Social Corporations
Research Paper Title:
“Social corporations under the spotlight: A governance perspective”
Authors:
Coline Serres (Rotterdam School of Management - Erasmus University)
Marek Hudson (Centre Emile Bernheim de Recherche Interdisciplinaire en Gestion)
Background:
Social corporations (i.e., socially oriented profit-seeking businesses addressing core societal issues) have emerged across various environments. From community interest companies in the UK to benefit corporations in the US, these new corporate forms blur traditional boundaries between classic for-profits and nonprofits. Actors often find it challenging to distinguish between these venturing forms in terms of their legal status and key organizational and governance features. First, the authors analyze governing documents of these ventures to highlight core commonalities and differences among various types of social corporations that do not fit in the traditional categories of for-profit and social organizations. Second, the authors identify the governance capabilities that social corporations develop to be sustainable and avoid mission drift in the long run. These provide entrepreneurs with empirical guidance on how to nurture governance combining social and economic ambitions in the long run. Our work shows that, despite commonalities, “one size does not (always) fit all”. It emphasizes that policymakers wishing to fund these organizations should be attentive to their specific characteristics.
Highlights:
Entrepreneurship research that relies on averages ignores the discipline's dynamism.
The formalization process requires different institutional works over time.
Challenges to formalization depend on the characteristics of the institutional field.
Formalization may reintroduce the liability of newness.
Inductive, longitudinal studies unveil the complexity of formalization.s.
Methodology:
Sample Description:
Study 1 - corporate-governing documents of social corporations in 7 countries
Study 2 - 3 social corporations: 2 in the United Kingdom and 1 in France
Sample Size:
Study 1 - 40 corporate-governing documents; Study 2 - 48 interviews
Results:
1. The authors classify social corporations (i.e., profit-seeking social ventures) into three generic types: hard-law, soft-law, and bylaw. They vary according to legal structure and core governance-related requirements and features. Beyond references to the social mission in corporate-governing documents, the authors identify four governance dimensions that both connect and separate these generic types: voting rights, profit distribution, property regime, and ownership structure.
2. The authors find five governance capabilities developed by social corporations to be sustainable and avoid mission drift in the long run. They relate to organizational performance, conformance, and responsibility. Regarding performance, social corporations (1) develop specific abilities to achieve a balance between several objectives and (2) intensively leverage limited resources. Further, they provide assurances to stakeholders about their aptitude to conform (3) by demonstrating that they can be held accountable for performing their social mission and (4) by implementing inclusive, shared governance practices. Last, (5) they meet impact expectations and responsibility-related demands by fostering change with and for the community
Conclusion:
Our findings show how social corporations can deploy resources and competencies to achieve mission-related social impact and economically sustain relationships with key stakeholders. Moreover, our study shows that next to the performance and conformance pillars of governance typically critical to profit-oriented organizations, governance-related challenges of social corporations also relate to responsibility considerations.