Case Study:
Toi Foundation & TSB Bank
Organisation inception and background
TSB Bank (founded in 1850) is the seventh largest bank in New Zealand, with a 1.4% market share, an asset base of over $9 billion and a workforce of around 550 staff members.
In 1988, ownership of the bank was transferred to the Toi Foundation (formerly the TSB Community Trust), a charitable entity that plays a critical role in the growth and development of the Taranaki region through philanthropic efforts, strategic grant-making and impact investing.
The Toi Foundation is a 100% owner of TSB bank through its subsidiary, Toi Foundation Holdings Limited. Each year, TSB gives just over 20% of its after-tax profits to Toi Foundation Holdings, which then distributes grants through the Toi Foundation to support various initiatives and organisations in the Taranaki region.
As we’ve matured, we’ve grown alongside our community. Our infrastructure has strengthened and we’ve expanded our staff so we can better support grant making and the ways we engage with our community. We are no longer just a grant maker – we also work alongside organisations and our community helping them to develop their capacity and their own solutions.
What was the genesis for the transition to Steward Ownership?
In 2015, the Foundation made a strategic decision to diversify its assets, and purchased a 66% controlling share in Fisher Funds. Fisher is the 4th largest KiwiSaver provider and the 5th largest investment manager overall in New Zealand. This robust investment provides Toi Foundation with reduced risk and increased dividends, ultimately contributing to greater community outcomes.
The purchase also led to a staffing restructure, and further maturing in the Foundations dual role as funder and asset manager.
What has the impact been?
Through dividends provided by TSB Bank and Fisher Funds, the trust has now distributed more than $200 million to Taranaki people and projects.
The last 35 years have taught the Toi Foundation team a lot, which we have distilled into four clear lessons for others looking to establish or exit to Foundation ownership.
The Foundation must build the capacity and capability to govern as both a funder and an asset manager.
The board of the Foundation must be able to provide adequate oversight and professional tension, contributing as an involved shareholder to protect both purpose and profit. For most foundation boards this will involve upskilling, recruiting for specific expertise, and building a skilled and specialist group of advisors.
Distinct roles and mutual respect.
In this model both organisations have a distinct role to play – one focused on profit generation and one on social impact. For the model to work long term, the business and the Foundation must create separate identities with aligned values, mutual respect and a shared picture of social good.
Shared directorship benefits both.
Shared directorship increases connection and understanding across the two entities and helps to hold both to account when there is culture or mission drift. For the Toi Foundation this shows up as 10 Foundation Directors, 5 of whom are also on the board of the holdings company, and one who is also on the board of each of the Bank and Fisher Funds.
Set expectations clearly, and early.
Clear and structured reporting, communication and expectation enables both parties to operate effectively and plan into the future. A letter of expectation outlining strategic priorities, expected return, cost of capital investments and risk analysis provides a robust baseline, supported by relationships, policy and practice.