There was a bit of an unintentional theme running through a couple of events and conversations I’ve been to over the past few weeks regarding the future of capitalism and corporations, and then last week Ed Miliband’s speech at this year’s Labour conference continued his emphasis last year on “predatory capitalism“.
Miliband was talking about aggressive capitalism which he saw as damaging the economy, and I doubt anyone could really disagree right now.
Last month I went to a talk on “caring capitalism” – perhaps the antidote to Miliband’s “predatory capitalism”. Focusing on social enterprise – as the speakers pointed out, a broad term with no real definition (though Wikipedia has a go) – as a means to create a more just society, a few different models were explored: though frankly none of them seemed particularly new.
For Helen Chambers and Mary Duffy, a social enterprise is one which exists specifically for social purposes, working within a commercial, for profit model – with a commnon principle “to do good”. Two specific organisations – Haven Products and Rag Tag ‘n’ Textile – were used as examples though the latter is a registered charity (and hence a not-for profit – although presumably just as many charities run retail, for profit operations, it does too). Both these organisations work largely for the benefit of their employees, providing opportunities to those who might otherwise not find employment.
Other objectives for social enterprises include working for the benefit of employees more generally, suppliers (such as fairtrade), the environment, and the wider community.
Whilst social enterprises might explicitly have such objectives, I can’t help thinking that most commercial corporations implicitly act in a similar fashion: a business which works against customers, suppliers or the community should not prosper, at least in the long term: if you work against customers, they will move (that’s what competition is about). Many commercial, profit-seeking organisations make large donations to charity – including banks such as the near-collapsed RBS. The rising interest in corporate social responsibility has focused investors, managers, employees and other “stakeholders” on organisations’ governance, ethics, ways of working and their internal and external relationships. (Much of this may be mere window dressing, though…)
Much of the talk was about social investment. It sounded like a wall of philanthropic finance was pouring into a small, undeveloped and fragmented sector: this could distort the economics and lead to imperfect allocation (one of the things markets are supposed to be good at – though the economic crisis has clearly dented that particular claim). But the amounts of money are still chickenfeed compared to the amounts spent by governments.
Nor is philanthropy anything new – Andrew Carnegie distributed his large wealth, endowing libraries, museums and universities; other “robber barons” such as Frick, Rockefeller and Vanderbilt did the same. Indeed, contrite financiers such as Michael Milken have tried to make amends through charitable donations and work, though the rich have long been using the gains – ill-gotten or not – to buy forgiveness.
Most social enterprises are small: perhaps it is easier of small organisations working outside the usual constraints of (non-social) investors “to be good”. Certainly large, international corporations seem to suffer from much of the criticism – perhaps because they are further from their suppliers, customers and communities: and of course one of the main advantages of large organisations – the ability to leverage economies of scale – means that someone, somewhere is paying more or getting less than smaller firms.
I still believe that outside a few industries – tobacco, arms and extractive industries, perhaps – all businesses benefit from “doing good”, if they want returning customers. Perhaps some organisation structures are better fitted for this than others – cooperatives, employee-owned firms or mutuals, perhaps. With businesses focused on customers, employees and suppliers, all organisations would be “social enterprises”: exploitation of one or oanother of these key groups would be to the detriment of the business.
Or what am I missing?