We are starting to win the battle of social enterprises

Recently, Craig Dearden-Phillips and Rob Greenland, two of our
most respected social enterprise commentators, both wrote blogs that, taken together, shattered the illusion of a
consensus on the definition of social enterprise.

The part in particular that stood out for me was when Rob asked how
wages and loan interest are any different to paying dividends. A poll on the
issue was split down the middle.

Well, wages and interest count as costs, whereas dividends are
different as they come out of profits extracted from the bottom line. But
distributing profits is not necessarily any less ethical than repaying debts.
Equity can even be fairer than debt, as there is no obligation to repay and it
shares risks and rewards. And social entrepreneurs may need to share profits in
order to attract the capital they need to achieve the impact they seek to
deliver.

But as our most popular definition of social enterprise says, it’s
first what you do with the majority of these profits that distinguishes you as
a social entrepreneur and second, in Rob’s words, that the “primary aim of the
business will be a social one.”

How can we test for this? Well, we might learn from the most
boring of places, the Office for National Statistics, which classifies whether
organisations sit on or outside the public accounts. They look at who controls
an organisation through owning more than half the voting shares or controlling
more than half the voting power, or through regulation.

So what would the ONS make of Circle Partnership, Europe’s largest healthcare partnership, for instance,
who call themselves a social enterprise? Do they have a social mission and how
is it controlled? Do remote investors own less than half the shares? Or more
than half as conflicting reports suggest?

For Craig, this control and the majority rights to the profits are
“often the fair reward for risk” and if his salary was the only reward he
received, then that wouldn’t reflect the risks he takes. While for others,
there is sufficient reward in the social impact they achieve, and, if you don’t get
off on that, then sure, a private business model makes perfect sense.

A ‘pure’ ownership model is no guarantee of social impact. Apple
or Boots may well deliver more net benefit than Network Rail or Eton College.
So Craig – and Circle – sit in this interesting space emerging “between the
private sector and just beyond the outer-edge of the social enterprise sector”.
But crucially, this is beyond social enterprise, in what we might call social
or ethical business.

For years, the biggest challenge for social enterprise has been
awareness and understanding out in the real world. We are starting to win. The
people on the street are starting to get it, newsreaders say it without
clarification, newspapers no longer include an explanation.

If Craig’s “progressive business sector” is delivering more and
more social impact then that’s a wonderful thing. As Rob says, we should be
“relaxed about people making money out of social business and a variety of
business models”. But can we all agree that this needs a different term? Social
business or ethical business, for example?

Please, Rob and Craig, don’t undo your own great work over the
years in promoting social enterprise by diluting and confusing it when others
have become attached to it – and just at the point where it’s starting to hit
the streets.

Dan Gregory is founder of Common Capital, a website about social enterprise

  • Neil Pope

    Excellent article and point well made Jackie. Unfortunately it is not uncommon to see organisations here in Ireland led by people for well over the 7 year maximum term you recommend.

  • Carl Allen

    The anecdotal conclusion of a 5-7 year optimum tenure of leadership looks premature.

    It is reasoned but not reasoned out and is a perhaps dangerous generalisation seeking justification by way of acknowledging magnificent but isolated exceptions.

    Surely there are other worthy conclusions based on anecdotal evidence.

  • John Weth

    Both CEO”s and the organisations they serve might benefit from operating 5 year contracts,with the possibility of fixed term renewals. Such contracts can provide a useful opportunity for both parties to reflect upon the needs of the organisation at the end of the contract period.

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