the privatization of foundations, because the
establisher of foundations and the owner of companies are the same in the management
structure by the owner family. This period represents one of serious economic hardship and
modernization in Korea, with less systematic governmental oversight and institutional rules
over foundations. Moreover, skepticism from the Korean public strengthened through the
1980s and the 1990s (The Beautiful Foundation, 2012).
2.3.1.2 Government-Leading Philanthropy from the 1980s.
Rather than paying taxes properly, many corporations created and then took advantage of
their own foundations to gain controlling interest and maintain their assets. For example,
founders of conglomerates (chaebols) tried to transfer ownership to their children, and used
their foundations to evade inheritance taxes (Lee, 2012). Consequently, the government
amended the Inheritance and Gift Tax in 1984, preventing foundations from getting tax
exemption inappropriately, and strengthening monitoring and oversight over those foundations.
In 1993, another government regulation was enacted—tax restrictions on public corporations,
which lowered foundations’ retainable stock proportion for tax exemption from 20% to 5%
30
(The Beautiful Foundation, 2012).
Condensed industrialization by strong state intervention had a major impact. In 1979,
President Chung-hee Park’s regime collapsed from internal power struggles. In 1980, President
Doo-hwan Chun came to power through a coup d’état. He was a soldier like President Chung-
hee Park, and continued to implement and maximize the government’s top-down control. His
military regime lacked legitimacy—ironically, the government’s catchphrase was “construction
of welfare state,” but its solution was to push chaebols to give back rather than to increase its
own social welfare spending (Lee, 2004). In other words, corporations felt burdened to donate
their money to the government’s Social Service Fund as quasi-taxes.
In fact, “quasi-taxes” had influenced Korean companies. David Kang (2001) has argued
that Korea’s political funds usually came from corporations that wanted to avoid hidden
penalties and protect their business incentives from the strong state. According to Kang (2001),
“[to] not make ‘voluntary’ donations is to run the risk of payback in the form of tax audits or
rejected loan applications” (p. 163). In order to respond to government pressure, many
corporations established their own foundations. Most of those foundations had individual gifts
program, usually for “academic” purposes and occasionally for “social welfare” ones. Often
these actions were taken out of obligation rather than altruistic purposes, which can be
expected of American foundations. Another institutional choice was to donate to the
government’s Social Service Fund.
The government launched a fund to help citizens in need in the 1970s, and established a
special law in 1980 called the “Social Services Fund Act,” which supported merged funds for
needy neighbors and disabled people (Community Chest of Korea, 2010). The fund in the
Ministry of Health and Welfare did not provide its distribution transparently, and a main target
31
of fundraising was not usually citizens but companies (Community Chest of Korea, 2010). For
many corporations, their donations were regarded as quasi-taxes with some advertising effects.
Sung, Kim, Lee, and Kang (1997) argued that the biggest issue arising from this fundraising
was that responsibility for social welfare, which belongs to the central and local governments,
was transferred to companies and citizens. In other words, companies’ and citizens’ donations
replaced the social welfare budget allocation. According to Sung et al. (1997), some
government agencies misused the funds for politically preferable policies or specifically
targeted populations to make themselves seem caring.
As with the Social Service Fund, President Jeon Doo-Hwan’s administration and
President Ro Tae-Woo’s administration established various government foundations and
government-sponsored organizations, which they utilized to support political elections (Hwang,
1998). In 1994, the regime of President Kim Young-Sam, the first civilian, embarked on an
“anti-corruption campaign,” requesting that government and military officials provide their
fiscal records under the “the real-name financial transaction system.” Some officers resigned
and some resisted revealing information with excuses of establishing foundations (Lee, 2012),
confirming the misuse of foundations again, not only by conglomerates (chaebols) but also by
the social elites (Lee, 2012). Cho (2002) argued that the regime of President Kim Young-Sam
began to consider foundations as “extremely conservative” and “corrupted” forces and placed
more restrictions than ever.
Companies of considerable size and the wealthies established foundations in the 1990s
(The Beautiful Foundation, 2012). In this period, corporate social responsibility gained some
recognition, and rich individuals and families considered themselves possible founders.
However, the concerns of their foundations had limited scope, such as scholarship and
32
academic purposes by direct giving, rather than partnership with nonprofit organizations,
which American foundations pursue. Interestingly, partnership among the social elites was
maintained through foundations.
Kang (2002) argued that corruption and mutual hostage situation in the 1990s helped
economic development; political elites and economic elites were tight but, Kang explained:
having smaller numbers of rent seekers reduces the total social cost because property
rights over the rent are more secure. The balance of power meant that neither political
nor bureaucratic elites could gain a decisive edge over the other. The bargain these
elites struck was collusive – not cooperative – and both groups took as much advantage
of the other as possible. But the process never spun out of control because the elites
were vulnerable with respect to each other. (p. 183)
Meanwhile, he compared the Korean state to the Philippine state, concluding that the
overwhelmed democratic governance didn’t help comprehensible policy design and limit rent-
seeking demands. State-driven philanthropy in dictatorships and the process of democratization
show the most distinctive characteristics of Korean foundations, which saw a new phase at the
end of the 1990s.
2.3.1.3. The End of the 1990s–Present, a Transformation of Institutional Philanthropy
At the end of the 1990s, Korean society faced two transformative events: the IMF (the
International Monetary Fund) crisis in 1997, and the victory of President Kim Dae-Jung’s
administration in 1998. The IMF financial crisis brought serious economic hardship to Koreans
and public resentment took some roles for the opposition party’s first victory in the presidential
election. Politically, President Kim Dae-Jung’s administration (1998–2002) and President Ro
Moo-Hyun’s administration (2003–2007) can be described as “the moderate reformist regimes”
(Jung, 2013). Also, founders and potential funders started to recognize the need for diverse
purposes, such as the environment, local community, gender inequality, human rights,
33
unemployment problems, and so on, since the two regimes encouraged the diversification of
citizen wills and legitimized nonprofit organizations and social movements. One example is the
enactment of the NGO Support Law in 2000.
According to Hyuk-Rae Kim (2000), the National Congress for New Politics passed
legislation to promote the nonprofit sector in 1999. The legislation itself sought to enhance the
“institutional status” of nonprofits and to expand public money for them. In addition to
granting incorporated status and tax exemptions, the legislation provides “legal foundation to
file complaints if corruption occurs in state bureaucracy” (Kim, 2000). As an administrative
method for implementation, the NGO Cooperation Division is under the Ministry of
Government Administration and Home Affairs, which could facilitate collaboration between
the nonprofit sector and government, take charge of policy and budget for nonprofits, and bring
about significant growth of financial support (Kim, 2000). Because all nonprofit organizations
are permitted to hand in their project proposals, the shift in the amount of grants has fostered a
lot of nonprofit organizations for public purposes and “the political climate” reflects “demands
for participatory democracy with citizens as active agents” (Kim, 2000).
Next, the government’s “Social Service Fund” was transferred to a new nonprofit
organization, Community Chest of Korea in 1997; and The Beautiful Foundations was
established in 1999. Community Chest of Korea gained its legitimacy through the
government’s annual campaigns and a special law for itself, and The Beautiful Foundation was
initiated by the nonprofit sector. Korean civil society was successfully acting against the
government’s top-down control, such as its anti-campaign for the April 2000 elections and
grassroots fundraising. Also, more people enjoyed exposure to information about global
institutional philanthropy, which led to disputes about the legitimacy of traditional foundations.
34
Won Soon Park, a key leader in the anti-campaign for the April 2000 elections and
grassroots fundraising, observed the U.S. phenomenon and visited several community
foundations to adapt their practices to Korea. The ideas for The Beautiful Foundation were
embraced even by the upper class, which felt more comfortable with Western culture and
believed that soft power could change society. Won Soon Park chose “soft” philanthropy
instead of a “strong” social movement. Prior to The Beautiful Foundation in Korea,
philanthropy was not a central issue.
The BF produced the novel concept of stories for fundraising—such as the memorial
donor-advised funds of American community foundations and meaningful small amounts of
donations by marginalized Koreans. Traditionally, philanthropic organizations had shown
stories of beneficiaries; for example, stories of the poor, disabled, and “children in rags” were
utilized to appeal to public sympathies. Contrary to these traditional methods, The BF
distributed beautiful donors’ stories that relay the message that giving is not difficult and
should be a rational and consistent decision. Moreover, The BF adopted a transparent system
that revealed all financial and operational details, big and small, to donors and the public alike,
down to the last one. From its website, everyone is granted access to financial statements and
the salaries of all staff members. This transparency came at a time when the public was weary
of embezzlement scandals by other philanthropic organizations, and was reluctant to donate
money to what appeared to be untrustworthy organizations.
The BF came to represent a paradigm shift. Through significant exposure to The BF’s
activities in the media, many of its concepts such as “1% Sharing” and “beautiful donor”
become normalized. The subject of The BF, namely philanthropy, was also propagated.
Philanthropy is the idea that efforts undertaken to think of and help others are beautiful and
35
should occur on a daily basis. This idea can be seen as having evolved from a past concept,
namely, one-time donations to help those in need.
While CCK and The BF share similarities, such as community focus and fundraising
from the public, new norms have been distributed to a “public foundation model” or “quasi-
community foundation model.” The Korea Human Rights Foundation (in 1999), the Korea
Foundation for Women (in 1999), the Korea Green Foundation (in 2002), and Work Together
Foundation (in 2003) were established in this period, and targeted new areas and new kinds of
ownership. Before them, companies and the wealthy were usually the founders, but new
founders emerged. They were leaders of civil society and members of the nonprofit sector who
struggled with a lack of financial resources.
To raise funds and sustain organizational management, public foundations shared
innovative movements in two ways. First, they valued the meaning of the individual donation,
rational and regular giving cultures, and independent philanthropy by the citizen, which make a
distinction from the government and conglomerates. Second, they publicized their purpose to
make grants to nonprofit organizations. Although they were stagnated sometimes by an
increasing amount of designated funds and decreasing amount of unrestricted funds, The
Beautiful Foundation started its grant-making in 2004, for instance (The Beautiful Foundation,
2010).
With a narrower scope of scholarship and academic purpose, traditional foundations did
not require partnership with nonprofits and tended to give their money to beneficiaries directly.
Moreover, they regarded nonprofits as too risky because many emphasized an antigovernment
and anti-corporation campaign—a quality that makes the Korean model different from the U.S.
model. Even these days, foundations are likely to maintain partnerships only at the beginning
36
phase. More specifically, some recent corporate foundations have formed partnerships with
nonprofit organizations, focusing on social welfare at the beginning then inventing their own
CSR program without nonprofit partners afterward. Still, public foundations like The BF are
distributing money to their nonprofit partners, and are trying to gain legitimacy from the public
and other kinds of foundations. Nowadays, the supporting areas of foundations can have a
wider spectrum, and social problems at the community level can more easily be a fundraising
issue. Moreover, citizen and potential funders can regard themselves as possible “founders” or
“funders” even with a comparatively smaller endowment (see Table 2.5). On the other hand, if
we adopt the U.S. argument between instrumental and expressive orientations, ironically, this
would be a starting point of fragmentation of collective will in the long-term. It might be
dilemma that “compared to taxation and national spending, private charity and volunteerism
were seen as preferred means of solving social problems because they permitted greater
individual freedom and choice” (Frumkin, 2002, p. 18).
Table 2.5
Asset Size and Established Year of Korean Nongovernmental Foundations
Era
Asset Size Total
Below
$1
million
dollars
More than
$1 million
and below
$1 million
More than
$5 million
and below
$10
million
More than
$10 million
and below
$100
million
Over
$100
million
Before 1960 0 6 0 3 0 9
The 1960s 2 7 2 6 3 20
The 1970s 4 18 2 22 3 49
The 1980s 4 89 20 26 2 141
The 1990s 6 182 51 67 5 311
After 2000 19 286 66 90 6 467
Total 35 588 141 213 19 997
Source: The Beautiful Foundation, 2012, p. 41.
We will next examine the Law on Charitable Solicitation and Usage in 2006 and the
37
beginning of the Association of Fundraisers in 2014. The law about fundraising was first made
in 1951, and prohibited all private fundraising, under the name of “Prohibition on Charitable
Solicitation.” Then, it only admitted government agencies and local governments as possible
fundraisers. This inactive and unrealistic law was changed in 2006 to some extent, and its
correction is under way. Moreover, the Association of Fundraisers was formed to ensure ethical
fundraising in March 2014, supported by Ministry for Health, Welfare and Family Affairs.
Although Korean foundations do not have an umbrella organization like the Council on
Foundations and Foundation Center yet, fundraising has become legal and familiar in Korean
society, and citizens are beginning to regard themselves as actors and funders for foundations.
Meanwhile, the Korean government has emphasized the transparency of Public
Corporations, and thus started the “Public Corporation Self-Reporting System” (see
http://npoinfor.hometax.go.kr) in 2009 and expanded the system based on an amendment of the
tax rate in July 2011 (Son, 2012). According to The Beautiful Foundation (2012),
approximately 35% of the foundation population has its own webpage. Rather than informally
monitoring and assessing penalties, as in the past, the Korean government has tried to build up
institutional systems for transparency and communication.
2.3.2. Foundation-Related Dimensions and Future Issues
Before we examine foundation-related dimensions, we need to illuminate the legal
boundaries of foundations in Korea. Figures 2.2 and 2.3 show four kinds of laws that affect
foundation corporations: Corporation Tax Law and Civil Law, defining nonprofit corporations;
Inheritance and Gift Tax Law, defining a wider concept of public corporations; and Public
Corporation Law, defining a narrower concept of public corporation.
First, we look at Korean nonprofit boundaries. As nonprofit corporations, foundation
38
corporations are under the purview of Corporation Tax Law and Civil Law. Foundation
corporations are one of various kinds of nonprofit corporations and public corporations.
Second, if the foundation corporation as a public corporation wants to enjoy tax exemption
under Inheritance and Gift Tax law, it should be established based on this law. Lastly, the
highest tax incentives—at the same time the strictest conditions—belong to foundation
corporations based on Public Corporation Law. To be registered as a “Public Corporation,” the
purpose of the activities must be limited to scholarships, or research, philanthropic, and
academic support.
Public corporations by Inheritance and Gift Tax Law
Public corporations by Public Corporation Law
Membership corporations
FOUNDATION
CORPORATIONS
Special Laws corporations
(Social Welfare corporation,
Medical Law corporation,
Private School corporation)
Nonprofit Corporation Law
Corporate Tax Law
Figure 2.2 Foundation corporations’ location in Nonprofit Corporation Law.
Foundation corp. as nonprofit corporations by Corporate Tax Law
Foundation corp. as nonprofit corporations by Nonprofit Law
Foundation corp. as public corporations by Inheritance and Gift Tax Law
Foundation corp. as public corporations by Public Corporation Law
39
Figure 2.3 Foundation corporations by different based laws. Adopted from Jeon, 2011, p. 20.
2.3.2.1. Supply-side perspectives: Familiarity by public foundation model
For founders, foundations are “an institution, respond[ing] to existing demand, and
provid[ing the] (actual and potential) philanthropist with a legal instrument for expressing and
pursuing their philanthropic interest” (Anheier & Leat, 2006, p. 29). As mentioned earlier, TRA
1969 made a clear distinction between private foundations and community foundations. Before
TRA 1969, the distinction was just a conceptual difference that tried to identify the founders; it
introduced different tax treatment and regulations for the two kinds of foundations. The TRA
1969 classifies a private foundation as 501(c)(3) but clarifies its status with more duties and
fewer tax benefits. If resources come from a small number of corporations and individuals, the
foundation should endure more monitoring and reduced tax benefits than a community
foundation registered as a “public charity.”
This reformation provided a competitive advantage to community foundations but has
been criticized for transforming private foundations into dinosaurs with administrative burdens
and regulations. Although the Korean government wants to regulate foundations with
government-sponsored foundations, some policies, informal monitoring and penalties, and a
frame to define and classify foundations are yet to be constructed deliberately. As such, actors
who want to create foundations should consider activities and the laws that oversee them (Civil
Law, Inheritance and Gift Tax Law, or Public Corporation Law), just as actors in America
make a distinction between foundation forms for a “public charity” and a “private foundation.”
Table 2.6 shows different standards between nonprofit corporations and public corporations.
40
Table 2.6
Foundation Corporation as Nonprofit Corporations and Public Corporations
Nonprofit Corporation Foundation Public Corporation Foundation
Based Law Civil Law Laws on Establishment and Operation of
Public Corporations
Applicable Purpose Academic, religious, philanthropy, artistic,
social intercourse, and other nonprofit purpose
foundations
Scholarship for scholars and researches,
academic support, and philanthropic purpose
corporations
Applying Institution Supervising government departments Supervising government departments
Bylaws Foundation Corporation 1. Purpose
2. Name
3. Location of office
4. Asset type, status, and amounts
5. Financial management of assets
6. Numbers and terms of board of directors
7. Voting right and representative right
8. Change of bylaws
9. Announcement and a way of announcement
10. Enduring period and dissolution way
11. Audit and inspection
12. Activities
13. Etc.
1. Purpose
2. Rules on appointment of board of directors
Change of Bylaws Only possible when stated change of bylaws Change of bylaws stated in bylaws
Standards of Permission Different by supervising government
department
Examination of related factors
Enough amount of resources for endowment
(in case of foundation corporation)
Standards of Cancellation By supervising government department
1. Activities out of purpose
2. Disobey standards of permission
3. Damage the public good
By supervising government department giving
permission
1. Permitted by wrong and deceiving ways
2. Disobey standards of permission
3. Impossible case of achieving goals
4. Activities out of purpose
5. Obey this law, orders, and bylaws
6. Damage the public good
7. Do not begin activities after 6 months and
do not have visible outcome after permission
without reasonable explanation
Registration - Registration or change of registration to local agency within 3 weeks after permission and
changes
- 1. Purpose, 2. Name, 3. Location, 4. Date of Permission, 5. The reason of enduring period and
dissolution, 6. Total assets, 7. Investment ways if any, 8. Name and Address of board of directors,
9. Limitation of representative right of board of directors
Source: Son, 2011, p. 10.
Then, Korean foundations may justify their existence through their future performance
and support of giving cultures. Nowadays, a “foundation” is a comparatively easy institutional
option for various actors. Government agencies do not have agreed-upon standards for
41
establishing foundations and granting tax-exemption, which allows them to make decisions
arbitrarily (Jeon, 2011). The merit will be to gather people hoping changes of society together
in the nonprofit sector, for example, the social activists seeking grants and the wealthy
deliberating justification of the money.
If we can assume that the discourse about foundations will move in a similar direction
as U.S. foundations’ legitimacy, there will be many more foundations considering how to select
good nonprofit partners, and how to leverage grassroots. They will also communicate their
mission and activities more clearly and frequently for financial stability and organizational
legitimacy.
On the contrary, establishing foundations without considering financial perpetuity or
sun-setting will bring about more inactive foundations, and invite stronger government
intervention because government fundamentally provides tax incentives to foundations.
2.3.2.2. Inter-organizational perspectives: The foundation field
Tax incentives and social expectations for public foundations and private foundations
can be differentiated in the U.S., but Korean society does not have those standards yet.
According to Park and Hwang (2008), in Korea different treatment within the foundation field
only come from presidential decree and the Public Corporation Law, which means that more
favorable tax incentives are given when the government establishes foundations and when
foundations are established for government-imposed purposes and functions, such as
scholarships and academic support. However, tax incentives in the future can come from
proved funding resources (i.e., “public support test” in the U.S.) and their activities. This issue
will prove important sooner or later, and ought to cover a wide range of institutionalization
42
beyond laws and taxation. As an insider pressured by institutional norms, a foundation as a
partner of nonprofits is more likely to value nonprofit spirit and autonomy than government
contracts and collaboration with business funders. Of course, there have been political
dynamics and power games, but it may be reasonable to assume that actors tend to behave
based on institutional logic. Anheier and Leat (2006) argued that foundations are “an
independent source of funding that helps civil society counterbalance the forces of markets and
state, helping to prevent either from dominating and atomizing the rest of society” (p. 29).
In 2012, The Beautiful Foundation presented the first foundation analysis, which
marked a turning point in discussions of the institutionalization of foundations. Dialectical
discourses can be addressed to further the foundation field. For example, is it appropriate to
group corporate foundations, individual foundations, and public foundations together for
discourse? In the case of Japan, NGO support law excluded corporate foundations (Cho, 2002).
If we group various kinds of foundations, is it possible to share “sectoral norms” as
constituents of the foundation field? How can they make network-based rules and monitor
constituents within the field? Is it feasible to create a central association to lead the field and to
form a consensus? Those issues need to be answered for the future of foundations.
2.3.2.3. Demand-side perspectives: Government and nonprofits
Government policies and tax incentives have influenced the institutionalization of the
nonprofit sector, both intentionally and unintentionally. For example, Korean foundations tend
to stick to scholarships and academic purposes, as other purposes—such as philanthropy—
require a new path to find an appropriate government agency, get permission, and maintain the
relationship. The Beautiful Foundation and other community foundations had a hard time
43
finding the right department; it took a long time (approximately two to three years) to be
permitted and appointed a tax-deduction applicable organization (The Beautiful Foundation,
2007). To be established, community foundations had gone through procedural inconvenience
and confused standards (i.e. “enough amount of resources” for endowment), which even
government officials are not aware of. Figure 2.4 shows the original process to establish
foundations, and most Korean nonprofit scholars and practitioners are cautious about the fact
that permission may depend on officials’ arbitrary decisions and other political dynamics.
Appointment for
legally designated philanthropic organization
(donors’ tax-deduction applicable organizations)
Local tax assessor’s office, and local post
office applying for business tax
exemption and bulk mail usage
⇧
State and local tax exemptions applying
Charities Registration Bureau
⇧ ⇧ ⇧
Nonprofit Corporation
Public Corporation
File for 501(c)(3)
IRS
⇧
File for federal tax exemption
⇧
⇧ ⇧ EIN obtain
IRS
Permission Permission ⇧
Supervising government
department
Supervising government
department
Approval
⇧ ⇧ ⇧
Civil Law (Rules on
Establishment and
Monitoring of Nonprofit
Corporations)
Laws on Establishment
and Operation of Public
Corporations
Secretary of State, Attorney General
Legal incorporation document
(“certificate” of incorporation)
Korea U.S.A.
Figure 2.4 Procedural steps to establish foundation in Korea and the U.S. From Son, 2011, p.
13.
As government provides tax incentives and a public subsidy, it can require some
44
functions of foundations. The function that government cannot do or wants to share will relate
to issues of “devolution” and “privatization” of government. Moreover, foundations will be
involved in public policy-making processes—such as “problem identification,” “agenda-
setting,” “policy adaptation,” “implementation,” and “evaluation” (Eyestone, 1978; Ferris,
2009).
From the nonprofit perspective, as grants of Korean foundations increase and diversify,
nonprofits will expect partnerships with foundation more than ever—and foundations will
consider the impact of these partnerships on their funds. In fact, foundations are very
significant carriers of professionalized practices in the nonprofit sector, as they convey
“particular mind-set and practices” with their grants and requirements (Hwang & Powell,
2009). Given that capacity-building grants are rare, and nonprofit organizations are struggling
with insufficient resources all the time, the continuing experiments and attempts by
foundations have infiltrated into nonprofit practices, as they adjust to more challenging
requirements for performance outcome and more uncertainty with regard to the fragmented
visions of individual donors and foundations (Ferris, 2001).
Sievers (2004) criticized current specific funders’ expectations and requirements in
American philanthropy, predicting that inevitable outcomes are more demands and a narrower
focus:
These days, the need to satisfy funders’ desires for numerical targets has become
something of a joke among nonprofit organizations. Many set their targets
artificially low in order to insure a final report that will look good . . . In order to
achieve measurable outcomes, the next step typically taken by foundations is the
narrowing of program focus. With more tightly focused programs, so the logic goes,
a foundation can target its resources in such a way as to maximize impact and better
assess (through metrics) its progress toward objectives. And it is a natural next step
that the foundation becomes more proactive, setting its own agenda rather than
responding to diverse requests from others engaged in the fields in which it operates.
The ultimate consequence is foundation-driven, narrowly conceived programs that
45
pursue narrowly defined objectives (pp. 134–135).
According to Anheier and Leat (2006), foundations as risk-takers need to make
evaluation and performance measurement “a constant learning loop” over the long run rather
than a judgment of “success or failure” at the last stage of grant-making. They further pointed
out the importance of foundations’ effective knowledge management for nonprofit partners’
learning.
More equivalent relationships with governments, more demanding partnerships with
nonprofits, and more involvement in policymaking can be embraced by both conservatives and
liberals, but at the same time can be attacked by both (Frumkin, 2004). For example,
foundations can face criticism for serving the interests of the wealthy. On the contrary, people
can make a different critique in that foundations may subvert governments by grant-making for
citizen participation, radical policymaking, and community leadership roles. Moreover, in
terms of accountability and autonomy issues, boards of directors consisting of social elites are
a controversial topic, as they often enact their own “vision of the public good,” and procedural
transparency and immeasurable outcome may be a contentious issue as well (Prewitt, 2006a).
The pitfall of professionalized staff members distorting the aims of the original founders
(Frumkin, 2006) will also raise concerns in near future. Those issues are yet to come, but
Korean foundations will face problematic situations as this field is growing at a high speed.
Then, the Korean society can look to U.S. cases in a dialectical and critical way, as a strained
coexistence between “private deliberation” and the “public good” is inevitably universal, as
Prewitt (2006b) has argued. Regardless of many counterclaims and arguments, foundations
may very well use their independent dynamics to “stimulate democratic debate” (Anheier &
Leat, 2006).
46
2.3.3. Redefinition and Classification of Korean Foundations
How can we define the range of Korean foundations? In a case of The Beautiful
Foundation research (2012), it excluded government-related foundations and focused on
private and public foundations. However, government-directed and government-sponsored
foundations belonging to the Korean foundations field, coexist and compete with
nongovernmental foundations, and—mostly importantly—address a distinctiveness of Korean
foundations. In a global context, “nongovernmental foundations” are a main topic, but in
Europe, government-related foundations are also analyzed (Anheier & Toepler, 2002).
Next, how can we treat cultural foundations? This issue was raised by The Beautiful
Foundation’s presentation of research in June 2012. In the United States, cultural foundations
tend to accrue resources from “fees for service,” a factor that is intertwined with the distinction
between grant-making foundations and operating foundations. It’s not just conceptual
distinction, and tax incentives for operating foundations are more generous than ones for
private foundations, for instance, relieving private operating foundations of the 5% payout
requirement (if they can satisfy financial requirements), as IRS website illustrated. In fact,
operating foundations are hard to deal with, as they are hybrids of private foundations and
public charities (Anheier & Toepler, 1999). An operating foundation is defined as “making
qualifying distributions directly for the active conduct of their educations, charitable, and
religious purpose” (Anheier & Toepler, 1999, p.175; Internal Revenue Service, 1992, p.31).
In this regard, it seems reasonable to ask whether Korean educational foundations with
scholarships are operating foundations or not. For instance, Cho (2002) introduced the
argument that foundations can be easily regarded as normal public corporations with more
resources and may not require further lawmaking. Such foundations are conducting their own
47
programs directly rather than making grants to nonprofit partners. Nevertheless, even
educational foundations are still open to institutions such as universities and research
institutions, and to grant-making through nonprofits in the future. Then, they might not be
typical operating foundations—such as The J. Paul Getty Trust operating the Getty Museum
and the Getty Villa. Cultural foundations can be regarded as more of a prototype of operating
foundation in Korea as well.
Table 2.7 shows the Korean reality and the classification of American Foundations.
The major pillar, based on founders, addresses whether the entity was founded by a
nongovernmental funder or directed and sponsored by the government. The second pillar,
based on activities, divides foundations into “grant-making” or “operating,” and can categorize
their foci on “within local” or “beyond local,” which may include national and international
activities. If we focus on “nongovernmental” foundations (which The Beautiful Foundations
dealt with), nongovernmental foundations can be divided into individual and family
foundations, corporate-sponsored foundations in private foundations, or a group of public
foundations. However, those categorizations exist only for classification, as foundations are not
static organizations and may depart from the standard pattern. Sometimes, the distinctions
between of foundations are blurred because individual and family foundations can be located in
related corporations, and corporate-sponsored foundations also work by the individual
establisher as a sole decision maker. In addition, foundations created by members are
ambiguous in the sense whether they are private foundations or public foundations. Lastly,
recent individual and corporate foundations are fundraising from the public, and major donors
might intervene in public foundations too much. Therefore, if this classification can only
capture one point in time, the dynamic of foundations should be examined in terms of each
48
fundraising, grant-making, way of governance, and change in board members.
Table 2.7
Classification of Korean Foundations
Funders
Activities
- Grant-making
or Operating
- Local focus
Nongovernmental Government
directed and
sponsored
Private Public Governments
Individuals and
families
Corporations
Grant-making
beyond local focus
Gwanjung Lee
Jeon-hwan
Foundation,
Hyundai Motors
Jung Mong-gu
Foundation
LG Social
Welfare foun-
dation,
Kyobo Life
Insurance
Education and
Culture
Foundation
The Beautiful
Foundation,
Women
Foundation,
Environment
Foundation
The Korea
Foundation,
National
Research
Foundation of
Korea
Foundation
Grant-making with
local focus
Local education
foundations
Ulsan Social
Welfare
Foundation (S-
oil)
Cheonan
Grassroots Hope
Foundation,
Gimhae Life
Sharing
Foundation
Dongjak Welfare
Foundation,
Yangcheon Love
Welfare
Foundation
Operating beyond
local focus
Private Museum
foundations
Samsung
Culture
Foundation
Aruemjigy
Foundation
Northeast Asian
History
Foundation,
National
Museum
Foundation
Operating with local
focus
Wonju Togi
Culture
Foundation
(Park Gyong-
lee)
Yeosu GS Caltex
Foundation
Incheon Syeul
Culture
Foundation
Seoul Women
and Family
Foundation,
Jungsun Arirang
Foundation
2.4. Conclusion
The tension between publicness and privateness in foundations may cause various kinds
of controversy (Fremont-Smith, 1965; Prewitt, 2006b; Sacks, 1961). This chapter made a
cross-comparison of different countries, focusing on the U.S. and Korean cases. In sum, we can
observe several differences. First, U.S. foundations tend to provide grants mostly to nonprofit
49
organizations, forming strong partnerships that let foundations “derive their legitimacy from
the nonprofit sector as a whole, as an integral part of nonprofit sector” (Hammack, 2006, p. 5).
By contrast, Korean foundations have worked alone without the need for nonprofit
organizations—which they have seen as too risky and progressive because of their tradition of
anti-corporation and antigovernment campaigns.
Second, American foundations are generally encouraged to support the innovative issue-
making projects of nonprofit partners and to represent the relatively diverse passions of private
wealth; but Korean foundations have usually used their money in direct service, distributing
money to individual beneficiaries and not promoting their mission beyond the government’s
objectives in the government-leading philanthropic tradition. While this approach sustains the
“charity” paradigm to some extent, there are increasing requirements of evaluation and
performance measurement pursuing “scientific” and “strategic” approaches.
Third, American foundations as a field have built up their directory and association, and
can deliberate their identity and share their norms, while Korean foundations do not have their
umbrella organizations and are less likely to open their information to the public. Nevertheless,
changes from inside and outside make the field move forward.
Lastly, foundations in the U.S. have been deeply influenced by TRA 1969 and have
followed governments’ formal rules and regulations yet have negotiated with governments—
for example, in the case of revising Form 990 in 2008. In Korea, there have been not only
formal rules such as Public Corporation Law but also informal monitoring and strong
punishment, as the government has tried to control conglomerates in the collusive relationship
between politics and business. However, from the 2000s, some supporting laws newly emerged
to boost nonprofits and foundations, and their modification is still under way.
50
In terms of the distinctiveness of Korean foundations, strong state tradition has affected
the Korean foundation field, and this is not history long ago. The next chapter will look at
concrete examples for constructing the foundation field in the relation to government.
51
CHAPTER 3:
A TRADITIONAL MODEL VS. A GLOBAL NORM, ROLES OF TWO
(QUASI-) COMMUNITY FOUNDATIONS
3.1. Conceptual Framework
For over two decades, institutional Korean philanthropy has been intensively developed,
and the government-leading tradition has shifted. For example, President Myung-Bak Lee and
previous presidential candidate Chul-Soo Ahn have one interesting factor in common despite
their different political parties and perspectives: they are the founders of their own foundations
whose endowments come from their businesses. Both publicized their plans to give back to
society through their foundations before the presidential elections. Some believe their plans
were driven by their personal ambitions to become president.
However, just two decades ago, Korean citizens were encouraged to donate to the
government’s fund, and they rarely doubted that their donation would go to social welfare with
specific political meaning. Meanwhile, many Korean conglomerates (chaebols) were
associated with the government through backroom dealings with politicians, and their gifts
included corporate giving. Some created foundations, while others gave money to the Social
Service Funds of the government, enjoying tax exemptions and publicity via such charitable
actions. Of course, there have also been exceptions in the form of genuinely altruistic
donations. But, in the past, charitable action by conglomerates in general could be “quasi-taxes,”
which led to public resentment and skepticism toward many foundations and donations.
In the late 1990s, a progressive candidate from the opposition party won the presidential
election for the first time, and the 1997 Asian financial crisis hit Koreans. Under these
52
circumstances, the public grew to doubt top-down control by the government and
democratization has been consolidating. The Community Chest of Korea (hereafter, CCK) and
The Beautiful Foundation (The BF) were established. Unlike previous foundations, they are
neither private foundations nor government foundations, and have tried to broaden a
philanthropic scope and widen national focus to communities. The Korean government
established CCK with 17 satellites in 1998, succeeding the “Social Service Funds.” Won Soon
Park, a representative of Korean civil society, established The BF in 1999, modeling it after
community foundations from the United States.
Currently, CCK and The BF have fostered philanthropic cultures and have set the main
agendas in the field of charity in Korea. In the American context, one can call these
foundations as quasi-public foundations or quasi-community foundations. In the Korean
nonprofit sector, these types of foundations are funding intermediaries with public funding
resources. The figure below summarizes the concepts of Korean funding intermediaries. Quasi-
public foundations or quasi-community foundations in this article refer to intermediaries in
bold font.
Donors
Inter-
mediaries
Recipients
Foundations
: Individual and family
: Corporate
: Government
: Public – national
-community-based
Umbrella Fundraising
- Community Chest of
Korea (national)
- Community Chest of
Korea Satellites
(community-based
satellites)
53
Figure 3.1 Funding intermediaries in Korea. Adopted from Clotfelter, Federal Tax Policy and
Charitable Giving, 1985, p. 7.
This chapter will compare and contrast CCK and The BF. While CCK is a traditional
fundraising model initiated by government, The BF represents a civil foundation affected by a
diffused global cultural norm. As such, this chapter will demonstrate how different foundations
affect the process of structuration in the foundation field. After comparing and contrasting the
two foundations, this chapter will answer two research questions: First, how has the traditional
Korean fundraising model been influenced by the global cultural norm, and what is the process
of institutionalization? Second, do the different relationships with the government make a
difference in fundraising, grant-making, and legitimacy-seeking? If so, what role does each
organization take?
3.2. Two Cases: Community Chest of Korea and The Beautiful Foundation
3.2.1. Traditional Korean Philanthropy: A History of Community Chest of Korea
After the collapse of President Chung-hee Park’s regime, President Doo-hwan Chun
came to power through a coup d’état in 1980. As a soldier, like President Chung-hee Park,
Doo-hwan Chun continued to make the most of the government’s top-down control, but a lack
of legitimacy led his regime to try to adjust public sentiment (Lee, 2004). The government’s
catchphrase was “construction of welfare state,” but its solution was to pressure chaebols
rather than to allocate social welfare budget (Lee, 2004). In other words, corporations felt
burdened to donate their money to the government’s Social Service Fund as quasi-taxes.
As Kang (2001) argued, corporations needed to endure “payback” in the form of sudden
54
tax audits or declined loan applications if they refuse to provide “quasi-taxes.” Instead, many
corporations responded to those pressures by establishing their own foundations. Most of those
foundations had individual gifts programs, usually for “academic” purposes and occasionally
for “social welfare” ones. Those passive purposes did not reflect efforts to get rid of root
causes of social problems or leverage nonprofit partners. Another institutional choice of
potential founders was to donate to the government’s Social Service Fund.
During the period of condensed industrialization, most institutionalized philanthropy
was led by the Korean government, and the history of CCK reflects this. In the 1970s, the
Korean government started a fund to help citizens in need in 1980, it established a special law
called the “Social Services Fund Act,” which supported merged funds for needy neighbors and
disabled people (Community Chest of Korea, 2010). The fund was located in the Ministry of
Health and Welfare. In 1992, the government launched an association for helping needy
neighbors using several pseudo-civil organizations (namely, Kwanbyun Danch’e), and carried
on nationwide fundraising campaigns via media outlets, such as newspapers and television
broadcasts (Community Chest of Korea, 2010). However, the government had not discovered
how to use fundraised money, and brought in a low level of public participation. A main target
of fundraising was companies rather than usual citizens (Community Chest of Korea, 2010).
Meanwhile, corporations took advantages of quasi-taxes to advertise donations on TV and in
newspapers. The problem was that nongovernmental funds were collected by tax payers’
money, replacing the social welfare budget, and distributed to the public again. The worst cases
arise when government agencies are used for political purpose or to serve public officials’
interests (Sung et al., 1997).
As public opinion against the “Social Services Fund Act” grew, a turning point came
55
about in 1996 with the Board of Audit and Inspection. It decreed that citizens’ donations should
not be used as government funds, and recommended the development of a new organization
from the independent sector (Community Chest of Korea, 2010). In other words, funds from
private donations should not be part of the government’s budget and should not be controlled
by government agencies. From the findings of the audit, the previous act was discarded, and
the funds were transferred to a new organization—CCK. This history shows government-
leading traditions of philanthropy in Korea.
1.8 million
dollars
9.8 million
dollars
Periods 1975-1980 1981-1991 1992-1997 1998-2009
Fund operator The Ministry of Health and Welfare The Ministry of
Health and
Welfare
& Association for
helping needy
people
Community Chest
of Korea
Figure 3.2 Averages of annually fundraised money of Community Chest of Korea. Adopted
from Community Chest of Korea, 2012, www.chest.or.kr
Given the context of traditional institutionalized philanthropy, we can now analyze some
of the impacts on Korean philanthropy and foundations. First, government control narrows the
scope of philanthropic purposes, such as only helping the needy. Unlike in Korea, the mission
331
Million
dollars
18 million
dollars
56
and purpose of U.S. foundations cover a wider, more general spectrum. Most activities by
foundations in Korea have concentrated on academic programs and traditional social welfare
“charity.” Most importantly, they have not provided grants to nonprofit organizations, and
instead choose to give money directly to individual beneficiaries because they believed that
nonprofit organizations were too risky and progressive to be considered reliable philanthropic
partners. This meant that foundations did not further their mission beyond the government’s
objectives and were not encouraged to support innovative issue-making projects or address the
diverse interests of private wealth.
Second, backroom dealings between the state and businesses brought about many kinds
of skepticism about the accumulation of wealth or “giving back.” Despite genuine altruistic
giving from some of the wealthy, people usually focused on negative cases of tax evasion,
control ownership of parent companies, and closed-door politics. For example, the government
put pressure on corporations to donate and, if they refused, the government would penalize
them with strict audits and publicize the negative reports via the media.
On the surface, Korea’s CCK was modeled after Japan’s Community Chest and United
Way of America. For example, the United Way of America positioned CCK as an office of
United Way of Asia. However, CCK is an entirely different entity in that it has had a strong
relationship with the government from its origins, as with Community Chest of Japan.
The government established Community Chest of Korea and exclusively supported and
monitored it from the end of the 1990s, directly appointing every chairman. In other words, it
has reinforced implications that CCK is a desirable institutional choice for many corporations
and individuals to donate to. Until now, the government has been providing favorable tax status
and has also been supporting an annual campaign to CCK. Among nonprofit organizations in
57
Korea, only CCK has 50% tax exemption benefits for corporate donations, which is why many
corporations choose it as their philanthropic partner (comparison: other institutions without a
special law, 5%). As a result, CCK ranks first in total amount of fundraising and grant making,
thanks to government sponsorship.
However, CCK’s partnership and its exclusive status have been questioned by the
government of President Myung-Bak Lee. Although special status such as favorable tax
exemption and support for annual campaign has been maintained, the tradition of holding the
First Lady as honorary president was denied for the first time. In 2010, the government raised
questions about whether CCK should maintain its exclusive status, and audited CCK to
undercover scandals. As a result, some key people left the organization, and a public apology
for the organization’s misbehaviors was made. In return, CCK maintained its exclusive status
with a newly appointed philanthropic foundation, but its partnership with the government has
come to face greater scrutiny. In December, 2011 First Lady Yun Ok Kim became the president
of Community Chest. As public resource dependence theory explains, support from the
government can strengthen the institutional legitimacy of organizations but, at the same time,
weaken organizational autonomy (Jung & Moon, 2007).
On the other hand, The Beautiful Foundation was the first foundation to emphasize
independence from the government. The founder, Won Soon Park, was an executive director of
the People’s Solidarity for Participatory Democracy, an NGO advocating Korean democracy.
An emphasis on independence has been reflected by the fact that The Beautiful Foundation
does not receive funds from the government. Although Won Soon Park’s election as mayor of
Seoul in 2011 led to some questions about BF’s “independence,” we can compare and contrast
the relationships with the government and their consequences. We will then explore when and
58
why The BF emerged, and how it has coexisted with CCK.
3.2.2. Democratization and Diffusion of a Global Norm: The Beautiful Foundation
Haegun Koo (2002) argued that Korea’s dominant government has its own origins and
long-lasting traditions. Its “historical and geopolitical condition,” such as colonial experience,
the Korean War, the division of the peninsula, and rapid modernization in a condensed period
established a centralized state structure and resulted in many kinds of oppression (Koo, 2002).
Most Korean scholars agree that this structure has changed since the June democratic
movement in 1987 and has brought about the growth of Korean civil society and the nonprofit
sector. Kim and Hwang (2002) said that “a burst of citizens’ energy” was released in 1987. To
explain this movement and corresponding changes, Ho-ki Kim (1997) distinguishes economic,
political, and internal factors.
First, strong state intervention resulted in condensed industrialization and economic
growth. Citizens’ discontent with and resistance to the authoritarian regime appeared at the
same time, provoking the emergence of Korean civil society. In the democratic movement of
June 1987, students and industrial laborers were initial key players, and it was their solidarity
with the citizens’ movement that finally led to “the demise of military rule” (Kim, 2000; Koo,
2002). Then, civil society and nonprofit organizations had space to diversify issues, such as the
environment, women, education, and human rights, that had been previously ignored (Kim,
1997).
Second, despite Korea’s democratic transition, citizens demonstrated political
dissatisfaction. Many expected the consolidation of democracy by reformation of party politics.
As Koo (2002) explained:
59
In the process of Korean democratization, it became clear that party politics, or
political society, is probably the most difficult arena to reform. Korean party politics
has long been based on regionalism, personalism, bossism, and parochial ties based
on schools, clans, villages, and the like. Political parties depend on regional and
personal loyalties to mobilize support, and parties have come and gone with the
personalities around which they formed. The politics in the National Assembly is
dominated by opportunistic partisan bickering but fails to address important
substantive issues with any consistent policy orientations. People were extremely
dissatisfied with rampant corruption, bossism, and money politics, but political
society is very difficult to reform. (p. 43)
On the contrary, Korean nonprofit organizations started to make the legitimized space
necessary for an institutionalized social movement to form and take root. Consequently, the
nonprofit sector was expected to be the most trustworthy tool for pressuring politicians to
transform by citizens (Koo, 2002). In other words, the Korean nonprofit sector came to
perform the function of a “quasi-political party” (Kim, 1997).
Finally, an internal change influenced the growth of civil society in Korea. In civil
society, nonprofit organizations started the diversification and differentiation of their
orientations, activities, issues, and strategies. Radical nonprofit organizations kept traditional
antigovernment and aggressive anti-corporate social movement separate from the general
public. On the other hand, moderate nonprofit organizations newly expanded under the name
of “citizens’ movement” (Kim, 1997). These three factors were very important aspects in
Korean nonprofit organizations’ history. At the same time, they were required to enhance the
pluralism and diversification of issues, interests, activities, and orientations that represent the
“citizens” themselves. Thus, the Korean nonprofit sector evolved by an expectation from the
citizens who had been oppressed by the authoritative state, an opportunistic business sector,
and unreliable politics.
In the 1990s, many transformations for consolidating Korean democracy influenced
philanthropy as well. While CCK fundraising (with strong legitimacy granted by the
60
government) was quickly increasing, Korean civil society was consolidating and successfully
acting against the government’s top-down control—as with the anti-campaign for the April
2000 elections and grassroots fundraising. Also, more people enjoyed exposure to information
on global institutional philanthropy, which led to questioning the legitimacy of traditional
foundations. Won Soon Park, a key leader in the anti-campaign for the April 2000 elections and
grassroots fundraising, observed U.S. phenomena and visited several community foundations
to adopt their practices in Korea. While many criticized the dark side of money politics, he
captured the positive side of money, arguing that it can be “beautifully spent” to express good
will—as is the case in the U.S., where active citizens are aligned with institutional philanthropy.
Although this way of thinking was doubted by many people, it still managed to gain support.
The lists of supporters for the establishment of The BF were not the names normally found in
Korea’s nonprofits and traditional social movements. The ideas for The BF were embraced
even by the upper class, which felt more comfortable with Western culture and believed that
soft power could change society.
In 1999, a new entity entered the nonprofit sector and the foundation world: The
Beautiful Foundation, which introduced the community foundation model to Korean society.
The community foundation is considered one of the influential global cultural norms designed
by the United States. A community foundation is defined as:
a tax-exempt, nonprofit, autonomous, publicly supported, nonsectarian philanthropic
institution with a long-term goal of building permanent, named component funds
established by many separate donors to carry out their charitable interests and for the
broad-based charitable interest of and for the benefit of residents of a defined
geographical area. (http://www.cof.org/content/glossary-philanthropic-terms)
Community foundations execute their grant making and fundraising activities with
geographical focus. In America, they have the legal status of 501(c)(3) and are tax-exempted
61
like other nonprofit organizations, so they have the same legal accountability to the
government and the public. As mentioned, their main activities are not only grant-making
(providing grants to nonprofit organizations and beneficiaries), but also fundraising and
undertaking donor services to raise funds and cultivate donors. Generally, community
foundations have multiple funding resources, while the resources of private foundations come
from a single major donor, such as individual, family business, and investment. With the same
501(c)(3) legal status as nonprofit organizations, community foundations are classified as
“public charities,” which distinguishes them from private foundations. This means that
community foundations are required by the IRS to file the 990 Form (Internal Revenue Service,
2009).
As of March 2009, 1,125 community foundations were registered with the Council on
Foundation (Council on Foundation, 2009) at the U.S. national level. In addition to the Council
on Foundation, umbrella organizations in some states (e.g., The League of California
Community Foundation) are key players that help most community foundations share their
languages, practices, and some standards across geographical boundaries (Graddy & Morgan,
2006).
There is a wide spectrum of assets, ages, and regions of community foundations. In
terms of assets in 2008, larger foundations such as the New York Community Trust held assets
worth up to $2.1 billion, (The New York Community Trust, 2009), while smaller community
foundations held less than $100,000. Their total assets were over $35 billion, and have been
rapidly increasing with the growing number of community foundations (California Community
Foundation, 2009). The age of community foundations varies as well. The first community
foundation in the U.S. is the Cleveland Foundation, founded in 1914; new community
62
foundations keep forming.
Nowadays, the community foundation is a global phenomenon due to the diffusion of the
model. Most research has focused on community foundations in the United States (Carman,
2001; Graddy & Wang, 2009; Hammack, 1989; Lowe, 2006; Morgan, 2007). But Wang,
Graddy, and Morgan (2011) analyzed the goal, outcome, and financial mechanism of three
representative community foundations in East Asia: the Osaka Community Foundation in
Japan, The Beautiful Foundation in South Korea, and the Shanghai Charity Foundation in
China. According to their analysis, the diffusion of this institution resulted in the creation of
1,441 community foundations worldwide by 2008, and it has even reached East Asia, despite
relatively little public understanding of institutional philanthropy in the region and the strong
government-led way of addressing social problems (Wang et al., 2011).
Theoretically, the diffusion can be explained by the world-polity perspective in
sociological new institutionalism (Meyer, 2000). World-polity analyses “emphasize the
importance of cultural or institutional frames . . . Empirical studies from a world-polity
perspective find striking structural homology across countries and argue that this homology
results from an overarching world culture” (Boli & Thomas, 1997, p. 172). Before the diffusion
of this global cultural norm, Korean traditional philanthropy was led by the government.
Missions of foundations have usually mirrored government-determined objectives like other
Asian countries (Wang et al., 2011). Until the 1990s, “foundations” belonged to the
government and corporations, whereas NGOs belonged to civil society. This dichotomy
resulted partly from crony capitalism (Kang, 2001), which makes for strong connections
between Korean government and conglomerates. This dichotomy also lent a unique form of
legitimacy to Korean foundations. Many corporations with and without foundations donated
63
their money to Community Chest of Korea, and people interpreted those donations as
functioning as quasi-taxes. This kind of taken-for-granted foundation type and similar
behaviors match DiMaggio and Powell (1983)’s coercive isomorphism among three
mechanisms of institutional isomorphic changes.
However, in 1999, a different type of foundation model was introduced with the
creation of The Beautiful Foundation. As an enactor and carrier of this global cultural norm,
The Beautiful Foundation brought about a cognitive change that led citizens to realize that they
could be more than just “agents” participating in government funds—they could also be “actors”
taking part in building philanthropic institutions. This was a strikingly entrepreneurial
movement. Two decades ago, Koreans donated to government funds without fully knowing the
intended usage. However, recently, they have started to claim donors’ rights and have started to
participate in the decision-making process to determine the distribution of grants.
In this vein, we can say that The Beautiful Foundation itself is an institutional
entrepreneur in the Korean context. Interestingly, the world-polity perspective points out that
institutional actors are very similar in their characteristics and objectives on the surface
regarding the enactment of a cultural model, even with very different backgrounds and settings
(Boli & Thomas, 1997). Yet a world-cultural model is not institutionalized without contestation
and considerable conflict, as its enactment involves much ambiguity, disarticulation and
conflict (Boli & Thomas, 1997).
Further, this diffusion of a new norm was possible due to an internal framework of
consolidation of democratization and an external factor of exposure to a community foundation
model, a cultural global norm.
64
3.2.3. Institutionalization of a Global Norm: Public Foundation and Community
Foundation
These Korean foundations responded to the diffusion of a global cultural norm then
translated and localized its institutional logic (Heydemann & Hammack, 2009). Colyvas and
Jonsson (2011) distinguished diffusion and institutionalization thusly:
As a process, diffusion emphasizes contagion and reinforcement, whereas
institutionalization emphasizes patterned activation and reproduction. As an outcome,
diffusion is contingent on alignment with existing cultural and cognitive frames,
whereas institutionalization depends on actual integration into modes of reproduction.
Diffusion emphasizes the pace and pattern of the object that spreads;
institutionalization underscores depth and durability. Feedback in diffusion points to
information and exposure, whereas feedback in institutionalization emphasizes the
higher- and lower-order links that become mutually reinforcing. (p. 45)
In terms of activation and the reproduction of a model, The Beautiful Foundation
successfully achieved institutionalization. Its establishment was not only a controversy for the
Korean foundation’s legitimacy, but it also gave insight to various local actors as a standard
model, rationale, and organizational structure.
There are several phases to the institutionalization of Korean foundations’ population.
First, the foundation population has been increasing. Besides government foundations and
corporate foundations, the number of private and public foundations doubled in the 2000s,
according to The Beautiful Foundation (2012). Moreover, people’s charitable actions went
through qualitative changes, which demonstrate that citizens have become more active as
principals in philanthropic deeds instead of just acting as agents.
65
Table 3.1
Newly Established Foundations
Established Frequency Percentage Valid Percentage Cumulative
Percentage
Before the 1960s 123 2.7 2.8 2.8
1960s 127 2.8 2.9 5.7
1970s 186 4.1 4.2 10.0
1980s 552 12.0 12.6 22.6
1990s 1387 30.3 31.7 54.2
After the 2000s 2004 43.7 45.8 100.0
Total 4379 95.6 100.0
Missing data 203 4.4
Total 4582 100.0
Source: The Beautiful Foundation, 2012, p. 28.
Second, public foundations with multiple themes and different geographical foci were
founded after the creation of The BF.
Table 3.2
Classification of Public Foundations in Korea
Public
foundations/
Grant-making
public charity
National-
based
The Beautiful Foundation (1999), Korea Human Rights
Foundation (1999), The Korea Foundation for Women
(1999), Korea Green Foundation (2002), Work Together
Foundation (2003), The Peace Foundation (2004), The
Prume Foundation (2004)
Community-
focused
Cheonan Grassroot Hope Foundation (2006), Kimhae Life
Sharing Foundation (2009), Bucheon Hope Foundation
(2011)
Adopted from Foundation Research Association, 2012, http://npongo.tistory.com/29
. As Heydemann and Hammack (2009) argued, institutional logic is translated and the
localized. Without exceptions, there have been “decoupling” practices in the
66
institutionalization of the community foundation. Decoupling practices can occur because
organizations employ formal policies not to solve organizational problems, but to seek
sociological legitimacy; that means the formal policies might not fit into the existing
organizational setting and may hamper functional organizational effectiveness. According to
Meyer and Rowan (1977), this is “ceremonial conformity.” To enhance functional
organizational effectiveness, organizations are likely to undertake decoupling practices, which
means they intend to make and keep the gap between organizational formal forms and
organizational practices (Meyer & Rowan, 1977).
The BF, a community foundation, is located in Seoul (the capital of Korea) rather than
being at a “local community” level. Its functions do not include fundraising and grant making
for specific regions, but rather are similar to the activities of national public foundations in
Western countries. As many nonprofit scholars in Korea argue, major Korean nonprofit
organization activities are greatly preoccupied with political change and national politics. In
other words, many Korean nonprofits are still performing both political and “comprehensive”
activities to change the “macro-structure” rather than “everyday life” and “community” issues.
For example, Dong Chun Kim (2006) pointed out that major NGOs in Korea remain in Seoul,
where unreliable and corrupt party politics occur. Seoul-based activities hinder the
development of place-based or community-based activities, which have greater influence on
the day-to-day life of citizens. In this sense, what The BF instigated first in the Korean
foundation population was not community foundations but public foundations. Institutional
logics are simple here. At a time when most nonprofits in Korea were experiencing difficulty
managing their organizations’ financial stability (with the exception of a few major nonprofit
organizations such as Citizens’ Coalition for Economic Justice and People’s Solidarity for
67
Participatory Democracy), The BF gave new fundraising model insights. Although The BF was
modeled after community foundations and had been advocating a community fundraising
model, community foundations for local residents could not be reproduced until the middle of
the 2000s. On the contrary, establishing public foundations emerged as a promising
institutional option for nonprofit organizations that suffered from unstable financial situations.
Won Soon Park, founder of the BF, explains in his book, Guidebook for Community
Foundation (2011), that it is hard to adapt community foundations in Korea because local
communities have come to lose their identities as discrete communities due to the movement of
populations between regions, and more importantly, due to local residents’ failure to share the
present of regions and future blueprints of that community. He posited that the colonial era of
Japan, the Korean War, and ensuing poverty caused an exodus from rural communities and
resulted in rapid urbanization and condensed industrialization. These events, in turn, destroyed
the community spirit for building a common community identity and hope for prosperity (Park,
2011).
Third, and surprisingly, community foundations have been established by various kinds
of actors, such as local citizens and municipal governments. Before The Beautiful Foundation,
the national CCK had 17 satellites in 17 regions. While those offices were controlled by the
national office and local governments, a new model was adopted in 2006. The first community
foundation for a specific region applying a bottom-up approach was the Cheonan Grassroot
Hope Foundation in 2006. However, local governments also established their own community
foundations, and those opposite models have different aims and reflect complicated
institutional contexts in Korean philanthropy. Meyer (2000) argued that local decoupling is one
of the consequences of globalization since actors adopt “symbolic frames without substantive
68
meaning” (p. 244). According to him, although the relationship between organizational
practices and institutional norms might not be strong at the initial stage, the standard model can
penetrate the system over time.
There are four kinds of quasi-community foundations, which can be distinguished by
types of leading actors and regional levels.
Table 3.3
Four Kinds of Quasi-Community Foundations Representative Examples in Korea
Level Government Leading Nonprofits and Residents Leading
National Community Chest of Korea The Beautiful Foundation
Local CCK local satellites,
Dongjak Welfare Foundation,
Yangcheon Love Welfare
Foundation
Cheonan Grassroots Hope
Foundation,
Gimhae Life Sharing Foundation
One type of community foundation is the Community Chest of Korea, which is
organized by the national government. A second type is The Beautiful Foundation, organized
by civil society on a national level; a third type includes the 17 satellites of Community Chest
of Korea controlled by local governments; the last type is very similar to U.S. community
foundations, which are organized by grassroots efforts, and money is distributed with a
geographical focus.
Overlapping community foundations in one region can be attacked by inefficient
competition (Cho, 2002); more importantly, public officials in local government can easily
become involved in fundraising, grant-making—participation that may be criticized as the
govermentalization of local citizens’ money and further political purpose distributions (The
Beautiful Foundation, 2007).
To sum up, The Beautiful Foundation as an adopter of an institutional norm
demonstrates decoupling practices from the community foundation in that it does not have a
69
geographical focus. In other words, it maintains a national model as a strategic means of
embedding its political agenda. Seoul is a critical location even in philanthropy, and this
location factor is unique when we refer to the Korean nonprofit sector as whole. However, as
time goes by, things can change and the standard model can penetrate the system (Meyer,
2000), meaning that genuine community foundation models may eventually be replicated in
Korea. In spite of different actors and geographical levels, this quasi-community foundation
population appears homogenous in terms of legal structure, actors, institutional forms,
governance, fundraising, and grant-making. The institutionalization of quasi-community
foundation population can be explained by combining two perspectives.
According to resource dependence theory, dependent organizations show
organizational practices to be approved by organizations controlling resources that are
important to them (Guler, Guillen, & Macpherson, 2002). We can use this theory to explain
government-led community foundations. Patrons can gain substantial power over nonprofits,
and important decision-making tends to depend not on the organization’s mission and
community needs, but on which programs will attract major and future donors (Frumkin, 2006).
Whereas resource dependence theory explains this organizational phenomenon, sociological
new institutionalism is a rival theory against rational choice theories that uphold utility
maximization. Frumkin (2006) has used sociological new institutionalism to complement
resource dependence theory for community foundations:
Resource dependence may well capture the most central assumption of community
foundations, namely the need to attract resources from local donors. But community
foundations also require legitimacy, in that the flow of contributions to the endowment
is contingent on the foundation being perceived as fulfilling the community’s interest
(p. 236)
This theory places emphasis on legitimacy and symbols rather than resource
70
maximization. In other words, nonprofits are shaped by external pressure to legitimize their
practice. They try to mimic peer organizations and follow accrediting agencies, which is why
isomorphism is omnipresent. In this sense, network norms become an important standard for
reputation and peer pressure, and reflect the public’s expectation of community foundations or
public foundations. When other members in a network of community foundations are seeking
legitimization, they adjust their practices to satisfy those kinds of external expectations. If
quasi-community foundations in Korea experience isomorphism due to global cultural norms
and shared sectoral norms, it belongs to DiMaggio and Powell’s (1983) mimetic and normative
isomorphism.
3.2.4. The Relationship with Governments and Hypotheses
My seniors criticized that my idea for “Kind Stores” (owners) which subscribe to
donate their interest monthly is too similar with The Beautiful Foundation . . . I
think I have a tendency classified as “alike The Beautiful Foundation”
– From a personal interview with CCK staff member
In the past, there were obvious differences between CCK and The BF in that, to
encourage donations, CCK usually showed poor people suffering from poverty,
disability, disaster and so on, and The BF showed healthy donors’ stories who
want to contribute to make a change in the society. But now? Every organization
including both organizations talks about “philanthropy” to change society. Exactly
same!
– From the BF report’s interviews with the BF staff member
As we examined, The Beautiful Foundation and Community Chest have very different
origins, but their organizational behaviors appear similar possibly due to institutionalization.
Thus, we must ask deeper questions about partnership with government, roles of sectoral
norms, and rationalization. We can raise several hypotheses in a public resource dependence
71
theoretical framework. Public resource dependence theory can explain the relationship of both
organizations with the government. For example, Jung and Moon (2007) analyzed the
governmental fund’s and private fund’s impacts on cultural nonprofit organizations in Korea.
They looked at organizational legitimacy and organizational autonomy, and pointed out that
Korean cultural nonprofit organizations are influenced by local governments and central
governments in goal-setting, resource allocation, and program choices when they receive
funding from the government, rather than from private sources. Their autonomy is reduced by
public resources; at the same time, reputation and recognition attached to public funding can
strengthen institutional legitimacy. Therefore, Jung and Moon (2007) concluded that a close
relationship with the government can be a “double-edged sword” for nonprofits.
In this chapter, several hypotheses will be raised regarding the second research question,
“Does a different relationship with the government make differences on fundraising, grant-
making, and legitimacy-seeking?” Two quasi-community foundations can be compared, as
Community Chest of Korean represents more traditional fundraising model with partnership
with the government, whereas The Beautiful Foundation represents a more diffused model
from world-polity that emphasizes independence. Institutional politics for Korean
philanthropic institutions are contested by these models, and institutionalization has resulted
from the dialectical process. Then we can examine five sets of hypotheses regarding
fundraising, grant making, and legitimacy seeking, given their different relationships with the
government.
72
Table 3.4
Hypotheses for Legitimacy and Autonomy in the Relationship with Government
Community Chest of Korea
(A partnership with government is likely
to…)
The Beautiful Foundation
(Independence from government is likely to…)
Fundraising Hypothesis 1-1. increase the total amount
of fundraising and corporate giving (more
legitimacy)
Hypothesis 1-2. decrease the total amount of
fundraising and corporate giving (less
legitimacy)
Hypothesis 2-1. have a high proportion of
designated funds and donor-advised funds
(less autonomy)
Hypothesis 2-2. have a high proportion of
discretionary funds and unrestricted funds
(more autonomy)
Grant-making Hypothesis 3-1. make more traditional
grants in welfare area (less autonomy)
Hypothesis 3-2. make more innovative grants in
advocacy area (more autonomy)
Hypothesis 4-1. has more principal-agent
relationships with recipients (more
legitimacy, less autonomy)
Hypothesis 4-2. has more stewardship
relationships with recipients (less legitimacy,
more autonomy)
Legitimacy
Seeking
Hypothesis 5-1. seek its legitimacy from
the relationship with government
Hypothesis 5-2. seeks its legitimacy from the
global norms
3.3. Data and Comparison
We will examine CCK and The BF using data collected during 2000-2009. CCK
published this data in its report “Social Impacts and the Future of Community Chest of Korea”
in 2010. In 2011, The BF made an internal report to summarize its activities over 10 years.
Although their information is not easy to compare, some information during 2005 (or
2006)–2009 and 2000–2009 is likely to support the initial hypotheses for organizational
legitimacy and autonomy.
Also, I conducted four face-to-face interviews and two one-and-one telephone interviews
with staff members who worked for CCK or The BF between 2000 and 2009 to generalize and
complement organizational information. Personal working experiences in both organizations
73
provided me 19 informal interviews, more specifically 13 in CCK and 6 in the BF, and helped
me identify and contact key people of CCK and The BF. During March and April 2014, with a
protocol, face-to-face interviews lasted approximately one-and-a-half hours; each interviewee
was recorded with consent. Telephone interviews lasted approximately 30 minutes and were
transcribed with consent. Additionally, The Beautiful Foundation’s report (2010) of its grant-
making over 10 years provided me several interview cases with internal staff members and
outside members of beneficiary organizations.
First, we can make a comparison in fundraising between CCK and The BF, as Figure 3.3
suggests. In fact, the absolute amount of funds raised by CCK is incomparable in Korea. For
example, in 2009, CCK fundraised 331 billion won (approximately $331 million) and The BF
fundraised 11 billion won (approximately $11million). According to the CCK report (2010), a
percentage of its fundraised money among a total of major funding intermediaries is over 50%,
which reflects that CCK is the most powerful fundraising institution—probably due to the
government’s strong support. This support includes direct donations from public officials,
nationwide annual campaigns, favorable tax benefits, and secured legitimacy for over time. For
example, in 2009, donations of public officials from government agencies amounted to 23
billion won (approximately $23 million); this source alone already exceeded the total amount
of The BF’s fundraised money. Annually, average donations of public officials account for
approximately 14.5% (CCK, 2010).
74
Figure 3.3 Comparison of fundraised money of CCK and the BF.
In terms of favorable tax benefits, under the “Community Chest of Korea Act,”
corporations that donate to CCK can get a 50% tax exemption; The BF only provides a 5% tax
exemption to corporations. For example, the representative chaebol, Samsung, donated 20
billion won (approximately $20 million) to CCK in 2009, and during 2002–2009, it donated a
total of 130 billion won (approximately $130 million).
By contrast, The Beautiful Foundation tends to refuse funds from sizeable conglomerates
with controversial issues. For instance, as explained by a staff member of The Beautiful
Foundation, it was tricky to arrive at internal consensus at the beginning phase, but those early
discussions of consensus produced a fundraising charter and accumulated precedents, which
can reduce inefficiency. The BF has considered more qualitative achievements such as issue-
making and agenda-setting using innovative fundraising and grant-making, and building up an
influential new model in the nonprofit sector. Of course, a total amount of fundraising money
matters, but The BF feels obligations to other things that cannot be easily measured. Still, it is
0
50
100
150
200
250
300
350
400
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Community Chest of
Korea
The Beautiful
Foundation
75
true that The BF is struggling to meet its operating cost without any profit structures.
CCK shows different features. Lee Jae-ho (2007), for example, pointed out that CCK
chose aggressive competition with other fundraising intermediaries rather than collaborations,
although CCK’s bylaw (5-7) publicizes “collaborative relationship with other fundraising
actors” as a “united way” of donations. One staff member of CCK tried to analyze four reasons
for their qualitative achievement: First, short three-year terms have given chairmen (no
information about how to be appointed) to prove themselves with those numbers. An ambitious
yearly fundraising goal was set up by the Office of Planning and Coordination of CCK national
office; failure to meet this goal means “dishonorable” personal and organizational history.
Second, a national office assigned the determined proportions to 17 satellites, and whether a
satellite achieves those numbers is reflected in all staff members’ performance assessments.
Third, conglomerates felt pressure about how much a leading chaebol donated to CCK in a
year. If one chaebol raises the bar, other conglomerates try to reach the amount. Last, CCK
accepts donations in kind, which account for approximately 50% of donations recent days.
With other profitable structures, all quantifiable figures are taken into account to show the
public CCK’s winning for the year. These successful fundraising performances place pressure
on the following year’s goal and serve as the imperative base of its presence.
Interestingly, the pressure in being the first fundraising foundation tends to result in real
“double-edged sword”: a close relationship with government and tough controlling from
governments. Staff members at CCK have been supported by government through negotiation,
at the same time that failures have led to harsh penalties and public resentment about why CCK
should be an only legal fundraising institution. One example is the unexpected resignation of
chairmen or executive directors under pressure from government. Another example is the CCK
76
satellites’ relationship to public foundations via local governments. While CCK satellites and
local governments were symbiotic in the past, the recent emergence of community foundations
by governments is leading to severe competitions for limited community members’ money.
Table 3.5 and Figure 3.4 below compare the percentage difference between individual
donations and corporate donations during 2005–2009. Although this table includes only a CCK
national office, we can see a high proportion of corporate giving in CCK.
Table 3.5
Percentages of Individual and Corporate Donation in The BF and CCK (only national
office), 2005–2009
Individual Giving
%
Corporate Giving
%
2005 The BF 44.09 55.91
CCK 9.69 90.31
2006 The BF 56.20 43.80
CCK 10.53 89.47
2007 The BF 46.91 53.09
CCK 9.76 90.24
2008 The BF 42.69 57.31
CCK 21.07 78.93
2009 The BF 52.08 47.92
CCK 14.33 85.67
Adopted from Community Chest of Korea, 2011, p. 103 and The Beautiful Foundation,
2011, pp. 30–31
77
Figure 3.4 Percentages of Individual and corporate donation in The BF and CCK (only
national office), 2005–2009.
For these years, the proportion of donations for CCK was 2:8 (individual vs. corporation),
and the proportion for The BF was 5:5. Given these figures, it is probably reasonable to say
that individual donors (including monthly giving) and corporate donors contribute to The BF in
similar proportions. Thus, hypothesis 1-1 and 1-2 can be supported. In addition, a recent
proportion for The BF was approximately 8:2 (individual vs. corporation), after the
corporations’ CSR performance “by themselves” and the election of Won Soon Park as a
Mayor of Seoul, according to the interpretation of one BF staff member.
Second, hypotheses 2 should be examined. Hypothesis 2-1 expects more donor-
controlled funds in CCK. It is hard to say that a partnership with the government brings about
donor-controlled types of funds, but their pressure to be the most powerful fundraising agency
is likely to introduce options of designated and donor-advised funds to the public. Although it
assumes resource exchanges between patrons and nonprofits, in practice, many community
foundations are struggling with loss of autonomy (Frumkin, 2006). Two representative funds
can be designated funds ensuring donor control and discretionary funds for foundations’ own
identity. Current donors tend to choose designated funds and donor-advised, which foundations
0
20
40
60
80
100
120
2005
2006
2007
2008
2009
Corporate
Individual
0
20
40
60
80
100
120
2005
2006
2007
2008
2009
Coporate
Individual
78
may not welcome. As Ferris (2001) has remarked, “The more active role of donors, and the
concomitant emphasis on outcomes, may intensify pressure on nonprofits to alter or deviate
from their missions” (p.8). While nonprofits try to maintain new programs suggested and
funded by donors, other programs that represented their values and those of the community are
more likely to disappear Ferris (2001)
Table 3.6
Percentages of Designated Fund in Community Chest of Korea (Billion Won =
Million Dollars), 2005–2009
Year Designated
Fund
Total
Funds
%
2005 99,882 214,742
46.51
2006 101,012 217,746 46.39
2007 144,190 267,407 53.92
2008 138,022 270,286 51.07
2009 170,304 331,863 51.32
Adopted from Community Chest of Korea, 2011, p. 97
Figure 3.5 Percentages of designated fund in Community Chest of Korea
(billion won = million dollars), 2005–2009.
40
45
50
55
2005 2006 2007 2008 2009
Percentage
Designated
funds
79
Table 3.6 and Figure 3.5 show that almost 50% of total funds during 2005–2009 were
designated funds. Although we cannot compare these to discretionary funds, it would be a
remarkably high proportion. An interview with a staff member in CCK revealed that designated
funds usually come from corporations, and one corporation can designate multiple recipients.
From the corporation’s point of view, this is a very attractive option, as it can give money to
the entity with the highest tax exemption. One staff member described this distribution process
as “machine-like,” creating an unproductive burden especially for officers in the grant-making
department. Staff members for grant-making in CCK want more self-designed projects in
which they can take a leadership role, but a higher level of their energy and time is spent
distributing a huge amount of designated funds. This scenario shows that CCK’s significant
designated funds have led to low autonomy.
Given that discretionary funds are rare (3% in Table 3.8) in The BF, The BF started the
“1% fund,” which means donors permitted their donation to go wherever The BF wants. It has
gone to grant-making targeting grassroots, including The BF’s capacity-building projects.
According to interviews with a staff member at BF, the “1% fund” was not planned but rather
started from “default” funds that accumulated when donors could not decide where to put their
money. The “1% fund” gave room for The BF to reflect on its own mission and vision, unlike
the experience of managing designated and donor-advised funds. Discretionary funds comprise
about 16% of the total fundraised money, and have given an extent of autonomy for The BF to
make its own projects, as Table 3.7 and Figure 3.6 show. However, there are a few designated
funds and many donor-advised funds in The BF as well, and they are targeting potential major
donors. The BF introduced the model of donor-advised funds from U.S. community
foundations and displayed their big donors’ stories at the beginning phase (hypothesis 5-2).
80
Table 3.7
Percentages of Discretionary Fund in The Beautiful Foundation (thousand
won = 1 dollar), 2005–2009
Year Discretionary
Fund
Total Funds %
2005 1,458,995,488 9,849,008,602
14.81
2006 1,505,802,567 9,298,346,986 16.19
2007 1,640,495,665 11,608,568,421 14.13
2008 1,851,126,496 11,668,035,099 15.86
2009 2,339,534,021 11,603,244,170 20.16
Adopted from The Beautiful Foundation, 2011, p. 37
Figure 3.6 Percentages of discretionary fund in The Beautiful
Foundation (thousand won = 1 dollar), 2005–2009.
Greater interest in and emphasis on donor control is a new worldwide trend in current
philanthropy. However, nonprofits and federated fundraising systems try to “sell” tailored
funds to donors who have a different preference “for a given price” (Young & Salamon, 2002).
0
5
10
15
20
25
2005 2006 2007 2008 2009
Percentage
Discretionary
funds
81
In doing so, nonprofits and community foundations try to maintain new programs suggested
and funded by donors, at the expense of programs that represent the organizations’ and
communities’ values (Ferris, 2001). In other words, grantee’s autonomy to focus and maintain
their initial mission might be threatened because of their reliance on funds from donors who
have a different priority (Delfin & Tang, 2006). As CCK and The BF interviews indicated, both
organizations are struggling with those difficulties, but The BF as the less heavy foundation,
can renovate a system of donor-advised funds earlier, and can keep the system with a relative
easiness, and its 1% sharing funds have been utilized.
Second, the grant-making process of The BF and CCK differ. According to Brinkerhoff
and Brinkerhoff (2002), the government initiative on partnership is likely to lead to focus on
“service provider” roles, and the nonprofit initiative on partnership is likely to lead to “policy
advocacy” and “constituency empowerment” roles. Table 3.8 combines the grant-making
subject categories of both foundations, and demonstrates that many areas overlap as both cover
general causes and institutions.
82
Table 3.8
Grant-Making Subject Categories of The BF (2000–2009) and CCK (2006–2009)
Categories The BF
(2000–2009)
%
Categories CCK
(2006–2009)
%
Poverty and
microfinance
18 57.99
Health and
disability
13 11.10
Education 9 6.46
Culture 5 4.27
Research 3 0.34
Community
development
1 3.54
Campaign 1 2.51
Giving
infrastructure
25 Residence 6.82
Grassroots free
projects
17
Disaster 3 Protection 3.60
Human right 2 Etc. 2.98
Fieldworker
education & welfare
1
Designated 3
Total 100 100
Adopted from The Beautiful Foundation, 2011, p. 42 and Community Chest of Korea,
2011, p.181
Besides the overlap in subject categories, CCK’s residence and protection areas still
belong to the traditional social welfare field. However, The BF’s areas—such as giving
infrastructure, grassroots free projects, human rights, and fieldworker education and welfare—
are relatively new and have greater possibility to support advocacy groups.
83
National
Council on Community
Foundation
In addition, “1% funds” as discretionary funds can grant the most autonomy to The BF,
and has been distributed to grassroots mainly under the name of “Scenario of Changes” (The
Beautiful Foundation, 2010). Moreover, The BF holds a grant-making concept for a distinction
between Community Chest of Korea and community foundation, as Figure 3.7 illustrates. It
clearly borrows a “Community Foundation” model to confirm its identity (hypothesis 5-2).
Figure 3.7 A purpose of grant-making defined by The Beautiful Foundation.
Source: The Beautiful Foundation, 2007, p.10
Nevertheless, it does not confirm hypotheses 3-1 and 3-2—that their areas of grant-
making are significantly different—and requires an in-depth examination for each grant. For
instance, one staff member at CCK pointed out that both foundations do not show dramatic
distinctions on the surface. Despite the limitations, we can detect a subtle difference, looking at
interviews with both foundations about their evaluations for grant-making. They both define
their success when their projects have achieved a “policy-making” level, but The BF wants a
Community Chest
Local Satellites
Local social welfare
nonprofits
Community
foundations
Social
welfare
Culture Environment Education
- Supporting grassroots, individuals
- Running own programs
84
wider range of “policy-making” in relation to public opinion, leveraging grassroots, and setting
new agendas. Then, it might be possible to describe “issue-making” and “norm-making”
beyond “policy-making” functions for The BF’s grant-making goals.
In terms of “policy-making,” CCK has achieved successful institutionalization. It
discussed its projects directly with the Ministry for Health, Welfare and Family Affairs, and has
produced good examples for linking with lawmaking. Instead, it should provide grants where
government wants to distribute them, since government cannot afford more social spending.
Thus, it seems that government is likely to offer legitimacy and to limit CCK’s autonomy. In
fact, government has kept trying to appoint CCK as a government agency, and one of its
attempts is to do so was seen with the unexpected audits and efforts to screen CCK’s grant-
making, according to the staff members of CCK.
When a process of grant-making combines with CCK’s “logic model,” we can estimate
more conservative grant-making on the part of CCK. CCK borrowed United Way’s logic model
for measurable impacts in the mid of 2000s, and trained its members and grantees according to
this system. Measurable outcomes and impact can show the validity of its grant-making, and
CCK tends to select more high performance–guaranteed grantees and give more project-
specific grants. One staff member said that The BF has made grants where CCK could not
cover costs. It has a relative autonomy to give to newly created nonprofits, to incubate
nonprofits for a whole new function, and to provide general operating grants.
Hypotheses 4-1 and 4-2 can have a direct relationship with the government. In personal
interviews with staff members in CCK, they complained about their strict evaluation and
monitoring system, and the requirements of many documents. As one said:
I know many organizations which get grants from us are discontented with our
strictness and bothersome paperwork. Sometimes, I feel that we are replacing the
85
government’ role monitoring nonprofit organizations. How about IRS in the U.S.?
I don’t think United Way of America is required to monitor their recipient this
much.
The interviewee pointed out that CCK itself has an obligation to be audited by the
government on a regular basis. According to this interview, if CCK staff members don’t
request various documents and demand high standards of nonprofit organizations, they
will harm each recipient, CCK, and its members. This means that they recognize the
principal-agent relationship between the government and CCK under the government’s
regular and unexpected audits, a relationship that is transferred to the relationship
between CCK and its recipients. Interestingly, the CCK case shows that legitimacy might
have an inverse relationship to autonomy.
According to a The Beautiful Foundation’s report (2010) from outside researchers,
a few interviewees who got grants from BF compared its grant-making to CCK grant-
making. They felt that The BF had a better understanding about fieldwork, providing
operating expenses and less strict and complicated reporting forms without actual
inspections. They suggested that this was possible because the relationship is based on
trust rather than suspicion. However, they also pointed out that The BF’s monitoring was
too weak, making it easy for recipients to take advantage of grants. One interviewee
regarded CCK’s monitoring process as realistic supervision in spite of the excessive
administrative fees that recipients have to cope with.
One staff member of The BF saw stronger monitoring taking place than in initial
relationships with recipient nonprofits, adding that The BF could not help but follow a
recent tendency toward meeting the expectations of donor’s interests in effectiveness,
foundation accountability issues, and public opinions about transparency. The tendency
86
may relate to rationalization and professionalization in the nonprofit sector (Hwang &
Powell, 2009). At the same time, the BF tries to strike a balance between those tendencies
and its original purposes in grant-making, according to BF staff members.
Given internal and external opinions, we can presume that CCK has a more control-
oriented approach to recipients and The BK has a less control-oriented approach. This might be
because CCK faces pressure to maintain its legitimacy, which is usually conferred from
government supports. On the contrary, The BF has “too weak” of a monitoring system, which
can cause misbehaviors by recipients.
Stewardship theory can be applicable not only for the relationship between foundations
and nonprofits and but also for the relationship between government and foundations. Although
stewardship theory has been criticized for being an overly passive (over-embedded in its
context) and optimistic perspective (pro-organizational human nature) (Renz, 2007), it argues
that mutual goal alignment can increase as relationships based on trust, reciprocal expectations,
autonomy, and discretion (rather than monitoring, sanctions, and incentives) are built up and
developed (Van Slyke, 2006). In Van Slyke’s research (2006), he explores long-term
contractual relationships between the government and nonprofits. He found that the manner of
public managers change over time from a principal-agent to principal-steward relationship. He
also pointed out:
whereas the principal in a principal-agent relationship invests in coercive and
compliance-based monitoring and reporting mechanisms and uses incentives and
sanctions for achieving goal alignment, the principal in a principal-steward relationship
invests in mechanisms that may cost more in the short run but offer long-term goal
alignment (Van Slyke, 2006 p. 166)
Lastly, we can make some comparison about legitimacy seeking between CCK and The
BF. Interestingly, we can find some proof for CCK’s legitimacy-seeking (hypothesis 5-1). Its
87
English-language homepage in 2012 distinctly recognizes CCK as:
the only legally incorporated fundraising and fund allocation agency in Korea. This
implies that CCK’s operation and its fundraising and allocating activities are confined
by the law, thereby ensuring transparency in its work. In addition, CCK follows a
nondiscriminatory policy of allocation. Unlike other fundraising agencies, CCK does
not limit itself to supporting a specific faction or religion, but covers all social welfare
related issues. (http://eng.chest.or.kr/05_faqs/faqs01.jsp)
Moreover, the website claims that “CCK is not a government agency,” but also cites a
special law—the “Community Chest of Korea Act”—which guarantees the highest tax
exemption and explains the dramatic growth of fundraising from the 1970s. These ambiguities
can be found in organizational members’ perspectives on how to view their organizations.
According to interviews with CCK staff members, there is a spectrum within CCK staff
members. At one end of this spectrum are staff members who applied to CCK to become quasi-
government employees; at the other end are staff members who remember the meaning of the
birth of CCK, an independence from government in order to secure donation from the citizens
and corporations. The former are likely to think CCK can become a government agency, and
the latter are likely to hope that CCK’s nonprofit leadership role at national and local levels
could operate with more autonomy. Those two extremes show a confused organizational
identity seeking legitimacy even among the internal members.
On the contrary, The BF introduced and promoted the community foundation model
and the stories of donor-advised funds from the U.S., as hypothesis 5-2 addressed. Also, it
started to talk about the “transparency” of nonprofit organizations, using examples of
disclosure of information in America. The BF’s legitimacy-seeking actions show that its
concept is aligned with global norms. For example, a prospectus from The Beautiful
Foundation’s establishment was as follows:
88
The Purpose of the Establishment
The Beautiful Foundation is a foundation which initiates giving cultures for the public good.
It will support ‘public purpose activities,’ ‘the isolated and vulnerable people,’ and ‘people
devoting for the public good’ and will change transferred hereditary culture to healthy giving
culture by making exemplary model of those activities. Especially, we adopt community
foundation model successfully prevailing in other countries, will embrace donor-advised
funds by individuals and memorial figures, and funds with specific purposes, and will
conduct influential public purposes activities.
The foundation believes that fundraising for people devoting for the public good and
grant-making for their projects is a key for Korean society’s future, and will take a beautiful
bridging role between citizens and public purpose activities.
22
nd
, November, 1999
All Founding Board of Directors
Representative of Promoters Park Sangjeung
Promoters Kim Seungyoo, Kim Youngtae, Moon Kookhyun, Park Woonsoon, Song
Sanghyun, Ann Jyunghwan, Yoo Youngkoo, Lee Kwangjae, Lee Daekong, Yim Kiljin, Jang
Hasung
Source: The Beautiful Foundation, 2010, p.7
However, recently CCK has also shown its membership and collaboration with United
Way of America on its webpage, and The BF displays its own big donors’ story and their
effects, rather than introducing the donor-advised funds of Michigan Community Foundations,
for instance. Interestingly, CCK tends to use United Way of America’s examples in
communication with the government to emphasize a global standard, according to the staff
member of CCK. And the rationalization and professionalization of the nonprofit sector can be
observed in both foundations, as indicated through language as “use of consultants,”
“independent financial audit[s],” “quantitative program evaluation[s],” and so on (Hwang &
Powell, 2009). Their organizational differences regarding legitimacy seeking may be
diminished by institutionalization, as compared to the earlier phase of establishments.
89
3.4. Conclusion
In conclusion, CCK and the BF in 2000–2009 show different results in fundraising and
corporate giving, designated and discretionary funds, and in relationships with recipients and
legitimacy seeking. CCK, with a strong relationship with government, can gain legitimacy
more, but cannot enjoy autonomy as much. Incomparable amounts of fundraising and grant-
making can be achieved but require corresponding obligations. On the contrary, BF can gain
autonomy but struggles with conservative criticism and fundraising for administrative fees. In
terms of grant-making, The BF staff members recognized that their grants should be made for
grassroots working beyond social welfare purposes. A difference in legitimacy seeking was
visible at the beginning phase but is getting weaker.
To answer “what role each organization takes,” we can compare the results. One
obvious fact is that CCK saw a quantitative growth in fundraising. Community Chest of Korea
publicized that it raised 15 billion won (approximately $15 million) in 1998 when it established
and raised 331 billion-won (approximately $331 million) in 2009. In a period of just over 10
years, it expanded its total amount of funds raised by more than 20 times. This is a remarkable
achievement in term of the development of Korean philanthropy. However, we also need to ask
what the qualitative meaning of growth is. The BF might answer this question by its initial
catchphrase “a step by ten people is more beautiful than ten steps by one person.” Despite the
same goal to cultivate Korean philanthropic culture, the approaches taken by CCK and the BF
were different. Despite their different relationships with the government, their organizational
behaviors seem very similar.
To sum up, CCK has been sponsored and controlled by the government since its origin.
90
Traditionally, the government has believed that donations can be used as “public funds,” and its
top-down approach has given the foundation a high level of legitimacy, but it has also given
rise to a low level of autonomy. In fact, CCK is trying to negotiate with government and to set
its own agenda. However, unless it gives up its status as a first fundraising foundation, it will
be hard to be independent from government intervention. The BF, on the other hand, has
adopted a community foundation model, seeking legitimacy from a global norm such as
citizen’s ownership and transparency of foundations. It successfully led the act of “giving” as a
new social movement and an innovative institutionalization movement for Korean foundations.
At the same time, it cannot be free from the flow of rationalization and professionalization. The
BF has tried to maintain independence from the government and to keep more flexibility, but it
seems that such methods limit its fundraising in some ways, as these have not been growing at
a remarkable pace.
Here, the government’s attempt to change “Community Chest of Korea Act” in 2008
and its enactment of this law in 2011 must be introduced. Scandals in CCK brought about the
enactment of a new law for multiple appointments for legal philanthropic foundations via
Corporation Tax Law 36-2. It has been argued that its purpose is to give foundations fair
competitive philanthropic environments (Son, 2012). A similar amendment was observed in
Japan. However, only one new entity, “Sharing of Babo” established in memory of Kim Su-
hwan, previous Cardinal Archbishop of Korea in 2009, became a legal philanthropic
foundation. Then, Korean Society had two “legally supported” foundations, CCK under the
Ministry for Health, Welfare and Family Affairs, and “Sharing of Babo,” under the Ministry of
Security and Public Administration.
One of the limitations of this research is the disconnection between data from CCK and
91
The BF. Although some of the data do not show consistency, they were still combined for
comparisons. Another limitation of this research is that the interviews were only with the
national foundation model. A future study should be conducted further down the line, including
people from CCK satellites and genuine community foundations that are located outside of
Seoul, as well as other layers of stakeholders around quasi-public foundations and quasi-
community foundations. Such study would be better able to suggest roles for government and
civil society in philanthropy, especially for developing countries.
92
CHAPTER 4:
THE EFFECTS OF POLITICAL-ECONOMIC FACTORS AND INSTITUTIONAL NORMS
ON KOREAN FOUNDATION INCEPTION
4.1. Introduction
Foundations have been an “important institutional expression” of philanthropy and also
have been seen as “black boxes” by the public. Although foundations have long contributed to
the public good, many have been questioned whether a foundation is a resource-maximizing
method for the founder or an appropriate giving vehicle for society.
Chapter 2 analyzed Korean foundations’ history, and chapter 3 explored the
structuration of public foundations. This chapter will investigate the field-wide data in Korea
using event history analysis and will answer the question of whether the political-economic or
cultural factors take a role in foundation creation.
Between the “logic of instrumentality” and the “logic of appropriateness,” which can
explain foundation inception in Korea, and how do the two different perspectives compete and
complement each other? I use the resource dependence theory of Pfeffer and Salancik (1978)
representing the “logic of instrumentality,” and sociological new institutionalism representing
the “logic of appropriateness” as rival theories (Frumkin & Galaskiewicz, 2004; Suárez &
Hwang, 2009).
Sociological new institutionalism suggests that a trend of organizing is a main
motivation for adopting models because the “efficacy” of a trend cannot be easily proved but
can provide legitimacy and increase reputation (DiMaggio & Powell, 1983; Meyer & Rowan,
1977). On the contrary, resource dependence theory argues that organizations tend to behave to
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maximize autonomy and to decrease uncertainty in the given contexts (Pfeffer & Salancik,
1978). In this way, the “logic of appropriateness” and the “logic of instrumentality” can be
compared to explain Korean foundations’ establishment.
There has been more research conducted about foundations in the United States than
Korea. To explore foundations’ behavior, most American researchers have dealt with specific
kinds of foundations, such as individual/family foundations, public foundations, or corporate
foundations.
Individuals and families can donate money to organizations directly or secure assets or
endowments in private foundations. Individual and family foundations may detach themselves
“from other environmental forces and operate independently of other funders” (Grønbjerg,
Martell, & Paarlberg, 2000, p.10). However they face more restrictions such as tax
requirements and fussy administrative processes entailing more accounting and legal resources
to operate (Frumkin, 2006).
Public/community foundations stay “closest to institutionalized modes of operation”
(Grønbjerg et al., 2000, p.38). Those foundations have various funding resources, while the
resources of private foundation come from a single major funding source such as one
individual or a family’s business and investment. Under the same legal status 501(c)(3) with
nonprofit organizations, community foundations are classified as “public charity” with the
Form 990, which distinguishes them from private foundations, with the Form 990 PF (Internal
Revenue Service, 2009). Many current donors want to establish donor-advised funds in
community foundations because when they put their funds into those institutions, they can get
tax exemption immediately and maintain their control (Steuerle, 1999). However, donors ought
to keep in mind that, eventually, “effectiveness for community foundations requires balancing
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their roles as fundraisers and grantmakers within their legal context in a way that is best suited
to the needs of their specific geographical community” (Ostrower, 2007, p. 522).
Corporate foundations are typically dependent on continued company contributions and
meet tax restrictions and shareholder’s confrontation in the portion of “corporate taxable
income” (Grønbjerg et al., 2000). Corporate foundations are the most complex of philanthropic
entities “because of the intrusion of outside interests and the contingency of funds on the
competitive struggle between firms” (Frumkin, 2006, p. 231). Rather than dynamics within the
nonprofit sector, corporate philanthropy is formed by “forces in the broader national economy”
(Frumkin, 2006, p. 231).Therefore, funders ought to perceive these subtle differences in each
philanthropic institution’s meaning of efficiency and trade-offs with their value/goal when they
choose their giving vehicle and increase their scope of giving.
In spite of those variances, this field-wide study tries to explain a general pattern of all
kinds of Korean foundations. The distinction among foundations is sometimes ambiguous in
Korea despite identifiable founders. For example, foundations by individual and family
founders can act just like corporate foundations, and foundations by corporations can act just
like individual foundations. And many member-based foundations, such as religious groups
and association founders, are working for the general public and specific communities. Those
patterns are the case in the United States as well.
Moreover, there are governmental foundations in Korea, which are distinctive entities
that are not found in many countries. Anheier and Toepler (1999) introduced a few
governmental foundations from U.K., Germany, Poland, and Brazil and argued that they are
contentious in terms of accountability because they can escape the governmental audits
applying to all government agencies. In Korea, government agencies can establish foundations,
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and other nongovernmental actors can donate their money to those foundations. In other words,
governmental foundations can be created to raise funds from the citizens and corporations and
make their own grants, just like public foundations. These ambiguous distinctions make
Korean foundations unique and may allow us to investigate the foundation population as a
whole. Then, as a follow-up analysis, a distinction between government-related foundations
and nongovernmental foundations will be used to explain whether there are different
mechanisms in their establishments.
Two research questions will guide this analysis. First, do cultural factors explain the
establishments of foundations? Or, do political-economic factors explain those creations?
Second, do government-related foundations and nongovernmental foundations have different
identifiable factors for inception? To answer those questions, this research will conduct event
history analysis of foundation population data from 1975 to 2009.
4.2. Theoretical Backgrounds and Major Hypotheses
Many factors could affect the establishment of foundations, and the research on
company-sponsored foundations by Nicole Esparza (forthcoming) is very useful in identifying
these factors. In addition to her findings, this research reflected own characteristics of Korean
society, its nonprofit sector, and generalizable factors across different kinds of foundations to
identify explanatory variables. To explain foundations’ behaviors, one important pillar is
political-economic factors, such as direct and indirect tax rate changes, favorable tax policies
promoting private donation and corporate giving programs, penalties on misbehavior, and
political regimes’ preferences. Resource dependence theory focuses on economic and political
environments as resources in that the “logic of instrumentality” is a major motivation of
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organizational choices and institutionalization to maximize efficiency.
Another important pillar is cultural factors, such as social expectations and cultural
conformity. For example, regarding corporate foundations, corporate social responsibility
(CSR) has received public recognition through the spread of normative “corporate citizenship”
ideas and through mimetic trends within and across the industries. In Korea, public scrutiny
against the social elites (Lee, 2012), and adaptation of global models may provoke the
inception and transformation of foundations. While social and cultural pressures do not have
immediate incentive and penalty functions, sociological new institutionalism posits that the
“logic of appropriateness” is a predominant factor for the foundation population’s
organizational choice to accommodate pressure.
4.2.1. Political-Economic Factors
Resource dependence theory starts from the assumption that organizations cannot
produce every resource within their organizations, which is why an organization must depend
on its environment to maximize power and resources (Hall, 1999). Aldrich and Pfeffer (1976)
argued that managers should oversee not only their organizations but also their environments.
Unlike population ecology, with its focus on the environment’s selection of organizational
forms, resource dependence theory emphasizes organizational strategies for interacting with
the environment in order to survive and flourish (Hall, 1999). Moreover, resource dependence
theory suggests managing organizational legitimacy strategically by pursuing a “variety of
exchanges” of resources rather than focusing on one source of resource attainment (Deephouse,
1996). This is a different approach from sociological new institutionalism, which believes that
conformity to institutional norms and mimetic behaviors can make organizations gain
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legitimacy and survive.
In terms of resources for foundations, Anheier (2005) pointed out two important factors
that lead to the creation of foundations. They are “the availability of financial capital and other
forms of assets, such as real estate, and the willingness of individuals or organizations to
dedicate such funds to a separate entity” (p. 325). Economic prosperity such as the stock
market’s growth or an economic boom explains the establishment of foundations. Anheier and
Toepler (1999) saw Germany’s increase in foundations as a result of the accumulation of
wealth followed by World War II and creators of that wealth from the 1950s. American venture
philanthropy followed by the dotcom boom is another example. In terms of economic
development, Korea is well known as a successful case of condensed industrialization in a
comparatively short time. Therefore, we may consider GDP growth one of the factors in the
foundation inception in Korea.
Hypothesis 1: The growth of GDP will have a positive effect on foundation birth rate.
Secondly, Anheier (2005) argued that “the degree of philanthropic entrepreneurship in
society” (p. 326) would impact foundation inception. Regarding philanthropic entrepreneurship
in Korea, we must consider regime changes as political and ideological shifts. Korea has
experienced a few dramatic changes in regimes; this study focuses on two critical junctures:
the June democratic movement in 1987 and the first victory of the opposition party in the
presidential election of 1997.
Hypothesis 2: Political shifts will influence foundation birth rate.
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Before the June Democratic movement in 1987, President Park Jung-Hee and
President Jeon Doo-Hwan tried to maintain their authoritative power, and are essentially
considered dictators. The two presidents are well known for having set up a cozy relationship
between politics and business that allowed their regimes to encourage corporations’ donations
and to take advantage of governmental foundations and nongovernmental foundations. After
the June Democratic movement in 1987, Korean society started democratizing through a
system of direct election and constitution reform (Jung, 2013). While social and political
diversification of the public will was not prohibited compared to previous regimes, and
moderate social movements had achieved more institutionalized space under the Roh Tae Woo
administration from 1988, President Roh Tae Woo was an heir of the military dictatorship from
the ruling party (Jung, 2013).
In 1997, the opposition party won the presidential election for the first time in Korean
constitutional government. Beginning in 1998, President Kim Dae Jung’s administration
pursued the consolidation of democratization and decentralization, and a wide range of
nonprofit organizations were established and could enjoy their institutionalized position. At the
same time, adopted economic policies influenced by neoliberalism to overcome a financial
crisis, IMF (the International Monetary Fund) which ended in 2005.
According to Taeseok Jung (2013), 1998 to 2007 were maintained by “the moderate
reformist regime” but President Kim Dae Jung and Roh Moo Hyun regimes didn’t differentiate
political democracy with market liberalism, and this irony finally resulted in the last transfer of
power to recent two conservative regimes. Those conservative regimes have been underway
since 2008, the President Lee Myung-Bak administration to the present, the Park Geun-Hye
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administration.
Therefore, this study hypothesizes that two periodical regimes, the dictatorship
regimes and the Democratic Party regimes, affect the establishment positively.
The most frequently addressed force for promoting philanthropy must be the tax
system, and many researchers have illuminated a positive relation between amount of donation
and tax rate. Not surprisingly, almost all research between tax policy and giving deals with
company-sponsored foundations and corporate giving (Boastman & Gupta, 1996; Clotfelter,
1985; Esparza, forthcoming; Levy & Shatto, 1978; McElroy & Siegfried, 1985; Navarro, 1998;
Nelson, 1970; Schwartz, 1968; Webb, 1994). This is likely the case because we assume that
corporations are the most rational and strategic actors. Rather than pay taxes, companies tend
to choose to give to other institutions directly, or to create foundations as more perpetual
vehicles with commitment (Esparza, forthcoming). In other words, corporations are likely to
establish their foundations as “tax shelters” to store their money and distribute later when there
is a high tax increase (Esparza, forthcoming; Webb, 1994). Here, this study considers various
founders, including corporations, and related tax rate changes. Based on a positive correlation
between the number of foundations and the tax rate by previous researchers (Andrews, 1967;
Clotfelter, 1985; Esparza, forthcoming; Webb, 1994), the next hypothesis can be suggested.
Hypothesis 3: The higher the related tax rate change to funder (governmental corporation tax/
general corporation tax/ inheritance tax/ income tax), the higher the rate at which foundations
are established.
Once potential founders consider foundation establishments, they also look at the tax rate
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of the foundation itself. In Korea, foundations have a duty to pay nonprofit corporation tax. In
this sense, the nonprofit corporation tax rate can affect foundation inception, since founders
may feel burdened to establish foundations when this tax rate goes up. Therefore, I hypothesize
a negative effect regarding the relationship between the nonprofit corporation tax rate change
and foundation inception.
Hypothesis 4: The higher the Nonprofit Corporation tax rate change, the lower the rate at
which foundation are established.
While the difference in tax rate by year can influence foundation creation, related law
enactment and change to the policy of tax incentives and penalties can be a force as well. The
list below is includes several laws that have been influential to foundations and philanthropy in
Korea. The enactment of Public Corporation Law offers 1975 as a starting point of analysis.
Since this research focuses on the risk period from 1975–2009, three major laws (marked
below) will be variables measuring critical historical distinction.
• 1951 Enactment of Prohibition Law on Charitable Solicitation
• 1960 Enactment of Civil Law which includes Nonprofit Corporation Law
• 1975 Enactment of Public Corporation Law (to control/ after 1988, publicize the
enforcement plan to monitor/ 1995, amendment to control)
• 1993 Amendment of Inheritance and Gift law (to add provision for public
corporation for monitoring)
• 2000 Enactment of Nonprofits Support Law (to boost)
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• 2006 Enactment and amendment of old law: Law on Charitable Solicitation and
Usage (to reflect the reality and boost charity)
• 2011 Enactment of Public Corporation Law (to boost faithful public corporations
based on Inheritance and Gift tax)
Hypothesis 5a: Foundation inception rate will decline following the tax restriction on
foundation corporations.
Hypothesis 5b: Foundation inceptions rate will climb following the charity-friendly reform of
law on Charitable Solicitation and usage, and NGO Support Law.
4.2.2. Cultural Factors
The “logic of instrumentality” addressing political-economic factors, such as related
law enactment or enforcement, can explain variations in organizational choices and
institutionalization. On the contrary, the “logic of appropriateness” argues that organizations do
not follow a “logic of instrumentality.” Rather, organizations are likely to accept socially
legitimized models, and the tendency reflects cognitive and normative factors in organizational
choices and institutionalization by diffusion.
Suárez and Hwang (2009) contrasted resource dependence theory and sociological new
institutionalism regarding nonprofit collaboration with the businesses sector and corporate
donations, showing paradoxical results that more institutionalized nonprofits tend to have more
collaborative relationships, and nonprofits with earned income tend to have less corporate
donations. Unlike resource dependence theory considering resource maximization, sociological
new institutionalism places emphasis on legitimacy and symbols. Formal organizations in a
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rationalized environment are trying to mimic successful cases regardless of efficiency for
organizational legitimacy (DiMaggio & Powell, 1983; Meyer & Rowan, 1977; Suárez &
Hwang, 2009).
In other words, nonprofits are shaped by cultural pressure to legitimize their practice.
They try to adopt “rationalized myths” among peer groups and follow accrediting agencies,
which is why isomorphism is omnipresent (DiMaggio & Powell, 1983; Meyer & Rowan, 1977).
In this sense, the sectoral norm becomes an important standard for foundation behaviors
including the creation and changes. This network-based conformity reflects social expectation
for the foundation population, and internal forces such as reputation monitoring and peer
pressure.
In sociological new institutionalism, institutional changes are possible when new norms
or organizational forms gain legitimacy, and accompany changes to cognitive frameworks that
transform judgment of “what is appropriate” (Ha, 2011). Regarding critical junctures in Korean
history, many mention the International Monetary Fund (hereafter, IMF) crisis, and the period
under this financial system (1997–2005). The IMF crisis caused extensive hardship in Korean
society, such as massive layouts, a currency crisis, and debt burden. Many Koreans lost their
jobs and suffered from bankruptcy in spite of the expanded social welfare system by President
Kim Dae Jung’s regime. The government’s reformation reached the philanthropy fields as well,
and initiated cultural responses to national crisis, such as the “gathering gold” movement
among citizens. Then, donations under IMF system were regarded as “sharing pains” with the
state, and the movement transferred institutional pressures to various actors. Among three
kinds of isomorphism (coercive, normative, and mimetic) (DiMaggio & Powell, 1983), this
IMF effect shows coercive isomorphism due to external pressures driven by state and
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corresponding social expectations, which made potential founders in Korea feel pressure.
Hypothesis 6: The national crisis, IMF will affect foundation birth in a positive direction.
One example of institutional changes could be “deinstitutionalization.” Oliver (1992) has
argued that the legitimacy of existing institutional logics can be weakened or vanish, although
taken-for-granted models are usually reinforced and maintained after institutionalization. He
explains three factors: “functional pressures” by weakened instrumental value, “political
pressures” by losing support for the existing frame, and “social pressures” due to conflicts by
members and changes to external environments.
After new norms or organizational forms are successfully institutionalized, institution
logics are diffused to the organization population or other countries. At the national level, this
homogeneity can be explained from a world-polity perspective. The world-polity perspective
argues that institutional actors are very similar in characteristics and objectives on the surface
regarding the enactment of a cultural model, even in very different backgrounds and settings
(Boli & Thomas, 1997) As Meyer, Boli, and Thomas (1987) examined, organizational form by
“Western cultural account” can justify organizers’ practice as “widely accepted rational myths.”
The diffusion of a global cultural norm is powerful and the institutional logic is translated and
localized (Heydemann & Hammack, 2009).
This transformation in Korean philanthropy can be traced back to the emergence of The
Beautiful Foundation in 1999. Before The Beautiful Foundation, corporate foundations and
governmental foundations were taken for granted under the strong intervention of the state. As
mentioned in chapter 3, The Beautiful Foundations introduced a community foundation model
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for the first time to the public. Moreover, as an enactor and carrier of global cultural norm, The
BF allowed citizens to be real “actors” in philanthropic foundations beyond “agents.”
Hypothesis 7: The diffusion of global model will have a positive effect on Korean foundation
birth.
Mimetic isomorphism refers to mimetic reactions to best practices within the field
(DiMaggio & Powell, 1983), and concerns identification with “focal actors” (Esparza,
forthcoming; Guler et al., 2002; Haunschild & Miner, 1997; Haveman, 1993; Strang & Soule,
1998). Those actors are likely to be copied as role models by peer groups, and peer groups can
be operationalized in various ways (Esparza, forthcoming). This research adopts Esparza’s
(forthcoming) frequency imitations of “industry specific pattern” and Burns and Whoely’s
(1993) “geographical region.” Therefore, two hypotheses can be suggested.
Hypothesis 8: The higher the specific purpose rate of foundation inception, the foundations
with the same purpose are to establish foundations in the following year.
Hypothesis 9: The higher the local rate of foundation inception, the foundations in the same
location are to establish foundations in the following year.
Although earlier sociological new institutionalism tends to ignore differences and
diverse adaptations of institution logics explaining diffusion, recent theorists are trying to
embrace more micro levels of explanation and political factors to explain institutionalization
and institutional changes (Ha, 2011).
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4.2.3. Government-Related Factors
Whether political-economic factors or institutional norms take a role in foundation
creation is one question; this study is additionally questioning whether government-related
foundations have different explanations for their inception compared to nongovernmental
foundations. While Korean society has not thoroughly participated in the discourse about
devolution and the privatization of government, extensive public administration literature in
the U.S. has dealt with “sectoral identity” issues and provoked controversial debates about
“convergence” as organizations (i.e., New Public Management in the 1980s and National
Performance Review in the 1990s), and “distinctiveness” as public sector organizations
because of ambiguous measurements of performance and indirect control over resources.
Nowadays, mixed results from empirical research have accumulated (Boyen, 2002).
For example, Frumkin and Galaskiewicz (2004) argued that public sector organizations
are more susceptible to “mimetic, normative, and coercive pressures” than for-profit and
nonprofit organizations. This result betrays our anticipation of structural inflexibility in
government agencies according to bureaucratic theory (Frumkin & Galaskiewicz, 2004; Park,
2012).
According to resource dependence theory, fewer organizational resources, more
susceptibility to external influences (Park, 2013; Pfeffer and Salancik, 1978). Governmental
foundations with stable tax revenues are likely to be less sensitive to external political-
economic factors. At the same time, public organizations should deal with criticisms of
“inefficiency” and “moral hazard” problems (Park, 2013), since they do not have vivid
standards of performance and principals (Frumkin & Galaskiewicz, 2004). As such, they need
to be permeable by public opinion, public policy, and ethical decisions (Boyen, 2002).
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While government agencies have comparatively abundant resources and are easily
regarded as a driving cause of other kinds of organizations (Frumkin & Galaskiewicz, 2004),
they are likely to be actors that are vulnerable to political-economic factors and institutional
pressures.
Then, the next hypothesis can test those arguments with a focus on Korean foundations
from 1975 to 2009.
Hypothesis 10: Government-related foundations and nongovernmental foundations will have
different identifiable factors to explain inception.
4.3. Data Description and Analysis
4.3.1. Sample
This study uses the foundation lists that The Beautiful Foundation researched in 2012. The
lists were collected by the request of information disclosure by central government
departments and local governments from October 2011 to February 2012. According to The
Beautiful Foundation’s lists, 4,582 foundations were created from 1920 to 2010. My study
limits the risk period to 35 years, 1975–2009. In 1975, the Public Corporation law was
established, so it may be a starting point in support for the recent law-based foundations. In
2012, The Beautiful Foundation reported analysis of 1,190 foundations, excluding foundations
established by governments and special laws (for medical, private school foundations),as it
targeted nonprofit and nongovernmental foundations. Unlike previous foundation analysis of
The Beautiful Foundation, my study includes governmental foundations because they reflect
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government-leading philanthropy in Korea.
For the analysis, we need to find foundations’ information which may be found in annual
reports, advertisement and newsletters, websites, the Korean guide star webpage, and so on.
However, unlike registered American nonprofits with Form 990 form and foundations with
Form 990 PF, Korean nonprofits and foundations did not have a legal duty of public reporting
until 2009. Until then, the general public in Korea could not find organizational information in
detail, unless nonprofits or foundations had it on their websites.
To date, less than 37% foundations in the population reportedly have their own
homepages (The Beautiful Foundation, 2012). Therefore, without using the National Tax
Service (formerly known as the Korean IRS) online reporting system, foundation information
often cannot be identified. From May 2011, Korean government has been enacting a tax law
and providing an online reporting system for financial transparency targeting nonprofit
corporations with more than one million dollar endowments or with five hundred thousand
dollars asset income in the previous year (Son, 2012). Today, anyone who wants to see the
financial information of comparatively large nonprofit organizations can examine those public
reports via NTS’s webpage (see http://npoinfo.nts.go.kr/ndp/index.jsp). Thus, foundations that
publicize and confirm their information via the NTS reporting system will be available for
statistical analysis; accordingly, a total number of my sample is 1,376 and their endowment
sizes are beyond one million dollars or their previous year’s asset income sizes are beyond five
hundred thousand dollars.
Then, this study focuses on 1,376 foundations established between 1975 and 2009 and
included on the foundation list that The Beautiful Foundation reported in 2012 and in the NTS
online reporting system. The Beautiful Foundation lists provide foundation information. I filled
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other parts additionally via the NTS online reporting system and various data sources such as
NTS reports for five kinds of tax rates, World Bank reports for GDP, and related researches.
4.3.2. Measures
4.3.2.1. Foundation inception as dependent variable
The dependent variable is a foundation’s establishment, which is based on The
Beautiful Foundation’s lists researched in 2012. This data were collected across fields, and
embraced all types of funders. Korean society had not tried to collect these kinds of data before.
Therefore, this is the first statistical analysis of the foundation field.
I retained all foundations to data set. Once one foundation was established, I terminated
foundations and got rid of from the risk-set. Figure 4.1 shows the years including the risk
period, 1975–2009, in which 1,376 foundations were created, and we can observe gradual
increase. The inception of five different types of foundations can be suggested, as Figure 4.1
illustrates.
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Figure 4.1 Foundation inception in Korea, 1960–2010.
Figure 4.2 Foundation inception by funder types, 19752009.
0 10 20 30 40 0 10 20 30 40
1970 1980 1990 2000 2010
1970 1980 1990 2000 20101970 1980 1990 2000 2010
Gov.related(n=328, 24%) Corporate(n=378, 28%) Individual&family(n=388, 29%)
Member-based(n=214, 16%) Public(n=45, 3%)
Frequency
Established year
Graphs by fundertype
0 20 40 60 80 100
Frequency
1960 1970 1980 1990 2000 2010
year
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4.3.2.2. Independent V ariables
Political-Economic Factors. Table 4.1 shows the independent variables and their descriptions
in the analysis. Korean Gross Domestic Product (hereafter, GDP) can be an important factor to
explain foundation creation in Korean society, since economic prosperity has a relation to the
financial capability of potential founders, as Anheier (2005) has argued. Among GDP-related
indexes, I used Korea’s “GDP deflator” index, which reflects most comprehensive economic
development measuring price inflation and deflation with respect to “a specific base year.”
World Bank provides this annual index for various countries continuously, and a formula is
GDP deflator = Nominal GDP/ Real GDP X 100.
Besides this economic index, two political shifts were considered: dictatorship regimes
and democratic regimes. Those two periods show critical changes for society in general, not to
mention for the Korean nonprofit sector. In terms of tax rate, many Korean nonprofit
researchers have used the “marginal corporation tax rate” to illuminate corporate giving and
tax effects. However, this research will cover various types of foundations, so I use the rate
change of “top tax rates,” which are related to funders. “Top tax rates” here are divided into
four kinds of taxes: government corporation tax for governmental founders, general
corporation tax for corporate founders, inheritance tax for individual and family founders, and
income tax for member-based and public foundation funders. Change means current year’s
“top tax rate” minus previous “top tax rate.” In addition to those taxes, once those founders
establish foundations, they need to pay nonprofit corporation tax. Therefore, its change from
the previous year is included as an independent variable. All tax variables can be found in NTS
reports and related research.
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To measure the effects of public corporation tax restriction and nonprofit corporation
supportive laws, three binary variables are used: tax restriction on Public Corporations (2003–
2009), Law on Charitable Solicitation and Usage (2006–2009), and Nonprofit Corporation
Support Act (2000–2009). Each variable is coded “1” if policy applies to one spell, and is
coded “0” if not.
Table 4.1
Independent Variables: Description, and Predicted Effect
Variable Description
Predicted
PEffect
Time-Varing Covariates
Political-economic Factors
GDP Growth GDP deflator +
Political Shift I_ Dictatorships President Park & Jeon, Dictator regimes periods +
Political Shift II_ Democratic
Party Regimes
President Kim II & Ro II, Opposition Party ruling periods +
Corporate Tax (Gov. • General) •
Inheritance • Income Tax
Change Rate (lagged effect)
Annual related Top tax change rate +
Nonprofit Corporation Tax
Change Rate
Annual NGO tax change rate -
Tax Restriction on Public
Corporation
Binary variable, 1993-2009 -
Law on Charitable Solicitation
and Usage
Binary variable, 2006-2009 +
Nonprofits Support Act Binary variable, 2000-2009 +
Cultural factors
IMF Effect Binary variable, 1997-2005 +
Diffusion of Global Model Binary variable, 1999-2009 +
Field Inception Density Foundations in the field as a fraction of all foundation lists in
the purpose in the previous year
+
Location Inception Density Foundations in the Seoul/Non-Seoul as a fraction of all
foundation lists in that location in the previous year
+
Fixed Covariates
Endowment Endowment size reported in 2011 (logged)
Location Dummy set for Seoul/Non-Seoul
Founder Types Dummy set for gov.-related/ corp. / individual & family / member-based /
public foundations
Field Types Dummy set for education/ culture / welfare / local gov. / etc., by supervising
department
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Cultural Factors. While Korean society has experienced promising economic development in
a very short time, the IMF crisis was a tough blow to Korean companies and people. According
to Lee (1998)’s report, for instance, “11 chaebols collapsed during 1997 and 10 more out of the
50 largest chaebol were at the risk of bankruptcy. Bankrupt chaebols cost South Korea $100
billion, 20% of the country’s half-a-trillion-dollar economy” (p.1). This hardship meant
financial uncertainty for the funders. At the same time, normative reactions, such as donations
and the establishment of foundations, were expected. And the government used cultural
campaigns to overcome this national crisis. Therefore, I include the IMF bailout period, 1997–
2005, as a binary variable. Another cultural factor is the emergence of a global model in terms
of foundations. The Beautiful Foundation gave insight to potential funders. From its
established year of 1999, the spells are treated “1” as dummy variable.
Field inception density and location inception density are intended to measure the effects
of mimetic isomorphism in Korean foundations. Two kinds of density mean foundations in the
field as a fraction of all foundations in the field in the previous year, and foundations in Seoul
or non-Seoul as a fraction of all foundations in that location in the previous year. To identify
each foundation’s field, this research uses supervising government departments that tell a
publicly registered purpose. In Korea, if an actor wants to create a foundation, the potential
founder should get permission from the related government department with its own purpose.
In this sample, there were 49 departments including various local governments; so the three
categories supervised by three major departments (Ministry of Education/Ministry of Culture,
sports and tourism/and Ministry for health, welfare and family affairs), a set of all local
governments, and the rest of the departments consist of five categories. Field inception density
is expected to show an “industry specific pattern,” and location density is used to identify
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geographical diffusion (in Seoul or out of Seoul).
4.3.2.3. Control V ariables
This model includes four kinds of fixed covariates as control variables; they are
organizational endowment, location, founder type, and foundation field. The NTS public
reporting system was developed in 2011 and does not require the degree of financial
information as Form 990 or Form 990 PF by the U.S. IRS. Whereas many researches use the
number of employees in terms of organizational size, it’s not possible to find the information in
that system. Therefore, this research uses endowment size reported in 2010 via the NTS system.
In terms of founder type variable—if governments fund the establishment, I categorized
the foundation as a government-related foundation. If corporations fund the establishments, I
categorized the foundation as a corporate-sponsored foundation. If only individuals and
families fund the establishment, I categorized the foundation as an individual or family
foundation. Member-based foundations are usually from religious groups and associations.
Public foundations include community foundations and quasi-community foundations funded
by various levels of founders. Figure 4.3 shows the composition of various founder types. With
29% of all foundations, individual and family foundations are the most frequent type; the
runner up is a group of corporate-sponsored foundations (28%). They together belong to
private sector foundation type, and their cumulative proportion is 57%. The next group is the
government-related foundation;, in other words, public sector foundations cover 24%.
Approximately 16% of foundations are member-based. Lastly, at 3% of all foundations, public
foundations become the least frequent types.
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Figure 4.3 Composition in foundation types.
Parallel with “field inception density,” five categories were used for the foundation field
variable: three categories supervised by major three departments (Ministry of Education,
Ministry of Culture, Sports and Tourism, and Ministry for Health, Welfare and Family Affairs),
a set of all local governments, and the rest of departments.
If we intertwine the comparison of foundation types (Figure 4.3) with a location variable
(Seoul vs. out of Seoul), we can observe interesting patterns. As Figure 4.4 shows, national
government agencies in Seoul are less likely to be involved in foundation establishment,
whereas local government agencies in non-Seoul are more likely to be involved—almost four
times higher. Except government-related foundations and member-based foundations, the rest
of foundations, corporate/individual and family/and public foundations are created more in
Seoul.
Gov.related Corporate
Individual&family Member-based
Public
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Figure 4.4 Comparison of Seoul funder types and non-Seoul funder types.
0 100 200 300
Gov. related Corporate Individual&family Membership Public Gov. related Corporate Individual&family Membership Public
Seoul Non-Seoul
Frequency
fundertype
Graphs by location
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Table 4.2
Summary Statistics
Variables Obs Mean S.D. Min Max
GDP
32638 46.0502 27.30192 8.710457 108.4973
Dictatorship
32638 .5226423 .4994947 0 1
Democratic party regimes
32638 .1596912 .366325 0 1
Related tax rate change (L)
32220 -.0834264 5.177485 -30 30
NGO tax rate change
32638 .0196397 1.45907 -3 7
Tax restriction on Public Corporations
32638 .3058092 .4607564 0 1
Fundraising Law
32638 .022673 .1488609 0 1
NGO Support Law
32638 .1199828 .3249464 0 1
IMF effects
32638 .1677799 .3736764 0 1
Global Model Diffusion
32638 .1423188 .3493821 0 1
Inception Density of Fields
32638 2.203098 1.896214 0 13.46
Inception Density of Locations
32638 2.193649 1.565244 .13 8.91
Log endowment size
32306 3.754892 1.220163 -.6931472 9.854124
Non-Seoul
32638 .5621362 .4961317 0 1
Supervising Dept._ Culture
32638 .1102702 .3132311 0 1
Supervising Dept._ Welfare
32638 .123108 .3285662 0 1
Supervising Dept._ Local governments
32638 .0453459 .2080649 0 1
Supervising Dept._ Etc. Field
32638 .1591703 .3658404 0 1
Table 4.3
Pairwise Correlation Among Continuous Variables
(1) (2) (3) (4) (5) (6)
(1) GDP
1.0000
(2) Related tax rate change (L) -0.0409* 1.0000
(3) NGO tax rate change -0.1338* 0.2537* 1.0000
(4) Inception Density of Fields
0.7544* 0.0122* -0.0939* 1.0000
(5) Inception Density of Locations
0.8788* 0.0056 -0.1075* 0.7772* 1.0000
(6) Log endowment size
-0.0089 0.0319* 0.0022 -0.0554* -0.0047 1.0000
* p < .05
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4.3.3. Estimation
I used event history analysis, which refers to “whether events occur or when events
occur” (Singer & Willett, 2003, p. 306). More specifically, a discrete-time logit model and
competing risks model were used to estimate “discrete-time hazard,” the conditional
probability that a potential founder will experience the event in the time period 1975–2009,
given that the founder did not experience this event in any earlier time period in this analysis
(Singer & Willett, 2003). Using event history analysis, I tried to focus on “when” and “why”
questions, with data all experiencing events, while the more conventional use of event history
analysis is to consider “whether” events occur. Why do potential founders establish in a
specific year? Were their inceptions affected by a specific year’s corresponding political-
economic factors or institutional norms, or both? And do different kinds of founders
(government-related or not) establish their foundations by different factors?
For the present analysis, the collected data (n = 1, 376) were transformed to annual
spells. Each annual record holds value for the dependent variable and independent covariates. I
coded a foundation’s creation with a “1” in the established year, and did not retain after that
year. In other words, records were maintained until those years of observation in which a
founder was at risk of establishing a foundation, and that observation was excluded from the
risk set, which contains 31,888 spells at which the number left after excluding 36 observations
with missing covariates.
I adopted a discrete-time logit model to estimate the hazard rate for foundations
established during the risk period 1975–2009 in Korea. The hazard at time t for a foundation
with time invariant characteristics i and time-varing characteristics j is equal to the following:
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log (p(t)/ (1-p(t)) = α0 + α
i
t+ β
1
x
1i +
β
2
x
2ij
Based on a baseline hazard function α0 + α
i
t, which means the risk for oganization with
baseline charateristic X =0 and α
i
t captures a log-linear time trend, nested models were
employed in order to measure a set of political-economic factors and a set of cultural factors
separately. Then pooled model is suggested to measure full factors in discrete-time logit model.
Lastly, I separated the government-related foundations model and the nongovernmental
foundations model to compare the hazard rate using a competing risks model. While a discrete-
time logit model analyzes whether each unit is at risk of experiencing a single of target event
transiting from the one status to the other status, the competing risks model assumes that a unit
can experience multiple destinations even starting from the one status. Based on multinomial
logit models, this competing risks model does not disregard significant differences from the
hazard rate between competing risks (Singer & Willett, 2003). Here, differences can exist
between government-related foundations and non-governmental foundations. In the competing
risks model, one target event among multiple destinations takes a role of censoring, so a unit
would be excluded from different competing risk sets (Singer & Willett, 2003).
4.4. Discussion of Findings
Political-Economic Factors vs. Cultural Factors. Table 4.4 shows discrete time-logit
estimates for the creation of Korean foundations during the risk period 1975–2009. The first
model suggests hypotheses 2, 3, and 5b about political-economic factors are supported.
Hypothesis 2 is supported, because two political shifts are statistically significant. I
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hypothesized that the dictatorship and the Democratic Party regimes would affect the
establishment of foundations positively, and that pressure from dictatorship seems to create
more foundations. However, the negative effect of the Democratic Party regimes can be
interpreted variously. The first possible explanation is loosened control and an increasing
burden from less cozy relations with the government. For example, while the regime of
President Jeon Doo-Hwan was notorious for taking corporate donations and reliving obedient
corporations of strict audits and negative media reporting. Rather, the Democratic Party regime
tried to be transparent in public funds and require transparency to foundations and potential
funders. The second possible explanation would be the diversification of the Korean nonprofit
sector. More institutionalized space was provided across the spectrum of nonprofit
organizations (for example, NGO support law from 2000). Foundations are not the only
institutional vehicle that potential founders may consider taking.
An increasing lagged related tax rate predicts greater inception rate, which turns out
statistically significant at the 0.01 level. The expected negative direction of tax restriction on
public corporations is same with hypothesis 5a, but there is no significance. Regarding
supportive laws for the nonprofit sector (H
5b
), both fundraising law and NGO support law are
positive predictors in this model. The odds of establishment are 107% higher after the
fundraising law (p < 0.001), and the odds of establishment are 45% higher after NGO support
law (p < 0.05), controlling for other covariates.
The second model suggests that all four variables for hypotheses 6, 7, 8, and 9 have a
statistically significant association with the inception rate, when we are concerned only with
cultural factors and fixed covariates. However, IMF’s effects explain inception with a strong
statistical significance (p < 0.001) in this model, but the expected positive direction of IMF’s
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effects was not supported. Interestingly, the pooled model addresses the opposite direction of
the IMF effect, but no significance anymore. The reason might be that the IMF effect was a
cultural factor when including political-economic factors; but it turns out that economic factors
reflect donor-side uncertainty when excluding political-economic factors. Looking at other
cultural factors, a global diffusion variable (p < 0.001) increases inception rates. Global model
diffusion and the inception density of fields are significant at the 0.001 level, and the inception
density of location is significant at the 0.05 level. Therefore, hypotheses 7 for global diffusion,
and 8, 9 for mimetic isomorphism are supported.
Last pooled model estimates the inception rate in a set of political-economic factors and
a set of institutional norms together. In terms of political-economic factors, the effects of
Democratic Party regimes and fundraising law were significant just like the first model, but
NGO tax rate changes and tax restrictions on public corporations become newly significant at
the 0.05 level. The odds of establishment are 6% lower for NGO tax rate changes law (p <
0.05), and they are 35% lower after tax restrictions on public corporations (p < 0.05). The
positive effect of NGO support law becomes negative but has no significance. In terms of
institutional norms, the effects of global model diffusion and inception density of fields were
significant just like the second model. By contrast, IMF effects and inception density of
locations are not significant anymore, and a direction of IMF effects shows a dramatic
difference (from negative to positive). Then, regarding the direction of cultural factors, all
support my hypotheses.
Four kinds of fixed controls were strong predictors across three models: endowment size,
location, funder types, and foundation fields. In pooled model, for example, a one-unit increase
in logged endowment size corresponds to an increase in the odds of 15% (p < 0.001), when
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controlling other covariates. Non-Seoul location decreases the rate at the 0.05 level, compared
to reference location, Seoul. Traditionally, major NGOs in Korea remain in Korea (Kim, 2006),
and foundations are also the case. Corporate foundations are used as a reference category for
funder types, and government-related foundations are associated with smaller odds of
establishment. On the contrary, the odds of establishment are 50% higher for member-based
foundations (p < 0.05). Turning to foundation fields, the education-supervising department was
used as a reference category. Four foundation fields decreased the inception rate at the 0.001
level. Most activities of foundations in Korea have concentrated on academic programs, and
some have covered conventional fields including culture and social welfare. Therefore, it might
be reasonable to say that diversification in purpose of foundations is yet to come. Then, we can
compare those explanations of a full model to two separate models distinguished by public
sector uniqueness.
Government-Related Foundations vs. Nongovernmental Foundations. Korean government
foundations represent a “statist” country’s typical nonprofit model. For example, Japan’s and
Korea’s governments have used representative government-sponsored foundations,
“Community Chest” to initiate donations from the public and community members, and
various departments of Korean national governments and local governments additionally
established their foundations. Then, what can explain the establishment of government-related
foundations and the establishment of nongovernmental foundations? And how can we
differentiate the explanatory factors?
Table 4.5 shows those differences. First we need to focus on estimates of the competing
risks model of governmental-related foundations. Similar to the pooled model, Democratic
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Party regimes (p < 0.001), NGO tax rate changes (p < 0.05), and fundraising law (p < 0.01) are
influential factors for government-related foundation creation, and lagged related tax rate
changes (p < 0.01) explain the inception rate among political economic factors. Turning to
cultural factors, inception density of fields was maintained as a strongly significant factor (p <
0.001). However, IMF’s effects (p < 0.01) explain the inception of government-related
foundations, unlike the pooled model, while the global model of diffusion became an
insignificant factor.
Then, estimates of the hazard rate of nongovernmental foundation creation showed
interesting comparisons. In political-economic factors, Democratic Party regimes (p < 0.001)
and fundraising law (p < 0.05) were still effective factors, but related tax rate changes and
NGO tax rate changes became nonexplanatory ones. More surprisingly, the direction of related
tax rate changes turned out negative, despite its insignificance. The meaning can be borrowed
from Esparza’s (forthcoming) explanation of corporate foundations’ decreasing inception in
positive changes in corporate tax rate. Both results contradicted with my hypotheses and hers.
She argued that “this may suggest that immediate (and possible short-term) changes to tax rates
may encourage founder to give through less permanent and formalized means, such as giving
to other institutions” (p.16). When we compare those results to the estimates of government-
related foundations, we may predict that nongovernmental foundations are less strategic and
have weaker resource-dependent founders, or at least more long-term actors hesitating to
respond quickly to changes in tax policies.
In terms of a set of cultural factors, another comparison seems feasible. While the IMF
period turned out positive effects with statistical significance for government-related
foundation establishment, it turned out negative effects, despite statistical insignificance, for
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nongovernmental foundations creation. The statistical significance of global models diffusion
(p < 0.01) was maintained, unlike the estimate of government-related foundations. And a
variable of inception density of fields predicted greater inception (p < 0.001) in the
nongovernmental foundation model, same with pooled model and the government-related
foundation model.
The effects of fixed control variables remained the same in the three models, except
the endowment size in the nongovernmental foundation model and the inception rate of culture
field in the government-related foundations model. Looking at the directions of variables, there
is one interesting difference between the government-related foundation model and the
nongovernmental foundation model—that is location variable. The location variable has a
statistically strong significance, but the direction of both models is opposite. This result is
parallel with a description of Figure 4.4, and the “non-Seoul” location predicted the
establishment of fewer foundations in the nongovernmental foundation model, while it
predicted the establishment of more foundations in the government-related foundation model.
Those mixed results elucidate different factors to explain the different hazard rate of
inception between government-related foundations and nongovernmental foundations, as
hypothesis 10 suggests. Here, we need to take a look at “governmental” organizations. Because
not many societies have government foundations and related researches, I adopted a
comparison frame “public sector organization” versus “others” (private sector organization or
nonprofit organization, or both). Basically, all kinds of foundations in this study are “nonprofit,”
but we need to trace back to each foundation’s roots, which includes establishments from the
government sector or the nongovernment sector.
As we see more predictors in terms of political-economic factors in government-related
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models, public sector foundations tend to respond more directly to tax changes and supportive
public policy. Despite the stability of organizational input by gathering taxes and assess fees,
they need to “win public approval so that decisions about the allocation of resources end up
favoring one purpose or agency over another” (Frumkin & Galaskiewicz, 2004, p. 291) against
the criticism of bureaucratic inertia, administrative inefficiency, and so on. On the contrary,
nongovernmental foundations seem to respond less directly and to defer their decisions to
create permanent institutional vehicles. Then we need to reconsider tax and public policy
effects on private and nonprofit sector rooted foundations.
Looking at cultural factors requires, the result requries more complex explanations. If
we can assume that IMF’s effects are state-driven by coercive pressure and corresponding
public opinion, they pushed government-related foundations effectively, but did not push
nongovernmental foundations. Rather, nongovernmental foundations have been moved by
global diffusion, so-called “sectoral norms” in the nongovernment sector across countries. The
inception density of fields, one of mimetic pressures, was an effective influence for both kinds
of foundation models. Therefore, we can say that institutional pressures in general can affect
both kinds of foundations, but institutional pressures “from where” would be a more interesting
question in the future.
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Table 4.4
Discrete Time-Logit Estimates for Creation of Korean Foundations, 1975–2009
Pooled Foundations
Political-Economic Factor Model Cultural factor Model Full Model
Coef. (S.E) Coef. (S.E) Coef. (S.E)
Political-economic factors
GDP 0.00 (0.02) 0.02 (0.02)
Dictatorships 0.50** (0.16) 0.28 (0.17)
Democratic Party Regimes -0.96*** (0.12) -1.13*** (0.16)
Related Tax Rate Changes (L) 0.02** (0.01) 0.01 (0.01)
NGO Tax Rate Changes -0.05 (0.03) -0.06* (0.03)
Tax Restrictions on Public Corporations -0.27 (0.20) -0.42* (0.20)
Fundraising Law 0.73*** (0.16) 0.87*** (0.22)
NGO Support Law 0.37* (0.15) -0.06 (0.17)
Cultural factors
IMF Effects -0.68*** (0.08) 0.25 (0.17)
Diffusion of global model 0.41*** (0.12) 0.69** (0.23)
Inception Density of Fields (Supervising
Dept.)
0.20*** (0.02) 0.20*** (0.02)
Inception Density of Locations 0.08* (0.03) 0.06 (0.03)
Fixed controls
Endowment size 0.14*** (0.03) 0.14*** (0.03) 0.14*** (0.03)
NonSeoul -0.15* (0.07) -0.15* (0.07) -0.16* (0.07)
Foundation Type_ Gov. Related -0.32*** (0.09) -0.28** (0.09) -0.30*** (0.09)
Foundation Type_ Individual & Family -0.05 (0.08) -0.04 (0.08) -0.05 (0.08)
Foundation Type_ Member-Based 0.47*** (0.10) 0.44*** (0.10) 0.47*** (0.10)
Foundation Type_ Public -0.08 (0.18) -0.05 (0.18) -0.06 (0.18)
Supervising Department_ Culture Field -0.55*** (0.10) -0.74*** (0.11) -0.74*** (0.11)
SD_ Welfare Field -0.35*** (0.10) -0.41*** (0.10) -0.42*** (0.10)
SD_ Local Government Field -0.62*** (0.16) -0.9*** (0.17) -0.94*** (0.18)
SD_ Etc. Field -0.67*** (0.10) -0.78*** (0.10) -0.833*** (0.10)
Constant
-6.72*** (0.30) -6.00*** (0.17) -6.34*** (0.32)
Log Likelihood -4465.51 -4441.18
-4393.73
Wald X
2
1849.59*** 1853.31*** 1908.89***
Prob> Chi2 0.0000 0.0000 0.0000
Observations 31865 31865 31865
Events 1340 1340 1340
Note: * p <.05 ** p <.01 *** p <.001 (two-tailed tests). “L” means lagged one year.
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Table 4.5
Competing Risks Estimates for Establishment of Government-Related Foundations vs.
Nongovernmental Foundations, 1975–2009
Full Model
Gov.-Related Foundations Model Nongovernmental
Foundations Model
Coef. (S.E.) Coef. (S.E.)
Political-economic factors
GDP -0.01 (0.05) 0.02 (0.02)
Dictatorships 0.19 (0.43) 0.29 (0.18)
Democratic Party Regimes -1.06*** (0.24) -1.09*** (0.17)
Related Tax Rate Changes (L) 0.06** (0.02) -0.00 (0.01)
NGO Tax Rate Changes -0.14* (0.07) -0.03 (0.03)
Tax Restrictions on Public
Corporations
-0.55 (0.47) -0.37 (0.22)
Fundraising Law 1.27** (0.48) 0.61* (0.25)
NGO Support Law -0.30 (0.32) 0.05 (0.20)
Cultural factors
IMF Effects 0.75* (0.34) -0.00 (0.20)
Diffusion of global model 0.51 (0.41) 0.71** (0.27)
Inception Density of Fields
(Supervising Dept.)
0.26*** (0.04) 0.19*** (0.02)
Inception Density of Locations 0.08 (0.06) 0.03 (0.04)
Fixed controls
Endowment size 0.39*** (0.05) 0.01 (0.03)
Non-Seoul 1.09*** (0.16) -0.58*** (0.07)
Supervising Dept. _Culture Field -0.34 (0.21) -0.44*** (0.11)
SD_Welfare Field -2.27*** (0.40) -0.49*** (0.11)
SD_Local Government Field -0.67* (0.30) -1.29*** (0.22)
SD_Etc. Field -0.38* (0.18) -1.15*** (0.13)
Constant -10.70*** (0.77) -5.67*** (0.34)
Log Likelihood -4990.96
Wald X
2
2063.52***
Prob> Chi2 0.0000
Observations 31888
Events 328 1,025
Note: * p <.05 ** p <.01 *** p<.001 (two-tailed tests). “L” means lagged one year.
127
4.5. Conclusion
The contribution of this research to the Korean foundations can be threefold. First, it
embraces institutional norms to explain Korean foundations. Institutional norms have attracted
little attention as influences on foundations, but Lee (2012) has started to discuss the public’s
skepticism against the wealthy, for instance. Rather, most of researchers on philanthropy have
targeted corporate-giving and corporate-sponsored foundations, and have emphasized economic
factors such as tax incentives and net income (Kim, 1997; Son, 2009; Son & Park, 2008).
Inspired by Suárez and Hwang (2009), and Esparza (forthcoming), this research compared
two streams: “logic of instrumentality” and “logic of appropriateness.” Supporting by the results,
both theories can explain Korean foundation inception. Korean foundations have been
established not only by political-economic influences, but also by cultural pressures.
Theoretically, it might be reasonable to say that the “logic of instrumentality” and the
“logic of appropriateness” complement each other rather than compete, and the relative
importance of the logics depends on the contexts in which organizational behaviors are
embedded (Grendstad & Selle, 1995; Ha, 2011).
Second, differences between governmental organizations and nongovernmental
organizations were tested. The result of the competing risks model showed that government-
related foundations are closer to resource maximizing actors, and compliers to state-driven forces
(and probably corresponding public opinion). Public administration literature has pointed out that
governmental organizations are likely to fall in bureaucratic inertia; but, as Frumkin and
Galaskiewicz (2004) argued, they tend to be vulnerable to institutional forces. Although this
study does not include the normative isomorphism variable, the establishment of government-
related foundations has been influenced by coercive and mimetic isomorphism.
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Comparatively, nongovernmental foundations tend to respond to a public policy design for
the possible growth of foundations (Law on Charitable Solicitation and Usage) and a cultural
factor aroused within the foundation field (diffusion of global model), and do not to react to
economic and political forces immediately. Law on Charitable Solicitation and Usage and
diffusion of global model together might encourage the creation of nongovernmental foundations
and offer an opportunity for citizen empowerment, which means that all constituents in Korean
society can regard themselves potential founders, or at least donors of foundations and
fundraisers.
Third, this study is the first attempt to analyze the Korean foundation field statistically.
Whereas foundations have become a more popular topic in Korea than ever, it is much easier to
find a descriptive analysis of segmented foundations, or normative arguments about which
direction would be desirable for foundations’ future. The reason is probably a lack of
comprehensive data.
Collecting foundation data had not been tried before The Beautiful Foundation’s research
in 2012, since the NTS does not provide information. In Korea, NTS is the only place to put
foundation information together, since foundations are controlled by separate supervising
government departments. If funders want to establish foundations, they need to get permission
from the related government department based on a foundation’s own purpose. A lack of
information can be confirmed in that NTS does not want to provide information to the public and
the Korean society does not have nongovernmental organizations like the Council on Foundation
and the Foundation Center, which can function as a hub for the foundation field. In other words,
it’s hard to accumulate data and to conduct further research on foundations in Korea.
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Likewise, the significance of findings has several limitations. This research is based on
research into The Beautiful Foundations, and data of The Beautiful Foundations might not be
thoroughly collected, if there is one which NTS can put together. Collected data by information
disclosure from each government department and local governments may cause some blanks and
inconsistency. Even information from NTS reporting system can have some mistakes since there
are no clear directions or standards to guide staff members of public corporations (Son, 2012).
In addition, using event history analysis, I have tried to focus on “when” and “why”
questions, with data about all experiencing events, while a more conventional way for event
history analysis is to consider “whether” events occur. Although there are a few examples, some
reviewers may not agree. Also, there are many “inactive” foundations and officially terminated
foundations, and this method for establishment cannot reflect them. Those inactive and
terminated foundations were treated the same once they were established.
A lack of umbrella organizations such as the Foundation Center relates to this problem.
Also, normative isomorphism associated with professionalism cannot be included in this research.
Therefore, interpretations of these findings are limited because this study only includes two
aspects of institutional pressure: coercive and mimetic isomorphism. In this sense, if this
research can be a starting point to discuss information disclosure from the NTS and the
establishment of a center for foundations, the findings here will have further implications for
both theory and practice.
Finally, we can recall the Korean government’s regulating mode on foundations until now.
If we see the American cases, the TRA 1969 shows the bright and dark sides, but it seems
successful “in altering some forms of behavior by foundations and their donors without
jeopardizing the continued use of the foundation form” (Clotfelter, 1985, p. 272). Then, an
130
advisable government role would be somewhere between strengthening regulations to control
and boosting inter-organizational networking to share the cultural norm.
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CHAPTER 5:
CONCLUSIONS
5.1. Key Findings
This dissertation examined the Korean foundation field regarding governance with
different sectors, as well as the processes and outcomes of institutionalization by a global cultural
norm. Also it elucidated the effects of political-economic factors and institutional norms on the
establishment of foundations over 35 years, 1975–2009. Three major conclusions of the study
are explained below.
Chapter 2 explained the several differences between Korean foundations and American
Foundations. While American foundations have built up strong partnerships with nonprofits and
gained their legitimacy from those partnerships (Hammack, 2006), Korean foundations have
been led by government and have mirrored the government’s objectives. Until the 1990s,
“foundations” belonged to governments and corporations mainly, whereas nonprofits belonged to
civil society. This situation produced a particular tension between foundations and nonprofits in
Korea. However, recent foundations have experienced new public policies to boost the field and
have taken some opportunities to recalibrate their identities and share new norms.
Chapter 3 examined the process of institutionalization of the Korean foundation field
from the end of the 1990s. This change aligned with the development of the Korean nonprofit
sector and has been affected by a community foundation model as a global cultural norm. Two
cases in Korea—Community Chest of Korea (a more traditional fundraising organization) and
The Beautiful Foundation (a more diffused model from world-polity)—show different
fundraising and corporate giving, designated and donor-advised funds, and relationships with
recipients and legitimacy seeking. A different relationship with government is likely to make
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different levels of legitimacy and autonomy, and it is reasonable to say that Community Chest of
Korea with more legitimacy can achieve quantitative growth and qualitative evolution was
initiated by The Beautiful Foundation with more autonomy. Their coexistence seems to affect
each other, and many kinds of sectoral norms have diffused to other foundations in the field.
Chapter 4 demonstrated that not only political-economic factors but also cultural factors
affect foundation inception in Korea. The “logic of instrumentality” and “logic of
appropriateness” are likely to complement each other rather than compete. As examined
separately, the creation of government-related foundations tends to be influenced by political and
economic factors, and at the same time is exposed to institutional pressures, such as coercive and
mimetic isomorphism. Relatively, the establishment of nongovernmental foundations tends to be
more explained by institutional norms in terms of global diffusion and mimetic pressures. Then,
internal factors within the field seem to have a more powerful influence on nongovernmental
foundations.
5.2. Implications
I hope that this dissertation is able to provide an impetus to discourse about governance
with other sectors and sectoral norms within the foundation field. Over three decades, Korean
government tended to control foundations as a form institutional expression. This might be
because the government tried to maintain advantages in a strong relationship with chaebols.
While this government-leading tradition has shifted, recent government also tends to establish
foundations and hold controls on their money as public funds, which, in some ways, might
prevent foundations from innovating around issues or representing the diverse passions of private
wealth, behaviors that are often encouraged in American foundations.
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Korean society can view the United States cases in a dialectical and critical way, as
America foundations are going through various problematic situations due to a strained
coexistence between “public ends” and “private means” in foundations, as an institutional
vehicle. For example, looking at TRA 1969 and a guideline reported by the National Committee
for Responsive Philanthropy in 2009 in the U.S., regulations by government and network-based
norms together can shape the field and correct misuse by founders.. Regardless of many
counterclaims and arguments, foundations are hoped to use their independent dynamics to
“stimulate democratic debate” (Anheier & Leat, 2006).
This dissertation also demonstrated the usefulness of embracing institutional norms to
explain Korean foundations. Institutional norms have attracted little attention as influences on
foundations, but state-driven pressures, “public’s skepticism against the wealthy” (Lee, 2012),
the global diffusion of a community foundation model, and other kinds of cultural factors can
explain the field.
In this sense, this dissertation may be a starting point for discussing information
disclosure from NTS and the establishment of an umbrella organization for foundations.
5.3. Limitations and Future Study
One of the limitations of this research is its exclusive discussion of national foundations
despite its original interest in community foundations. In fact, a local community is the best unit
for experiments in problem solving by foundations due to the nearness between micro- and
macro- contexts. In other words, community may be a desirable unit for bringing every sector to
the table and forming a consensus, according to Habermas’s “communicative actions” and
Giddens’s “structuration,” for example.
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Future study conducted further down the line should include people from CCK satellites,
and genuine community foundations located outside of Seoul, as well as other layers of
stakeholders around quasi-public foundations and quasi-community foundations. Such focus will
suggest advisable roles for government and civil society in philanthropy—not only for Korea but
also for developing countries.
Next, using event history analysis, I tried to focus on “when” and “why” questions, while
a more conventional way to apply event history analysis is to consider “whether” events occur.
Although there are a few examples, some reviewers may not agree. Given this limitation on data
and method, The Beautiful Foundation is planning to collect more advanced data, which will
likely suggest more concrete results to further this research. Segmented types of foundations can
be analyzed in detail, taking analysis of the foundation field as a whole into account.
135
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APPENDIX A
Interview Protocol and Instrument
Professionals are expected to construct the field. Then, staff members of two organizations,
Community Chest of Korea and The Beautiful Foundation, were chosen for interview.
I conducted four face-to-face interviews and two one-and-one telephone interviews with
staff members who worked for CCK or the BF between 2000 and 2009 to generalize and
complement organizational information. Personal working experiences in both organizations
provided me 19 informal interviews, more specifically 13 in CCK and 6 in the BF, and helped to
identify and to contact with key people of CCK and the BF. During March and April in 2014,
with a protocol, face-to-face interviews lasted approximately one and half hours where each
interviewee suggested and were recorded with consents. And telephone interviews lasted
approximately thirty minutes and were transcribed with consents.
The interview instrument consists of four categories with semi-structured interview
questionnaire.
Fundraising focus questions
(1) What would you say in the foundation’s main target for fundraising between 2000 and
2009?
(2) How has the foundation achieved the target? How has it changed over time?
(3) Do you think your foundation has diverse funding resources? What is the portion for
discretionary and unrestricted funds?
(4) Do the targeting strategy and the proportion of funds affect your organizations?
Grantmaking focus questions
(1) How would you characterize the grantmaking tendencies of your organization between
2000 and 2009? Do you describe them as innovative areas? Do you describe them as
traditional areas? Do you describe them as advocacy areas? Do you describe them as
welfare areas?
(2) What was the reason for it? Does your organization intend it or not?
(3) How would you describe your typical grantees and the relationship with them? What you
do think of the reason?
149
Legitimacy seeking focus questions
(1) Which organization affects your organization most in establishment? Which organization
is your model and peer groups between 2000 and 2009? Is it a national level? What about
an international level?
(2) How do you set up your organizational rules and policies? Where do you adopt them?
Have they changed and where did they derive from?
(3) How do you signal those modeling and relationship? What was the response from your
stakeholders?
Etc.
(1) Do you recognize any differences with The Beautiful foundation (or Community Chest
of Korea) from 2000 to 2009? How about these days?
(2) What is the main effect of independence from government (or dependence on
government)?
(3) Do those factors have effects on organizational cultures and governance?
Abstract (if available)
Abstract
This dissertation examines the South Korean foundation field in terms of governance in different sectors, and the processes and outcomes of institutionalization in the field. It also elucidates the effects of political‐economic factors and institutional norms on the establishment of foundations over a 35‐year span, 1975-2009. Three main chapters are organized as follows: ❧ Chapter 2 clarifies the societal conditions of the Korean foundation field using comparative historical analysis to foundations in the United States, based on social origin theory, and historical institutionalism. Korean foundations and American foundations have several differences. Whereas American foundations have built up strong partnerships with nonprofits and have gained their legitimacy from those partnerships (Hammack, 2006), Korean foundations have been led by the government and have mirrored the government’s objectives. Many traditional foundations were established in collusive relationships between business elites and government, and earned a negative image through misbehaviors and corresponding public policies for regulations. As a result, the private passions of founders and partnerships with nonprofits have rarely been encouraged. However, recent foundations have experienced new public policies to boost the field and have taken some opportunities to formulate their identities and share new norms. ❧ Chapter 3 deals with two cases of quasi‐community foundations or quasi‐public foundations, and adopts case studies and interviews. Based on the world‐polity perspective and public resource dependence theory, it examines the processes of institutionalization of the Korean foundation field from the end of the 1990s. The processes are aligned with the development of Korean nonprofit sector and have been affected by a community foundation model, as a global cultural norm. Two cases from Korea, the Community Chest of Korea (a more traditional fundraising organization) and The Beautiful Foundation (a more diffused model from world‐polity), show different fundraising and corporate giving, designated and donor‐advised funds, the relationship with recipients, and legitimacy seeking. A different relationship with government is likely to lead to different levels of legitimacy and autonomy
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University of Southern California Dissertations and Theses
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Asset Metadata
Creator
Sohn, Yu Jean
(author)
Core Title
The institutional context of Korean philanthropy and the role of government and (quasi-) community foundations
School
School of Policy, Planning and Development
Degree
Doctor of Philosophy
Degree Program
Policy, Planning, and Development
Publication Date
07/18/2014
Defense Date
04/29/2014
Publisher
University of Southern California
(original),
University of Southern California. Libraries
(digital)
Tag
community foundations,Korean foundation field,Korean philanthropy,OAI-PMH Harvest
Format
application/pdf
(imt)
Language
English
Contributor
Electronically uploaded by the author
(provenance)
Advisor
Graddy, Elizabeth (
committee chair
), Esparza, Nicole (
committee member
), Kang, David (
committee member
)
Creator Email
yjeansohn@gmail.com,ysohn@usc.edu
Permanent Link (DOI)
https://doi.org/10.25549/usctheses-c3-446191
Unique identifier
UC11287762
Identifier
etd-SohnYuJean-2723.pdf (filename),usctheses-c3-446191 (legacy record id)
Legacy Identifier
etd-SohnYuJean-2723.pdf
Dmrecord
446191
Document Type
Dissertation
Format
application/pdf (imt)
Rights
Sohn, Yu Jean
Type
texts
Source
University of Southern California
(contributing entity),
University of Southern California Dissertations and Theses
(collection)
Access Conditions
The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the a...
Repository Name
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Repository Location
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Tags
community foundations
Korean foundation field
Korean philanthropy