Lesson to be taught at the University of Edinburgh, Business School, February 2nd, , 2012  Social enterprises in Europe: a...
Introduction  <ul><li>Focus: concept of multistakeholder governance </li></ul><ul><li>Some assumptions: </li></ul><ul><li>...
Agenda <ul><li>Remind you of the EMES concept of social enterprise </li></ul><ul><li>When do these types of companies come...
EMES concept of social enterprise <ul><li>Three aspects: </li></ul><ul><li>Economic and entrepreneurial dimensions </li></...
When do these types of multistakeholder governance enterprise come to be? <ul><li>In order for different stakeholders to w...
Models of governance(I) <ul><li>Many theoretical models attempt to explain the function of an organization’s social bodies...
Multistakeholder or co-governance model <ul><li>An organization is deemed multistakeholder when it is governed by differen...
Democratic model <ul><li>The multistakeholder model is an extension of the democratic model. </li></ul><ul><li>Main charac...
Agency Theory  <ul><li>Dominant model used to  explain the theory of the organizations  and the agreement of the corporate...
Administrative Theory or partner – based model <ul><li>Assumption: </li></ul><ul><li>There is  no discrepancy of interest ...
Consumer cooperatives <ul><li>What are consumer cooperatives?  </li></ul><ul><li>Consumer cooperatives are economic organi...
Consumer coops: some figures. 2010 <ul><li>Total:  </li></ul><ul><li>128 consumer coops  associated by the Federation of C...
Consumer coops: The four largest structures are:  <ul><li>Eroski Group: </li></ul><ul><li>points of sale: 2,246 </li></ul>...
Analysis of Governance in consumer cooperatives <ul><li>CIES (2010) conducted a  small study about the  main functions of ...
Two questions(I) <ul><li>First question : How can members of a consumer cooperative control the management team and at the...
Two questions(II) <ul><li>Second question : How can the consumer members ensure that among them there are people with the ...
Final considerations: the dominance of stakeholder dialogue in practice <ul><li>The concept of multistakeholder governance...
Final considerations: againts the validity of stakeholder dialogue and multistakeholder governance  <ul><li>There is also ...
Final considerations: we should continue researching (I) <ul><li>The following are some areas or lines of research that ca...
Final considerations: we should continue researching (II) <ul><li>From the viewpoint of the social enterprise, some areas ...
Lesson to be taught at the University of Edinburgh, Business School, February 2nd, , 2012  Social enterprises in Europe: a...
Upcoming SlideShare
Loading in …5
×

Social enterprises in Europe: a theoretical approach to their corporate governance

973 views

Published on

A lecture given by Professor Isabel Vidal at the University of Edinburg Business School, the 2nd of February, 2012.
This lecture gives an interesting insight into the corporate governance of social enterprises in Europe with a focus on Spain, combining a theoretical approach with the results of an empirical study.


Published in: Business, Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
973
On SlideShare
0
From Embeds
0
Number of Embeds
5
Actions
Shares
0
Downloads
7
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Social enterprises in Europe: a theoretical approach to their corporate governance

  1. 1. Lesson to be taught at the University of Edinburgh, Business School, February 2nd, , 2012 Social enterprises in Europe: a theoretical approach to their corporate governance By Isabel Vidal CIES, University of Barcelona [email_address]
  2. 2. Introduction <ul><li>Focus: concept of multistakeholder governance </li></ul><ul><li>Some assumptions: </li></ul><ul><li>1.- Rational agent behavior : An organization will be governed by different stakeholders if these stakeholders are confident that this is the best way to maximize their interest at that particular time. </li></ul><ul><li>2.- Multistakeholder organizations offer a greater sense of trust to the society were they are working on behalf of the general public’s interest. </li></ul><ul><li>3.- Trust : multistakeholder organizations is the product of a process of the building and accumulation of reciprocal trust among different stakeholders. </li></ul>
  3. 3. Agenda <ul><li>Remind you of the EMES concept of social enterprise </li></ul><ul><li>When do these types of companies come to be? </li></ul><ul><li>An overview of some different models of governance </li></ul><ul><li>Compare theoretical analysis with empirical study </li></ul><ul><li>Some brief conclusions </li></ul>
  4. 4. EMES concept of social enterprise <ul><li>Three aspects: </li></ul><ul><li>Economic and entrepreneurial dimensions </li></ul><ul><ul><li>A continuous activity producing goods and/or selling services </li></ul></ul><ul><ul><li>A significant level of economic risk </li></ul></ul><ul><ul><li>A minimum amount of paid work </li></ul></ul><ul><li>Social dimensions </li></ul><ul><ul><li>An explicit aim to benefit the community </li></ul></ul><ul><ul><li>An initiative launched by a group of citizens </li></ul></ul><ul><ul><li>A limited profit distribution </li></ul></ul><ul><li>- Governance dimensions </li></ul><ul><ul><li>A high degree of autonomy </li></ul></ul><ul><ul><li>A decision- making power not based on capital ownership </li></ul></ul><ul><ul><li>A participatory nature, which involves various parties affected by the activity </li></ul></ul>
  5. 5. When do these types of multistakeholder governance enterprise come to be? <ul><li>In order for different stakeholders to want to coordinate and cooperate, three circumstances must occur, that are closely linked of this coordination: </li></ul><ul><li>1.- Existence of uncertainty : asymmetric information or incomplete information, which result in inefficient decisions. </li></ul><ul><li>2.- Existence of strategic interdependence : results (profits) obtained by one party depends on the decisions made by the other party. </li></ul><ul><li>3.- Possibility of betterment derived from collaborative work are substantial for each one of the stakeholders that wishes to form part of the network. </li></ul>
  6. 6. Models of governance(I) <ul><li>Many theoretical models attempt to explain the function of an organization’s social bodies, specifically the Board of Directors . Each of these models proposes a different form to understand how the Board members should behave and whom they should serve; that is, the interests that they should serve. </li></ul><ul><li>We will focus on 4 models of government in organizations: </li></ul><ul><li>The interest group theory – multistakeholder model or co-governance </li></ul><ul><li>Democratic model </li></ul><ul><li>Agency Theory </li></ul><ul><li>Administrative Theory or partner-based model </li></ul><ul><li>The theories coexist . It is difficult for a perspective to act alone. One model or another could be dominant. And the dominant model may evolve over time. </li></ul>
  7. 7. Multistakeholder or co-governance model <ul><li>An organization is deemed multistakeholder when it is governed by different interest groups that must reach agreements in cooperation and collaborate as a network. </li></ul><ul><li>Its main ideas and practices include : </li></ul><ul><li>The principal of one person, one vote or a decision–making power not based on capital ownership </li></ul><ul><li>Pluralism , the possibility of representing different interest, not necessarily the separation of the elected members from the executives: members and staff can share the Director of Board. The workers can be one of the stakeholder groups. </li></ul><ul><li>All the stakeholders represented in the board of Directors have political power which is expressed by the right not only to a voice but also a vote . </li></ul><ul><li>The role of the boards is: </li></ul><ul><ul><li>To represent the interest of the different stakeholders; </li></ul></ul><ul><ul><li>To solve issues or choose between different interest group options, and </li></ul></ul><ul><ul><li>To establish a set of policies to be implemented by the executives and the workers of the organizations </li></ul></ul><ul><li>Information and transparency to all different stakeholders </li></ul>
  8. 8. Democratic model <ul><li>The multistakeholder model is an extension of the democratic model. </li></ul><ul><li>Main characteristic: the principal of one person, one vote . </li></ul><ul><li>The democratic model does not require the existence of different stakeholders groups represented in the Boards of Directors. However, it is perfectly viable with pluralism. </li></ul><ul><li>The multistakeholder and democratic models may coexist with the theories of agency and administration . </li></ul>
  9. 9. Agency Theory <ul><li>Dominant model used to explain the theory of the organizations and the agreement of the corporate governing body. </li></ul><ul><li>Whenever an individual depends on an action taken by another individual, an agency relationship is present. </li></ul><ul><li>The one taken the action is called the agent . </li></ul><ul><li>The one affected by the agent’s action is called the principal . </li></ul><ul><li>Central elements: </li></ul><ul><li>The existence of asymmetries in information , and </li></ul><ul><li>The discrepancy between the agent’s and the principal’s objectives . </li></ul><ul><li>Main function of the board: To control management </li></ul>
  10. 10. Administrative Theory or partner – based model <ul><li>Assumption: </li></ul><ul><li>There is no discrepancy of interest between members and executives </li></ul><ul><li>Main function of the Board </li></ul><ul><li>Members establish a collaborative relationship with executives. The members must work with managers to improve the strategy and add value to high-level decisions. </li></ul>
  11. 11. Consumer cooperatives <ul><li>What are consumer cooperatives? </li></ul><ul><li>Consumer cooperatives are economic organizations created voluntarily by and for consumers . In the cooperatives there is not the figure of the shareholder . </li></ul><ul><li>Some Spanish consumer coops are multistakeholder organizations : two groups of stakeholders are represented by voice and vote in the political bodies of the organizations: the consumer members and work members. </li></ul><ul><li>Spanish law allows cooperatives to voluntarily to not distribute benefits and they become not-for-profit organizations. </li></ul>
  12. 12. Consumer coops: some figures. 2010 <ul><li>Total: </li></ul><ul><li>128 consumer coops associated by the Federation of Consumer Cooperatives </li></ul><ul><li>Revenue : 10,086 billions euros </li></ul><ul><li>Workers : 57,232 of whom 36 per 100 are work member </li></ul><ul><li>Consumer members : 2.5 millions people </li></ul>
  13. 13. Consumer coops: The four largest structures are: <ul><li>Eroski Group: </li></ul><ul><li>points of sale: 2,246 </li></ul><ul><li>turnover: more than 8 million € </li></ul><ul><li>workers: 45,000, 14,733 are work members </li></ul><ul><li>consumer members: 634,830 </li></ul><ul><li>Consum </li></ul><ul><li>Point of sale: 585 </li></ul><ul><li>Turnover: 1,675 millions € </li></ul><ul><li>Workers: 9,889, 7,420 work members </li></ul><ul><li>Consumer members: 1. 5 millions </li></ul><ul><li>Abacus </li></ul><ul><li>Point of sales: 37 </li></ul><ul><li>Turnover: 100 millions € </li></ul><ul><li>Workers: 768, 471 work members </li></ul><ul><li>Consumer members: 700,000 </li></ul><ul><li>Hospital de Barcelona </li></ul><ul><li>Point: 1 </li></ul><ul><li>Turnover: 62.77 millions € </li></ul><ul><li>Workers: 833, 812 work members </li></ul><ul><li>Consumer members: 164,613 </li></ul>
  14. 14. Analysis of Governance in consumer cooperatives <ul><li>CIES (2010) conducted a small study about the main functions of the Board of Director of 10 consumer cooperatives operating in Spain . </li></ul><ul><li>Work Methodology : 13 surveys to board members from 10 cooperatives and 2 interviews to president of multistakeholder cooperatives. The four large cooperatives named are part of the study. </li></ul><ul><li>Main finding : </li></ul><ul><li>Participation of the member : dominance of the democratic and the interest models. </li></ul><ul><li>Function of Board of Director : control the executive and collaborate with the management team </li></ul><ul><li>Imbalance between resources , capacities and formal responsibilities of the Board </li></ul><ul><li>Summary : The four models coexist : democratic, the interest groups, agency and administrative models. The objective of the study was not know which of </li></ul><ul><li>the models – control or collaboration – was the dominant. </li></ul>
  15. 15. Two questions(I) <ul><li>First question : How can members of a consumer cooperative control the management team and at the same time be experts who advise and support the management team? </li></ul><ul><li>The theory points out that control and collaboration are contrast and ask different behaviors of the members of the Board. </li></ul><ul><li>Control role is typically reactive and aims to pay attention to detail, monitoring and scrutinizing an organization’s past performance and management while demanding a behavior of risk aversion. </li></ul><ul><li>The vision of collaborating with the management team and adding value to its function implies a more active behavior on behalf of board members and demands that they have a more future-oriented vision as well as a desire to take business risks. </li></ul>
  16. 16. Two questions(II) <ul><li>Second question : How can the consumer members ensure that among them there are people with the knowledge and experience necessary to direct, for example, the board? </li></ul><ul><li>Two solutions: </li></ul><ul><li>Ensuring the existence of strong professional in the Board with prior experience in running an organizations, and </li></ul><ul><li>Increasing the formation and support available for current and potential board members </li></ul>
  17. 17. Final considerations: the dominance of stakeholder dialogue in practice <ul><li>The concept of multistakeholder governance are adept in theory. </li></ul><ul><li>In reality, the experiences of multistakeholder governance is a minority . However, they exist in all countries. </li></ul><ul><li>The experiences of binary and multistakeholder dialogue are dominant : voice </li></ul><ul><li>In the experiences of relationship between public administrations with the voluntary and private sector the dominant experiences are binary or multistakeholder dialogue with different stakeholders. </li></ul>
  18. 18. Final considerations: againts the validity of stakeholder dialogue and multistakeholder governance <ul><li>There is also literature that questions the validity of stakeholder dialogue and multistakeholder governance as mechanism that should facilitate performance and consequently, an organization’s sustainability . Henderson (2000) point out that one organization can not simultaneously satisfy the interest of different stakeholders. </li></ul><ul><li>In short: </li></ul><ul><li>Clearly, multistakeholder governance has strengths and weaknesses, as well as opportunities and threats for each partner. </li></ul>
  19. 19. Final considerations: we should continue researching (I) <ul><li>The following are some areas or lines of research that call for more study to gain more thorough understanding of when and under what conditions the social enterprise is more beneficial for all stakeholders. </li></ul><ul><li>From the point of view of the interests of public administrations: Andrews, Boyne and Enticott (2006) recognize the implication of the role, for example, of local government in the administrations of organizations that provide public service generate new cost for governments,-new cost of contracting, particularly cost relating to transaction cost, trust and rent seeking-, and for the organizations: they lost autonomy. The impact of multistakeholder governance for governments has not been studied enough. We need more studies that make an evaluation of the impact for governments in becoming involved directly in the administration of private organizations. </li></ul>
  20. 20. Final considerations: we should continue researching (II) <ul><li>From the viewpoint of the social enterprise, some areas or aspects which should be studied further are: </li></ul><ul><li>It is important to study not only how it affects the management of the organization itself but also the way its directors and workers behave in a social enterprise with multistakeholder government </li></ul><ul><li>In general: </li></ul><ul><li>We must continue working to better detect the conditions required to develop a favorable environment for multistakeholder governance . </li></ul><ul><li>We must continue moving forward to solve the problems of interpretation inherent in training processes , especially values such as credibility , reputation and trust with other stakeholders with whom the enterprise strives to work in partnership. </li></ul>
  21. 21. Lesson to be taught at the University of Edinburgh, Business School, February 2nd, , 2012 Social enterprises in Europe: a theoretical approach to their corporate governance Thank you for your attention By Isabel Vidal CIES, University of Barcelona [email_address]

×