Denmark's non-profit foundation's virtuous governance cycle

Believes new drug development is of public interest

The foundation's ownership structure, free from short-term pressure, serves as an advantage

Last year, Novo Holdings' sales reached KRW 13 trillion... Foundation → Biotech → Follow-up investment → Return

In 1922, Dr.

 

August Krogh paid just $1 to introduce insulin production technology from the University of Toronto in Canada.

 

At the time, he made two promises to the University of Toronto research team: to make insulin available to all patients at an affordable price and to use insulin for public healthcare rather than for commercial gain.

 

And Leo Pharma delivered on this promise.

 

Despite the uncertain profitability of insulin production, Leo Pharma participated in its production, laying the groundwork for the first commercialization of insulin in Northern Europe.

 

Following this, Dr.

 

Krogh established the non-profit organization Nordic Insulin Laboratory to ensure a stable supply of insulin.

 

The two brother researchers who worked with him at the laboratory later spun off to form Novo Insulin Research Institute.

 

The two organizations merged in 1989, giving rise to today's Novo Nordisk.

 

Denmark's public-interest-driven medical philosophy did not end as a single generation’s promise.

 

The spirit was carried forward through the corporate governance structure of foundation ownership.

 

Major Danish pharmaceutical companies such as Novo Nordisk, Leo Pharma, and Lundbeck all have a structure in which a non-profit foundation serves as the top shareholder.

 

These foundations support the long-term stability of the companies and return profits to society and science, thereby putting into practice the public values emphasized by Dr.

 

Krogh even today.

 

'Foundation is the largest shareholder'...

 

A sustainable management model created by society, institutions, and culture According to industry sources on the 15th, Denmark has the most structured ‘foundation-owned model’ in Europe.

 

Approximately 1,300 companies in Denmark are operated as foundations.

 

According to research by Børsting and Thomsen (2017), foundation-owned companies account for approximately 70% of the total market capitalization of the stock market in Denmark, demonstrating the overwhelming influence of foundation-owned companies.

 

Pharmaceutical companies such as Novo Nordisk, Leo Pharma, and Lundbeck, as well as toy company Lego, beer company Carlsberg, and shipping company Maersk, all adopt a governance structure where a foundation is the majority shareholder.

 

Novo Nordisk's governance structure is organized as a “foundation → holding company → operating company” structure.

 

At the top is the non-profit public interest foundation Novo Nordisk Foundation, established with the goal of realizing corporate social responsibility and public value.

 

Rather than directly managing the company, it owns Novo Holdings, a holding company and professional investment firm, as a 100% subsidiary.

 

Novo Holdings, in turn, holds shares in major pharmaceutical companies such as Novo Nordisk and Novozymes.

 

This structure effectively allows the foundation to control Novo Nordisk through Novo Holdings.

 

Novo Holdings holds approximately 28% of Novo Nordisk's shares.

 

Although the surface ownership ratio is relatively low, Novo Holdings secures approximately 77% of the total voting rights of Novo Nordisk through a dual-class share structure, enabling it to maintain stable management control.

 

Under the dual-class share structure, the number of voting rights varies depending on the type of shares.

 

The shares held by Novo Holdings are designed to allow the exercise of more voting rights per share than ordinary shares.

 

Novo Holdings Ownership Structure (Source: Novo Holdings)

Lundbeck is another publicly listed pharmaceutical company with a foundation-based governance structure.

 

The Lundbeck Foundation is the largest shareholder, holding approximately 70% of Lundbeck's shares.

 

Another pharmaceutical company, Leo Pharma, is approximately 80% owned by the Leo Foundation.

 

The remaining shares of Leo Pharma are held by private equity fund Nordic Capital.

 

Leo Pharma plans to go public as early as next year, with the Leo Foundation maintaining a majority stake even after the IPO.

 

Denmark's foundation-based governance structure is different from Germany's family ownership and South Korea's holding company-based structures, as it is based on social values.

 

In this structure, the foundation functions as the core entity that designs the company's direction and strategy, going beyond the role of the largest shareholder.

 

The foundation prioritizes long-term research and development and the realization of social value, rather than being swayed by short-term profits.

 

The foundation reinvests profits from dividends received from the company and its own investment activities into public welfare projects.

 

The establishment of a foundation-based governance structure in Denmark is not simply due to the philosophy of founders or historical coincidence.

 

It is a structural product of the interplay between social, economic, institutional, and cultural factors.

 

Many Danish companies began as family businesses, but instead of passing on shares to their children, founders often chose to transfer them to public interest foundations.

 

For example, the founder of Novo Nordisk, Dr.

 

Krogh, did not pass on shares to his family even after the Nordic Insulin Laboratory grew into a corporation, instead transferring ownership to a public foundation.

 

Leo Pharma, a company founded by a pharmacist who accumulated capital to grow the business, also passed on shares to a foundation rather than to his children, continuing the founding philosophy.

 

Novo Nordisk Foundation, Lundbeck Foundation, Leo Pharma Foundation

Denmark's characteristics as a small open economy also influenced the establishment of foundation-based governance structures.

 

In Denmark, external capital inevitably held significant influence, leading to the natural adoption of foundation-based governance structures.

 

Since foundations function as a means of defending corporate control, even if external parties attempt to suddenly acquire a large amount of shares or engage in hostile mergers and acquisitions (M&A), they cannot effectively seize control of management.

 

Government policy support also played a crucial role in the establishment of a foundation-based governance structure.

 

Under Danish law, companies owned by foundations are eligible for corporate tax exemptions if they distribute a certain percentage of their annual net profits for public welfare purposes.

 

For example, if a foundation allocates more than 4% of its annual revenue to social welfare, it is exempt from taxation.

 

This enables foundations to actively disburse subsidies and research funds.

 

The legal framework enabling foundations to stably own companies is another core factor enabling public interest-centered management.

 

Denmark restricts the easy sale of shares owned by foundations.

 

This is to ensure that foundations are not swayed by short-term market fluctuations or external pressures, and can execute long-term corporate strategies in line with the founder's philosophy and public interest objectives.

 

In other words, policy support has provided a foundation for the founders' philosophy to be institutionalized and sustainably implemented, rather than remaining a one-time legacy.

 

Long-term perspective rather than short-term performance...

 

Foundation-based governance proves with results The most distinctive feature of the Danish foundation-based governance structure is the clear separation of ownership and management and the simplicity of the structure itself.

 

For example, the Novo Nordisk Foundation's board of directors consists of 11 members, including Chairman Lars Rebien Sørensen.

 

Three of the board members are employee representatives.

 

Employee representatives are elected by Novo Nordisk or Novonesis employees for a four-year term.

 

It is also noteworthy that there are no issues of dual listing within the governance structure.

 

In the Novo Nordisk model, the foundation controls the listed operating company through a non-listed holding company, creating a single stakeholder structure that minimizes the potential for conflicts of interest and external interference.

 

This distinguishes it from the domestic model, where the holding company and operating company are listed separately, leading to recurring issues such as conflicts of interest between the holding company and subsidiary shareholders and allegations of profit diversion from subsidiaries.

 

Jun-beom Cheon, Vice Chairman of the Korean Corporate Governance Forum (Attorney), explained, “The fact that the foundation holds 100% of the holding company's shares means that the holding company is unlisted.

 

This structure allows for the continuous pursuit of business under the same interests without duplicate listings of the operating company.” Ultimately, the core is the “single governance structure without duplicate listings” formed around the foundation.

 

This structure provides a foundation for companies to consistently execute long-term strategies without being overly concerned about short-term results.

 

As they are relatively free from the short-term profit demands of external investors or shareholders, they can focus on tasks such as long-term research and development (R&D) or the realization of public value.

 

Also, the foundation can demonstrate high flexibility in terms of equity ownership and investment methods.

 

It can secure a majority stake to deeply engage in management or, conversely, hold a minority stake while focusing on long-term support and public interest objectives.

 

Since the timing of investment exit is not strictly predetermined, it follows a distinctly different trajectory from private equity funds that pursue short-term exits based on the premise of achieving a certain level of returns.

 

The most notable product of foundation-based governance is “Wegovy.” Thanks to an environment that enabled sustained R&D, Novo Nordisk has grown into the world's leading GLP-1 antidiabetic and obesity treatment company.

 

Lundbeck and Leo Pharma are no exceptions.

 

Thanks to their stable foundation-based governance structures, these companies have been able to maintain consistent strategies over the long term, even in low-profit or market-uncertain fields such as mental health treatments and rare/chronic skin disease therapies, despite incurring losses.

 

Lan Ding, Vice President of Lundbeck, stated, “We have pursued a strategy focused solely on a specific disease group, neurological disorders, similar to Lundbeck.

 

If a company has a structure where the foundation holds 70% of the shares, like Lundbeck, it can prioritize long-term value over short-term results.”

Trend and portfolio of Novo Holdings

The foundation is not bound by short-term performance, but it does not neglect profit generation.

 

Last year, Novo Holdings earned 8 billion euros (approximately KRW 13 trillion), doubling its sales from the previous year.

 

The portfolio return rate jumped from 9.4% in 2023 to 18% last year.

 

This is the result of Novo Holdings' strategic investments based on its expertise in life sciences and its ability to connect ecosystems.

 

Denmark Foundation returns profits to society...

 

Attracting global talent through investment in basic sciences The Danish pharmaceutical company's foundation also plays the role of an investor in the national medical and basic science ecosystem.

 

All profits generated by Novo Holdings are transferred to the foundation.

 

As a 100% non-profit organization, the Novo Nordisk Foundation redistributes these funds in the form of grants for the benefit of society.

 

This creates a cycle structure where corporate profits are reinvested through the foundation for public purposes such as science, health, and education.

 

The Novo Nordisk Foundation executes public-interest investments across a wide range of fields, from promoting science, technology, engineering, and mathematics (STEM) education to vaccine development, infectious disease response, and AI supercomputing infrastructure construction.

 

The foundation allocates an annual grant budget of USD 1 billion for these activities and plans to expand its investment to USD 2 billion over the next decade.

 

Novo Nordisk Foundation

These investments have strengthened the scientific base throughout Denmark and attracted top talent from around the world to the country.

 

In fact, many scientists from around the world have flocked to major Danish universities such as the University of Copenhagen and the Technical University of Denmark, which in turn has led to an influx of talent to Danish biotech companies, including Novo Nordisk.

 

A representative from Novo Holdings explained, “There was a shared awareness that without attracting overseas talent, both Novo Nordisk and Danish universities would struggle to maintain their current level of research capabilities.

 

Through the Novo Nordisk Foundation and Novo Nordisk actively supporting research infrastructure centered in Copenhagen, we have created a virtuous cycle where talented researchers and professors from around the world are drawn to Denmark.” The foundation is also recognized as the hub of Denmark's bio-industry innovation ecosystem.

 

This is because the foundation directly designed and led the structure that connects early-stage science and technology with entrepreneurship.

 

The BioInnovation Institute (BII) is one representative example.

 

BII is a non-profit startup support organization established with full funding from the Novo Nordisk Foundation.

 

The BioInnovation Institute (BII), a world-class life science startup support organization based in Denmark, provides various dedicated spaces and infrastructure to nurture startups.

BII provides up to NKR3 million (approximately KRW 600 million) in grants to early-stage technology-based startups without requiring equity.

 

In addition, it operates a full-cycle support system that includes shared laboratory infrastructure, dedicated mentoring, investor connections, and business development strategy planning.

 

Currently, BII accounts for about 80% of Denmark's life science and bio sectors, playing a central role in the overall bio ecosystem.

 

Startups incubated by BII attract follow-up investments from Novo Holdings' venture funds and global investors.

 

Some form strategic partnerships with Novo Nordisk and Leo Pharma.

 

A BII representative stated, “To date, 80 companies that have received BII support have successfully secured external funding.

 

For every 1 euro invested by BII, companies secure an average of 7 euros in additional grants or investments.” This virtuous cycle has solidified the foundation-based governance structure as the backbone connecting Denmark's bio industry ecosystem.