Governed by Who We Are: Identity Work in the Governance of Foundation-Owned Firms

Abstract

Foundation-owned firms (FOFs) present a persistent governance paradox: The organizational form that excludes residual claimants and capital market exit is simultaneously one of the most stable and durable forms. Prior research has identified organizational identity as a likely explanatory variable but left the underlying mechanisms unexplored. We draw on 26 semi-structured interviews with directors and managers across five FOFs in the media and industrial sectors in Central and Northern Europe. Our main findings show that FOFs are governed through self-regulation produced by active identity work organized around the founder's will as codified in the charter. The charter functions not as an external compliance boundary but as an identity referent, such that deviation becomes legible as self-betrayal rather than rule violation. We identify three interlocking governance mechanisms: Structural mechanisms determining who enters executive positions and under what motivational framing; constitutive mechanisms through which members continuously renew their self-understanding in relation to the charter; and activating mechanisms through which accumulated identity work enters real-time decisions as distributed peer monitoring. The findings challenge the passive spillover account in prior FOF scholarship and demonstrate that alignment is an active organizational accomplishment requiring continuous investment to sustain.