Navigating tensions


Governance issues need to be more visible in social enterprise debates in Australia, according to a study by Swinburne University of Technology and the University of York.

The study, A fair trade-off? Paradoxes in the governance of fair-trade social enterprises, was co-authored by Dr Chris Mason of the Centre for Social Impact at Swinburne in Melbourne, and Bob Doherty of the York Management School, University of York in the UK.

It suggests corporate governance theories are inadequate to address the different missions and expectations of social enterprise. This is because social enterprise board members are exposed to institutional pressures to achieve financial sustainability, generate social value and build and maintain close relationships with a range of stakeholder groups.

The study tracked three fair-trade social enterprises, each operating and selling fair-trade products in international markets, over a period of six years, in order to understand how management teams in social enterprises handled tensions.

Four core tensions arising in social enterprise governance narratives were identified: social/commercial benefits, conflicts of interest, producer participation and resource pressures.

It was found that social enterprises are unlikely to resolve tensions by a reliance on new legal forms alone, and instead require explicit organisational processes and mechanisms that ensure overall direction, control and accountability for the dual mission.

The study recommends that social enterprise boards manage tensions with the following strategies:

  • Clearly articulated short-term and long-term objectives.
  • Open discussion regarding tensions and trade-offs.
  • Flexible budgeting approaches.
  • The training of beneficiaries who have direct representation on the board.
  • Careful selection of board members to balance the boards with hybrid, social and commercial skills.
  • Socialisation of board members.
  • Avoidance of unanimous voting procedures.
  • Performance measurement that includes both financial and social performance measures (i.e. key performance indicators).
  • New investment from social investors.

The study can be found here.