Industrial foundations are nonprofit holding companies that own business firms. These
entities are common in Northern Europe, and many successful international companies are owned in thus fashion. Because of their strong economic performance and unusual combination of nonprofit and for-profit entities, they present interesting challenges to theories of the firm.

In this paper, we present the first study of the manner in which the foundations govern the companies that they own. We work with a rich data set comprising 121 foundation-owned Danish companies over the period 2003-2008.
We focus in particular on a composite structural factor that we term “managerial distance.”
We interpret this as a measure of the clarity and objectivity with which a foundation-owned
company’s top managers are induced to focus on the company’s profitability. More particularly, managerial distance seems best interpreted as a factor, or aggregate of component factors, that put the foundation board in the position of “virtual owners,” in the sense that the information and decisions facing the managers are framed for them in roughly the way they would be framed for profit-seeking outside owners of the company. Our empirical analysis shows a positive, significant, and robust association between managerial distance and company economic performance. The findings appear to illuminate not just foundation governance, but corporate governance and fiduciary behavior more generally.