Why is Ikea a Non-Profit?
Ikea is a non-profit. It’s stated mission: to “offer a wide range of home furnishing items of good design and function, excellent quality and durability, at prices so low that the majority of people can afford to buy them.” But why? Why choose to be a non-profit? And how can a company with 135,000 employees in 44 countries with $27 billion in annual sales, possibly justify being a non-profit? Watch the video and learn how Ikea uses its unique business model and non-profit status to exploit tax loopholes for the benefit of its founding family.
IKEA has a little known secret: the company is a non-profit. Ingvar Kamprad the founder of IKEA created the philanthropic Stichting Ingka Foundation whose mission is to “further the advancement of interior design.” IKEA’s bizarre business model looks like this: the non-profit Stichting Ingka owns a private Dutch Company, Ingka Holdings that owns the majority of individual stores at the franchise level.
The company’s main motivation for having a non-profit structure seems business-driven. Consider the fact the Stichting Ingka Foundation only donated $1.7 million (out of billions in profits) to a design school – which is in line with the foundation’s mission – but the rest of the money goes to IKEA stores and into savings “as a cushion for the future.”
IKEA employs 135,000 people in 44 countries. Because of tax breaks for non-profits, IKEA pays about 33 times less on taxes than their for-profit counterparts, a minuscule 3.5% in taxes on its $27 billion in annual sales.
An IKEA store manager typically takes home $125,000 per year, while store support staff earn just $28,000. As for the executives, their salaries don’t have to be reported publicly thanks to Dutch privacy laws.
But, there is one big hole in the IKEA non-profit operation. IKEA Systems, another private Dutch Company owns the trademark. This means money is paid directly from IKEA profits to the owners of this private company to license the trademark. The beneficiaries are not publicly recorded, but it’s not hard to speculate that the Kamprad family is on the receiving end of this loop hole.
According to the Economist: “The overall set-up of IKEA minimizes tax and disclosure, handsomely rewards the founding Kamprad family and makes IKEA immune to a takeover.”
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